Tribunal sets aside disallowance under section 80IB(10), directs reassessment

The Tribunal allowed the appeals for statistical purposes, setting aside the CIT(A)'s decision disallowing the deduction u/s 80IB(10) for exceeding built-up area. The Tribunal directed the AO to reconsider the issue based on relevant law and facts, providing the assessee with a hearing opportunity. The Tribunal relied on precedents supporting proportionate deduction for eligible units, emphasizing the legislative intent of increasing housing stock for low and middle-income groups.

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Issues Involved:
1. Disallowance of the claim u/s 80IB(10) of Rs. 1,04,58,412/-.
2. Pro-rata allowance of deduction u/s 80IB(10) for residential units not exceeding 1500 sq.ft.

Summary:

Issue 1: Disallowance of the claim u/s 80IB(10) of Rs. 1,04,58,412/-

The Assessing Officer (AO) disallowed the assessee's claim for deduction u/s 80IB(10) on the grounds that the residential units exceeded the maximum built-up area specified u/s 80IB(10). The AO found that independent units were merged into single units, thus violating the condition for maximum built-up area. The legislative intent of u/s 80IB(10) was to increase housing stock for low and middle-income groups, and this intent was deemed defeated by the assessee's actions. The CIT(A) upheld the AO's decision, rejecting the claim for deduction.

Issue 2: Pro-rata allowance of deduction u/s 80IB(10) for residential units not exceeding 1500 sq.ft.

The assessee argued that the CIT(A) was not justified in disallowing the pro-rata deduction for residential units not exceeding 1500 sq.ft. The ITAT Pune Bench in the case of D.S.Kulkarni Developers Ltd. vs. ACIT had previously upheld the plea for proportionate deduction u/s 80IB(10) where some residential units violated the built-up area condition. The Tribunal observed that the assessee would not lose the exemption u/s 80IB(10) entirely but would be entitled to a proportionate deduction for eligible units. Similar decisions were cited from other cases, including M/s. Ekta Housing Pvt. Ltd., G.V. Corporation vs. ITO, and Kruti Constructions.

Judgment:

The Tribunal found that the lower authorities did not consider the decisions in G.V. Corporation and Kruti Constructions, which supported the assessee's claim for proportionate deduction. The Tribunal set aside the order of the CIT(A) and restored the issue to the AO for reconsideration based on the facts and law available at the relevant time, providing due opportunity of hearing to the assessee. Both appeals were allowed for statistical purposes.

Pronounced in the open court on the 31st day of October, 2012.

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