2011 (7) TMI 199 - AT - Income Tax

Tribunal grants full deduction for housing project, dismisses revenue's appeal. Residential units to be treated independently.

The Tribunal allowed the appellant's appeal by granting full deduction under section 80-IB(10) for the entire project, modifying the CIT(A)'s order. The ... Income escaping assessment - Deduction under section 80-IB(10) - on the ground that size of the residential unit was in excess of 1,000 sq.ft. which, in turn, proceeds on the basis that the flats sold to the family members admittedly by separate agreements, should be treated as one unit. We are unable to approve this approach - It is important to bear in mind the fact that what section 80-IB(10) refers to is 'residential unit' and, in the absence of anything to the contrary in the Income-tax Act, the expression 'residential units' must have the same connotations as assigned to it by local authorities granting approval to the project - The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature. It will, therefore, be contrary to the scheme of law to proceed on the basis that wherever adjacent residential units are sold to family members, all these residential units are to be considered as one unit - Appeals are allowed Issues Involved:1. Deduction under section 80-IB(10) on a proportionate basis.2. Interest levied under section 234B.3. Reopening of assessment.Detailed Analysis:1. Deduction under Section 80-IB(10) on a Proportionate Basis:The primary issue revolves around the eligibility of the appellant for deduction under section 80-IB(10) of the Income-tax Act, 1961. The appellant claimed deductions of Rs. 6,54,82,573 for the assessment year 2003-04 and Rs. 1,91,72,008 for the assessment year 2004-05, which were initially allowed. However, a subsequent survey revealed that some residential units exceeded the 1,000 sq.ft. limit by selling two separate agreements to the same family members. The Assessing Officer (AO) disallowed the deduction on these grounds, but the CIT(A) allowed a proportionate deduction based on the eligible units.The CIT(A) held that the appellant is entitled to a proportionate deduction on the qualifying units that met the conditions of section 80-IB(10). The CIT(A) relied on various ITAT and High Court decisions, notably the Mumbai ITAT in the case of Saroj Sales Organisation and the Kolkata ITAT in the case of Bengal Ambuja Housing Development Ltd., which allowed proportionate deductions for qualifying units.Upon appeal, the Tribunal found that the AO's approach of treating adjacent flats sold to family members as a single unit was incorrect. The Tribunal noted that each flat, as per the approved building plan, was less than 1,000 sq.ft. and should be treated as an independent residential unit. The Tribunal emphasized that the legislative amendment restricting the sale of multiple units to family members was prospective, effective from 1-4-2010, and did not apply to the assessment years in question. Therefore, the Tribunal allowed the appellant's claim for deduction under section 80-IB(10) for the entire project, modifying the CIT(A)'s order to grant full relief to the appellant.2. Interest Levied under Section 234B:The appellant contended that the CIT(A) should have deleted the interest levied under section 234B or, alternatively, should have limited the interest to the period between the original assessment and reassessment. The Tribunal did not provide a detailed discussion on this issue, implying that the primary focus was on the deduction under section 80-IB(10). Consequently, the Tribunal's decision to allow the deduction in full would inherently affect the computation of interest under section 234B.3. Reopening of Assessment:The appellant also raised grievances against the reopening of the assessment. However, the Tribunal noted the absence of specific arguments supporting this grievance. As a result, the Tribunal treated these grievances as abandoned and dismissed them.Conclusion:The Tribunal allowed the appellant's appeals by granting full deduction under section 80-IB(10) for the entire project, thereby modifying the CIT(A)'s order. The revenue's appeals were dismissed as infructuous. The Tribunal's decision was based on the interpretation that each residential unit, as approved by the local authorities and less than 1,000 sq.ft., should be considered independently, and the legislative amendment restricting multiple sales to family members was prospective and not applicable to the assessment years in question.