2011 (2) TMI 407 - AT - Income Tax

Tribunal affirms eligibility for deductions under section 80IB(10) for real estate projects.

ACIT Versus Shree Ostwal Builders Ltd.

The Tribunal upheld the CIT(A)'s decisions, allowing deductions under section 80IB(10) for both the Ostwal Nagari and Asha Nagar projects. The Tribunal ... Deduction u/s 80IB(10)in respect of Ostwal Nagari Project - existing project - Held that: this issue is squarely covered in favour of the assessee by the decision of the Special Bench of the I.T.A.T in the case of Brahma Associates (2009 -TMI - 71895 - ITAT PUNE) and the learned CIT(A) was fully justified in following the said decision to held that deduction u/s.80IB could not be denied to the assessee on the basis of existence of Ostwal Nagari project especially when the said project was sanctioned by the competent authority as housing project and the total commercial area in the said project was less than 10% of the total constructed area - Decided in favour of assessee. Deduction 80IB(10) in respect of Asha Nagar project - The objection of the Assessing Officer regarding non-obtaining of completion certificate by the assessee in respect of Asha Nagar project is not sustainable keeping in view that the said project was completed prior to 01.04.2005 when the condition of completing the project prior to 31.3.2008 was not stipulated in the Statute - Even the existence of commercial area in Asha Nagar project as found during the course of search was to the extent of 5313.25 sq.ft. which was less than 10% of the total built up area of the said project as submitted by the assessee before the learned CIT(A). As such, keeping in view all the facts and circumstances of the case, we find ourselves in agreement with the learned CIT(A) that there was no justifiable reason for the Assessing Officer to deny the benefit of deduction u/S 80IB(10) to the assessee in respect of Asha Nagar project - Decided in favour of assessee. Issues Involved:1. Assessee's claim for deduction under section 80IB(10) for the Ostwal Nagari project.2. Assessee's claim for deduction under section 80IB(10) for the Asha Nagar project.Detailed Analysis:1. Assessee's Claim for Deduction Under Section 80IB(10) for the Ostwal Nagari Project:Background:- The assessee, a company engaged in building and developing housing projects, claimed deductions under section 80IB for its projects 'Ostwal Nagari' and 'Asha Nagar.'- A search and seizure action under section 132 of the Act was conducted on 21.02.2007, leading to a reassessment.Assessing Officer's Findings:- The project was initially sanctioned by CIDCO on 03.08.1998, with the commencement certificate issued simultaneously.- The Assessing Officer disallowed the deduction, asserting that the project commenced prior to 01.10.1998, and included commercial premises exceeding the permissible area.CIT(A)'s Decision:- The CIT(A) found that the assessee purchased the land from M/s. Sonal Venture on 30.08.2001, with no existing structures at the time of purchase.- It was noted that the project commenced after the purchase, satisfying the condition of commencement post-01.10.1998.- The CIT(A) also referenced the Special Bench decision in Brahma Associates, which allowed deductions for projects with commercial areas if the total commercial area did not exceed 10% of the total constructed area.Tribunal's Findings:- The Tribunal upheld the CIT(A)'s decision, confirming that the project commenced after 01.10.1998, and the commercial area was within permissible limits.- The Tribunal dismissed the revenue's appeal, affirming the assessee's eligibility for the deduction under section 80IB(10).2. Assessee's Claim for Deduction Under Section 80IB(10) for the Asha Nagar Project:Background:- The original assessment allowed the deduction, considering the project as exclusively residential.- During the search, it was revealed that 5315.25 sq.ft. of the built-up area was commercial.Assessing Officer's Findings:- The existence of commercial area led to the disallowance of the deduction, as the project was not purely residential.CIT(A)'s Decision:- The CIT(A) found that the project was approved as a residential project by the competent authority.- Conversion of residential units to commercial by purchasers post-completion did not affect the eligibility for deduction.- The CIT(A) noted that the commercial area was less than 10% of the total built-up area.Tribunal's Findings:- The Tribunal upheld the CIT(A)'s decision, confirming that the project was initially residential, and subsequent conversions by purchasers did not impact the deduction eligibility.- The Tribunal dismissed the revenue's appeal, affirming the assessee's eligibility for the deduction under section 80IB(10).Conclusion:- The Tribunal dismissed both appeals by the Revenue, upholding the CIT(A)'s decisions to allow the deductions under section 80IB(10) for both the Ostwal Nagari and Asha Nagar projects.- The judgments were based on the commencement dates post-01.10.1998 and the permissible commercial area within the projects.