Tribunal allows deduction for housing project exceeding commercial area limit under section 80IB(10)

The Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80IB(10) for the housing project, despite exceeding the commercial area limit. Relying on the Bombay High Court's decision in Brahma Associates, the Tribunal emphasized the project's approval as a housing project before the amended provisions took effect, justifying the deduction. The Tribunal rejected the revenue's arguments, affirming that the project primarily qualified as a housing project, meeting the criteria for the deduction under section 80IB(10). As a result, the appeal was dismissed, maintaining the allowance of the deduction.

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Issues:
- Eligibility for deduction u/s. 80IB(10)
- Application of the limit on the built-up area of shops and commercial establishments

Eligibility for deduction u/s. 80IB(10):
The appeal by the revenue pertained to the eligibility for deduction u/s. 80IB(10) against the order of CIT(A) II, Thane. Two grounds were raised by the revenue regarding the eligibility for deduction. The first ground questioned the justification of CIT(A) in holding the assessee eligible for deduction u/s. 80IB(10) based on a decision of the Bombay High Court, despite a pending SLP before the Supreme Court. The second ground challenged the retrospective application of the limit on the built-up area of shops and commercial establishments as prescribed by clause (d) of subsection 10 of section 80IB. The AO disallowed the deduction claimed by the assessee under section 80IB(10) due to the commercial area exceeding the prescribed limit. However, the CIT(A) allowed the deduction based on the project being approved as a housing project before the introduction of the amended provisions effective from 1.4.2005. The CIT(A) relied on the decision of the Bombay High Court in the case of Brahma Associates, emphasizing the prospective application of the restriction on commercial area.

Application of the limit on the built-up area of shops and commercial establishments:
The facts of the issue under consideration revealed that the assessee, a partnership firm engaged in construction, had a housing project with a small percentage of shops in excess of the limit prescribed by section 80IB(10)(d). The AO disallowed the deduction claimed by the assessee based on this excess commercial area. However, the CIT(A) allowed the deduction, considering the project's approval as a housing project by the local authority and the project's commencement before the amended provisions came into effect. The CIT(A) relied on the decision of the Bombay High Court in Brahma Associates, which clarified the prospective application of the restriction on commercial area. The Tribunal upheld the CIT(A)'s decision, emphasizing that the project was primarily a housing project with a minimal commercial area, meeting the criteria for deduction under section 80IB(10). The Tribunal rejected the revenue's grounds, concluding that the project's approval as a housing project and compliance with the principles established in Brahma Associates justified the allowance of the deduction.

In conclusion, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision to allow the deduction under section 80IB(10) based on the project's nature as a housing project and the prospective application of the restriction on commercial area as per the decision in Brahma Associates.

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