Tribunal rules pre-2005 projects eligible for tax deduction under Sec. 80 IB(10)

The Tribunal ruled in favor of the appellants, determining that the amended provisions of Sec. 80 IB(10) effective from 1.4.2005 do not apply to projects that commenced before this date. The projects in question, which began in 2001 and were completed prior to the amendment, were deemed eligible for the claimed deduction u/s. 80 IB (10). The Tribunal directed the A.O to allow the deductions, ultimately allowing the appeals.

---

---

Issues Involved:
1. Whether the Ld. CIT(A) was justified in confirming the disallowance of claimed deduction u/s. 80 IB (10) of the I.T. Act 1961.
2. Interpretation of the term "Housing Project" under Sec. 80IB(10).
3. Applicability of the amended provisions of Sec. 80 IB(10) effective from 1.4.2005 to the assessee's project.

Issue-wise Detailed Analysis:

1. Justification of Disallowance of Deduction u/s. 80 IB (10):
The assessees questioned the first appellate order confirming the disallowance of the claimed deduction u/s. 80 IB (10). The A.O denied the deduction on the basis that the projects included commercial establishments, which exceeded the permissible limits under the amended provisions effective from 1.4.2005. The Ld. CIT(A) upheld this decision, stating that the commercial construction exceeded 5% or 2000 sq.ft., whichever is less, as per the amended provisions.

2. Interpretation of "Housing Project":
The appellant argued that the term "Housing Project" should include commercial areas as understood in common parlance and as clarified by the CBDT. The Special Bench in the case of Bramha Associates held that a housing project could include commercial portions. This interpretation was upheld by the Hon'ble Bombay High Court, which stated that up to 31/3/2005, deduction under Section 80IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the DC Rules/Regulations.

3. Applicability of Amended Provisions of Sec. 80 IB(10):
The main contention was whether the amended provisions of Sec. 80 IB(10) effective from 1.4.2005 apply to projects that commenced before this date. The appellant argued that the projects commenced before the amendment and hence, the amended provisions should not apply. The Tribunal agreed, referencing the Mumbai Bench decision in Hiranandani Akruti J.V. v/s. DCIT, which held that the amended Section would apply to projects started after 1.4.2005. The Tribunal emphasized that applying the amended provisions to projects started earlier would result in hardship and absurdity, as the assessees would not have known about future restrictions.

Conclusion:
The Tribunal concluded that the law as it existed when the project was approved and commenced should apply. The amended provisions of Sec. 80 IB(10) effective from 1.4.2005 do not apply to projects that started before this date. The assessees' projects, which commenced in 2001 and were completed before the amendment, are eligible for the claimed deduction u/s. 80 IB (10). The Tribunal directed the A.O to allow the claimed deductions, thus allowing the appeals. The judgment was pronounced on 31st May, 2011.

---