Tribunal allows deduction under sec. 80IB on pro-rata basis for housing project, except for commercial area limit

The Tribunal upheld the decision of the CIT(Appeals) to allow deduction u/s.80IB on a pro-rata basis, finding that the assessee met all conditions except for the maximum limit of commercial area in the housing project. Relying on judgments of the Hon'ble Madras High Court, the Tribunal dismissed the Revenue's appeals, granting proportionate relief to the assessee for the entire project except for the profit element exceeding the statutory limit.

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Issues:
Allowing deduction u/s.80IB on pro-rata basis.

Analysis:
The appeals were filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for three Assessment Years (AYs) 2006-07, 2007-08 & 2008-09. The main issue raised in the appeals was the allowing of deduction u/s.80IB to the assessee on a pro-rata basis. The Assessing Officer denied the benefit of deduction u/s.80IB to the assessee as the commercial area in the project exceeded the maximum limit of 2000 sq. ft. required by the provision. The CIT(Appeals) partly allowed the appeals of the assessee, leading the Revenue to appeal before the Tribunal challenging the findings of the CIT(Appeals).

The Revenue contended that the CIT(Appeals) erred in allowing the deduction u/s.80IB to the assessee on a pro-rata basis. The Revenue argued that the issue had not attained finality as the decisions relied upon by the CIT(Appeals) were challenged before the Supreme Court. On the other hand, the assessee's advocate argued that the excessive commercial area was used for common purposes of the residents and not for setting up any commercial establishment. The advocate relied on judgments of the jurisdictional High Court to support the order of the CIT(Appeals.

The Tribunal considered the submissions of both parties and reviewed the orders of the authorities below. It was noted that the only condition the assessee failed to fulfill for claiming deduction u/s.80IB was the maximum limit of commercial area in the housing project. The Tribunal referred to the judgments of the Hon'ble Madras High Court, which allowed deduction on a pro-rata basis in cases of partial compliance with the conditions. The Tribunal found that the CIT(Appeals) was justified in granting proportionate relief to the assessee, allowing deduction on the entire project except for the profit element in the area that exceeded the statutory limit. Therefore, the Tribunal dismissed the appeals of the Revenue.

In conclusion, the Tribunal upheld the decision of the CIT(Appeals to allow deduction u/s.80IB on a pro-rata basis, based on the interpretation of the relevant legal provisions and precedents set by the jurisdictional High Court.

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