Tribunal grants deduction for all flats in "Neptune" project under section 80IB(10)

The Tribunal allowed the assessee's appeal, granting the deduction under section 80IB(10) for all 94 flats in the "Neptune" project. The Revenue's appeal was dismissed as the merging of flats did not violate any provisions of section 80IB(10), and the project was approved by competent authorities. The order was pronounced on 17.09.2014.

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Issues Involved:
1. Disallowance of deduction under section 80IB(10) for the project "Neptune" due to the alleged merging of two contiguous flats into one residential unit exceeding 1000 sq.ft.
2. Proportionate deduction under section 80IB(10) for flats with an area less than 1000 sq.ft.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10) for "Neptune" Project:

The assessee, engaged in the development of housing projects, claimed deductions for two projects, "Neptune" and "Pluto," under section 80IB(10) of the Income Tax Act. During a survey, it was found that some flats in the "Neptune" project exceeded the 1000 sq.ft. limit due to merging of contiguous flats. The Assessing Officer (AO) denied the entire deduction claim for the "Neptune" project, arguing that the merging of flats violated the conditions of section 80IB(10).

The CIT(A) partially agreed with the AO, confirming that the merging of flats resulted in units exceeding 1000 sq.ft., thus disqualifying them for the deduction. However, the CIT(A) allowed proportionate deductions for the flats that individually met the 1000 sq.ft. limit.

Upon appeal, it was argued that the project was approved by competent authorities, and the flats were constructed and sold as per the approved plans. The separate sale deeds, electricity meters, and municipal records supported the claim that the flats were sold as independent units. The pamphlet found during the survey was dismissed as an advertising gimmick. The Tribunal noted that the AO did not provide evidence that the flats were merged by the assessee. The Tribunal emphasized that the law applicable at the time did not prohibit the purchase of multiple flats by an individual or their subsequent merging.

The Tribunal referred to a similar case (Emgeen Holdings Pvt. Ltd.), where it was held that as long as each flat was an independent residential unit as per approved plans, the deduction under section 80IB(10) could not be denied even if the end-users merged the flats. The Tribunal concluded that the assessee did not violate any provisions of section 80IB(10) and was entitled to the deduction for all 94 flats in the "Neptune" project.

2. Proportionate Deduction under Section 80IB(10) for Flats with Area Less Than 1000 sq.ft.:

The CIT(A) had allowed proportionate deductions for flats with an area less than 1000 sq.ft., which the Revenue contested. However, since the Tribunal allowed the deduction for all flats in the "Neptune" project, this issue became moot.

The Tribunal reiterated that the assessee was entitled to deductions for all flats as per the pre-amended provisions of section 80IB(10), which did not restrict the purchase or merging of multiple units by an individual.

Conclusion:

The Tribunal allowed the assessee's appeal, granting the deduction under section 80IB(10) for all 94 flats in the "Neptune" project. Consequently, the Revenue's appeal became infructuous and was dismissed. The order was pronounced in the open court on 17.09.2014.

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