2014 (6) TMI 1020 - AT - Income Tax

ITAT Pune Bench allows pro-rata deductions for completed units, dismisses Revenue's appeals.

ACIT Versus Shri Subhash F Bafna And Subhash F Bafna Versus DCIT, Circle 11 (2), Pune And Vice-Versa

ACIT Versus Shri Subhash F Bafna And Subhash F Bafna Versus DCIT, Circle 11 (2), Pune And Vice-Versa - TMI Issues Involved:1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.2. Validity of the statement made during survey proceedings.3. Completion of the housing project within the stipulated time.4. Pro-rata deduction for completed units.5. Impact of commercial space on eligibility for deduction.6. Applicability of amendments to Section 80IB(10).Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10):The core issue revolves around whether the assessee is entitled to claim deductions under Section 80IB(10) for the housing project 'Vardhaman Township.' The project was approved on 20-05-2002 and was supposed to be completed by 31-03-2008. The Assessing Officer (AO) disallowed the deduction, noting that the project was not completed by the stipulated date, as evidenced by a survey conducted on 13-05-2008.2. Validity of the Statement Made During Survey Proceedings:The AO's decision was influenced by the assessee's statement during the survey, where he admitted that 90% of the project was completed by March 2008 and surrendered the deduction claim. However, the Commissioner of Income Tax (Appeals) [CIT(A)] observed that the assessee retracted this statement within 15 days, requesting the deduction for the completed part of the project. It was held that any legal claim by an assessee must be entertained unless specifically prohibited by law.3. Completion of the Housing Project within the Stipulated Time:The CIT(A) noted that the project received multiple approvals and revisions, but the original approval date was 20-05-2002. According to Section 80IB(10), the project should have been completed by 31-03-2008. Since the completion certificate was not obtained by this date, the AO's rejection of the deduction was initially justified. However, the CIT(A) allowed the deduction for completed units based on the principle that legal claims can be made at any stage unless explicitly prohibited.4. Pro-rata Deduction for Completed Units:The assessee argued for a pro-rata deduction for the completed units, citing various judicial precedents. The CIT(A) allowed this, noting that the project was largely complete, and the delay in obtaining the completion certificate was due to factors beyond the assessee's control, such as a survey by the CID and local issues. This view was supported by several ITAT decisions, including the Pune Bench in the case of Ramsukh Properties.5. Impact of Commercial Space on Eligibility for Deduction:The AO noted that the project included commercial space exceeding the permissible limit. However, the CIT(A) and subsequent ITAT decisions held that for projects approved before 31-03-2005, the inclusion of commercial space does not disqualify the project from claiming deductions under Section 80IB(10). This interpretation was supported by the Hon'ble Bombay High Court in the case of Brahma Associates and the Hon'ble Gujarat High Court in the case of Manan Corporation.6. Applicability of Amendments to Section 80IB(10):The AO and CIT(A) initially applied amendments to Section 80IB(10) retrospectively, affecting the assessee's claim. However, judicial precedents, including the Hon'ble Gujarat High Court in Manan Corporation and the ITAT Pune Bench, clarified that such amendments are prospective and do not apply to projects approved before 01-04-2005.Conclusion:The ITAT Pune Bench upheld the CIT(A)'s decision to allow pro-rata deductions for the completed units for Assessment Years 2004-05 to 2007-08. For Assessment Year 2008-09, the ITAT set aside the CIT(A)'s order and directed the AO to allow proportionate deduction for eligible units. The appeals filed by the Revenue were dismissed, while the assessee's appeal for A.Y. 2008-09 was allowed. The appeal challenging the CIT(A)'s order under Section 154 was dismissed as infructuous.