Assessee eligible for Section 80IB(10) deduction for entire project pre-amendment

The Tribunal held that the assessee is eligible for deduction under Section 80IB(10) for the entire project as the transactions were completed before the amendments took effect. The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, emphasizing that the amendments introduced by the Finance Act, 2009, could not be applied retrospectively to transactions completed before 19-08-2009.

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Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Applicability of amendments to Section 80IB(10) introduced by the Finance Act, 2009.
3. Concept of prorata deduction under Section 80IB(10).

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The assessee, a promoter and builder, filed a return for the assessment year 2010-11, declaring 'Nil' taxable income after claiming a deduction of Rs. 9,16,23,159/- under Section 80IB(10) for a housing project. During scrutiny, the Assessing Officer (AO) observed that several flats were horizontally merged and allotted to the same individuals or their family members, violating the conditions under Section 80IB(10)(e). Consequently, the AO denied the deduction and added Rs. 9,16,23,159/- to the assessee's income.

2. Applicability of Amendments to Section 80IB(10) Introduced by the Finance Act, 2009:
The assessee contended that the amendments to Section 80IB(10), specifically Clauses (e) and (f), were inserted by the Finance Act, 2009, effective from 01-04-2010. The assessee argued that since the agreements with the vendees were executed before this date, the amended provisions should not apply. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected this argument but allowed prorata deduction on eligible units.

3. Concept of Prorata Deduction under Section 80IB(10):
The Revenue appealed against the CIT(A)'s decision to allow prorata deduction, arguing that there is no concept of prorata deduction under Section 80IB(10). The Tribunal, however, noted that various High Courts and Tribunals have upheld the concept of prorata deduction. The Tribunal cited several cases, including CIT Vs. Arun Excello Foundation (P) Ltd., where prorata deduction was allowed for eligible units.

Tribunal's Findings:
The Tribunal found that the assessee had allotted multiple flats to individuals and their family members before the amendments introduced by the Finance Act, 2009, became effective. The Tribunal held that the amendments could not be applied retrospectively to transactions completed before 19-08-2009. The Tribunal also referred to CBDT Circular No. 5 of 2010, clarifying that the restrictions on allotment of multiple residential units would not apply to allotments made before 19-08-2009.

Conclusion:
The Tribunal concluded that the assessee is eligible for deduction under Section 80IB(10) for the entire project, as the transactions were completed before the amendments took effect. The appeal of the Revenue was dismissed, and the appeal of the assessee was allowed.

Order Pronounced:
The order was pronounced on Monday, the 15th day of February, 2016.

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