2017 (1) TMI 1794 - AT - Income Tax

ITAT affirms CIT(A)'s decision on Section 80IB(10) deduction, excludes terrace area.

The ITAT upheld the CIT(A)'s decision, allowing the deduction under Section 80IB(10) on a proportionate basis for the eligible units and excluding the ... Deduction u/s 80IB - Denial of deduction as house project had not been completed by 31/03/2012, thus violating the conditions provided in clause (a) to section 80IB(10) - CIT-A allowed the deduction - Non-completion of project, namely building “C” and therefore denying the deduction - HELD THAT:- We find that ld.CIT(A) has given a finding that “Building C” could not be completed because the required FSI for construction was not sanctioned / allowed by PMC and that no pending compliance remained on the part of the assessee. He has further noted that when the compliance of provision had become impossible on the part of the assessee the claim of deduction could not be denied and for which he placed reliance on the decision of Pune Tribunal in the case of M/s. Ramsukh Properties [2012 (12) TMI 360 - ITAT PUNE]. He had also relied on decision of Pune Tribunal in the case of ITO Vs. Satyanarayan Ramswaroop Agarwal [2014 (4) TMI 1132 - ITAT PUNE] and other decisions. He has further given a finding that the construction of the ‘Park Land’ which was sanctioned on 04.08.2006 was subsequently revised and has been totally completed before 31.03.2012 and in such a situation, the claim of deduction u/s 80IB(10) of the assessee was allowable on a proportionate basis. Violation of provisions of the Act on account of the area of 5 Row Houses being in excess of 1500 Sq.Ft. - CIT-A has given a finding that Government Approved Valuer had taken the outer measurement of the Row Houses and calculated the area which is contrary to the definition contained in Sec.80IB(14)(a). He has further noticed that the Authorized Valuer had added the area of car porch, terrace above porch while measuring the area of Row Houses and if the terrace area is excluded from calculation of area, the total area of the units do not exceed 1500 Sq.Ft. For excluding the area of terrace, Ld. CIT(A) had relied on the decisions of M/s. Commonwealth Developers CD Fountain Head [2014 (4) TMI 122 - BOMBAY HIGH COURT] and the decision of CIT Vs. Mahalakshmi Housing [2012 (11) TMI 1121 - MADRAS HIGH COURT] and other Tribunal decisions. Before us Revenue has not placed any material on record to controvert the findings of ld. CIT(A) nor has placed any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A). Thus, the grounds of the Revenue are dismissed. Issues Involved:1. Deduction under Section 80IB(10) of the Income Tax Act.2. Completion of the housing project by the stipulated date.3. Interpretation of 'housing project' under Section 80IB(10).4. Pro-rata deduction for eligible units.5. Inclusion of terrace area in the built-up area.Detailed Analysis:1. Deduction under Section 80IB(10) of the Income Tax Act:The primary issue revolves around the eligibility of the assessee for the deduction under Section 80IB(10) for the housing project 'Parkland.' The AO denied the deduction due to non-completion of the project by the stipulated date and the area of certain units exceeding the prescribed limit. The CIT(A) allowed the deduction, which was contested by the Revenue.2. Completion of the housing project by the stipulated date:The AO observed that the project commenced on 18.11.2006 and was supposed to be completed by 31.03.2012. However, the 'C Wing' of the project was not constructed, and the completion certificate for other buildings was obtained on 28.03.2012. The AO concluded that the project was incomplete as of 31.03.2012. The CIT(A) noted that the construction of 'C Wing' could not commence due to the unavailability of FSI, which was beyond the control of the assessee. The CIT(A) relied on the decision in Ramsukh Properties Vs. DCIT, which held that if compliance of the provision becomes impossible due to reasons beyond the assessee's control, the deduction should not be denied.3. Interpretation of 'housing project' under Section 80IB(10):The AO argued that the entire project must be considered as a single unit, and non-completion of any part would disqualify the entire project from deduction. The CIT(A) and ITAT, however, supported a liberal interpretation, allowing proportionate deduction for the completed parts of the project. This interpretation aligns with the decisions in cases like Johar Hassan Zojwalla and Satyanarayan Ramswaroop Agarwal, where the courts allowed deductions for completed portions of the project when non-completion was due to external factors.4. Pro-rata deduction for eligible units:The AO denied the deduction on the grounds that some units exceeded the 1500 sq.ft. limit. The CIT(A) allowed pro-rata deduction for units that met the criteria, citing various judicial precedents, including Brigade Enterprises (P) Ltd., AIR Developers, and Sheth Developers, which upheld the principle of granting deductions on a proportionate basis for eligible units.5. Inclusion of terrace area in the built-up area:The AO included the terrace area in the built-up area calculation, leading to some units exceeding the 1500 sq.ft. limit. The CIT(A) excluded the terrace area, referencing the definition in Section 80IB(14)(a) and judicial decisions in Commonwealth Developers CD Fountain Head Vs. ACIT and CIT Vs. Mahalakshmi Housing, which held that open terrace areas should not be included in the built-up area.Conclusion:The ITAT upheld the CIT(A)'s decision, allowing the deduction under Section 80IB(10) on a proportionate basis for the eligible units and excluding the terrace area from the built-up area calculation. The appeal of the Revenue was dismissed, affirming the assessee's entitlement to the deduction.