Tribunal grants prorata deduction for compliant flats under section 80IB(10)

The Tribunal allowed prorata deduction for flats compliant with section 80IB(10) and directed re-verification of the built-up area for disputed flats. The appeal of the assessee was allowed for statistical purposes, while the Revenue's appeal was dismissed, emphasizing prorata relief and accurate verification of compliance with the Income Tax Act.

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Issues Involved:
1. Eligibility of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Validity of prorata deduction under section 80IB(10) for flats that comply with the area condition.
3. Verification of the built-up area of flats exceeding 1500 sq. ft.

Issue-wise Detailed Analysis:

1. Eligibility of Deduction under Section 80IB(10):
The core issue in the cross appeals is the eligibility of the assessee to claim deduction under section 80IB(10) of the Income Tax Act, 1961. The assessee declared income from a housing project and claimed a deduction amounting to Rs. 3,21,92,617/-. The Assessing Officer (AO) referred the project to a Government Approved Valuer (DVO), who reported that 16 flats exceeded the built-up area of 1500 sq. ft., a condition under section 80IB(10). Consequently, the AO issued a show cause notice and eventually disallowed the deduction for these flats, leading to an addition of Rs. 3.39 crores to the income.

2. Validity of Prorata Deduction:
The CIT(A) upheld the AO's finding regarding the 16 flats exceeding the area limit but allowed prorata deduction for the remaining flats that complied with section 80IB(10). This decision was based on various Tribunal rulings and the Hon’ble Madras High Court's decision in Viswas Promoters Pvt. Ltd. Vs. ACIT. The Revenue appealed against this prorata deduction, arguing that section 80IB(10)(c) does not contemplate prorata relief and that the entire project must meet the conditions for deduction.

3. Verification of Built-up Area:
The assessee contested the DVO's report, claiming it was factually incorrect and based on incomplete verification. The assessee submitted an alternative valuation report from another Government Valuer, asserting that none of the flats exceeded the 1500 sq. ft. limit. The CIT(A) and AO did not accept this alternative report. The Tribunal, considering the conflicting reports, directed the AO to re-verify the built-up area of the 16 disputed flats through a detailed measurement process, ensuring a fair opportunity for the assessee to present their case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to allow prorata deduction for compliant flats, referencing consistent Tribunal and High Court rulings supporting such relief. For the 16 disputed flats, the Tribunal remanded the matter back to the AO for a thorough re-verification of the built-up area, emphasizing the need for accurate and just measurements.

Final Order:
The appeal of the assessee was allowed for statistical purposes, and the appeal of the Revenue was dismissed, reinforcing the principle of prorata deduction and ensuring accurate verification of compliance with section 80IB(10).

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