ITAT grants full deduction under section 80IB(10) for entire project, upholds pro-rata deduction for compliant units. (10)

The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal, directing the Assessing Officer to grant the deduction under section 80IB(10) for the entire project. The ITAT upheld the pro-rata deduction for units that complied with the conditions of section 80IB(10). The ITAT's decision was based on the exclusion of architectural projections from the built-up area calculations and previous judicial decisions supporting pro-rata deductions. The Revenue's appeal was dismissed, affirming the CIT(A)'s decision.

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Issues Involved:
1. Disallowance of deduction under section 80IB(10) for exceeding the built-up area limit.
2. Eligibility for deduction under section 80IB(10) on a pro-rata basis.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10) for Exceeding the Built-up Area Limit:

The primary issue in this case was whether the assessee's claim for deduction under section 80IB(10) should be disallowed because 10 flats in Building B of the project "Sun Orbit" exceeded the built-up area limit of 1500 sq. ft.

The Assessing Officer (AO) denied the deduction, arguing that the built-up area of these 10 flats exceeded 1500 sq. ft. The AO relied on the report of a government-approved valuer, Shri Nitin Lele, who calculated the built-up area considering the thickness of the walls at 18 inches. The assessee, however, contended that the built-up area did not exceed the limit, as per their architects' reports, which considered the wall thickness to be 6 inches as per the sanctioned plan. The assessee's architects, Shri Prakash Kulkarni and Shri Harshad Ruparel, calculated the area of each flat to be less than 1500 sq. ft.

The Commissioner of Income-Tax (Appeals) [CIT(A)] observed that the AO's valuer included architectural projections in the built-up area, which were primarily for aesthetic purposes and not utilizable or habitable. The CIT(A) noted that local authorities, such as the Pune Municipal Corporation (PMC), did not consider these projections in the built-up area calculations. The CIT(A) also found that the AO's valuer did not provide detailed calculations for his findings.

The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s observations, noting that the architectural projections should not be included in the built-up area as they are not utilizable from inside and are for aesthetic purposes. Consequently, the ITAT directed the AO to allow the deduction under section 80IB(10) for the entire project, as the built-up area of the flats did not exceed the prescribed limit when calculated correctly.

2. Eligibility for Deduction under Section 80IB(10) on a Pro-rata Basis:

The second issue was whether the assessee was eligible for a pro-rata deduction under section 80IB(10) for the units that complied with the conditions of the section, even if some units did not.

The CIT(A) granted the deduction on a pro-rata basis, citing various judicial decisions that supported the allowance of deductions for units that met the conditions of section 80IB(10). The CIT(A) referenced several cases, including DCIT vs. Brigade Enterprises Pvt. Ltd., AIR Developers, Sheh Developers Pvt. Ltd., and others, which upheld the principle of granting deductions on a pro-rata basis.

The ITAT found no reason to interfere with the CIT(A)'s decision on this matter, as the Revenue did not present any contrary binding decision or evidence to refute the CIT(A)'s findings. Consequently, the ITAT dismissed the Revenue's appeal on this issue.

Conclusion:

The ITAT allowed the assessee's appeal, granting the deduction under section 80IB(10) for the entire project, and dismissed the Revenue's appeal, upholding the pro-rata deduction for units that complied with the conditions of section 80IB(10). The order was pronounced on 27th October 2017.

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