Assessee's Deduction Claim Approved Under Section 80IB(10) for A.Y. 2013-14

The ITAT upheld the CIT(A)'s decision to allow the assessee's claim for deduction under section 80IB(10) for the A.Y. 2013-14, based on legitimate transactions and compliance with CBDT notification. The revenue's appeal was dismissed, affirming the CIT(A)'s order.

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Issues Involved:
1. Whether the development rights acquired by the assessee firm were a collusive transaction to claim unjustified deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Whether the additional housing project constructed by the assessee by consuming Transferable Development Rights (TDR) on an existing housing project site qualifies as an infrastructural facility under section 80IB(10).
3. Whether the CIT(A) erred in vacating the order of the Assessing Officer (AO) and allowing the assessee's claim for deduction under section 80IB(10).

Detailed Analysis:

1. Collusive Transaction Allegation:
The revenue argued that the development rights acquired by the assessee firm were a collusive transaction to claim unjustified deduction under section 80IB(10). The AO noted that the payments for the TDR were made before the firm’s formation, and the documents were unregistered, casting doubt on the transaction's legality. However, the CIT(A) found that the assessee firm was genuinely constituted as per the partnership deed dated 01.12.2003, and the transactions were legitimate. The CIT(A) observed that the firm had regularly filed income tax returns from A.Y. 2005-06 onwards, and the development rights were duly accounted for in the balance sheets. The CIT(A) concluded that the transactions were not collusive, as the payments made by one of the partners (Kashish Park Realty Pvt. Ltd.) were credited to the firm’s liability account, which is permissible under the law.

2. Qualification of Additional Housing Project as Infrastructural Facility:
The revenue contended that the CIT(A) erred in applying the CBDT notification No. 205/3/2001/ITA-II dated 04.05.2001, which allows additional housing projects on existing sites to qualify as infrastructural facilities under section 80IB(10). The CIT(A) referred to the CBDT clarification and the jurisdictional High Court's decision in the case of CIT vs. Vandana Properties, which affirmed that additional housing projects utilizing TDR on existing sites are eligible for deduction under section 80IB(10). The CIT(A) noted that the assessee firm maintained separate books of account for the project, ensuring the correct ascertainment of profits, thus fulfilling the conditions laid out in the CBDT notification.

3. Vacating AO's Order and Allowing Deduction:
The AO denied the assessee's claim for deduction under section 80IB(10), arguing that the project did not meet the requirement of being on a plot of land measuring at least one acre. The CIT(A) found this observation incorrect, noting that the total area covered by the housing projects constructed by the assessee firm exceeded one acre. The CIT(A) highlighted that the assessee firm constructed buildings MN-6, MN-7, MN-8, and Towers A and B, covering a total area of 8952.45 sq. meters, which is more than one acre. The CIT(A) also noted that the AO’s decision was based on an erroneous interpretation of the law and factual inaccuracies.

Conclusion:
The CIT(A) allowed the assessee's claim for deduction under section 80IB(10) for the A.Y. 2013-14, based on the findings from earlier years (A.Y. 2010-11 to 2012-13) and the CBDT notification. The ITAT affirmed the CIT(A)’s decision, referencing previous ITAT rulings in the assessee's favor for A.Y. 2010-11 and A.Y. 2011-12. The revenue's appeal was dismissed, and the CIT(A)’s order was upheld.

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