Tribunal Upholds Proportionate Deduction for Housing Project Despite Violations

The tribunal upheld the Commissioner's decision to allow proportionate deduction u/s. 80IB(10) on the housing project developed by the assessee. The Revenue's appeal challenging the allowance of deduction on eligible units of the project, despite violations in two flats, was dismissed. The tribunal relied on legal precedents and legislative provisions to support the allowance of proportionate deduction in such cases. The order was pronounced on September 20, 2019.

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Issues:
- Allowability of pro-rata deduction u/s. 80IB(10) on a housing project developed by the assessee.

Detailed Analysis:
The appellate tribunal heard an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the allowance of pro-rata deduction u/s. 80IB(10) for the assessment year 2012-13. The Revenue contested the findings of the Commissioner in allowing the deduction on a housing project developed by the assessee, specifically challenging the treatment of two flats in the project. The Assessing Officer initially denied the deduction on the entire project due to violations of conditions under section 80IB(10) related to the two flats. The Commissioner, however, following the decision of the Hon'ble Madras High Court, allowed a proportionate deduction on eligible units of the project, leading to the Revenue's appeal.

The assessee argued for the well-settled principle of allowing pro-rata deduction u/s. 80IB(10) on eligible units of a housing project, citing various legal precedents to support their case. The Revenue, represented by Shri S.B. Prasad, opposed the Commissioner's decision and sought to reverse it. The tribunal analyzed the contentions of both parties and reviewed the lower authorities' orders. It was noted that the only issue in the appeal pertained to the allowance of proportionate deduction u/s. 80IB(10) on eligible residential units of the housing project, considering the violations in only two flats. The tribunal referred to decisions by the Hon'ble Bombay High Court and the Hon'ble Madras High Court, which upheld the concept of proportionate deduction under section 80IB(10) of the Act.

Further, the tribunal highlighted its consistent practice of allowing proportionate deduction when a housing project complies with all conditions under section 80IB(10). It referenced a case involving the assessee's sister concern, where a similar violation occurred, and proportionate deduction was allowed on the unaffected units. The tribunal emphasized that where violations exist, the assessee is not entitled to claim deduction under section 80IB(10) for those specific units but can claim proportionate deduction on the remaining units of the project. Citing precedents and legislative mandates, the tribunal upheld the Commissioner's decision to allow proportionate deduction on eligible units of the housing project, dismissing the Revenue's appeal for lack of merit.

In conclusion, the tribunal upheld the order of the Commissioner, affirming the allowance of proportionate deduction u/s. 80IB(10) on the housing project developed by the assessee. The appeal of the Revenue was dismissed, and the order was pronounced on September 20, 2019.

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