2021 (9) TMI 951 - AT - Income Tax

Tribunal affirms CIT(A)'s decision on Income Tax Act appeal, allows deduction under section 80IB(10) (A)

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal challenging the reopening of assessment under sections 147 and 148 of the ... Deduction u/s 80IB(10) on pro rata basis - Few/some units satisfying the condition of the built-up area - HELD THAT:- Assessee is entitled to claim proportionate relief in respect of units satisfying the condition of the built-up area. In the case of ITO vs. Paras Builders [2015 (6) TMI 286 - ITAT PUNE] held that where the assessee had violated provisions of section 80-IB(10)(C) in respect of two units of housing project, denial of deduction u/s 80IB would be limited only to said two units and for balance units assessed would be entitled to deduction. Similarly, in the case of Om Swami Smaran Develpoers (P) Ltd.[2018 (1) TMI 1646 - ITAT MUMBAI] of the Tribunal has held that where the assessee developer had allotted three flats in a housing project to a single person in violation of section 80 IB(10)(f) of the Act, the assessee would be entitled to deduction in respect of the remaining flats. In the present case, since the assessee had claimed full deduction u/s 80IB(10) of the Act, without complying with the conditions laid down in respect of certain units, the Ld. CIT(A) has accepted the arguments advanced on the alternative ground in the light of the cases relied upon by the assessee and directed the AO to allow the deduction on proportionate basis. - Decided against revenue. Issues Involved:1. Validity of reopening the assessment under sections 147 and 148 of the Income Tax Act, 1961.2. Legitimacy of the deduction claimed under section 80IB(10) of the Income Tax Act, 1961.3. Proportional allowance of deduction under section 80IB(10) for units complying with the conditions.Issue-Wise Detailed Analysis:1. Validity of Reopening the Assessment:The assessee filed a return declaring nil income after claiming a deduction under section 80IB(10) amounting to Rs. 2,08,89,635/-. The Assessing Officer (AO) reopened the case under sections 147 and 148, alleging that the deduction was wrongly claimed. The assessee objected, arguing that the information was already available with the AO and reassessment would amount to a review, which is not permissible under settled law. The AO rejected these objections and disallowed the deduction. The CIT(A) partly allowed the appeal, deleting the addition made by the AO. The Revenue challenged this decision, arguing that the CIT(A) erred in allowing the appeal without appreciating the facts and relied on judgments rendered on different facts.2. Legitimacy of the Deduction Claimed Under Section 80IB(10):The Revenue contended that the CIT(A) erred in directing the AO to restrict the disallowance to the extent of profits earned on a particular unit, as there is no provision for proportionate allowance/disallowance of deduction under section 80IB(10). The Revenue pointed out that the assessee admitted that the conditions under section 80IB(10) were not fulfilled and offered the disallowance on a pro-rata basis. The AO disallowed the deduction, citing the allotment of flats to related individuals in contravention of section 80IB(10)(f)(i). The CIT(A) allowed the deduction on a proportionate basis, which the Revenue argued was incorrect as it was based on different facts from the cases cited.3. Proportional Allowance of Deduction Under Section 80IB(10):The CIT(A) directed the AO to allow the deduction on a proportionate basis, relying on various judgments. The CIT(A) referenced the case of M/s Bengal Ambuja Housing Development Ltd., where it was held that deduction should be restricted to profits derived from smaller residential units complying with section 80IB(10). The Madras High Court in M/s Viswas Promoters (P) Ltd. also held that the assessee is entitled to claim proportionate relief for units satisfying the built-up area condition. The CIT(A) concluded that the assessee was eligible for deduction for the units not violating the Act's provisions and directed the AO to restrict the disallowance to the profits of the non-compliant units.Conclusion:The Tribunal upheld the CIT(A)'s decision, finding it well-reasoned and based on relevant case law. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s direction to allow the deduction on a proportionate basis for units complying with section 80IB(10). The appeal filed by the Revenue was dismissed, and the order pronounced on 11th August 2021.