ITAT Pune: Pro Rata Deduction Allowed for Residential Projects Despite Size Non-Compliance

The ITAT, Pune, upheld the CIT(A)'s decision to allow a pro rata deduction under Section 80IB(10) of the Income Tax Act for residential projects despite non-compliance with size limits for certain units. The court ruled that the deduction should apply to eligible units even if some units did not meet the size requirements, emphasizing that non-compliance in one unit should not disqualify the entire project from claiming the deduction. This decision aligns with previous judgments supporting proportionate deductions and clarifies the application of Section 80IB(10) in such scenarios.

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Issues:
1. Appeal under Section 260 A of the Income Tax Act, 1961 against ITAT's judgment.
2. Eligibility for deduction under Section 80IB(10) for residential projects.
3. Compliance with size limits for residential units in housing projects.
4. Interpretation of Section 80IB(10) regarding pro rata deduction.

Analysis:
1. The appeal was filed against the ITAT's order directing the Assessing Officer to calculate the pro rata deduction under Section 80IB(10) of the Income Tax Act, 1961 for the assessment year 2011-12.
2. The assessee, a firm developing residential projects, claimed a deduction under Section 80IB(10) for two projects, Kumar Shantiniketan and Kumar Kruti, in their income tax return.
3. The Assessing Officer disallowed the deduction for the projects due to non-compliance with the size limits of residential units as prescribed in Section 80IB(10).
4. The CIT(A) allowed the appeal, following previous ITAT decisions in favor of the assessee for other assessment years.
5. The ITAT, Pune, dismissed the Revenue's appeal, leading to the question of law on whether the ITAT was justified in allowing the deduction on a pro rata basis despite non-compliance with size limits.
6. The Respondent cited a judgment supporting proportionate deduction under Section 80IB(10) based on consistent views of various High Courts and the Supreme Court.
7. Section 80IB(10) allows deductions subject to conditions like project approval timelines and size limits for residential units.
8. The argument against pro rata deduction was based on the interpretation that non-compliance in a single unit would disqualify the entire project, but the court disagreed.
9. The court held that Section 80IB(10) does not aim to deny deduction for compliant units due to non-compliant units, affirming the ITAT's decision on pro rata deduction for eligible residential units.

This detailed analysis of the judgment highlights the issues, arguments, and the court's interpretation of the relevant legal provisions, providing a comprehensive understanding of the case and its implications.

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