2024 (6) TMI 1283 - AT - Income Tax

Assessee wins section 80IB(10) deduction appeal: open balconies excluded from built-up area calculation

ITAT Delhi allowed the assessee's appeal regarding deduction under section 80IB(10). The tribunal held that for calculating built-up area limits of 1000 ... Deduction u/s 80IB(10) - units where built up area exceeds the limit of 1000 sq. fts only when area of open sky balcony is added to built area - HELD THAT:- We observe that the Tribunal for the assessment years 2008-09 & 2009-10 in the common order [2016 (5) TMI 1555 - ITAT DELHI] allowed the claim for deduction u/s 80IB(10) in respect of flats excluding the balcony open to sky for the purpose of calculating the built-up area of the individual units Thus, we allow the claim for deduction u/s 80IB(10) of the Act in respect of those flats which area exceeds 1000 sq. fts excluding balcony open to the sky. The Assessing Officer is directed to verify the claim of the assessee after obtaining the details and allow deduction in view of the observations of the Tribunal in assessee’s own case. Choice of Method of accounting - CIT(A) directing AO to accept “Project Completion Method” - assessee is neither following cash system nor mercantile system completely - HELD THAT:- As decided in the assessment years 2008-09 & 2009-10 [2016 (5) TMI 1555 - ITAT DELHI] Tribunal decided the issue in appeal in favour of the assessee by sustaining the order of the CIT(A) in holding that the project completion method adopted by the assessee is the right method for determining the profits. Ld. CIT(A) also held that the Assessing Officer should not have been disturbed the project completion method followed by the assessee regularly and there is no cogent reason to change the method. We further observe that the appeal of the Revenue has been dismissed by the Hon’ble High Court [2017 (5) TMI 1824 - DELHI HIGH COURT] holding that there is no substantial question of law. Hon’ble High Court held that the question “whether the addition made by the Assessing Officer to the income of the Respondent for the relevant year based on percentage completion method was not correct as held by the ITAT” stands answered in favour of the assessee and against the Revenue in PCIT Vs. Shipra Estate Ltd. & Jai Krishan Estate Developers Pvt. Ltd [2016 (11) TMI 1758 - DELHI HIGH COURT] - Decided against revenue. Partly allowing the deduction u/s 80IB(10) as the project as a whole does not satisfy the conditions enumerated - two projects have been sanctioned by a common approval - HELD THAT:- This ground also decided in favour of the assessee in earlier years [2016 (5) TMI 1555 - ITAT DELHI] by the Tribunal following the decision of Vishwas Promoters Pvt. Ltd. [2012 (11) TMI 1117 - MADRAS HIGH COURT] and also Siddhivinayak Kohinoor Venture [2013 (10) TMI 1295 - ITAT PUNE] as held that the requirement of s. 80-IB (10) of the Act to the effect that project should be approved by a 'local authority' is fulfilled no sooner when the 'housing project' considered by an assessee is approved by a 'local authority'. Moreover, the expression 'housing project' is not defined in the Development Control Rules for PCMC i.e. the 'local authority' in the case before us and thus, the said enactment cannot be resorted to for the purpose of understanding the meaning of expression 'housing project' contained in s. 80-IB(10) of the Act. Therefore, so long as the claim of deduction is in relation to a 'housing project', which has been approved by the 'local authority', it would satisfy the requirement of s. 80- IB(10) of the Act. There is no dispute that the expression 'housing project' is not defined in the Development Control Rules for PCMC and therefore, the concept of housing project’ as sought to be understood by the AO based on the explanation of Chief Engineer. PCMC is not relevant for the purposes of s, 80IB (10) of the Act. Thus, the argument of the Revenue to the effect that since SWRH and ’S'1 projects have been approved by PCMC under a common approval, the two projects should be combined and considered as a single project for the purpose of s. under s. 80-IB(10) of the Act in our opinion is misplaced. Decided in favour of assessee. Deduction u/s 80IB(10) - conditions laid down in clauses (e) & (f) of subsection u/s 80IB(10) of sub-section (10) of section 80IB of the Act are not fulfilled - HELD THAT:- As observed that even though there is a reference to clause (e) & (f) of section 80IB(10) of the Act in the assessment order there is no specific finding by the Assessing Officer as to which flats are violative of clause (e) & (f) of section 80IB(10) of the Act. We also observe that there is no separate addition or disallowance for violation of these clauses u/s 80IB(10) of the Act in the assessment order. Similarly, there is no specific adjudication on this aspect of the matter by the CIT(A). In such circumstances, we find no merit in the ground raised by the Revenue. Thus, this ground is rejected. Assessee appeal allowed. Issues Involved:1. Disallowance of deduction under section 80IB(10) of the Income Tax Act, 1961.2. Acceptance of the 'Project Completion Method' for accounting.3. Conditions under section 80IB(10) not satisfied for the entire project.4. Violation of clauses (e) & (f) of section 80IB(10).Detailed Analysis:1. Disallowance of Deduction under Section 80IB(10):The primary issue was whether the built-up area exceeding 1000 sq. ft. should include the area of open balconies. The Tribunal had previously ruled in favor of the assessee for the assessment years 2008-09 to 2011-12, stating that balconies open to the sky should be excluded from the built-up area calculation. The Tribunal referenced the case of Naresh T. Wadhwani vs DCIT, where it was held that the area of projected terrace (open to sky) should not be included in the built-up area. The Tribunal observed no contrary judicial precedent and directed the Assessing Officer to verify and allow the deduction under section 80IB(10) accordingly.2. Acceptance of the 'Project Completion Method':The Revenue challenged the CIT(A)'s direction to accept the 'Project Completion Method' for accounting. The Tribunal upheld the CIT(A)'s decision, referencing its earlier rulings for assessment years 2008-09 to 2011-12. The Tribunal noted that the 'Project Completion Method' is a recognized accounting method prescribed by the ICAI and regularly followed by the assessee. The Tribunal also referenced a High Court decision which dismissed the Revenue's appeal, affirming that the method was appropriate for determining profits.3. Conditions under Section 80IB(10) Not Satisfied for the Entire Project:The Revenue argued that the project as a whole did not satisfy the conditions of section 80IB(10). The Tribunal, following its earlier decisions and judicial precedents, held that the deduction under section 80IB(10) applies to eligible units within a housing project, even if the project includes ineligible units. The Tribunal referenced the Hon'ble Madras High Court's decision in Vishwas Promoters Pvt. Ltd. vs. ACIT and the Pune Bench's decision in Siddhivinayak Kohinoor Venture vs. ACIT, which supported the view that a housing project can comprise both eligible and ineligible units, and the deduction is limited to eligible units.4. Violation of Clauses (e) & (f) of Section 80IB(10):The Revenue contended that the conditions laid down in clauses (e) & (f) of section 80IB(10) were not fulfilled. However, the Tribunal found no specific findings by the Assessing Officer regarding which flats violated these clauses. There was no separate addition or disallowance for this reason in the assessment order. The Tribunal observed that the issue was not specifically adjudicated by the CIT(A) and found no merit in the ground raised by the Revenue, thus rejecting it.Conclusion:The Tribunal allowed the assessee's appeal regarding the deduction under section 80IB(10) and dismissed the Revenue's appeal on all grounds. The Tribunal directed the Assessing Officer to verify the claims and allow deductions as per the Tribunal's observations in previous assessment years. The order was pronounced in the open court on 24/04/2024.