2008 (10) TMI 589 - AT - Income Tax

Entitlement for exemption u/s 80IB(10) - flats having area measured less than 1500 sq. ft. - AO denied to allow the deduction because the housing project comprised residential units exceeding 1500 sq. ft. - CIT(A) allowed the deduction u/s 80-IB(10) in respect of the residential units with an area of less than 1500 sq. ft. - It was argued on behalf of the assessee that each block of residential units covered by a plan has to be considered as a separate project and deduction is to be allowed on that basis. HELD THAT - For enabling the benefit of section 80-IB it is necessary that profits must be derived in the previous year from housing project. The eligibility conditions include inter alia that the built-up area should not exceed 1500 sq. ft. in the context of cities other than Delhi and Mumbai. This restriction is applicable to the entire project. If some of the residential units of the project comprised area exceeding the prescribed limit the benefit as per the language of the section cannot be extended to the project. The language employed in a statute is the determinative factor of the legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The same view is expressed in the case of Britannia Industries Ltd. v. CIT 2005 (10) TMI 30 - SUPREME COURT . In this case the hon ble apex court has held that when the language of a statute is clear and unambiguous the courts are to interpret the same in its literal sense and not to give a meaning which would cause violence to the provisions of the statute. The term project is nomen generalissimum It is a term of the most general meaning. It connotes a proposal for undertaking or a scheme for something to be done. The assessee did formulate four such schemes namely Agrini Vajra Porkudam Phase-I and Phase-II. These four schemes as such were approved by the local authority. A project cannot be approved in piecemeal. Approval is accorded to the entire project. Blocks of residential units are parts of a project and not project by itself. As such a block of residential units cannot be construed to be a separate project. It is therefore evident that the assessee did not comply with the conditions precedent for availing the benefit of section 80-IB(10). We therefore reverse the order of the CIT (A) and restore the order of the AO on this count. In the result the appeal of the Revenue stands allowed.

Summary

Issues:
- Allowability of deduction under section 80-IB(10) of the Income-tax Act, 1961.

Comprehensive Analysis:
The case involved an appeal by the Revenue against the order related to the assessment year 2004-05. The main issue raised was the allowability of a deduction of Rs. 4,48,98,542 under section 80-IB(10) of the Income-tax Act, 1961. The assessee had completed four housing projects in Madurai, claiming the deduction for flats with an area less than 1500 sq. ft. The Assessing Officer denied the deduction as some residential units exceeded 1500 sq. ft. The Commissioner (Appeals) allowed the deduction for units with an area less than 1500 sq. ft. The key contention was whether the conditions stipulated in the statute were met for claiming the deduction under section 80-IB(10).

The Tribunal examined the statutory provisions of section 80-IA and 80-IB, which extended benefits to approved housing projects meeting specific criteria. The conditions required the housing projects to have certain characteristics, including a maximum built-up area for dwelling units. The insertion of section 80-IB expanded the scope of deduction for housing projects beyond certain limits. It was argued that each block of residential units should be considered a separate project for claiming the deduction.

The Tribunal emphasized that for claiming the benefit of section 80-IB, it was essential that profits be derived from a housing project meeting the eligibility conditions, including the built-up area not exceeding 1500 sq. ft. The Tribunal highlighted the importance of interpreting the plain language of the statute without reading into it. Referring to legal precedents, the Tribunal reiterated that legislative intent must be derived from the words used in the statute.

Regarding the term "project," the Tribunal clarified that it signifies a general proposal or scheme for something to be done. The approval of a project is granted as a whole and not in parts. Blocks of residential units are considered parts of a project, not separate projects. Since the assessee did not comply with the conditions for availing the benefit of section 80-IB(10), the Tribunal reversed the Commissioner (Appeals)'s order and upheld the Assessing Officer's decision.

In conclusion, the Tribunal allowed the appeal of the Revenue, emphasizing the importance of adhering to the statutory conditions for claiming deductions under section 80-IB(10) of the Income-tax Act, 1961.