2012 (5) TMI 637 - AT - Income Tax

Disallowance of claim of deduction u/s 80IB(10) - Held that - Assessing Officer was not justified in rejecting the affidavit furnished by the assessee and concluding that the appellant had constructed duplex house no. 128(28) having built up area of 1610.53 sq.ft. Since during the year under consideration, out of 35 Duplex Houses, only five houses were sold and the assessee has claimed that in respect of three houses, different size was found by the DVO. We also find that the Assessing Officer had not examined the affidavit filed by the assessee nor cross examined the respective occupant of house no. 128(28) to ascertain the additional construction done by him. In the interest of justice, we restore this ground back to the file of the Assessing Officer to have a fresh measurement of the house and if the same is found to be up to 1500 sq.ft., he shall allow the assessee s claim for deduction subject to other conditions of section 80IB(10) being fulfilled. We direct accordingly.

Summary

Issues:
1. Disallowance of claim of deduction u/s 80IB(10) of the Income-tax Act, 1961.

Analysis:
1. The appeal was filed against the order of CIT(A) for the assessment year 2006-07, specifically challenging the disallowance of the deduction claimed under section 80IB(10) of the Income-tax Act, 1961.

2. The Assessing Officer disallowed the deduction on the grounds that the assessee was a contractor, not a developer, and the built-up area exceeded 1500 sq.ft. without a completion date mentioned. However, it was found that the assessee had undertaken a housing project approved by the Municipal Corporation, Bhopal, and had incurred development expenses for road, electricity, and water, meeting the criteria for being considered a developer under section 80IB(10). The AO's decision was deemed unjustified based on precedents and documentary evidence presented.

3. Regarding the completion certificate, although there were discrepancies in dates, it was established that the project was completed within the statutory time limit. However, due to cuttings on the certificate and lack of the original document, the issue was remanded to the Assessing Officer for verification from the original certificate to ensure compliance with the statutory deadline.

4. Concerning the area of construction, it was argued that only one house exceeded 1500 sq.ft., and the disallowance under section 80IB(10) should be limited to that house. The DVO's measurements were contested, claiming that the additional area was constructed by the buyer post-sale. As the AO did not thoroughly examine the evidence provided, the issue was sent back for a fresh measurement and verification to determine the eligibility for deduction under section 80IB(10).

5. The appeal was partially allowed based on the above findings, directing the AO to reevaluate the issues in accordance with the statutory provisions. The judgment was pronounced on 9th May 2012.