2012 (11) TMI 1121 - HC - Income Tax

Claim deduction u/s.80IB(10) - Held that - The open terrace area cannot form part of the built up area, in the result, the assessee would be entitled to deduction under Section 80-IB(10) of the Act. As far as the Revenue s contention that for the purpose of Section 80-IB(10) deduction, the assessee should have owned the property is concerned is liable to be rejected.

Summary

Issues involved:
1. Revenue's appeal regarding eligibility of deduction under sections 80IB and 80IB(10) of the Income Tax Act for assessment years 2006-07.
2. Assessee's appeal concerning the inclusion of private terrace area in the built-up area for claiming deduction under Section 80IB(14) of the Income Tax Act.

Analysis:

1. Revenue's Appeals (T.C.(A)No.585 of 2011):
The Revenue raised substantial questions of law regarding the eligibility of deduction under sections 80IB and 80IB(10) of the Income Tax Act. The Court admitted questions related to the mandatory conditions stipulated under these sections and the difference between developers, builders, and construction contracts for claiming deductions. The Tribunal's decision on the cap of 10% for flats exceeding 1500 sq.ft. in built-up area was also challenged. During the hearing, the Revenue requested reframing of questions to better reflect the issue. The Court admitted revised questions, including the eligibility of developers or builders for benefits under Section 80(IB)(10), compliance with submission of completion certificates, and entitlement to deductions for housing projects with flats exceeding 1500 sq.ft. The Tribunal's decisions on these matters were crucial for determining the Revenue's appeal outcome.

2. Assessee's Appeal (T.C.(A).No. 318 of 2012):
The assessee's appeal focused on whether the private terrace area should be considered part of the built-up area for claiming deductions under Section 80IB(14) of the Income Tax Act. The assessee had entered into a joint development agreement, leading to a dispute with the Assessing Officer over ownership rights and eligibility for deductions. While the Commissioner of Income Tax (Appeals) ruled in favor of the assessee on ownership, the Tribunal favored the Revenue regarding the inclusion of open terrace area in the built-up area. However, the Court referred to a previous judgment where a similar issue was decided against the Revenue, leading to the allowance of the assessee's appeal. The exclusion of the open terrace area from the built-up area was crucial in determining the assessee's entitlement to deductions under Section 80-IB(10) of the Act.

3. Final Judgment:
The Court ruled in favor of the assessee, allowing the appeal and confirming that the open terrace area should not be included in the built-up area for claiming deductions under Section 80-IB(10) of the Act. The application of the principle of proportionality for relief grant was deemed unnecessary due to this exclusion. Additionally, the Court rejected the Revenue's contention that ownership of the property was a prerequisite for claiming deductions under Section 80-IB(10), citing a previous judgment. Consequently, the Revenue's appeal was dismissed, and the Tribunal's decision was upheld. The judgment provided clarity on the interpretation of statutory provisions and their application in determining eligibility for tax deductions in housing projects.