2011 (11) TMI 689 - AT - Income Tax

Summary

Issues Involved:
The issues involved in this case are the eligibility of deduction u/s.80IB(10) for a housing project with commercial units, interpretation of the amendment to section 80IB(10) by the Finance Act, 2004, and the applicability of the decision in the case of Brahma Associates to the assessment year 2006-07.

Eligibility of Deduction u/s.80IB(10):
The appellant, the revenue, challenged the order of the Ld. CIT (A) allowing deduction u/s.80IB(10) for the assessment year 2006-07. The project in question involved a housing project with both residential flats and commercial units. The AO disallowed the deduction claimed by the assessee based on the amendment by the Finance Act, 2004, which restricted the permissible commercial shopping area. However, the Ld. CIT (A) relied on the decision of the Special Bench of the ITAT, Pune in the case of Brahma Associates and directed the AO to allow the deduction. The Tribunal confirmed that the project was approved prior to 1.4.2005, making the amendment inapplicable, and upheld the assessee's entitlement to deduction u/s.80IB(10).

Interpretation of Amendment to Section 80IB(10):
The revenue argued that the amendment to Sec. 80IB(10) by the Finance Act, 2004, was operative from the assessment year 2005-06 onwards, imposing restrictions on the commercial area in housing projects. However, other coordinate Benches held that the amendment would apply only to projects approved after 1.4.2005. The Tribunal cited a case where it was established that the amendment was not retrospective in nature, supporting the assessee's claim for deduction.

Applicability of Brahma Associates Decision:
The decision in the case of Brahma Associates was pivotal in this appeal, as it clarified that housing projects with commercial user within permissible limits were eligible for deduction u/s.80IB(10). The Tribunal affirmed that the project in question, approved before 1.4.2005, fell within the criteria set out in the Brahma Associates case, thereby confirming the assessee's entitlement to the deduction. The Tribunal dismissed the revenue's appeal, upholding the order of the Ld. CIT (A) in favor of the assessee.