2012 (11) TMI 1159 - AT - Income Tax

Deduction u/s 80-IB - pure housing project or not - with or without commercial use - built up area - Held that - Since the expression housing project was not defined under the Act its meaning would have to be gathered from the Rules and Regulations framed by the approving local authority. The Hon ble High court explained that since a local authority could approve the project to be a housing a project with or without commercial use it was therefore the intent of the legislature that deduction envisaged u/s 80-IB(10) was allowable to such housing projects. Therefore the aforesaid objection raised by the Revenue to dis-entitle the assessee from claiming of deduction u/s 80-IB(10) is untenable. Since the project of the assessee commenced prior to 1-4-2005 the definition of built up area as provided in sec. 80-IB(14)(a) cannot be applied in this case. Thus the objection raised by the Revenue to disentitle the assessee from claiming of deduction u/s 80-IB(10) of the Act is untenable. Disallowance on the basis of layout plant - Held that - The original lay out plan of this commercial building was mentioned as residential plus commercial in the original commencement. It is therefore held that appellant was entitled for deduction u/s 80-IB(10) - Decided in favour of assessee.

Issues Involved:
1. Assessee's claim of deduction under section 80-IB(10) of the Income-tax Act, 1961.
2. Whether the project qualifies as a "housing project" under section 80-IB(10).
3. Whether the built-up area of certain units exceeded the prescribed limit.
4. Applicability of amendments made by the Finance (No. 2) Act, 2004 and Finance (No. 2) Act, 2005 to the project.
5. Whether the commercial area in the project disqualifies it from deduction.
6. Whether the Assessing Officer exceeded the scope of directions given by the Commissioner of Income-tax (CIT) under section 264.

Detailed Analysis:

1. Assessee's Claim of Deduction under Section 80-IB(10):
The assessee, an Association of Persons engaged in the business of promoters, builders, and land developers, claimed deduction under section 80-IB(10) for profits derived from a housing project named 'Citadel'. The Revenue denied this claim, arguing that the project did not meet the conditions prescribed under section 80-IB(10).

2. Qualification as a "Housing Project":
The Revenue argued that the project included commercial establishments, violating the requirement of being a pure housing project under section 80-IB(10)(a). The assessee countered, citing the approval from Pune Municipal Corporation (PMC) as a residential-cum-commercial project. The Tribunal noted that the project was approved by PMC, a local authority, and included 6.7% commercial area. The Tribunal relied on the Bombay High Court's decision in Brahma Associates, which stated that the definition of "housing project" should be based on local authority approvals, allowing for some commercial use.

3. Built-up Area Exceeding Prescribed Limit:
The Revenue contended that some units exceeded the 1500 sq.ft. limit, as defined by section 80-IB(14)(a), which includes projections and balconies. The assessee argued that this definition, effective from 1-4-2005, should not apply to projects commenced before this date. The Tribunal agreed, stating that the definition of "built-up area" should follow local municipal rules for projects commenced before 1-4-2005, excluding terraces and balconies.

4. Applicability of Amendments by Finance Acts:
The Tribunal held that amendments made by the Finance (No. 2) Act, 2004, and Finance (No. 2) Act, 2005, were prospective and not applicable to projects commenced before 1-4-2005. Therefore, these amendments could not disqualify the assessee's project from claiming deductions.

5. Commercial Area in the Project:
The Revenue's objection based on the project's commercial area exceeding the limit prescribed in section 80-IB(10)(d) was dismissed. The Tribunal noted that the project commenced before the amendment's effective date, and thus, the restriction on commercial area did not apply.

6. Assessing Officer Exceeding Scope of Directions by CIT:
For the project 'Citadel Enclave', the CIT-II had directed the Assessing Officer to re-examine the deduction claim without considering the commercial area issue. The Tribunal found that the Assessing Officer had wrongly included a commercial building developed by another firm, Wide Angle Associates, in the assessee's project. The Tribunal upheld the CIT(A)'s decision, stating that the Assessing Officer exceeded the scope of the CIT-II's directions.

Conclusion:
The Tribunal allowed the appeals of the assessee for the assessment years 2003-04, 2004-05, 2005-06, and 2006-07, directing the Assessing Officer to grant deductions under section 80-IB(10) as claimed. The Revenue's appeal for the assessment year 2005-06 was dismissed, affirming the CIT(A)'s decision that the assessee was entitled to the deduction for the 'Citadel Enclave' project. The decision was pronounced in open court on 23rd November 2012.

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