2010 (5) TMI 887 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for deduction u/s 80IB(10) for entire projects.
2. Pro-rata deduction for housing projects.
3. Retrospective or prospective application of section 80IB(14)(a).
4. Correct methodology for computing built-up area.

Summary:

1. Eligibility for deduction u/s 80IB(10) for entire projects:
The revenue contended that the assessee was not eligible for deduction u/s 80IB(10) due to violation of clause (c) of sub-section 10 of section 80IB. The CIT(A) allowed the deduction, which the revenue appealed against. The Tribunal found that the assessee complied with all conditions u/s 80IB(10) and was eligible for the deduction. The Tribunal noted that the measurement of flats by the A.O. was flawed and not representative of the entire project. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

2. Pro-rata deduction for housing projects:
The CIT(A) allowed pro-rata deduction for the housing project, which the revenue contested. The Tribunal held that the pro-rata deduction was justified as the A.O.'s sample measurement was not representative. The Tribunal emphasized that beneficial provisions should be interpreted liberally and granted pro-rata deduction if necessary. The Tribunal dismissed the revenue's grounds, supporting the CIT(A)'s pro-rata deduction approach.

3. Retrospective or prospective application of section 80IB(14)(a):
The Tribunal addressed whether section 80IB(14)(a) was retrospective or prospective. It concluded that the provision was substantive and thus prospective, rejecting the revenue's contention of its retrospective application. The Tribunal relied on judicial decisions and CBDT circulars clarifying that the definition of built-up area applied from the assessment year 2005-06 onwards.

4. Correct methodology for computing built-up area:
The Tribunal determined that in the absence of a specific definition in the Act for the assessment year in question, the built-up area should be computed according to local laws, specifically the M.P. Bhoomi Vikas Rules. The Tribunal found that the built-up area of the flats, as per local laws, was within the specified limit, making the assessee eligible for the deduction. The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, directing the A.O. to grant the deduction as claimed.

Conclusion:
The Tribunal dismissed the revenue's appeals and allowed the assessee's cross-objection, affirming the CIT(A)'s decision to grant deduction u/s 80IB(10) and pro-rata deduction for the housing project. The Tribunal emphasized the prospective application of section 80IB(14)(a) and the use of local laws for computing the built-up area.