2011 (10) TMI 687 - AT - Income Tax

Claim of deduction u/s. 80IB(10) - once the residential project has been approved by the local authorities - commercial establishment - receipts of TDR and sale of the TDR

Summary

Issues Involved:
- Claim of deduction u/s. 80IB(10) of the I.T. Act, 1961
- Justification and substantiation of payments to individuals
- Eligibility for deduction u/s. 80IB(10) based on project approval date

Analysis:

Claim of deduction u/s. 80IB(10):
The appeals by the revenue challenged the CIT(A)'s decision to allow the claim of deduction u/s. 80IB(10) made by the assessee for the AYs 2007-08 and 2008-09. The revenue contended that the build-up area of the shops in the housing project exceeded the prescribed limit, the assessee was a contractor and not a builder, and the sale of Transfer of Development Right (TDR) did not qualify for the deduction. However, the CIT(A) allowed the claim after considering a remand report. The revenue argued that the SRA scheme needed to be notified by the Government of India, but the Tribunal found no merit in this objection. Additionally, the Tribunal determined that the project approval date governed the eligibility for deduction u/s. 80IB(10), and the sale of TDR was considered income from the housing project, making the assessee entitled to the deduction.

Justification and Substantiation of Payments:
The revenue raised concerns about the lack of documentary evidence justifying the payments made by the assessee to individuals. However, the Tribunal did not find this argument compelling, as the focus was primarily on the eligibility for the deduction under section 80IB(10) based on the specific circumstances of the housing project and income sources.

Eligibility for Deduction based on Project Approval Date:
The eligibility for deduction u/s. 80IB(10) was a crucial issue in this case, with the revenue arguing that the project approval date post-31.3.2005 made the amended provisions applicable. However, the Tribunal determined that as the project was approved before 1.4.2005, the un-amended provisions of sec. 80IB(10) applied. The Tribunal cited a relevant High Court decision to support this interpretation, emphasizing that there was no bar for allowing the deduction prior to the amendment, especially concerning the presence of commercial establishments in the housing project.

In conclusion, the Tribunal dismissed the appeals filed by the revenue, upholding the CIT(A)'s decision to allow the deduction u/s. 80IB(10) for the assessee based on the project's approval date and the nature of income derived from the housing project, particularly concerning the sale of TDR. The judgment provided a detailed analysis of the legal provisions and relevant precedents to support the decision.