2015 (8) TMI 1367 - AT - Income Tax

Deduction u/s. 80IB(10) - reason for disallowing deduction on the said project is that the size of plot is less than 1 acre - Held that - Respectfully following the decision in the case of M/s. B.K. Pate Enterprises Vs. ACIT (2009 (5) TMI 566 - ITAT PUNE-A) we hold that the reduction in size of plot on account of area earmarked for D.P. Road would not make the assessee in eligible for the claim of deduction u/s. 80IB(10) of the Act. Entire project was not completed within the specified time limit - Held that - As per the provisions of section 80IB(10)(a)(ii) the housing project should be completed within 4 years from the end of the financial year in which the housing project is approved i.e. by 31-03-2009. Originally project was approved for 30 flats. Subsequently 6 more flats were added vide revised layout plan. Undisputedly 30 flats (10 flats in building A and 20 flats in building B) were completed within the stipulated time limit of 4 years and completion certificate in respect of those 30 flats were received by the assessee from PMC on 08-05-2008. In respect of remaining 6 flats i.e. 2 flats in building A and 4 flats in building B the completion certificate was obtained by the assessee from PMC on 09-08-2011 i.e. after the expiry of 4 years from the end of financial year in which the housing project was originally approved. It has been repeatedly held by various Hon ble High Courts and the Tribunal that where the part of the project has been completed and all the conditions as laid down u/s. 80IB(10) have been complied with the assessee is eligible to claim deduction u/s. 80IB(10) on the completed part of project on pro-rata basis. Thus we hold that the assessee is eligible to claim deduction on 30 flats on proportionate basis. See Commissioner of Income Tax Chennai Versus M/s. Arun Excello Foundations Pvt. Ltd 2012 (12) TMI 415 - MADRAS HIGH COURT

Summary

Issues involved:
1. Eligibility of the assessee to claim deduction under section 80IB(10) for a housing project.
2. Reduction in the size of the plot below the mandatory limit of 1 acre due to acquisition for D.P. Road.
3. Completion of the housing project within the specified time limit of 4 years from approval.

Detailed Analysis:
Issue 1: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the eligibility of the assessee to claim deduction under section 80IB(10) for the assessment year 2009-10. The assessee, a construction firm, developed a housing project named 'Mitrangan' and claimed a deduction of Rs. 1,14,00,368 under section 80IB(10). The Assessing Officer disallowed the deduction due to non-completion of the project within the specified time frame and the size of the plot being less than 1 acre.

Issue 2: The reduction in the size of the plot below 1 acre was a crucial point of contention. The original layout plan of the project was on 6300 sq. mtr. land, out of which 2955 sq. mtr. was reserved for D.P. Road, reducing the usable plot area to 3344 sq. mtr. The Tribunal, citing precedent, held that if the reduction in plot size is due to land acquisition for D.P. Road, the assessee remains eligible for the deduction under section 80IB(10).

Issue 3: Another aspect was the completion of the housing project within the stipulated time frame. The project was approved in 2004, and as per section 80IB(10), it should have been completed by 2009. While 30 out of 36 flats were completed within the time limit, the remaining 6 flats were finished after the deadline. The Tribunal, following legal precedents, allowed the deduction on a pro-rata basis for the completed part of the project, considering the completion of 30 flats within the specified time.

The Tribunal, after considering the arguments from both sides, ruled in favor of the assessee on both issues. It held that the reduction in plot size due to D.P. Road acquisition did not disqualify the assessee from claiming the deduction under section 80IB(10). Additionally, it allowed the deduction on a proportionate basis for the completed flats within the prescribed time frame. The appeal was partly allowed, emphasizing compliance with statutory requirements for eligibility for deductions under the Income Tax Act.