2011 (11) TMI 801 - AT - Income Tax

Summary

Issues Involved:

1. Entitlement to deduction u/s 80IB(10) of Rs. 9,03,02,289/-.
2. Entitlement to additional deduction u/s 80IB(10) of Rs. 61,42,053/-.
3. Allowance of excess labor expenses of Rs. 24,04,494/- related to M/s. Shah Heritage Project.

Summary:

Issue 1: Entitlement to deduction u/s 80IB(10) of Rs. 9,03,02,289/-

The Revenue contested the CIT(A)'s decision allowing the assessee's deduction u/s 80IB(10) of Rs. 9,03,02,289/-. The AO had denied the deduction based on the assessment orders for A.Yrs. 2005-06 and 2006-07, noting that the commercial area exceeded the permissible limit. The CIT(A) ruled in favor of the assessee, referencing earlier orders and the Tribunal's consistent view that projects approved before 31-3-2005 are eligible for the deduction, even if the commercial area exceeds the limit. The Tribunal upheld this view, citing the Bombay High Court's decision in CIT vs. Brahma Associates, confirming that clause (d) in sec. 80IB(10) is prospective and not retrospective.

Issue 2: Entitlement to additional deduction u/s 80IB(10) of Rs. 61,42,053/-

The Revenue argued that the assessee did not claim the additional deduction of Rs. 61,42,053/- in the return of income, thus contravening sec. 80A(5). The Tribunal, however, found that the issue was covered by the Tribunal's earlier decisions and the Bombay High Court's ruling in CIT vs. Brahma Associates, which supported the assessee's entitlement to the deduction since the project was approved before the amendment's effective date.

Issue 3: Allowance of excess labor expenses of Rs. 24,04,494/- related to M/s. Shah Heritage Project

The AO disallowed Rs. 24,92,590/- of labor charges, alleging inflated costs in the Shah Heritage Project compared to the Shah Arcade Project. The CIT(A) found that the projects were not in the same vicinity, and the cost differences were justified by the project's size and location. The CIT(A) allowed the expenses except for Rs. 88,196/- related to Shah Arcade's water charges. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not find specific defects in the expenses and that the costs depended on various factors, including quality and location.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decisions on all grounds. The assessee was entitled to the deductions u/s 80IB(10) and the labor expenses were justified except for the minor adjustment of Rs. 88,196/-.