2011 (5) TMI 1077 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for deduction u/s 80IB(10) based on commercial area exceeding prescribed limits.
2. Interpretation of "housing project" and its approval by local authorities.
3. Applicability of amendments to section 80IB(10) for projects approved before 01.04.2005.

Summary:

1. Eligibility for Deduction u/s 80IB(10) Based on Commercial Area Exceeding Prescribed Limits:
The Assessing Officer (AO) disallowed the deduction u/s 80IB(10) claimed by the assessee on the grounds that the commercial area of the project exceeded 5% of the aggregate built-up area and more than 2000 sq.ft., as per the amended provisions effective from 01.04.2005. The AO argued that all conditions laid down in section 80IB(10) must be fulfilled for the deduction to be allowable, and the project in question failed to meet these criteria due to the excessive commercial area.

2. Interpretation of "Housing Project" and Its Approval by Local Authorities:
The assessee contended that the project was a "housing project" duly approved by CIDCO, which included residential flats and some shops. The assessee argued that the term "housing project" is not explicitly defined in section 80IB(10) but is defined in section 80HHBA, which includes construction of buildings and other structures. The assessee also referred to a CBDT clarification stating that any project approved by a local authority as a housing project should be considered adequate for the purposes of section 80IB(10). The assessee further cited the ITAT decision in the case of Harshad P. Doshi, where full deduction was allowed for a project with some commercial area.

3. Applicability of Amendments to Section 80IB(10) for Projects Approved Before 01.04.2005:
The assessee argued that the restriction on commercial area introduced by the Finance Act, 2004, effective from 01.04.2005, should not apply to their project, which was approved prior to this date. The CIT(A) accepted this argument, noting that the project was approved before the amendment and thus the restriction on commercial area was not applicable. The CIT(A) also referred to the decision in Brahma Associates vs JCIT, where it was held that the restriction on commercial area is prospective and not retrospective.

Final Judgment:
The ITAT upheld the CIT(A)'s decision, stating that the issue is covered by the Hon'ble Bombay High Court's decision in CIT vs Brahma Associates, which held that deduction u/s 80IB(10) is allowable for housing projects approved by local authorities with commercial user to the extent permitted under the DC Rules/Regulations, irrespective of whether the project is approved as a "housing project" or "residential plus commercial." The appeals filed by the Revenue were dismissed, and the assessee was entitled to the deduction u/s 80IB(10).

Order Pronounced:
The appeals filed by the Revenue are dismissed. Order pronounced on this 6th day of May, 2011.