2014 (10) TMI 970 - AT - Income Tax

Deduction claimed u/s 80IB (10) - partial completion certificate received - Held that - It is an admitted fact that the facts and circumstances of the present case are identical to the facts and circumstances in the earlier years i.e. assessment years 2008-09 and 2009-10 and following the same parity of reasoning we hold that the assessee is entitled to claim of deduction under section 80IB (10) of the Act in relation to the profits derived from the housing project Harsh Paradise. Second residential unit allotted in the same project to two members of the said family - Applicability of the amended provisions of sub section (f) to section 80IB (10) of the Act - Held that - The amended provisions having been introduced on a later date cannot be applied to the transactions completed before the said provisions were introduced were amended as the assessee cannot be expected to do deeds which are impossible. Applying the ratio laid down by the Hon ble Supreme Court in the case of Krishnaswamy S. Pd. v. Union of India (2006 (2) TMI 75 - SUPREME Court) and in the case of CIT Vs. Revathi Equipment Ltd. (2007 (6) TMI 154 - MADRAS HIGH COURT) we hold that the assessee is entitled to claim of deduction under section 80IB (10) of the Act in respect of the flat allotted to Mrs. Nalini Andar i.e. second residential unit allotted in the same project to two members of the said family. The amended clause (f) to section 80IB (10) of the Act are to be applied w.e.f. 19-08-2009 and cannot be used to deny the deduction under section 80IB (10)in respect of the residential unit allotted 14 prior to the coming into operation of amended provisions i.e. clause (f) inserted to section 80IB (10) of the Act. - Decided against revenue

Issues Involved:
1. Deduction under section 80IB(10) for incomplete housing project.
2. Deduction under section 80IB(10) for partially completed housing projects.
3. Applicability of amended sub-section (f) to section 80IB(10).
4. Allotment of multiple flats to related individuals and its impact on deduction under section 80IB(10).

Issue-wise Detailed Analysis:

1. Deduction under section 80IB(10) for incomplete housing project:
The Revenue contended that the Learned Commissioner of Income-tax (Appeals) erred in allowing the deduction under section 80IB(10) to the housing project Harsh Paradise, which was approved on 28.05.2003 and was incomplete by 31.03.2008. The project consisted of four buildings (H-1, H-2, H-3, and G) and another building H-4, which was not completed due to the inability to acquire Transferable Development Rights (TDR). The completion certificates for the completed buildings were received before the stipulated date, but the project was deemed incomplete as the H-4 building was not finished.

The Tribunal found that the issue was covered in favor of the assessee by previous orders for assessment years 2008-09 and 2009-10. It was held that the assessee was entitled to the deduction for the completed buildings (H-1, H-2, H-3, and G) as they met the conditions prescribed under section 80IB(10). The Tribunal emphasized that the law should be interpreted liberally to promote economic growth and should not penalize the assessee for incomplete portions due to circumstances beyond their control.

2. Deduction under section 80IB(10) for partially completed housing projects:
The Revenue argued that the deduction should not be allowed on a standalone basis for partially completed projects. However, the Tribunal held that the completed buildings (H-1, H-2, H-3, and G) were eligible for the deduction under section 80IB(10) as they were completed within the stipulated time and met all the necessary conditions. The Tribunal relied on the decision in the case of Brigade Enterprises Pvt. Ltd., which supported the claim of deduction for completed portions of the project.

3. Applicability of amended sub-section (f) to section 80IB(10):
The Revenue contended that the amendment to sub-section (f) to section 80IB(10), effective from 01.04.2009, should apply to the assessee's case. The amendment introduced restrictions on the allotment of multiple residential units to related individuals. The assessee argued that the booking of the second flat occurred before the introduction of the Finance (No.2) Act, 2009.

The Tribunal found that the Finance Bill was introduced on 06-07-2009 and passed on 19-08-2009, while the booking of the second flat occurred in June 2009. Therefore, the amended provisions could not apply retroactively to transactions completed before the amendment. The Tribunal upheld the CIT(A)'s decision, allowing the deduction as the transaction was completed before the amendment.

4. Allotment of multiple flats to related individuals and its impact on deduction under section 80IB(10):
The Revenue argued that the assessee violated section 80IB(10)(f) by allotting two flats to members of the same family, thereby disqualifying the deduction. The Tribunal noted that the second flat was booked and the agreement was executed before the Finance (No.2) Act, 2009 was passed. The Tribunal held that the amended provisions could not be applied to transactions completed before their introduction and upheld the CIT(A)'s decision to allow the deduction.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, allowing the deduction under section 80IB(10) for the completed portions of the housing project and rejecting the applicability of the amended provisions to transactions completed before their introduction.

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