2010 (4) TMI 838 - AT - Income Tax

Deduction under section 80-IB(10) denied - Project was not exclusively for units with built-up area less than 1500 sq. ft. - Certificate from the Village Administrative Officer (VAO) could not be accepted since the Village Administrative Officer was not the authority to issue approval for housing proposal - Held that - As the individual owners to whom plots were given had obtained sanction for constructing the units, and constructions carried out by the assessee. The approved layout shows the bifurcation of the site to various plots, areas earmarked for shops and houses. All these would lead to an irresistible conclusion that the project had the approval of a local authority, and each individual house were only part of a whole. The deduction under section 80-IB(10) is provided as an incentive and motivation for construction of the housing project so as to make the maximum residential houses available for the general public. The built-up area restriction is provided under the provision to achieve the object of houses available within the financial capacity of the general public at affordable prices. Therefore, if the units having built-up area of more than 1500 sq. ft. are excluded from the project, the remaining project still fulfils the objects of the legislature and thus entitles for the claim under section 80-IB(10) on proportionate basis as all other conditions prescribed under the provision are satisfied. Thus assessee was eligible for claiming deduction under section 80-IB(10), pro rata for the housing units having less than 1500 sq. ft. for both the year.

Summary

Issues Involved:
1. Denial of deduction under section 80-IB(10) of the Income-tax Act, 1961.
2. Approval of the housing project by local authorities.
3. Built-up area exceeding 1500 sq. ft. for some housing units.

Issue-Wise Detailed Analysis:

1. Denial of Deduction under Section 80-IB(10):
The primary grievance of the assessee was the denial of deduction under section 80-IB(10) of the Income-tax Act for the assessment years 2003-04 and 2004-05. The assessee, engaged in property development, claimed deductions for specific housing units that met the criteria of being less than 1500 sq. ft. The Assessing Officer denied the deduction on the grounds that the project was not exclusively for units under 1500 sq. ft., approvals were unit-wise rather than project-wise, and the certificate from the Village Administrative Officer (VAO) was not acceptable.

2. Approval of the Housing Project by Local Authorities:
The Commissioner of Income-tax (Appeals) upheld the denial, emphasizing that the entire project must be considered as a whole for approval, and individual house approvals could not substitute for project approval. The assessee argued that the project had approval from the Deputy Collector Town Planning and that the total housing units included a substantial number of units under 1500 sq. ft. The Tribunal reviewed the approval documents, including a letter from the Deputy Director Town Planning dated February 16, 1987, and concluded that the project had indeed received necessary approvals from local authorities, thus meeting the requirements of section 80-IB(10).

3. Built-up Area Exceeding 1500 sq. ft. for Some Housing Units:
The Tribunal considered whether the presence of some units exceeding 1500 sq. ft. invalidated the entire project's eligibility for deduction. The Tribunal referenced several decisions, including those from co-ordinate Benches, which supported the view that deductions could be claimed proportionately for units that met the criteria. The Tribunal noted that the project as a whole exceeded one acre and that the area for units under 1500 sq. ft. was substantial. The Tribunal rejected the Departmental representative's contention that the presence of larger units disqualified the project, citing decisions that allowed for proportional deductions.

Conclusion:
The Tribunal concluded that the assessee was eligible for claiming deductions under section 80-IB(10) proportionately for the housing units with built-up areas less than 1500 sq. ft. for both assessment years. The disallowance of such claims was deleted, and the appeals of the assessee were allowed.