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2011 (8) TMI 680 - AT - Income Tax


Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Deduction under Section 80IB(10) for the project N G Complex, Marol.
3. Deduction under Section 80IB(10) for the project N G Estate, Mira Road (E).
4. Conditions regarding the commercial area in the housing project under Section 80IB(10).

Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act:
The common ground raised by the assessee for AY 2002-03 to 2006-07 was the disallowance made by the AO under Section 14A. The AO applied Rule 8D for disallowance of interest expenditure. The CIT(A) confirmed this disallowance by following the decision in ITO v. Daga Capital Management (P.) Ltd. The assessee contended that Rule 8D was not applicable and no interest expenditure was incurred in relation to earning tax-free income. The Tribunal, considering the decision of the jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT, set aside the issue to the AO for fresh adjudication.

2. Deduction under Section 80IB(10) for the project N G Complex, Marol:
The assessee raised the issue that the CIT(A) erred in excluding the profit from the sale of two flats whose built-up area exceeded 1000 sq. ft. The AO held that the assessee was not entitled to deduction as the area of these flats exceeded the limit. The CIT(A) directed the AO to exclude the profit from these flats while granting the deduction. The Tribunal upheld the CIT(A)'s decision, noting that the proportionate deduction is available if only some flats violate the area condition, provided the overall project meets the minimum area requirement.

3. Deduction under Section 80IB(10) for the project N G Estate, Mira Road (E):
The revenue raised the issue that the CIT(A) erred in directing the AO to allow the deduction, arguing that the project commenced before the stipulated date of 1.10.1998. The CIT(A) held that the project commenced after the receipt of the Commencement Certificate on 2.3.2001. The Tribunal upheld the CIT(A)'s decision, clarifying that the date of commencement is when actual development and construction start, not the date of project approval by the local authority. The Tribunal referred to the decision in Nirmiti Construction v. Dy. CIT, which supported this interpretation.

4. Conditions regarding the commercial area in the housing project under Section 80IB(10):
The revenue contended that the presence of shops and commercial establishments made the project ineligible for deduction. The CIT(A) allowed the deduction, following the decision in Brahma Associates v. Jt. CIT, which allowed commercial use up to 10% of the total built-up area. The Tribunal upheld the CIT(A)'s decision, noting that the commercial area was less than 10% of the total built-up area, thus complying with the conditions for deduction under Section 80IB(10).

Additionally, the revenue's issue regarding the sale of 32 flats to a single entity was addressed. The Tribunal noted that the prohibition on selling more than one flat to a single person was inserted prospectively from 1.4.2010 and did not apply to the assessment years in question. The Tribunal concluded that the subsequent use of flats for non-residential purposes by the end-user does not affect the eligibility for deduction if the flats were constructed as residential units as per the approved plan.

Conclusion:
The appeals of the revenue were dismissed, and the appeals of the assessee were partly allowed. The Tribunal's decisions were based on the interpretation of relevant sections and precedents, ensuring compliance with the conditions prescribed under the Income Tax Act.

 

 

 

 

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