2012 (5) TMI 196 - HC - Income Tax

Deduction u/s 80IB - inclusion / exclusion of balcony - built up area - held that - admittedly if the balcony area is excluded, none of the residential units is more than 1,500 sq. ft. Therefore, the assessee is entitled to 100% benefit of Section 80IB(10), The Tribunal was not justified in giving only the proportionate benefit. - the assessee is entitled to the benefit of Section 80IB(10) in respect of the 152 flats. - Decided in favor of assessee. Dis allowance on account of payment in cash - Rule 6DD read with section 40A(3) - The assessee contends when he has not put forth any claim of expenditure, Section 40A (3) is not attracted and 20% disallowance was not permissible. - held that - matter remanded back.

Summary

Issues:
1. Challenge to order granting benefit under Section 80IB(10) of the Income Tax Act, 1961.
2. Denial of relief to the assessee under Section 80IB.
3. Validity of search for jurisdiction in assessment.
4. Disallowance under Section 40A(3) of the Act.
5. Levy of interest under Section 234B of the Act.

Analysis:

Issue 1: Challenge to order granting benefit under Section 80IB(10)
The assessee, a private limited company engaged in the construction business, claimed deduction under Section 80IB. A search was conducted, revealing discrepancies in the built-up area of residential units exceeding the prescribed limit of 1,500 sq. ft. The Assessing Officer held that the balcony area could not be excluded, thus denying the benefit under Section 80IB. The Appellate Commissioner and the Tribunal upheld this decision. However, the High Court clarified that the definition of "built-up area" inserted in 2005 was prospective and did not apply to projects approved before that date. Consequently, the assessee was entitled to the benefit under Section 80IB(10) for the residential units.

Issue 2: Denial of relief under Section 80IB
The Tribunal excluded certain flats exceeding 1,500 sq. ft. from the benefit under Section 80IB. The High Court ruled that the assessee should receive the benefit for all flats as the balcony area exclusion was permissible, and the new definition did not apply retroactively. Therefore, the assessee was entitled to the benefit for all residential units constructed.

Issue 3: Validity of search for jurisdiction in assessment
The High Court addressed the question of the assessing officer's jurisdiction in making the assessment post a search under Section 132 and Section 153A of the Act. The Court clarified that the assessing officer had valid jurisdiction for assessment post the search conducted, ensuring proper application of the law in determining the eligibility for deductions under Section 80IB.

Issue 4: Disallowance under Section 40A(3) of the Act
The assessing authority disallowed a portion of cash payments under Section 40A(3) due to non-compliance with Rule 6DD. The High Court remitted the matter back to the assessing officer for reconsideration, emphasizing the need to verify whether the disallowance was justified based on the facts presented.

Issue 5: Levy of interest under Section 234B of the Act
The High Court did not provide specific details on the levy of interest under Section 234B in the summarized judgment.

In conclusion, the High Court allowed some appeals in part and dismissed others, clarifying various legal aspects related to the Income Tax Act and providing relief to the assessee based on the correct interpretation of the law and relevant provisions.