2012 (6) TMI 386 - AT - Income Tax

Deduction u/s 80IB - incorrect allowance/denial - assessee, a private limited company, engaged in the business of real estate and construction of various housing projects - deduction allowed in AY 04-05 in respect of projects viz Kaveri, Panchavati, Vrindavan, denied for AY 05-06 & 06-07 on ground of the change in law w.e.f. 1.4.2005 - Held that - Since the project was approved before 1.4.2005 and as AO allowed deduction in earlier years, there is no need for disallowing the deduction in these years, as revised provisions do not apply to the projects approved earlier to 01-04-05. Therefore, assessee is eligible for deduction u/s 80IB(10). In respect of Balaji & Silicon projects - deduction dis-allowed on the reason that commercial area was exceeding the limits and size of individual flat exceeds 1000 sq ft - Held that - Issue was covered by the ITAT in assessee s own case for AY 2004-05, therefore, assessee is eligible for deduction on these projects. Deduction on project Tulsi claimed in AY 2006-07 denied on the reason that this is an extension of the project sanctioned earlier and assessee has not satisfied the conditions u/s 80IB(10) - Held that - Tulsi Project is separately approved project as a residential housing project and amended provisions of section 80IB(10) effective from 01/04/2005 are applicable and those conditions are satisfied by assessee as the project is a residential project and commercial area is less than the prescribed area and other conditions are satisfied, so we hold that Tulsi project is also eligible for deduction u/s 80IB(10).

Issues Involved:
1. Incorrect allowance/denial of deduction u/s 80-IB(10) of the Income-tax Act, 1961 for various housing projects.
2. Interpretation and application of Section 80-IB(10) provisions.
3. Treatment of commercial area within housing projects.
4. Definition and inclusion of "built-up area" for the purpose of deductions.
5. Applicability of amended provisions of Section 80-IB(10) post 01.04.2005.
6. Classification of projects as separate or extensions of existing projects.

Detailed Analysis:

1. Balaji Towers Project:
The deduction was denied as the project was not approved purely as a residential project and some units exceeded 1000 sq. ft. The ITAT referred to the jurisdictional High Court's judgment in Brahma Associates, which established that a project approved as residential-cum-commercial is eligible for deduction u/s 80-IB(10). The ITAT also clarified that balconies should not be included in the built-up area calculation for periods prior to 01.04.2005. The claim for deduction was upheld based on these precedents.

2. Silicon Tower Project:
Similar to Balaji Towers, the deduction was denied due to the inclusion of commercial areas and units exceeding 1000 sq. ft. The ITAT reiterated its stance from the Balaji Towers case, confirming that such mixed-use projects are eligible for deductions. The ITAT upheld the deduction for Silicon Tower as well.

3. Panchvati Project:
The deduction was denied due to the commercial area exceeding 2000 sq. ft. and some units exceeding 1000 sq. ft. The ITAT noted that the project was approved before 01.04.2005, and hence, the amended provisions limiting commercial area did not apply. The deduction was allowed based on the principle that the law applicable at the time of project approval governs the deduction.

4. Kaveri Project:
The deduction was denied because one unit exceeded 1000 sq. ft. including the balcony. The ITAT referred to the definition of "built-up area" and the exclusion of balconies for periods before 01.04.2005. Consequently, the deduction was allowed.

5. Vrindavan Project:
The deduction was denied due to the commercial area exceeding 2000 sq. ft. The ITAT upheld the deduction, citing that the project was approved before the amendments and referring to the Brahma Associates judgment, which allowed for such mixed-use projects.

6. Tulsi Project:
The deduction was denied as it was considered an extension of the Vrindavan Project. The ITAT held that even if it were an extension, the Vrindavan Project itself was eligible for deduction. Moreover, the Tulsi Project met all conditions post-01.04.2005 and was a separate approved project. The ITAT allowed the deduction for the Tulsi Project.

General Submissions and Legal Interpretations:
The ITAT emphasized that the provisions of Section 80-IB(10) should be interpreted based on the law applicable at the time of project approval. It highlighted the principle that tax incentives should be liberally interpreted to promote economic growth. The ITAT referenced several judgments, including Bajaj Tempo Ltd. and CIT v. Brahma Associates, to support its conclusions.

Conclusion:
The ITAT allowed the appeals for deductions u/s 80-IB(10) for all projects except the Shanti Niketan Project, which was withdrawn by the assessee. The ITAT's decision was based on the interpretation of the applicable law at the time of project approvals and the principle of liberal interpretation of tax incentives.

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