2012 (8) TMI 265 - AT - Income Tax

Deduction u/s 80IB - denial on ground that commercial area constructed in the project is more than 2000 sq. ft - reference made to amendment to section w.e.f. 1-4-2005 ceiling built up area of the shops and other commercial establishments included in the project to 5% of the aggregate built up area of the housing project or 2000 sq. ft. whichever is less - project of the appellant started in 1999 - first phase completed on 1-10-2005 including the commercial area - entire scheme approved by the Government of Maharashtra and SRA - Held that - Since the project was started in 1999 i.e. prior to the amendment by the Finance Act 2005 and the deduction u/s 80IB(10) is on the profits derived from the housing project approved by the local authority as a whole the A.O. was not justified in disallowing the claim of the assessee and hence we are inclined to uphold the findings of the ld. CIT(A) in allowing the same - Decided in favor of assessee.

Summary

Issues:
1. Eligibility of deduction u/s 80IB(10) of the Income Tax Act, 1961 based on the commercial area constructed in a housing project.
2. Interpretation of the law regarding the applicability of the amended provision in force at the time of project completion.

Analysis:

1. Eligibility of deduction u/s 80IB(10):
The case involved a dispute regarding the eligibility of the assessee for deduction u/s 80IB(10) of the Income Tax Act, 1961. The assessee, engaged in real estate development, claimed the deduction for a project where the commercial area constructed exceeded the specified limits. The Assessing Officer (A.O.) disallowed the claim based on the commercial area exceeding 2000 sq. ft. as per the certificate issued by the Architect. However, the assessee contended that the project commenced before the relevant amendment and relied on previous decisions to support their claim. The ld. CIT(A) allowed the deduction, emphasizing that the project was initiated before the amendment and was approved by relevant authorities. The Tribunal upheld the ld. CIT(A)'s decision, citing precedents and the project's approval date as key factors in determining eligibility for the deduction.

2. Interpretation of amended provision:
The Revenue challenged the ld. CIT(A)'s decision, arguing that the amended provision should apply at the time of project completion, restricting the commercial area for deduction eligibility. The Revenue relied on a decision pending before the Supreme Court to support their stance. In response, the assessee referenced a Tribunal decision and contended that the project's approval date dictated the applicability of the amendment. The Tribunal, considering previous rulings and the approval date of the project, held that the amendment introduced post-project commencement did not apply retroactively. The Tribunal emphasized that the deduction is based on the entire project's approval and profits, not limited to specific sections. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the ld. CIT(A)'s decision and affirming the assessee's eligibility for the deduction under section 80IB(10) of the Act.