2012 (10) TMI 679 - AT - Income Tax

Proportionate deduction u/s 80IB(10) - Flats having built up area of below 1000 sq. ft. - Held that - As decided in Income-Tax Officer, Ward - 8(1), Nagpur. Versus Air Developers 2008 (5) TMI 333 - ITAT NAGPUR that if AO finds that the built-up area of some of the residential units is exceeding 1,500 sq. ft., he will allow the proportionate deduction under s. 80-IB(10) - in favour of assessee.

Summary

Issues:
1. Allowance of proportionate deduction under section 80IB(10) for flats with built-up area below 1000 sq. ft.
2. Fulfillment of conditions of section 80IB(10) for the entire project or building.

Issue 1:
The appellant, engaged in construction, appealed against the disallowance of the claim under section 80IB(10) for flats with built-up area below 1000 sq. ft. The First Appellate Authority (FAA) directed the Assessing Officer (AO) to allow proportionate deduction based on the built-up area. The FAA considered that the appellant had misrepresented single flats as multiple smaller flats to claim benefits. The FAA relied on previous tribunal decisions and directed the re-calculation of the disallowance. The Authorized Representative (AR) argued for the appellant's eligibility for proportionate benefit, emphasizing that the appellant had not constructed any flat exceeding 1000 sq. ft. The ITAT upheld the FAA's decision, citing relevant case laws and maintaining that the appellant was entitled to proportionate allowance under section 80IB(10).

Issue 2:
The Departmental Representative (DR) contended that once conditions of section 80IB(10) were breached, no deduction should be allowed. The AR argued that the appellant was entitled to proportionate benefit, as customers had converted flats into larger units, and the appellant had not constructed units exceeding 1000 sq. ft. The ITAT considered various cases, including Jahangir HC Jahangir and AIR Developers, where similar issues were decided in favor of the assessee. Relying on these precedents, the ITAT upheld the proportionate allowance under section 80IB(10) for the appellant. The ITAT dismissed the appeals filed by the AO, affirming the FAA's decision.

In conclusion, the ITAT, Mumbai upheld the FAA's decision to allow proportionate deduction under section 80IB(10) for flats with built-up area below 1000 sq. ft. The ITAT rejected the AO's appeals, citing relevant case laws and previous tribunal decisions supporting the appellant's entitlement to the benefit. The judgment was pronounced on 19th October 2012.