2013 (7) TMI 649 - AT - Income Tax

Deduction under Section 80IB(10) - Provisions of section 80-IB(10) were applicable only when project is approved as housing project and in the assessee s case it was residential as well as commercial project approved by the Navi Mumbai Municipal Corporation - Deduction under section 80-IB(10) be allowed even if the commercial area is up to 10 percent of the total built up area of the plot Held that - There was no evidence about the commercial area not being on the ground floor. It, therefore, depicts that the commercial area being shops, etc. were situated on the ground floor of the building. If that be the case then the built up area for staircase and passage, lift or lift room are to be considered as part and parcel of residential area because these are only to facilitate residents for going up and coming down from the building. It does not assist shops, in any manner, to function with the help of staircase, lift area, lift room, etc. In such a situation the built up are covered under staircase, life passage, lift room etc. has to be considered as part and parcel of residential area and not as commercial area Deduction is eligible to housing project approved by the local authority as such or as residential plus commercial project having residential as well as commercial units to the extent permitted under the Development Control Rules Decided in favor of Assessee. Unbuilt-up area also be considered in proportion to the residential and commercial area Held that - It is obvious that there cannot be 100 percent construction on any plot. Some area has to be left open as per the plan and construction can be done only as per the specifications approved by the competent authority. By no stretch of imagination can an open area be considered as proportionately relatable to residential as well as commercial area. As the size of the plot in this case is more than one acre, condition under section 80IB(10)(b) also stands fully satisfied - Decided in favor of Assessee. Proceeding under section 147 read with section 143(3) Held that - Assessee can be allowed deduction under section 80-IB(10) only to the extent it was disallowed in the present proceedings which amounts to ₹ 2,23,85,571. In so far as the disallowance of deduction to the tune of ₹ 31,70,650 is concerned, the same cannot be conferred on the assessee for the reason that it was disallowed in the original assessment order passed under section 143(3) and no material has been brought to our notice to indicate that such order has been modified in any manner. As the reassessment proceedings are aimed at taxing the income which has escaped assessment, these cannot be taken as a tool for putting the assessee in a better position than in which it was before such proceedings - Decided against the Assessee.

Issues:
- Disallowance of deduction under section 80-IB(10)
- Eligibility criteria for deduction under section 80-IB(10)
- Interpretation of the judgment in Brahma Associates case
- Calculation of commercial area percentage and its impact on deduction eligibility
- Consideration of plot size for deduction under section 80-IB(10)
- Reassessment proceedings and granting of deduction

Disallowance of deduction under section 80-IB(10):
The appeal involved the disallowance of a deduction claimed by the assessee under section 80-IB(10) of the Income Tax Act. The original assessment disallowed a portion of the deduction claimed, leading to the issuance of a notice under section 148 by the Assessing Officer. The disallowance was based on the project being approved as a "residential plus commercial project" by the Navi Mumbai Municipal Corporation, which the Assessing Officer deemed ineligible for the deduction under section 80-IB(10).

Eligibility criteria for deduction under section 80-IB(10):
The Tribunal referred to the judgment in Brahma Associates case, which clarified that housing projects approved by the local authority with residential units and commercial establishments were eligible for deduction under section 80-IB(10). The Tribunal highlighted that the project in question had been approved by the Navi Mumbai Municipal Corporation as a "residential plus commercial project," meeting the criteria for deduction eligibility.

Interpretation of the judgment in Brahma Associates case:
The Tribunal emphasized that the Brahma Associates case established that deductions under section 80-IB(10) were applicable to housing projects approved by local authorities, even if they included commercial units within the project. The judgment clarified that the commercial area percentage should not exceed a certain limit for eligibility.

Calculation of commercial area percentage and its impact on deduction eligibility:
The Assessing Officer had calculated the commercial area percentage incorrectly, leading to a dispute regarding the eligibility for deduction. The Tribunal noted that the commercial area percentage in the project was within the permissible limit as per the Brahma Associates judgment, making the assessee entitled to the deduction.

Consideration of plot size for deduction under section 80-IB(10):
The Tribunal addressed the argument regarding the plot size requirement for deduction eligibility under section 80-IB(10). It was established that the plot size in the present case exceeded the minimum requirement, satisfying the condition for deduction.

Reassessment proceedings and granting of deduction:
The Tribunal ruled that the reassessment proceedings could only allow deductions to the extent disallowed in the present proceedings. The disallowed amount in the original assessment could not be granted as it was not modified. The Tribunal directed the allowance of the deduction under section 80-IB(10) for the amount disallowed in the present proceedings.

In conclusion, the appeal was partly allowed, with the Tribunal providing detailed reasoning for the decision on each issue raised in the case.

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