2013 (10) TMI 418 - AT - Income Tax

Deduction u/s 80IB Built up area more than prescribed limit i.e. 1500 sq.ft. Held that - No merit in the contention of the Revenue - With respect to the construction of the 26th bungalow, the assessee has categorically denied and had replied that it had raised bills for construction of 25 bungalows and not for 26 bungalows. The Revenue had only stated that from the two bills raised by the assessee dated 31.03.2005 and 31.03.2006 of Rs. 50 lacs each mentioned that the fees charge was for 13 bungalows in each bill which meant that the fee was charged for 26 bungalows. Other than this statement, there is not finding by the assessee to establish that the assessee had constructed the 26th bungalow. Further, it is pertinent to note that the DVO s report also do not suggest conclusively that the construction was carried out by the assessee. This is evident from the report of the DVO Decided in favor of Assessee. Whether construction of commercial space in the project is in excess of 5% of the aggregate built up area Held that - Reliance has been placed upon the judgment in the case of Manan Corporation vs. ACIT 2012 (9) TMI 700 - Gujarat High Court - Amendment of s. 80-B(10) and the insertion of cl. (d) w.e.f. 1 April, 2005 is prospective only and cannot be applied retrospectively; assessee s two housing projects having been approved prior to 31st March, 2005 and the built-up area of commercial use being 5.12 per cent and 3.5 per cent respectively, it was entitled to deduction under s. 80-IB(10) In the present case, permission of development was granted by AUDA on 16.10.2002 and BU permission was granted on 01.03.2004. The amendment by way of insertion in clause (d) of 80-IB(10) came to effect from 01.04.2005 and it is prospective in nature and therefore, it cannot be applied for housing projects approved prior to 01.04.2005 Decided in favor of Assessee.

Summary

Issues Involved:
1. Disallowance of deduction under section 80-IB(10) for Assessment Years 2005-06 and 2006-07.
2. Validity of reassessment proceedings for Assessment Year 2005-06.
3. Deletion of penalty under section 271(1)(C) for Assessment Year 2006-07.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80-IB(10):

Assessment Year 2006-07:
The assessee contested the disallowance of deduction under section 80-IB(10) amounting to Rs. 42,00,136/-. The CIT(A) had confirmed the disallowance on the grounds that the conditions precedent for claiming the deduction were not fulfilled. Specifically, the CIT(A) found that the built-up area of the bungalows exceeded 1500 sq.ft. and the commercial establishments exceeded 5% of the aggregate built-up area. The assessee argued that the additional construction was carried out by the allottees after possession was handed over and cited a letter from the Housing Society confirming this. The Tribunal found merit in the assessee's contentions, noting that the Revenue did not provide cogent reasons or evidence to counter the assessee's claims. The Tribunal also referenced the Jurisdictional High Court's decision in Manan Corporation vs. ACIT, which held that amendments to section 80-IB(10) were prospective and could not be applied to projects approved before the amendment. Consequently, the Tribunal decided in favor of the assessee.

Assessment Year 2005-06:
The assessee challenged the disallowance of deduction under section 80-IB(10) amounting to Rs. 43 lakh. The CIT(A) upheld the disallowance, relying on the appellate order for A.Y. 2006-07, despite the assessee's contention that the facts were different. The Tribunal, consistent with its findings for A.Y. 2006-07, ruled in favor of the assessee, noting that the Revenue failed to establish that the assessee had constructed beyond the prescribed limits.

2. Validity of Reassessment Proceedings for Assessment Year 2005-06:
The assessee argued that the reassessment proceedings initiated under section 147 were invalid, as they were based on a change of opinion without any new or fresh material on record. The CIT(A) upheld the validity of the reassessment, relying on an amendment to section 80-IB(10). The Tribunal, however, found that the reasons recorded by the AO did not mention the amendment and that the reassessment was indeed based on a change of opinion. Therefore, the Tribunal ruled that the reassessment proceedings were invalid.

3. Deletion of Penalty under Section 271(1)(C) for Assessment Year 2006-07:
The Revenue appealed against the deletion of a penalty amounting to Rs. 14,13,765/- levied under section 271(1)(C). Since the Tribunal allowed the assessee's appeals for A.Y. 2005-06 and 2006-07, the basis for the penalty no longer existed. Consequently, the Tribunal dismissed the Revenue's appeal regarding the penalty.

Conclusion:
The Tribunal ruled in favor of the assessee for both A.Y. 2005-06 and 2006-07, allowing the deduction under section 80-IB(10) and invalidating the reassessment proceedings for A.Y. 2005-06. The Tribunal also dismissed the Revenue's appeal concerning the penalty under section 271(1)(C) for A.Y. 2006-07. The order was pronounced in the open court on 04-10-2013.