2014 (1) TMI 1430 - AT - Income Tax

Eligibility for deduction u/s 80IB(10) of the Act Limit exceed as provided in the section - SLP pending before the SC Held that - The restriction on the commercial area imposed by the introduction of sub-section (d) to section 801B(10) w.e.f. 1.4.2005 are therefore not applicable to the appellant as this project having commercial area had commenced prior to the said date thus, the housing projects commencing construction before the introduction of the amended provisions, made effective from 1.4.2005, would be entitled for deduction u/s. 801B(10) even though it contained the commercial area - Relying upon CIT vs. Brahma Associates 2011 (2) TMI 373 - BOMBAY HIGH COURT the claim of deduction u/s.801B(10) is allowable to the appellant - There was no reason to interfere with the order of the ld. CIT(A) - the project was approved as a housing project and the commercial area is even less than 5% - Decided against Revenue.

Summary

Issues:
- Eligibility for deduction u/s. 80IB(10)
- Application of the limit on the built-up area of shops and commercial establishments

Eligibility for deduction u/s. 80IB(10):
The appeal by the revenue pertained to the eligibility for deduction u/s. 80IB(10) against the order of CIT(A) II, Thane. Two grounds were raised by the revenue regarding the eligibility for deduction. The first ground questioned the justification of CIT(A) in holding the assessee eligible for deduction u/s. 80IB(10) based on a decision of the Bombay High Court, despite a pending SLP before the Supreme Court. The second ground challenged the retrospective application of the limit on the built-up area of shops and commercial establishments as prescribed by clause (d) of subsection 10 of section 80IB. The AO disallowed the deduction claimed by the assessee under section 80IB(10) due to the commercial area exceeding the prescribed limit. However, the CIT(A) allowed the deduction based on the project being approved as a housing project before the introduction of the amended provisions effective from 1.4.2005. The CIT(A) relied on the decision of the Bombay High Court in the case of Brahma Associates, emphasizing the prospective application of the restriction on commercial area.

Application of the limit on the built-up area of shops and commercial establishments:
The facts of the issue under consideration revealed that the assessee, a partnership firm engaged in construction, had a housing project with a small percentage of shops in excess of the limit prescribed by section 80IB(10)(d). The AO disallowed the deduction claimed by the assessee based on this excess commercial area. However, the CIT(A) allowed the deduction, considering the project's approval as a housing project by the local authority and the project's commencement before the amended provisions came into effect. The CIT(A) relied on the decision of the Bombay High Court in Brahma Associates, which clarified the prospective application of the restriction on commercial area. The Tribunal upheld the CIT(A)'s decision, emphasizing that the project was primarily a housing project with a minimal commercial area, meeting the criteria for deduction under section 80IB(10). The Tribunal rejected the revenue's grounds, concluding that the project's approval as a housing project and compliance with the principles established in Brahma Associates justified the allowance of the deduction.

In conclusion, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision to allow the deduction under section 80IB(10) based on the project's nature as a housing project and the prospective application of the restriction on commercial area as per the decision in Brahma Associates.