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2014 (3) TMI 643 - AT - Income TaxEligibility to claim deduction u/s 80IB(10) of the Act - Retrospective applicability of section 80IB(10)(d) of the Act - Benefit of 100% deduction taken from the profits earned from undertaking, developing and building housing projects Held that - The decision in The Commissioner of Income Tax-II, Pune Versus M/s. Brahma Associates 2011 (2) TMI 373 - BOMBAY HIGH COURT followed - clause 'd' to section 80IB(10) is prospective in nature and cannot be made applicable to the projects approved prior to 01.04.2005 also in MANAN CORPORATION Versus ASSTT COMMISSIONER OF INCOME TAX 2012 (9) TMI 700 - Gujarat High Court it has been held that the condition of built up area provided in clause 'd' is prospective in nature and it is not applicable to projects approved prior to 01.04.2005. CIT(A) was of the view that when a housing project is approved, the law as on the date of approval should be taken into consideration in which event the amended provision, which has come into effect from 01.04.2005, cannot be made applicable - so long as the built up area of shops is less than 10% of the total built up area the assessee cannot be denied the benefit under section 80IB of the Act - the project undertaken by the assessee was approved as a 'housing project' by the local authority in March, 2004 and the construction also having been commenced in 2004 the pre-amended provisions are applicable in which event the assessee is entitled to claim deduction under section 80IB(10) of the Act - thus, the order of the CIT(A) is upheld Decided against Revenue.
Issues Involved:
1. Eligibility to claim deduction under section 80IB(10) of the Income Tax Act, 1961. 2. Applicability of amended provisions of section 80IB(10) w.e.f. 01.04.2005 to housing projects approved prior to this date. 3. Interpretation and application of clause 'd' of section 80IB(10) regarding built-up area of shops and commercial establishments. Issue-wise Detailed Analysis: 1. Eligibility to claim deduction under section 80IB(10) of the Income Tax Act, 1961: The core issue revolves around the eligibility of the assessee to claim deduction under section 80IB(10) for the assessment years 2006-07 and 2007-08. The assessee, engaged in developing housing projects, claimed the deduction on the grounds that it met all the stipulated conditions under the said section. The conditions included commencement of the project after 1st October 1998, the plot area being not less than one acre, and each residential unit not exceeding a built-up area of 1000 sq.ft. in Mumbai. The projects were approved and commenced before the amendment date of 31.03.2004, and completion certificates were obtained within the stipulated period. 2. Applicability of amended provisions of section 80IB(10) w.e.f. 01.04.2005 to housing projects approved prior to this date: The amendment to section 80IB(10), effective from 01.04.2005, introduced clause 'd', which limits the built-up area of shops and commercial establishments to 5% of the aggregate built-up area or 2000 sq.ft., whichever is less. The AO contended that the assessee violated this condition as the built-up area of the shops exceeded 2000 sq.ft., thus disqualifying the assessee from claiming the deduction. However, the assessee argued that the amended provisions should not apply to projects approved before the amendment date. The CIT(A) supported this view, referencing the ITAT Pune Special Bench decision in Brahma Associates, which held that the law as on the date of project approval should apply. 3. Interpretation and application of clause 'd' of section 80IB(10) regarding built-up area of shops and commercial establishments: The AO's position was that the built-up area of shops in the assessee's project exceeded the 2000 sq.ft. limit, thus violating clause 'd' introduced in the amendment. The assessee countered that this clause should not retroactively apply to their project, which was approved and commenced before the amendment date. The CIT(A) and subsequent Tribunal decisions, including those of the Hon'ble Bombay High Court in Brahma Associates and the Hon'ble Gujarat High Court in Manan Corporation, supported the view that the amended clause 'd' is prospective and not applicable to projects approved before 01.04.2005. The Tribunal upheld the CIT(A)'s decision, affirming that the amended provisions of clause 'd' are prospective and cannot be applied to the assessee's project, which was approved and commenced before the amendment date. The Tribunal emphasized the binding nature of the jurisdictional High Court's decision and dismissed the Revenue's appeals, thereby allowing the assessee's claim for deduction under section 80IB(10). Conclusion: The Tribunal concluded that the amended provisions of section 80IB(10) w.e.f. 01.04.2005, particularly clause 'd', do not apply to housing projects approved prior to this date. The assessee's project, having met the conditions as per the law at the time of approval, is eligible for the deduction under section 80IB(10). The appeals filed by the Revenue were dismissed, and the order of the CIT(A) was upheld.
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