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2014 (7) TMI 592 - AT - Income TaxAllowability of deduction u/s 80IB of the Act on pro rata basis Held that - The assessee has fulfilled the conditions relating to minimum area of plot size, the commencing and completion of the project and the maximum built-up area in respect of residential units - The only condition which the assessee has failed to fulfill is with respect to the maximum limit of commercial area in a housing project i.e., 2000 sq. ft.- In housing project under consideration, the area allocated for commercial purpose is 3906 sq. ft. the area marked as commercial area, is in fact a common area to be used as cr che by the residents of the housing project - The area is not for the benefit of general public but for the exclusive use of the flat owners alone the decision in Commissioner of Income Tax Chennai Versus M/s. Arun Excello Foundations Pvt. Ltd 2012 (12) TMI 415 - MADRAS HIGH COURT followed - where there is a partial compliance, deduction u/s.80IB(10) is allowable on pro-rata basis where both commercial and residential houses have been built thus, the CIT(A) is justified in granting proportionate relief to the assessee - CIT(Appeals) rightly held that the assessee is entitled to deduction u/s 80IB on the entire project except the profit element in respect of area of 1906 sq. ft., which exceeds the maximum statutory limit of 2000 sq. ft., that could be used for commercial purpose u/s.80IB(10) Decided against Revenue.
Issues:
Allowing deduction u/s.80IB on pro-rata basis. Analysis: The appeals were filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for three Assessment Years (AYs) 2006-07, 2007-08 & 2008-09. The main issue raised in the appeals was the allowing of deduction u/s.80IB to the assessee on a pro-rata basis. The Assessing Officer denied the benefit of deduction u/s.80IB to the assessee as the commercial area in the project exceeded the maximum limit of 2000 sq. ft. required by the provision. The CIT(Appeals) partly allowed the appeals of the assessee, leading the Revenue to appeal before the Tribunal challenging the findings of the CIT(Appeals). The Revenue contended that the CIT(Appeals) erred in allowing the deduction u/s.80IB to the assessee on a pro-rata basis. The Revenue argued that the issue had not attained finality as the decisions relied upon by the CIT(Appeals) were challenged before the Supreme Court. On the other hand, the assessee's advocate argued that the excessive commercial area was used for common purposes of the residents and not for setting up any commercial establishment. The advocate relied on judgments of the jurisdictional High Court to support the order of the CIT(Appeals. The Tribunal considered the submissions of both parties and reviewed the orders of the authorities below. It was noted that the only condition the assessee failed to fulfill for claiming deduction u/s.80IB was the maximum limit of commercial area in the housing project. The Tribunal referred to the judgments of the Hon'ble Madras High Court, which allowed deduction on a pro-rata basis in cases of partial compliance with the conditions. The Tribunal found that the CIT(Appeals) was justified in granting proportionate relief to the assessee, allowing deduction on the entire project except for the profit element in the area that exceeded the statutory limit. Therefore, the Tribunal dismissed the appeals of the Revenue. In conclusion, the Tribunal upheld the decision of the CIT(Appeals to allow deduction u/s.80IB on a pro-rata basis, based on the interpretation of the relevant legal provisions and precedents set by the jurisdictional High Court.
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