2014 (9) TMI 653 - AT - Income Tax

Rejection of deduction u/s 80IB(10) Conditions not fulfilled Merger of three plots - scheme for redevelopment of the slum area - Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the assessee carried out development on three different plots; each of those plots was less than one acre - These plots were not contiguous to each other - Though the plots were located at Dharavi, Mumbai, they were at different places - there were other slums in between these three slum area which was rehabilitated by the assessee - the development cannot be said to be done by the assessee in plot of land of one acre and above - the issue of merger of three plots for the purpose of area of plot being 1 acre has been decided against the assessee consistently by this Tribunal relying upon CIT v. Brahma Associates 2011 (2) TMI 373 - BOMBAY HIGH COURT - the requirement under the proviso to section 80IB(10) (a) & (b) for exclusion of the conditions prescribed under the clauses is that the housing project is carried out in accordance with the scheme for reconstruction or redevelopment of slum area - the intent of legislation is to exempt the condition of minimum of 1 acre plot size in the case where the housing project is carried out in accordance with the slum reconstruction scheme framed by the Central Government or State Government and such scheme is notified by the board. The projects are carried out in accordance with the scheme for redevelopment of the slum area as framed by the State Government of Maharashtra and the same has been notified by the board vide notification dated 5th January 2011 - once the scheme is notified all projects carried out in accordance with such scheme are entitled for the benefit of the proviso whereby the conditions prescribed under clause (a) & (b) are relaxed - the second part of the notification is inconsistent/contrary to the proviso of clause (a) & (b) of section 80IB(10) as well as to the intent of the legislature inserting the said proviso - The Board cannot insert a new condition in the provisions of a statute which is repugnant to the provisions itself as well as against the very object and scheme of the said provision of the statute - the proviso to clause (a) & (b) of section 80IB(10) mandates the notification of scheme and not the project under the scheme - Therefore, putting any extra condition for discriminating the project under the scheme is outside the scope of notification under clause (a) & (b) of section 80IB(10) - the assessee is entitled for benefit of the proviso to clause (a) & (b) of section 80IB(10) and, therefore, is eligible for deduction u/s 80IB(10) if the other conditions as prescribed under clause (c) to (e) are satisfied Decided in favour of assessee.

Issues Involved:

1. Rejection of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Whether multiple plots can be considered as one project for the purpose of section 80IB(10).
3. Applicability of the notification dated 5th January 2011 regarding slum rehabilitation schemes.

Issue-wise Detailed Analysis:

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

The assessee's appeal concerns the rejection of a deduction claim under section 80IB(10) for the Assessment Year 2008-09. The assessee had claimed this deduction for profits from three housing projects under the Slum Rehabilitation Scheme (SRS) of the Government of Maharashtra. The Assessing Officer (AO) denied the claim on the grounds that the minimum area requirement of 1 acre, as stipulated in clause (b) of section 80IB(10), was not met.

2. Whether Multiple Plots Can Be Considered as One Project:

The assessee argued that the three plots should be considered as one project for the purpose of the deduction. The rationale was that under the SRS, plots are often less than 1 acre, and since these plots were under one city survey number, they should be aggregated. However, the AO did not accept this argument, leading to the disallowance of the deduction.

On appeal, the assessee reiterated that the projects were developed under one survey number and should be considered a single project. The assessee cited the case of CIT v. Vandana Properties [2013] 353 ITR 36, where it was held that a "housing project" could mean constructing a building or group of buildings with several residential units, and the minimum area condition of 1 acre need not apply if only part of the plot is used for the eligible project.

The Tribunal, however, referred to its earlier decisions for the assessment years 2003-04 to 2005-06 and 2006-07, where it was held that each project must meet the minimum area requirement independently. The Tribunal noted that the plots in question were not contiguous and were separated by other slum areas, thus failing to meet the 1-acre requirement when considered individually. Consequently, the Tribunal upheld the AO's decision, stating that merging the plots to meet the 1-acre requirement was not permissible.

3. Applicability of the Notification Dated 5th January 2011:

The assessee also argued that the slum rehabilitation scheme had been notified by the board on 5th January 2011, making the minimum area condition inapplicable. The CIT(A) noted that the notification applied only to projects approved after 1st April 2004, which did not include the assessee's projects.

The Tribunal examined the notification and the relevant provisions of section 80IB(10). It noted that the notification aimed to relax the minimum area condition for projects under government-framed slum rehabilitation schemes. The Tribunal found that the projects were indeed carried out under such a scheme and that the scheme had been notified by the board.

However, the Tribunal observed that the notification's condition, which limited its applicability to projects approved after 1st April 2004, was inconsistent with the legislative intent and the provisions of section 80IB(10). The Tribunal held that the board could not impose new conditions that contradicted the statute's provisions and the legislative intent. Therefore, the Tribunal concluded that the assessee was entitled to the benefit of the proviso to section 80IB(10), making the minimum area condition inapplicable.

Conclusion:

The Tribunal ruled that the assessee's appeal was partly allowed. While the merging of plots to meet the 1-acre requirement was not permissible, the assessee was entitled to the deduction under section 80IB(10) due to the relaxation provided by the notification for projects under the slum rehabilitation scheme. The Tribunal emphasized that any additional conditions imposed by the board's notification, which were inconsistent with the statute, could not be upheld.

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