2015 (1) TMI 51 - AT - Income Tax

Allowability of deduction u/s 80IB(10) - Applicability of the amended provisions of section 80IB(10) w.e.f 1.4.2005 vide Finance Act, 2004, in respect of the project of the assessee which was approved prior to 1.04.2005 - Fact relating to Development rights of commercial units were transferred to its sister concern M/s Nikunj Developers considered or not Held that - Following the decision in The Commissioner of Income Tax-16, Mumbai Versus M/s. Happy Home Enterprises, M/s. Kanakia Spaces Pvt. Ltd. 2014 (9) TMI 707 - BOMBAY HIGH COURT - there were several conditions that were imposed in the newly substituted section 80-IB(10) that were absent in the section prior to its amendment - the housing projects were approved prior to 31st March, 2005 - the Legislature did not intended to give any retrospectivity to clause (d) of section 80-IB(10) - it is clearly a condition that relates to and/or is linked with the approval and construction of the housing project - clause (d) of subsection (10) of section 80-IB cannot have any application to housing projects that are approved before 31st March, 2005 - The said clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the clause operates only prospectively i.e. for housing projects approved after 1st April, 2005 - the project was approved prior to 1.4.2005 on 10.01.2005 by the local authority thus, the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues:
- Appeal against CIT(A) orders for assessment years 2008-09 to 2010-11 regarding deduction u/s 80IB(10) of Income Tax Act.

Detailed Analysis:

1. The appeals by the revenue were directed against CIT(A) orders for assessment years 2008-09 to 2010-11. The main issue raised was the correctness of allowing deduction u/s 80IB(10) without considering the transfer of development rights of commercial units to another entity for availing the deduction.

2. Following a search & seizure action, the assessee claimed deduction u/s 80IB(10) for a housing project. The Assessing Officer disallowed the claim due to the commercial area exceeding the prescribed limit. The CIT(A) allowed the claim, emphasizing that the deduction was only for the housing project, not the commercial establishment.

3. The applicability of amended provisions of section 80IB(10) from 1.4.2005 was questioned. The Authorized Representative cited relevant judgments, including the decision of the Hon'ble Jurisdictional High Court. The High Court's stance was that the amended clause (d) of section 80IB(10) should only apply prospectively to projects approved after 1.4.2005.

4. Referring to judgments by the Karnataka High Court and Gujarat High Court, it was reiterated that the conditions of section 80IB(10) should apply to projects approved post the amendment date. The Gujarat High Court highlighted that retrospective application of conditions would defeat the purpose of encouraging housing projects.

5. As the project in question was approved before 1.4.2005, following the precedents and High Court judgments, the Tribunal upheld the CIT(A) order, dismissing the revenue's appeal. The decision was based on the principle that conditions under section 80IB(10) should not be retrospectively applied to housing projects approved before the amendment.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A) order regarding the deduction u/s 80IB(10) for the housing project approved before 1.4.2005. The judgment emphasized the prospective application of amended provisions and the importance of considering the legislative intent behind such tax deductions.