2015 (7) TMI 516 - AT - Income Tax

Claim of deduction u/s.80IB(10) - CIT(A) allowed the claim - Held that - The building plan of the housing project has been first approved by the Thane Municipal Corporation on 21.9.2004 which was sanctioned by the Executive Engineer, Thane Municipal corporation on 17.09.2004. Once it is established that the building plan of the housing project was first approved on 21.9.2004 and no plan was approved prior to that date, we need to go into the other aspects of question. Accordingly the housing project in question was approved on 21.09.2004 when the plan was approved by the Thane Municipal Corporation. The correspondence between the assessee and the Thane Municipal Corporation prior to that approve of the building is not relevant to decide the date of approval as per the Explanation to section 80IB(10). In view of the above discussion, we decide this issue against the revenue and in favour of the assessee Denying benefit of deduction u/s.80IB(10) in respect of profits arising from development of 12 residential units of buildings Varsha and Grishma of the housing project Prakruti Park at Thane - Held that - The proportionate deduction is allowable when the other conditions regarding the area of plot is fulfilled after reducing the proportionate area of the plot representing the residential units which have the area exceeding 1000 sq.ft.. In the case in hand, the learned AR of the assessee has pointed out from the record that the total area of plot is 18742.2 sq.mtrs. and if proportionate area of 12 flats combined into six residential units is reduced from the total area of plot, the balance would be much more than the requirement of one acre. We note that the total number of flats in two buildings are 192 out of which 13 flats are merged for making six residential units. Therefore, keeping in view of the total area of the plot, we find that the remaining area is more than one acre as required u/s.80IB(10). We do not find any error or illegality in the order of the CIT(A) qua this issue - Decided against assessee.

Summary

Issues Involved:
1. Deduction under Section 80IB(10) of the Income Tax Act.
2. Date of approval of the housing project.
3. Compliance with the built-up area requirements for residential units.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IB(10) of the Income Tax Act:
The appeal filed by the revenue was primarily concerned with the allowance of the claim of deduction under Section 80IB(10) of the Income Tax Act. The assessee, a partnership firm engaged in the business of development and building, claimed a deduction amounting to Rs. 4,48,97,145/- for the assessment year 2009-2010. The project in question, 'Prakruti Park', was found to have combined flats exceeding the permissible built-up area of 1000 sq. ft., leading to the denial of the deduction by the Assessing Officer (AO) based on previous assessment orders. However, the CIT(A) allowed the deduction except for 12 units, observing that the housing project was approved on 21-09-2004 and completed within the stipulated time, thus complying with Section 80IB(10)(a)(ii).

2. Date of Approval of the Housing Project:
The key issue was determining the date of approval of the housing project. The AO argued that the project was approved on 27-02-2004, which would require completion by 31-03-2008. The CIT(A), however, concluded that the project was first approved on 21-09-2004, allowing completion by 31-03-2009. This conclusion was based on the issuance of the "Commencement Certificate" on 21-09-2004 by the Thane Municipal Corporation, which was deemed the date of first approval. The Tribunal upheld this view, noting that the approval of the building plan on 21-09-2004 was the relevant date as per the explanation to Section 80IB(10).

3. Compliance with the Built-up Area Requirements for Residential Units:
The cross-objection by the assessee contested the denial of deduction for 12 residential units, which were combined into 6 units exceeding the 1000 sq. ft. limit. The CIT(A) and the Tribunal both upheld the denial of deduction for these units, noting that the combination of units breached the conditions prescribed under Section 80IB(10)(c). The Tribunal referred to previous decisions, including the Calcutta bench ruling in Bengal Ambuja Housing Development Limited, to maintain consistency. It was clarified that proportionate deduction is allowable when other conditions are fulfilled, and the remaining area of the plot still meets the requirement of one acre.

Conclusion:
The Tribunal confirmed the CIT(A)'s order allowing the deduction under Section 80IB(10) for the housing project 'Prakruti Park', except for 12 combined units. The date of first approval was determined to be 21-09-2004, and the project was completed within the permissible time frame. The denial of deduction for the combined units was upheld due to non-compliance with the built-up area requirements. Both the revenue's appeal and the assessee's cross-objection were dismissed.