2015 (10) TMI 80 - AT - Income Tax

Claim of deduction u/s 80IB(10) - AO rejected assessee s claim as the housing project has not been completed on or before 31/03/08 and some of the residential units have exceeded the prescribed built up area of 1500 sq.ft. - CIT(A) deleted the addition - Held that - As held in case of CIT Vs. Vandana Properties 2012 (4) TMI 54 - BOMBAY HIGH COURT since the term housing project has not been defined under section 80IB(10), meaning as per common parlance has to be taken. The Hon ble High Court observed that the expression housing project in common parlance would mean constructing a building or group of buildings consisting of several units. Referring to explanation u/s 80IB(10), the hon ble court observed, the language used in the explanation to the effect that approval granted to a building plan would suggest that housing project would mean a building consisting of several units. Thus, the Hon ble Court ultimately held that construction of a building with several residential units having prescribed built up area would constitute a housing project u/s 80IB(10). In view of the aforesaid, as approval by local authority for the four blocks, namely, Prime Rose, Lilly, Jasmine and Morning Glory was granted by local authority on 06/02/06, assessee, in our opinion, would be eligible to avail deduction u/s 80IB(10) since these four blocks were completed within the stipulated period of five years. As far as the second allegation of AO that few of the residential unit in the housing project exceeded the prescribed limit of 1550 sq.ft., it is to be noted that assessee before AO itself has stated that the total number of units which exceeded prescribed built up area limit of 1500 sq.ft. constitute 9% of the total housing project. It was further brought to the notice of AO, assessee itself has not claimed deduction u/s 80IB(10) in respect of those units. In our view, ld. CIT(A) was justified in allowing assessee s claim of deduction u/s 80IB(10) in respect of the residential units comprising housing project, which adhered to conditions of section 80IB(10). Since the provision contained u/s 80IB(10) is a beneficial provision, a liberal approach has to be taken as a literal interpretation would lead to a situation where the very intention of bringing such provision would be defeated. The Hon ble Madras High Court in case of CIT Vs. Arun Excello Foundation (P) Ltd. (2012 (12) TMI 415 - MADRAS HIGH COURT ) expressing similar view held, in a case where some of the units exceed the prescribed built up area of 1500 sft., assessee would not be entitled to have benefit 100% deduction u/s 80IB(10) of the Act for entire project, but would be entitled to prorate deduction on the units satisfying the conditions under clause (c). Thus CIT(A) was justified in allowing assessee s claim of deduction u/s 80IB(10) - Decided against revenue.

Summary

Issues Involved:
1. Eligibility of the assessee for deduction under section 80IB(10) of the Income Tax Act.
2. Completion of the housing project within the stipulated period.
3. Compliance with the built-up area limit for residential units.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue revolves around whether the assessee, a partnership firm engaged in the development of housing projects, is eligible for deduction under section 80IB(10). The assessee claimed a deduction of Rs. 9,16,96,622 under this section for the AY 2010-11. The Assessing Officer (AO) rejected this claim, arguing that the housing project did not meet the completion deadline and some residential units exceeded the prescribed built-up area.

2. Completion of the Housing Project:
The AO noted that the housing project, consisting of six blocks on a 7.39-acre land, had initial approval from HUDA on 07/05/01 and the local authority on 10/05/01. The AO argued that the project should have been completed by 31/03/08 to qualify for the deduction. However, the assessee contended that the approval for four blocks was granted by HUDA on 20/01/06 and by the local authority on 06/02/06, and the project was completed within five years from this date. The CIT(A) agreed with the assessee, stating that the approval date by the local authority for the four blocks should be considered as 06/02/06, making the project eligible for the deduction.

3. Compliance with Built-up Area Limit:
The AO also observed that some residential units exceeded the built-up area limit of 1500 sq.ft., violating one of the conditions for the deduction. The assessee argued that only 9% of the units exceeded this limit and had proportionately disallowed the deduction for these units. The CIT(A) supported this view, allowing the deduction for the compliant units and restricting the disallowance to the non-compliant 9%.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the approval date for the four blocks should be considered as 06/02/06, making the project eligible for the deduction under section 80IB(10). The Tribunal also supported the proportionate disallowance for the units exceeding the built-up area limit, allowing the deduction for the compliant units. The department's appeal was dismissed, and the assessee's claim for the deduction was upheld.

Pronouncement:
The judgment was pronounced in the open court on 4th September 2015, dismissing the department's appeal and upholding the order of the CIT(A).