2015 (12) TMI 363 - AT - Income Tax

Disallowance of deduction u/s. 80IB(10) in respect to profit derived from housing project (luxury) - CIT(A) deleted the addition - Held that - As decided in in the case of Shriram Properties (P) Ltd 2013 (9) TMI 446 - ITAT CHENNAI for determining the amount which qualifies for deduction u/s 80IB(1), one has to compute the income from eligible business as if the eligible business was the only source of income of the assessee. In other words, the income or loss from other business or other activities are to be ignored for the purpose of determining the amount which is eligible for deduction u/s 80IB(1) of the Act - gross total income of the assessee is ₹ 2,56,37,975/- after adjusting losses suffered by the assessee in the other two projects viz. Shreyas and Coimbatore . There are no brought forward losses or unabsorbed depreciation. The claim of deduction u/s 80IB in respect of the two eligible units viz. Spandhana and Samruddhi of ₹ 2,23,22,237/- is obviously less than the gross total income. Thus the Assessing Officer as well as the ld. CIT(A) erred in interpreting the relevant provisions when they held that the losses suffered by the assessee from two projects, viz. Shreyas and Coimbatore be reduced from the profits of the other two units viz. Spandhana and Samruddhi for granting deduction u/s 80IB. Accordingly, the impugned orders of the lower authorities are set aside. The Assessing Officer is directed to allow deduction u/s 80IB on the profits derived by the assessee from two projects viz. Spandhana and Samruddhi of ₹ 2,23,22,237 - Following decision of CIT v. Canara Workshop (P.) Ltd. 1986 (7) TMI 5 - SUPREME Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Deduction under Section 80IB(10) of the Income-tax Act, 1961 for housing projects.
2. Treatment of losses from different housing projects while computing the deduction.
3. Eligibility of commercial area within the housing project for deduction.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IB(10) of the Income-tax Act, 1961 for housing projects:
The primary issue in these appeals was whether the assessee was entitled to deduction under Section 80IB(10) of the Income-tax Act, 1961, specifically for profits derived from the "Luxury" (HIG) housing project. The Assessing Officer (AO) had disallowed the deduction, aggregating the losses from the "Efficiency" (LIG) and "Comfort" (MIG) projects with the profits from the "Luxury" project. The CIT(A) allowed the deduction, noting that the assessee maintained separate books of accounts for each project, and the profits and losses were separately identifiable. The Tribunal upheld the CIT(A)'s decision, emphasizing that the projects were distinct and independently approved by the regulatory authority.

2. Treatment of losses from different housing projects while computing the deduction:
The AO aggregated the losses from the LIG and MIG projects with the profits from the HIG project to compute the deduction under Section 80IB(10). The CIT(A) found that the AO did not dispute the separate maintenance of books for each project and that the profits and losses were separately identifiable. The Tribunal referenced the case of Shriram Properties (P) Ltd. Vs. ACIT, where it was held that the deduction under Section 80IB should be computed separately for each eligible unit without reducing the losses of one unit from the profits of another. The Tribunal concluded that the AO was not justified in aggregating the losses of the LIG and MIG projects with the profits of the HIG project.

3. Eligibility of commercial area within the housing project for deduction:
For the assessment year 2005-06, the AO disallowed the deduction under Section 80IB(10) on the grounds that the housing project contained a commercial area ("Utsa Centre") exceeding the specified limit of 2000 sq. ft. The CIT(A) found that the "Utsa Centre" was part of the Efficiency and Comfort housing project, which was separate from the "Utsa-The Condoville Luxury" housing project. Therefore, the commercial area did not affect the eligibility of the Luxury project for the deduction. The Tribunal upheld this finding, noting that the commercial area was part of a different project and did not impact the deduction claimed for the Luxury project.

Conclusion:
The Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s decision to allow the deduction under Section 80IB(10) for the profits derived from the "Luxury" housing project without aggregating the losses from the "Efficiency" and "Comfort" projects. The Tribunal emphasized the importance of maintaining separate books of accounts for each project and treating them as distinct entities for the purpose of computing the deduction. The decision also clarified that the presence of a commercial area in a different project did not affect the eligibility of the Luxury project for the deduction.