2016 (1) TMI 173 - AT - Income Tax

Validity of claim of deduction under sec. 80IB (10) - non fulfilment of 46 clause(c) of section 80IB (l0) of I.T. Act, 1961 that some of the residential units do not confirm to the requirements of built up area i.e. 1500 sq. ft. - Held that - In this project also for no. of eligible Towers are 24 where each residential unit is having constructed area less than 1500 sq. ft. as per the requirement of clause (c) of section 80IB (l0), where as ineligible no. of towers are 11 spread over on 24.174 acres & these towers are separately Located and separated from other Towers. Hence these towers together is a separate housing projects spread over 25.83 acres of Land & Satisfying all the conditions of section 80IB (l0) separately. Though there is a common approval of entire 50 acres of Land consisting of eligible housing project along with commercial area on 24.174 acres of Land. Both eligible & non eligible projects are separate by road & have separate common facilities. Ld. AR has relied upon various Judicial pronouncements on similar lines as in Omaxe Green Land, Sector 93B, Noida. As considered entire facts & circumstances of the case. Present eligible projects is similar to Omaxe Green Land project. Therefore, treat the eligible projects as a separate housing project on similar lines of Noida project. Commercial area of entire housing scheme is more than permissible limit as per clause (d) of Section 80IB(10) - CIT(Appeals) did not agree with the assessee that the commercial area are within the limit of amended permissible area as per clause D of section 80IB(10) introduced by Finance Act, 2010 as clarificatory in nature as it would apply to the project started before 31.3.2008. We concur with this finding of the Learned CIT(Appeals) that amendment in the said clause (d) is not clarificatory and, therefore, it would not apply retrospectively. The Learned CIT(Appeals) has, however, held that the eligible towers are separate housing projects and, therefore, deduction under sec. 80IB (10) is available. The further contention of the assessee that the commercial area is not developed and right to develop the same is transferred to other company and the said transfer is duly intimated to the local authority and that a transfer is not a mere book entry as claimed by the Assessing Officer was kept open by him in view of his above findings and treating the same as not relevant. We are agreeable to this finding of the Learned CIT(Appeals) especially when the assessee was found eligible to claim deduction under sec. 80IB(10) of the Act on the projects having residential units constructed within the prescribed limit of 1500 sq. fts. The same is upheld. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of claimed deduction under section 80IB(10) of the Income-tax Act, 1961.
2. Whether the group housing schemes constitute separate housing projects.
3. Allowability of deduction on profits derived from unbuilt housing sites.
4. Proportionate deduction for eligible residential units.
5. Transfer of commercial area and its impact on deduction eligibility.
6. Charging of interest under section 234B of the Act.

Detailed Analysis:

1. Validity of Claimed Deduction under Section 80IB(10):
The primary issue revolves around the validity of the claimed deduction under section 80IB(10) of the Income-tax Act, 1961. The assessee, a public limited company engaged in real estate development, claimed a deduction of Rs. 189,70,14,901 for the assessment year 2008-09. The assessing officer denied the deduction to the extent of Rs. 188,25,94,379, which was partially allowed by the CIT(A) only for built-up residential units, disallowing it for unbuilt housing sites.

2. Separate Housing Projects:
The Revenue contended that the group housing projects, such as Omaxe Heights in various locations, did not qualify for the deduction as separate projects. The CIT(A) allowed the deduction for these projects, holding them as separate housing projects that satisfy the conditions of section 80IB(10). The ITAT upheld this view, emphasizing that the projects had separate approvals, demarcated areas, and fulfilled all conditions independently.

3. Deduction on Unbuilt Housing Sites:
The assessee argued that the development of housing sites should qualify for the deduction under section 80IB(10). However, the CIT(A) and ITAT rejected this claim, stating that the conditions of section 80IB(10) regarding commencement of construction and maximum built-up area cannot be fulfilled if the housing sites are sold without any construction. This position was supported by the decision of the Hon'ble Madhya Pradesh High Court in the case of Navratan Techbuild (P) Ltd.

4. Proportionate Deduction for Eligible Residential Units:
The CIT(A) allowed proportionate deduction for residential units that met the built-up area criteria, even if some units in the same project did not. This approach was supported by various judicial precedents, including the decisions of the Hon'ble Madras High Court in the case of Vishwas Promoters Pvt. Ltd. and the Hon'ble Bombay High Court in the case of Brahma Associates. The ITAT upheld this view, allowing deduction on a pro-rata basis for eligible units.

5. Transfer of Commercial Area:
The Revenue argued that the transfer of commercial areas within the projects was merely a book entry to circumvent the provisions of section 80IB(10). The CIT(A) and ITAT found that the commercial areas were transferred to other entities and were not part of the eligible housing projects. The transfer was supported by MOUs, intimation to regulatory authorities, and separate accounting by the transferee companies. The ITAT upheld the CIT(A)'s view that the commercial area did not affect the eligibility of the residential units for deduction.

6. Charging of Interest under Section 234B:
The assessee contested the charging of interest under section 234B on the revised income. The ITAT held that this issue was consequential and did not require independent adjudication.

Conclusion:
The ITAT upheld the CIT(A)'s orders allowing proportionate deduction under section 80IB(10) for eligible residential units and rejecting the deduction for unbuilt housing sites. The appeals by both the Revenue and the assessee were dismissed, affirming the CIT(A)'s findings on the eligibility and conditions for the claimed deductions. The ITAT emphasized the importance of fulfilling the specific conditions of section 80IB(10) and supported the view that separate housing projects within a larger approved project could independently qualify for deductions.