2016 (2) TMI 884 - AT - Income Tax

Eligibility of benefit of deduction u/s.80IB(10) - case of the Revenue that since the assessee has not completed the B2 project, therefore, the assessee is not entitled to deduction u/s.80IB(10)- Held that - We find the assessee in the instant case has constructed the housing project namely Kumar Paradise at Hadapsar, Pune on Plot No.2 Survey No.134/1/1A/1. The said plot is divided into 3 parts, Part A, Part B and Part C. The first layout of the plan of the entire scheme was sanctioned by the local authority, i.e. PMC on 21-10-2003. The assessee proposed 2 separate projects Part A and B on the aforesaid plot. The project A of the plot comprised of the Buildings A1 and A2 and project B comprised of Buildings B1, B2, B3 and B4. The total area of the project A was 8,853 sq.mtrs. The construction of the building A1 was started vide commencement certificate dated 08-01-2004 and the said building A1 comprising of 108 units was completed on 06-07-2006. Similarly, Building A2 which was commenced vide commencement certificate dated 18-05-2004 consisting of 108 units was completed on 06-11-2007. The project B comprising of 10, 394.66 sq.mtrs of Part B and 1606.02 sq.mtrs of Part C. The Building B1 commenced construction vide commencement certificate dated 28-06-2006 and the same comprised of 44 residential units and the said building B1 was completed on 18-03-2008. The other building B2 was commenced vide commencement certificate dated 28-06-2006. However, the same was not completed as according to the assessee there was inadequate FSI to complete the entire building since the same was sanctioned with only 16 units with an FSI of 677.64 sq.mtrs. Since according to the assessee the same was not economically viable the assessee did not complete the residential floors but only completed the parking floors for want of adequate FSI. However, subsequently, the assessee renewed the same on 22-06-2010 vide a separate commencement certificate. For the other 2 buildings, i.e. B3 and B4 on Part C of the plot another commencement certificate was obtained and building plan was sanctioned as there was no adequate FSI for building B2 itself. It is the case of the assessee that it has completed A1, A2 and B1 of the project and because of inadequate FSI the assessee did not complete B2 building as it was not economically viable. Therefore, on stand alone basis itself, it is entitled to deduction u/s.80IB(10) in respect of whatever portion is completed. It is also the case of the assessee that in A.Y. 2007-08 the deduction claimed u/s.80IB(10) was allowed in order passed u/s.143(3). In A.Y. 2008-09 the deduction claimed was allowed in the order passed u/s.143(3)/147. Therefore, there is no justification for denying the claim of benefit of deduction u/s.80IB(10). There is no dispute to the fact that the assessee in the instant case has completed the B1 building consisting of 44 flats. As mentioned earlier the building B1 is having built up area of more than 1 acre. The built up area of all the residential units are less than 1,500 sq.ft. and there is no commercial construction and the building independently on standalone basis satisfies all the conditions u/s.80IB(10). It has been held by various decisions that deduction u/s.80IB(10) of the Income Tax Act, 1961 is to be allowed on standalone basis on satisfaction of the conditions prescribed under the said section. - Decided in favour of assessee

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
2. Completion of the housing project within the stipulated period.
3. Proportionate deduction for partially completed projects.
4. Interpretation of the term "housing project."

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue revolves around the eligibility of the assessee for claiming a deduction under Section 80IB(10) of the Income Tax Act. The assessee, engaged in real estate development, claimed a deduction for the housing project "Kumar Paradise." The Assessing Officer (AO) disallowed this deduction, arguing that the project was not completed within the stipulated period. The AO's stance was based on the fact that the project continued beyond 31-03-2008, and the revised plan sanctioned on 28-06-2006 was again revised on 22-06-2010. However, the assessee contended that even if Building B2 was not completed, the project fulfilled the conditions on a standalone basis, citing various legal precedents.

2. Completion of the Housing Project within the Stipulated Period:
The AO argued that the entire housing project needed to be completed by 31-03-2008 to qualify for the deduction. The AO referred to the decision of the Bombay High Court in CIT Vs. Brahma Associates, which stated that the deduction is allowable to the entire project approved by the local authority and not to a part of the project. However, the CIT(A) found that the project was divided into two parts (Part A and Part B), with separate commencement and completion certificates for each part. The CIT(A) observed that Part A (Buildings A1 and A2) and Part B (Building B1) were completed before the stipulated date, thus satisfying the conditions for the deduction.

3. Proportionate Deduction for Partially Completed Projects:
The CIT(A) allowed the deduction on a proportionate basis, considering the completed portions of the project. The CIT(A) cited various judicial precedents supporting the concept of proportionate deduction, including decisions from the Pune ITAT and the Bombay High Court. The CIT(A) emphasized that the legislative intent of Section 80IB(10) is to encourage the development of residential tenements, and the incentive provisions should be interpreted liberally to advance the object sought to be achieved. The CIT(A) concluded that Building B1, on a standalone basis, satisfied all the conditions of Section 80IB(10), and thus, the assessee was entitled to the deduction.

4. Interpretation of the Term "Housing Project":
The CIT(A) and the Tribunal both addressed the interpretation of the term "housing project." The CIT(A) referred to the decision in Vandana Properties, where the Bombay High Court held that the expression "housing project" means constructing a building or group of buildings consisting of several residential units. The CIT(A) concluded that Building B1, on a standalone basis, constituted a housing project and satisfied the conditions of Section 80IB(10). The Tribunal upheld this interpretation, agreeing that the assessee was entitled to a pro-rata deduction for the completed units of Building B1.

Conclusion:
The Tribunal upheld the CIT(A)'s order, allowing the deduction under Section 80IB(10) on a proportionate basis for the completed portions of the housing project. The Tribunal emphasized that the legislative intent of the provision is to encourage residential development and should be interpreted liberally. The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s decision to allow the deduction for the completed units of the housing project "Kumar Paradise."

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