2017 (5) TMI 1590 - HC - Income Tax

Addition of Long Term Capital Gain - Assessing Officer applying the market value on the basis of the rate communicated by Ghazibad Development Authority of ₹ 5,700/- per sq. mtr as against the rate of ₹ 4,200/- sq. mtr. applied by the assessee? - Held that - The issue agitated before tribunal as regard to previous year, the issues as discussed which we have decided today but there is no reference of price in the same. In our view in CIT(A) and the tribunal have committed an error in not referring to the price in the previous year. Therefore, the matter is required to be remitted back to the tribunal only on this issue. The matter is remitted back to tribunal to decide, the same keeping in view the statutory provision. We make it clear that we have not expressed any opinion of merits. Deduction u/s 80IB (10) - whether project which is cleared as residential plus commercial project cannot be treated as housing project ? - Held that - The second issue is covered by the decision of this court in Commissioner of Income Tax Vs. Veena Developers 2015 (5) TMI 193 - SUPREME COURT as held where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules/Regulation, the deduction under Section 80IB(10) upto 31.3.2005 would be allowable irrespective of the fact that the project is approved as housing project or residential plus commercial. - Decided in favour of assessee

Summary

Issues:
1. Long Term Capital Gain addition based on market value.
2. Deduction under Section 80IB(10) of the Income Tax Act, 1961.

Long Term Capital Gain Addition Based on Market Value:
The High Court addressed the common question of law and facts in two appeals challenging the Tribunal's decision to dismiss the department's appeals. The substantial question of law framed by the Court revolved around the deletion of Long Term Capital Gain additions made by the Assessing Officer based on different market values applied by the authorities and the assessee. The Court found errors in the decisions of the CIT(A) and the Tribunal for not considering the price in the previous year. Consequently, the matter was remitted back to the tribunal solely on this issue, emphasizing the need to adhere to statutory provisions without expressing any opinion on merits.

Deduction under Section 80IB(10) of the Income Tax Act, 1961:
Regarding the deduction under Section 80IB(10), the High Court referred to a previous judgment in Commissioner of Income Tax Vs. Veena Developers, highlighting the interpretation of the term "housing project" and the approval requirement by a local authority. The Court emphasized the approval of a project by the local authority as crucial for it to be considered a housing project, even if commercial elements are present within the project. Citing the relevant provisions, the Court concluded that the issue should be decided in favor of the assessee based on the precedent. Consequently, the Court quashed and set aside the tribunal's judgment on the first issue, remitting it back for fresh consideration, while deciding the second issue in favor of the assessee.

In conclusion, the High Court disposed of both appeals, directing a reevaluation of the Long Term Capital Gain addition issue while ruling in favor of the assessee on the deduction under Section 80IB(10) of the Income Tax Act, 1961. The judgment emphasized adherence to statutory provisions and the significance of local authority approval for projects to qualify as housing projects for tax deductions.