2017 (1) TMI 1648 - AT - Income Tax

Reopening of assessment - disallowance of deduction u/s 80IB - assessee has sold 20 flats to M/s. Indian Overseas Bank which is not an individual - claim allowable on pro-rata basis - HELD THAT - While the assessment was reopened within the four years from the end of the assessment year 2010-11 and there was a provision in the form of clause (e) to Section 80IB(10) introduced by the Finance Act 2010 which is applicable w.e.f. 01.04.2010 which reads as - not more than one residential unit in the housing project is allotted to any person not being an individual and Assessing Officer rightly recorded the reason for reopening and issued notice under Section 148 of the Act. Accordingly and validly the Assessing Officer reopened the assessment. We do not find any infirmity in the reopening of the assessment. Disallowance of benefit under Section 80IB(10) - In this case admittedly the assessee sold 20 flats to M/s. Indian Overseas Bank which is not an individual. In our opinion clause (e) of Section 80IB(10) of the Act is applicable from the assessment year 2010-11. However as held by Judicial High Court in the case of CIT Vs. Arun Excello Foundations Pvt. Ltd. 2012 (12) TMI 415 - MADRAS HIGH COURT the deduction u/s 80IB(10) cannot be denied in toto. On the other hand if there is a violation only that income generated from sale of those flats not to be considered for deduction under Section 80IB(10) of the Act. Deduction u/s 80IB(10) is allowable on pro-rata basis and 80IB(10) deduction to be granted accordingly. Thus remit the issue relating to the granting of deduction under Section 80IB(10) of the Act in all the assessment years to the file of the Assessing Officer for granting of deduction under Section 80IB(10) of the Act on pro-rata basis and decide accordingly. - Decided partly in favour of assessee for statistical purpose.

Summary

Issues:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961 for the assessment year 2010-11.
2. Disallowance of benefit under Section 80IB(10) of the Act to the assessee.

Analysis:

Issue 1: Reopening of assessment
The assessee's appeal challenged the reopening of the assessment for the assessment year 2010-11 under Section 148 of the Income Tax Act. The Assessing Officer reopened the assessment based on the violation of conditions in clause (e) of Section 80IB(10) of the Act, applicable from 01.04.2010, as the assessee sold 20 flats to a non-individual entity. The Tribunal upheld the reopening, stating that the provision in clause (e) justified the reassessment. The Tribunal found no infirmity in the reopening and confirmed the Assessing Officer's decision.

Issue 2: Disallowance of benefit under Section 80IB(10)
The second ground of appeal addressed the disallowance of benefits under Section 80IB(10) of the Act to the assessee. The lower authorities rejected the deduction claim as the assessee sold flats to a public sector undertaking, not an individual, violating clause (e) of Section 80IB(10). The assessee argued that the flats were sold for residential use by low or middle-income individuals and that the public sector bank was government-owned. Citing various judgments, the assessee pleaded for a proportionate deduction under Section 80IB(10). The Tribunal agreed with the assessee, emphasizing that the deduction cannot be denied entirely. It ruled that only the income from the violated units should be excluded from the deduction, allowing a pro-rata deduction under Section 80IB(10) for the remaining units.

In conclusion, the Tribunal partially allowed the assessee's appeals for statistical purposes, remitting the issue of granting deduction under Section 80IB(10) to the Assessing Officer for a pro-rata decision. The judgment highlighted the importance of adhering to the specific provisions of the Income Tax Act while considering deductions and reassessments.