2015 (10) TMI 2755 - AT - Income Tax

Claim of deduction u/s 80IB(10) in respect of two projects undertaken by the assessee i.e. Kumar Kruti and Kumar Shantiniketan - prorata claim of deduction in respect of project Kumar Shantiniketan - Two of the flat bearing Nos.3 and 4 in building D had covered area exceeding 1500 sq.ft. and on that basis the deduction claimed under section 80IB(10) was denied to the assessee - HELD THAT - Tribunal had in the earlier years relating to assessment years 2008-09 and 2009-10 allowed the claim of assessee with directions to the AO to allow prorata deduction u/s 80IB(10) and denied the said deduction in respect of two flats i.e. flat Nos.3 and 4 in building D which had covered area of more than prescribed limit. The relevant findings of the Tribunal which are being referred to but not being reproduced for the sake of brevity. In the entirety of the above said facts and circumstances where the issue is identical to the issue before the Tribunal in the earlier years following the same parity of reasoning we direct the AO to re-work prorata deduction under section 80IB(10). Deduction u/s 80IB(10) in respect of project Kumar Kruti - deduction was denied to the assessee on account of two accounts i.e. where the project Kumar Kruti was part of larger project named Kumar City and where the assessee had not completed the project by 31.03.2008 prorata deduction was allowed to the assessee - HELD THAT - Tribunal after considering the issue held that the project Kumar Kruti was an independent project since the building plan of the said project was sanctioned independently on 16.07.2006 and in view thereof there was no justification in holding that the project Kumar Kruti was part of Kumar City. The relevant findings of the Tribunal are reproduced which are being referred to but not being reproduced for the sake of brevity. Tribunal further held that the assessee was entitled to prorata deduction under section 80IB(10) in respect of eligible units which were within covered area limit of 1500 sq.ft. However few flats which exceeded the prescribed covered area were denied the deduction under section 80IB(10) - We uphold the order of CIT(A) in directing the Assessing Officer to work out the prorata deduction in respect of units sold in Kumar Kruti project. In the entirety of the above said facts and circumstances we uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue.

Summary

Issues:
1) Allowance of deduction u/s. 80IB(10) for projects Kumar Kruti and Kumar Shantiniketan.
2) Interpretation of Section 80IB(10) regarding housing project sanction.
3) Completion of housing project by specified deadline.
4) Prorate deduction for eligible flats.
5) Compliance with commercial area restrictions under Section 80IB(10).

Analysis:

Issue 1: Allowance of deduction u/s. 80IB(10) for projects Kumar Kruti and Kumar Shantiniketan:
The appeal by the Revenue challenged the CIT(A)'s decision to allow deduction under section 80IB(10) for the mentioned projects. The Tribunal considered the assessee's engagement in developing residential projects and the claim for deduction under section 80IB(10) for Kumar Shantiniketan and Kumar Kruti projects. The Assessing Officer disallowed the deduction citing non-compliance with project specifications and completion deadlines. However, the CIT(A) allowed the deduction based on previous Tribunal rulings in the assessee's favor for similar issues, directing the Assessing Officer to rework the deduction calculations for both projects.

Issue 2: Interpretation of Section 80IB(10) regarding housing project sanction:
The Revenue contended that the CIT(A) erred in not understanding the specific requirements of Section 80IB(10) related to housing project approvals and individual building deductions. The Tribunal analyzed the provisions of the Act and previous case law to determine that the projects in question were eligible for deduction as independent entities, not part of a larger project as argued by the Revenue.

Issue 3: Completion of housing project by specified deadline:
The completion deadline for the housing projects was a crucial factor in determining eligibility for deductions under Section 80IB(10). The Assessing Officer found non-compliance with completion deadlines for the Kumar Kruti project, leading to the disallowance of deductions. However, the CIT(A) and Tribunal ruled in favor of the assessee, considering the independent sanctioning of the project plan and directing the reworking of deductions based on eligible units within the covered area limit.

Issue 4: Prorate deduction for eligible flats:
The dispute over prorate deduction for eligible flats, particularly those exceeding the prescribed area limit, was a key point of contention. The Tribunal upheld the CIT(A)'s decision to allow prorate deductions for eligible units within the specified area limit, while denying deductions for flats exceeding the limit. The Tribunal directed the Assessing Officer to rework the prorate deductions accordingly.

Issue 5: Compliance with commercial area restrictions under Section 80IB(10):
The Revenue raised concerns regarding non-compliance with commercial area restrictions under Section 80IB(10) for the larger project, Kumar City. However, the Tribunal determined that the Kumar Kruti project was an independent entity, not part of Kumar City, and thus eligible for prorate deductions under Section 80IB(10) for eligible units within the covered area limit.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow deductions under Section 80IB(10) for the projects in question based on compliance with relevant provisions and previous Tribunal rulings.