2018 (8) TMI 1828 - AT - Income Tax

Eligibility for deduction u/s. 80IB(10) - as per DR assessee fails to fulfill the certain basic conditions that it has owned the land and the units constructed by it are within the limit prescribed as per the provisions of s. 80IB(10) - HELD THAT - The assessee build and develop housing project under agreement dated 18.01.2005 and became owner of the said land on 31.03.2008 when the sale deed executed in favour of the assessee. At this juncture the ratio of the order of Radhe Developers vs. ITO 2007 (6) TMI 316 - ITAT AHMEDABAD it was held that to claim deduction u/s. 80IB(10) of the Act there is no condition precedent that the assessee must be the owner of the land on which housing project is to be constructed and hence contention of the AO in this regard is not sustainable and ld. CIT(A) was right in dismiss the same. Entire housing project is to be treated as single unit - In the present case undisputedly the assessee has maintained separate accounts for flats and row houses and no claim has been made on the row houses measuring area of more than 1500 sq.ft. and the claim u/s. 80IB(10) has been made only on the flats which are measuring less than 1500 sq.ft. this fact is clearly discernable with the computation of income filing along with return of income wherein net profit as per P L a/c. on flat sale amounting to 2, 68, 88, 714/- has been shown and amount of 2, 65, 52, 967/- has been claimed as deduction u/s. 80IB(10) of the Act. Thus in view of decision of case of Vishwas Promoters 2012 (11) TMI 1117 - MADRAS HIGH COURT claim of the assessee on the flats which fulfill the conditions laid down provision of u/s. 80IB(10) of the Act is allowable and the CIT(A) was right in allowing the same. Entire housing project has to be treated as single unit - As in the case of Vishwas Promoters (supra) Hon ble High Court of Madras also made it clear that each residential block in a housing project is a housing project in itself for purpose of claiming deduction u/s. 80IB(10) of the Act. Therefore this contention of the AO is also not correct and sustainable and the first appellate authority was right in dismissing the same Thus we reach to a logical conclusion that the AO disallowed the claim by taking a hyper technical approach and on his own whims and surmises which is clearly by the scheme and mandate of provision of u/s. 80IB(10) - No valid reason to interfere with the findings arrived by the ld. CIT(A) in dismissing the allegations and contentions of the AO and in allowing deduction u/s. 80IB(10) of the Act to the assessee on the amount accrued to him on sale of flats measuring less than 1500 sq.ft. per unit. - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):

The Revenue challenged the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Years (AY) 2007-08 and 2009-10, arguing that the CIT(A) erred in holding that the assessee-firm was eligible for deduction under Section 80IB(10) of the Income Tax Act, 1961.

Arguments by Revenue:
The Departmental Representative (DR) contended that the CIT(A) erroneously allowed the deduction, asserting that the assessee did not fulfill the basic conditions for eligibility under Section 80IB(10). The DR argued that the assessee was not the owner of the land and had constructed units exceeding the prescribed limit of 1500 sq. ft., thus violating the conditions for the deduction.

Arguments by Assessee:
The Assessee’s Representative (AR) countered by citing various judicial precedents, including decisions from the Bombay High Court and the Madras High Court, which supported the claim that ownership of the land was not a prerequisite for the deduction. The AR emphasized that the assessee had maintained separate accounts for flats and row houses and had only claimed deductions for units below 1500 sq. ft.

Findings of the Tribunal:
The Tribunal noted that the CIT(A) had meticulously examined the facts and circumstances, including the legal provisions and judicial precedents. The CIT(A) observed that the assessee had complied with all requisite conditions under Section 80IB(10), including maintaining separate accounts for flats and row houses and not claiming deductions for units exceeding 1500 sq. ft.

Key Points from CIT(A) Decision:
- The CIT(A) highlighted that the assessee had purchased the land and obtained all necessary permissions for developing the housing project.
- The CIT(A) referred to judicial precedents, including the Radhe Developers case, which established that ownership of the land was not a condition for claiming the deduction.
- The CIT(A) concluded that the assessee had fulfilled all conditions under Section 80IB(10) and was eligible for the deduction on profits derived from the sale of flats.

Tribunal’s Conclusion:
The Tribunal upheld the CIT(A)’s decision, agreeing that the assessee had met all conditions for the deduction under Section 80IB(10). The Tribunal dismissed the Revenue’s appeals, affirming that the CIT(A) had correctly interpreted the law and judicial precedents. The Tribunal also noted that the Revenue had failed to provide any substantial evidence to contradict the assessee’s compliance with the conditions for the deduction.

Result:
Both appeals by the Revenue were dismissed, and the assessee’s eligibility for deduction under Section 80IB(10) was upheld. The Tribunal pronounced its order in the open court on 3rd August 2018.