2018 (4) TMI 1765 - HC - Income Tax

Addition u/s 80IB 10 - would an assessee be correct in contending that in many of the units in the housing project, the constructed area may exceed 1500 sq.ft., disallowance or deduction should relate to such unit and the remaining which fulfilled the necessary condition; including the limit of the constructed area, must be granted the benefit? - HELD THAT - In the present case, however, we are not inclined to entertain Revenue s Tax Appeal simply because out of several units included in the housing project the number being 65, as we are informed only in one of them, the constructed area exceeds the upper limit; that too, by a small margin. In the facts of the present case, therefore, we reserve our comments on the said question of law arising in a better case. To make it absolutely clear, not entertaining this Tax Appeal would not in any manner amount to our approving the ultimate conclusion of law reached at by the Tribunal on this issue.

Summary

Issues:
1. Interpretation of Section 80IB [10] of the Income-tax Act, 1961 regarding deduction for housing development.
2. Whether the disallowance of deduction under Section 80IB [10] should apply to the entire housing project or only to specific units.

Analysis:
1. The judgment deals with an appeal by the Revenue against the Income Tax Appellate Tribunal's decision regarding the deduction claimed by the respondent-assessee under Section 80IB [10] of the Income-tax Act, 1961 for a housing development project. The main contention was whether the condition of every residential unit having a built-up area of less than 1500 sq.ft. was met. The Revenue argued that if this condition was not met for even one unit, the entire project should be deprived of the deduction. However, the Tribunal accepted the assessee's argument that the disallowance should only apply to the specific unit not meeting the condition, not the entire project.

2. The Court acknowledged a similar question pending in another case regarding whether a developer breaching the condition of residential units not exceeding 1000 sq.ft. could still claim the deduction under Section 80IB [10] partially for units meeting the condition. In the present case, the Court noted that only one unit out of 65 in the housing project exceeded the limit by a small margin. Consequently, the Court declined to entertain the Revenue's appeal, emphasizing that their decision did not signify approval of the Tribunal's legal conclusion. The Court dismissed the Tax Appeal, maintaining that not entertaining it did not equate to endorsing the Tribunal's legal position.

In conclusion, the Court's judgment focused on the interpretation of Section 80IB [10] of the Income-tax Act, 1961 in the context of housing development deductions. It clarified that the disallowance of deduction should be specific to units not meeting the prescribed conditions rather than applying to the entire project. The Court's decision in this case was influenced by the specific circumstances where only one unit marginally exceeded the area limit, leading to the dismissal of the Revenue's appeal.