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2012 (10) TMI 1216 - HC - Income TaxDeduction u/s 80IB(10) - Meaning and scope of the term Housing Project - The assessee company purchased three residential flats and converted them into commercial establishments. AO viewed that the provisions u/s 80IB(10) not having been satisfied on the ground that housing projects don't include commercial buildings, assessee not entitled to the deduction. It was contended that Housing project would include commercial buildings also as per the s. 80HHBA. - HELD THAT - In the absence of definition of the expression 'housing project' anywhere else in the Act and the said expression being defined in a related deduction provision under the same Chapter VIA, we feel, it would be more appropriate to go by the definition of the expression 'housing project', as available under Section 80HHBA for the purpose of understanding the said expression of 'housing project' under Section 80IB of the Act. Project is not, pure and simple, a residential one. After reading s. 80HHBA and 80IA, it is clear that s. 80IB is concerned about housing project namely, construction of any building other than what is contemplated as an infrastructure facility u/s 80IA. In s. 80HHBA, the expression housing project is defined in a wider sense but there is no such decision that allow the interpretation of housing project in wider sense u/s 80IB(10) thereby restricting the scope of Housing project. Decision in the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL 2010 (11) TMI 13 - SUPREME COURT was relied upon. Revenue appeal dismissed. Seeking fresh claim / relief in the Revenue Appeal whereas no appeal was filed by the assessee against the decision of ITAT - Issue of chargeability of tax versus issue of grant of relief / deduction - HELD THAT - The reliance of assessee in the case of Essar Shipping Ltd.'s case 2013 (12) TMI 443 - MADRAS HIGH COURT is not valid. - The situation herein is a totally different one. The question is one of deduction and not of chargeability under the provisions of the Act. In the circumstances, we reject the assessee's case in this regard. The decision in the case of Essar Shipping Ltd.'s case 2013 (12) TMI 443 - MADRAS HIGH COURT distinguished.
Issues Involved:
1. Eligibility for deduction under Section 80IB(10) on a pro-rata basis for housing projects with both commercial and residential units. 2. Applicability and interpretation of Section 80IB(10) before and after the amendment effective from 01.04.2005. 3. Definition and scope of the term "housing project" under Section 80IB(10). 4. Impact of the conversion of residential units to commercial use on the eligibility for deduction. 5. Proportionate relief on partial compliance with Section 80IB(10). Detailed Analysis: 1. Eligibility for Deduction under Section 80IB(10) on a Pro-rata Basis: The core issue was whether the Tribunal was correct in holding that deduction under Section 80IB(10) is allowable on a pro-rata basis for projects with both commercial and residential units. The Tribunal allowed the deduction on a pro-rata basis, stating that the residential units complied with the conditions stipulated in Section 80IB(10), while the commercial area did not exceed the permissible limit. 2. Applicability and Interpretation of Section 80IB(10) Before and After the Amendment Effective from 01.04.2005: The Tribunal and the High Court noted that the amendment to Section 80IB(10) effective from 01.04.2005, which introduced sub-clause (d) restricting the built-up area for commercial usage, was prospective and not retrospective. Therefore, for the assessment years 2003-04 and 2004-05, the provisions as they stood before the amendment applied, and there was no restriction on the commercial area in a housing project. 3. Definition and Scope of the Term "Housing Project" under Section 80IB(10): The High Court referred to the definition of "housing project" under Section 80HHBA, which includes the construction of any building, road, bridge, or other structure. It held that the term "housing project" under Section 80IB(10) should be understood in a broader sense to include both residential and commercial buildings. The Court emphasized that the absence of a specific definition in Section 80IB(10) should not restrict the term to residential units alone. 4. Impact of the Conversion of Residential Units to Commercial Use on the Eligibility for Deduction: The Revenue argued that the conversion of residential units to commercial use by the purchasers should disqualify the project from deduction. However, the Court held that what the purchasers did with the units post-purchase was irrelevant to the assessee's claim for deduction. The assessee had sold the units as residential, and the conversion by purchasers did not affect the eligibility for deduction. 5. Proportionate Relief on Partial Compliance with Section 80IB(10): The Court upheld the Tribunal's decision to grant deduction on a pro-rata basis. It stated that in cases where the housing project included both compliant and non-compliant units, the deduction should be allowed proportionately for the compliant units. The Court referred to the decision in CIT v. Brahma Associates, which supported the view that a project approved with permissible commercial use should not be denied deduction under Section 80IB(10). Conclusion: The High Court dismissed the Revenue's appeal, confirming the Tribunal's order that allowed deduction under Section 80IB(10) on a pro-rata basis for the residential units in the housing project. The Court emphasized a broad interpretation of "housing project" to include commercial areas and held that the post-purchase conversion of units did not affect the eligibility for deduction. The decision reinforced the principle of granting proportionate relief for partial compliance with the conditions under Section 80IB(10).
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