2016 (9) TMI 295 - HC - Income Tax

Deduction under Section 80IB(10) - Held that - It is not disputed that the housing projects referred to as Omaxe Grandwoods (GH-03), Noida and Omaxe Palm Greens-I, Greater Noida are real estate developments that are complete on a stand-alone basis. The said projects comprise of towers of residential units alongwith common areas, facilities and amenities for the residents of those towers. Thus, considered on a standalone basis, the said real estate developments would constitute an integrated development independent of the other housing schemes developed by the Assessee on the adjoining lands. The expression housing project has not been defined under Section 80IB of the Act and thus, must be construed in its ordinary sense and in the context that Section 80 IB (10) which specifies the attributes of an eligible housing project. In the present case a real estate development which on a standalone basis is complete in all respects, that is, it includes the dwelling units, the necessary infrastructure, common areas and common facilities for the residents of the dwelling units would constitute a housing project for the purpose of Section 80IB of the Act and we find no infirmity with the decision of the CIT(A) and the ITAT. The decision in the case of Brahma Associates (2011 (2) TMI 373 - BOMBAY HIGH COURT ) is wholly inapplicable in the facts of the present case wherein held that the commercial establishments, which were a part of the housing project could not be excluded for the purposes of deduction available under Section 80IB of the Act. The Court held that the benefit was available to an Assessee in respect of income derived from the entire project and was not limited to the income derived from the sale of residential units alone. The said decision is of no assistance to the Revenue as this is not a case where income from a part of the housing project is sought to be considered for computing the deduction under Section 80IB; in the present case, the finding is that the income from the housing schemes in respect of which deductions are claimed are by themselves standalone complete housing projects. - Decided in favour of assessee

Summary

Issues:
- Interpretation of Section 80IB(10) of the Income Tax Act, 1961
- Determination of separate housing projects eligibility
- Disallowance of deduction under Section 80IB
- Examination of real estate developments as standalone projects

Interpretation of Section 80IB(10) of the Income Tax Act, 1961:
The Revenue appealed the ITAT's decision regarding the deduction under Section 80IB(10) of the Income Tax Act, 1961. The main contention was whether the entire project needed to meet the conditions specified in Section 80IB(10) or if eligible parts could be separated. The AO disallowed the deduction, arguing that the Assessee could not claim benefits for certain buildings within a larger project. However, the CIT(A) and ITAT found that the projects in question were standalone housing projects with separate common facilities and amenities, meeting the Act's conditions.

Determination of Separate Housing Projects Eligibility:
The CIT(A) examined the projects, Omaxe Grandwoods (GH-03) Noida and Omaxe Palm Greens-I, Greater Noida, and concluded that they qualified as separate housing projects. Each project had distinct demarcated plots, separate common facilities, and met the conditions specified under Section 80IB(10) of the Act. The projects were treated as independent developments, not reliant on the ineligible parts of the larger projects, as determined by the AO.

Disallowance of Deduction under Section 80IB:
The AO disallowed the deduction under Section 80IB for specific parts of the projects, considering them as integral to the larger housing developments. However, the CIT(A) and ITAT disagreed, emphasizing the standalone nature of the projects, their compliance with the Act's conditions, and the presence of separate common facilities. The courts held that the projects qualified for the deduction independently, rejecting the Revenue's argument that the entire project needed to meet the Act's criteria.

Examination of Real Estate Developments as Standalone Projects:
The courts analyzed the real estate developments in question, Omaxe Grandwoods (GH-03) Noida and Omaxe Palm Greens-I, Greater Noida, as complete standalone housing projects. These projects included residential units, infrastructure, common areas, and amenities, making them self-sufficient developments. The courts determined that the projects constituted integrated housing developments, meeting the ordinary sense of a housing project under Section 80IB of the Act. The decision in the case of Brahma Associates, cited by the Revenue, was deemed inapplicable to the present case, as the projects were self-contained and did not involve income from commercial establishments within the housing projects.

In conclusion, the High Court dismissed the appeals, stating that no substantial questions of law arose. The courts upheld the decisions of the CIT(A) and ITAT, affirming that the projects qualified as separate housing projects eligible for the deduction under Section 80IB(10) of the Income Tax Act, 1961.