2018 (6) TMI 1191 - HC - Income Tax

Deduction u/s 80IB - two flats in a housing project sold to two members of the same family, Smt. Latha Ramachandran and Shri K.Ramachandran, being husband and wife - relevant year selection - Held that - The relevant year would be the year of the actual sale and not the year when the revenue chooses to recognize the sale. In the instant case, the Appellate Commissioner and the learned Tribunal concurred in the factual finding that the actual sale of the flats in question took place on 14.1.2008 and 16.7.2008 respectively, long before the amendment of Section 80IB(10) of the Income Tax Act. The Appellate Commissioner and the learned Tribunal very rightly held that the amendments were prospective with effect from 1.4.2010. Actually sale of flats in question took place in 2008, long before the amendment of Section 80IB of the said Act, which is prospective, there is no question of law, let alone substantial question of law, involved in these appeals. It is well settled that right of appeal is not automatic, but is conferred by statute. The right of appeal to the High Court conferred under Section 260A of the said Act is a limited right of appeal, restricted only to substantial questions of law. The appeals cannot, therefore, be entertained. Whether an assessee would be liable to full deduction or only proportionate deduction or for that matter no deduction under Section 80IB(10) in respect of the two flats exceeding 1500 Sq. Ft. purchased prior to 1.4.2010 is covered by a judgment in Commissioner of Income Tax, Chennai v. Elegant Estates 2016 (1) TMI 502 - MADRAS HIGH COURT - Decided in favour of the assessee

Summary

Issues:
1. Challenge to common order of Income Tax Appellate Tribunal by Revenue.
2. Disallowance of deduction under Section 80IB for two assessment years.
3. Interpretation of Clause (f) of sub-section 10 of Section 80IB.
4. Eligibility of assessee for deduction under Section 80IB.
5. Prospective application of amendment to Section 80IB.
6. Entitlement to deduction for sale of flats to related persons.
7. Factual findings regarding actual sale dates.
8. Limitations on right of appeal to High Court.
9. Precedent set by a Division Bench judgment.

Analysis:
The High Court of Madras dealt with Tax Case Appeals filed by the Revenue challenging a common order of the Income Tax Appellate Tribunal. The appeals arose from disallowance of deductions under Section 80IB for two assessment years due to the sale of flats to related individuals. The case centered on the interpretation of Clause (f) of sub-section 10 of Section 80IB, which prohibits the allotment of residential units in a housing project to certain related persons. The Appellate Commissioner allowed the appeals, emphasizing that the actual sale of the flats occurred before the amendment to Section 80IB in 2010, making the amendment prospective in nature.

The key issues revolved around the eligibility of the assessee for deduction under Section 80IB and the retrospective application of the statutory amendment. The Tribunal's decision to dismiss the Revenue's appeals was based on the factual finding that the sale of flats took place prior to the legislative change, rendering the amendment inapplicable to the transactions. The High Court concurred with this view, highlighting that the right of appeal to the High Court is limited to substantial questions of law.

Furthermore, the Court referenced a Division Bench judgment that addressed the issue of deduction under Section 80IB for flats purchased before the statutory amendment. The Court noted that as a Bench of co-ordinate strength, they were bound by the precedent set in the earlier judgment, which supported the position taken in the present case. Ultimately, the appeals were dismissed, emphasizing that the matter was settled by existing legal principles and precedents.