2019 (1) TMI 465 - AT - Income Tax

Disallowance of deduction claimed u/s 80IB - claim of the assessee on pro rata basis - requirement of section 80IB (10)(c) is not satisfied with respect to the specified area of the residential units - AO held that only 72 out of 122 residential units in one project and 128 out of 154 residential units in another projects satisfy that condition - Held that - The assessee has constructed two housing projects which are eligible for deduction u/s 80 IB. In the Impression Vasundhara project there were 122 residential unit out of which 50 units has the built up area exceeding 1000 ft . In the project Impressions 58 has 154 residential units out of which 26 units exceeds the built up area of 1000 ft . Therefore the learned assessing officer was of the view that assessee is not eligible for deduction u/s 80 IB of the income tax act. Hence, disallowance of INR 19887408 was made. CIT(A) allowed the claim of the assessee following the decision of the coordinate bench in assessee s own case for assessment year 2009 10, which has also been upheld by the Hon ble Delhi High Court in 2015 (7) TMI 1302 - DELHI HIGH COURT as held that the provision is capable of being construed in a manner that is beneficial to the assessee by allowing the deduction on pro rata basis to the number of residential units that have complied with the requirement of section 80 IB of the maximum built up area. No infirmity in the order of the learned CIT(A) and direct the learned assessing officer to allow the claim of the assessee on pro rata basis as directed by the Hon ble Delhi High Court in assessee s own case for earlier years. - Decided against revenue

Summary

Issues:
- Disallowance of deduction claimed u/s 80IB of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by The Assistant Commissioner of Income Tax against the order of the Principal Commissioner of Income Tax (OSD) for assessment year 2012-13, challenging the deletion of disallowance of INR 1,98,87,408/- made on account of deduction claimed u/s 80IB. The assessing officer disallowed the claim as only a portion of residential units in the projects satisfied the conditions of section 80IB(10)(c).

2. The assessee, engaged in real estate development, claimed deduction u/s 80IB(10) in its return of income. The AO disallowed the deduction as not all residential units in the projects met the specified area criteria. Consequently, the total income was determined at INR 31,88,98,08/-. The CIT(A), relying on a coordinate bench's decision for a previous year, allowed the claim, leading to the revenue's appeal.

3. The revenue contended that the residential units exceeded the specified area eligible for deduction u/s 80IB, thus violating the conditions. The department argued that no provision in the Income Tax Act allows proportionate deduction. The authorized representative cited a decision of the Delhi High Court in the assessee's favor for a previous assessment year.

4. Upon reviewing the contentions and lower authorities' orders, it was found that the assessee had constructed two housing projects eligible for deduction u/s 80IB. The AO's disallowance was based on units exceeding the specified area. However, the CIT(A) upheld the claim, following the coordinate bench's decision and the Delhi High Court's ruling in the assessee's favor for an earlier year.

5. The High Court interpreted the provision favorably for the assessee, allowing deduction on a pro-rata basis for compliant residential units. Consequently, the order of the CIT(A) was deemed correct, directing the AO to allow the claim on a pro-rata basis as per the High Court's direction in the assessee's previous case. As a result, the revenue's appeal was dismissed.

6. In conclusion, the appeal of the revenue was dismissed, and the order was pronounced on 07/01/2019.