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2019 (2) TMI 982 - AT - Income TaxDeduction u/s 80IB(10) - revenue has argued that the CIT(A) has failed to comply the circular of CBDT205/3/2001/ITA-II Ft. 4.5.2001 and allowed the claim of the assessee u/s 80IB(10) of the Act wrongly - Held that - Claim of the assessee has been allowed by CIT(A) on the basis of the decision of earlier year for the A.Y. 2010-11 to 2012-13 decided by CIT(A), therefore, the claim of the assessee has rightly been allowed. The development rights acquired by the appellant firm was not a collusive transaction for the reasons - a. Just because M/s Kashish Park Realtors Pvt Ltd. a. partner of the appellant firm had initially intended to purchase the TDR from the landlord and had also made a payment of ₹ 1.10 cr to the landlord before the appellant jinn was constituted, does not in any way lead to the conclusion that the transaction entered into by the appellant with the landlord was a collusive transaction. b. The observation of the AO that had M/s Kashish Park Realtors Pvt Ltd developed the additional TDR-FSL then it would not have been eligible for deduction u/s 8OIB(IO) is without any legal basis because as held by the jurisdictional High Court in the case of Vandana Properties, even the additional building tied on the same plot of land where other buildings had already existed was eligible for the deduction provided other conditions were fulfilled. The project had been constructed on a plot of land of more than one acre as is apparent from the fact that the appellant firm had acquired the development rights of FSI to the tune of 9851 sq. mts. Therefore, deduction u/ 80IB(10) was available to the appellant as no violation of any other conditions has been pointed out by the AO. - Decided in favour of assessee.
Issues Involved:
1. Whether the development rights acquired by the assessee firm were a collusive transaction to claim unjustified deduction under section 80IB(10) of the Income Tax Act, 1961. 2. Whether the additional housing project constructed by the assessee by consuming Transferable Development Rights (TDR) on an existing housing project site qualifies as an infrastructural facility under section 80IB(10). 3. Whether the CIT(A) erred in vacating the order of the Assessing Officer (AO) and allowing the assessee's claim for deduction under section 80IB(10). Detailed Analysis: 1. Collusive Transaction Allegation: The revenue argued that the development rights acquired by the assessee firm were a collusive transaction to claim unjustified deduction under section 80IB(10). The AO noted that the payments for the TDR were made before the firm’s formation, and the documents were unregistered, casting doubt on the transaction's legality. However, the CIT(A) found that the assessee firm was genuinely constituted as per the partnership deed dated 01.12.2003, and the transactions were legitimate. The CIT(A) observed that the firm had regularly filed income tax returns from A.Y. 2005-06 onwards, and the development rights were duly accounted for in the balance sheets. The CIT(A) concluded that the transactions were not collusive, as the payments made by one of the partners (Kashish Park Realty Pvt. Ltd.) were credited to the firm’s liability account, which is permissible under the law. 2. Qualification of Additional Housing Project as Infrastructural Facility: The revenue contended that the CIT(A) erred in applying the CBDT notification No. 205/3/2001/ITA-II dated 04.05.2001, which allows additional housing projects on existing sites to qualify as infrastructural facilities under section 80IB(10). The CIT(A) referred to the CBDT clarification and the jurisdictional High Court's decision in the case of CIT vs. Vandana Properties, which affirmed that additional housing projects utilizing TDR on existing sites are eligible for deduction under section 80IB(10). The CIT(A) noted that the assessee firm maintained separate books of account for the project, ensuring the correct ascertainment of profits, thus fulfilling the conditions laid out in the CBDT notification. 3. Vacating AO's Order and Allowing Deduction: The AO denied the assessee's claim for deduction under section 80IB(10), arguing that the project did not meet the requirement of being on a plot of land measuring at least one acre. The CIT(A) found this observation incorrect, noting that the total area covered by the housing projects constructed by the assessee firm exceeded one acre. The CIT(A) highlighted that the assessee firm constructed buildings MN-6, MN-7, MN-8, and Towers A and B, covering a total area of 8952.45 sq. meters, which is more than one acre. The CIT(A) also noted that the AO’s decision was based on an erroneous interpretation of the law and factual inaccuracies. Conclusion: The CIT(A) allowed the assessee's claim for deduction under section 80IB(10) for the A.Y. 2013-14, based on the findings from earlier years (A.Y. 2010-11 to 2012-13) and the CBDT notification. The ITAT affirmed the CIT(A)’s decision, referencing previous ITAT rulings in the assessee's favor for A.Y. 2010-11 and A.Y. 2011-12. The revenue's appeal was dismissed, and the CIT(A)’s order was upheld.
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