2020 (12) TMI 90 - HC - Income Tax

Deductions u/s 80IB(10) - certain flats of the project were sold to the same person/family - whether there was no such bar in law as on the date of the commencement of the project as also on the date of relevant transactions? - assessee's alternative claim of prorata/ proportionate deduction - HELD THAT - The first substantial question of law is answered partly in favour of the assessee and against the Revenue and it is held that there was no justification in disallowing deductions under Section 80IB (10) in respect of the assessee s housing project Kamat Riviera except on pro-rata basis in respect of Flat No.103 therein. Second substantial question of law is answered in favour of the assessee and against the Revenue and it is held that the assessee is entitled to pro-rata deduction in respect of the entire housing project Kamat Riviera , including in respect of Flat Nos.401, 402 and 104 therein but not in respect of Flat No.103 which was allotted only on 10.10.2009. The impugned Order is set aside and the Revenue is directed to allow a deduction to the assessee in respect of its housing project Kamat Riviera except, on pro-rata basis in respect of Flat No.103 therein.

Summary

Issues:
1. Disallowance of deductions under Section 80IB(10) of the Income Tax Act based on the sale of flats to the same person/family.
2. Justification of refusing the assessee's alternative claim of pro-rata deduction under Section 80IB(10).

Analysis:
1. The Assessing Officer disallowed deductions under Section 80IB(10) of the Income Tax Act for a housing project due to non-compliance with the conditions. The project allotted flats to the same individual or family, breaching Section 80IB(10)(f). The Commissioner (Appeals) partly allowed the appeal, directing pro-rata deductions. The ITAT allowed the Revenue's appeal, dismissing the assessee's cross-objections, leading to the present appeal by the assessee on substantial questions of law.

2. The appellant argued that the amendment introducing Section 80IB(10)(f) should not apply retrospectively to projects approved before the amendment. They contended that the project in question was approved before the amendment. The appellant also challenged the ITAT's decision on pro-rata deductions, citing relevant case laws supporting their claim.

3. The ITAT's decision was defended by the Revenue, stating that Section 80IB(10) does not allow pro-rata deductions and that Section 80IB(10)(f) can have retroactive effect. They relied on court decisions to support their argument. The court held that the allotment of flats before the amendment did not breach the conditions. The court also found the ITAT's reasoning on the plot area to be flawed.

4. The court determined that pro-rata deductions can be granted under Section 80IB(10), citing previous judgments. They ruled in favor of the assessee on both substantial questions of law, allowing deductions for the entire housing project except for one flat. The court set aside the ITAT's order and directed the Revenue to allow deductions accordingly. The appeal was partly allowed with no order as to costs.