2022 (1) TMI 1157 - AT - Income Tax

Proportionate deduction u/s.80IB(10) - AO disallowed the entire deduction on the ground that the assessee contravened the provisions of section 80IB(10)(f) by selling two units to one person - HELD THAT - If there was violation of the relevant provision, only the deduction pertaining to such violation ought to have been disallowed. The ld. CIT(A), in our opinion, was fully justified in allowing the deduction on the amount claimed because the assessee had suo motu claimed deduction u/s.80IB(10) on reduced amount. The view taken by the ld. CIT(A) accords with the judgment of the Hon ble jurisdictional High Court in M/s. Kamat Constructions Pvt. Ltd. 2020 (12) TMI 90 - BOMBAY HIGH COURT in which identical facts were involved and the Hon ble High Court approved the granting of deduction on proportionate basis. We, therefore, accord our imprimatur to the view taken by the ld. CIT(A).

Summary

Issues:
- Appeal by the Revenue related to assessment years 2012-13 to 2015-16.
- Allowance of proportionate deduction u/s.80IB(10) of the Income-tax Act, 1961.

Analysis:

Assessment Year 2012-13:
The only issue raised in this appeal was regarding the allowance of proportionate deduction u/s.80IB(10) of the Income-tax Act, 1961. The assessee, engaged in the business as Builders and Promoters, claimed deduction on the profit from the sale of flats in a project located at Wakad, Pune. The AO disallowed the entire deduction due to the violation of selling two flats to one person, contrary to section 80IB(10)(f). However, the ld. CIT(A) allowed the deduction on a proportionate basis for the portion of the project not in violation. The Tribunal upheld the CIT(A)'s decision, stating that if there was a violation, only the deduction related to that violation should be disallowed. The Tribunal referenced a judgment by the jurisdictional High Court in a similar case and approved the granting of deduction on a proportionate basis.

Assessment Years 2013-14 to 2015-16:
The facts and circumstances of the appeals for these years were found to be similar to the assessment year 2012-13. Following the decision made for the earlier year, the Tribunal affirmed the impugned order for these subsequent years as well. Consequently, all the appeals were dismissed.

In conclusion, the Tribunal addressed the issue of allowing proportionate deduction u/s.80IB(10) for the assessment years 2012-13 to 2015-16. The decision was based on the violation of selling two flats to one person and the subsequent allowance of deduction on a proportionate basis. The judgment provided clarity on the eligibility for deduction in such cases and upheld the decision of the ld. CIT(A) based on relevant legal precedents.