2022 (5) TMI 519 - AT - Income Tax

Deduction u/s.80IB(10) - CIT- A allowed the deduction - scope of amendment brought - as per revenue CIT-A ignored that assessee sold three adjacent units to relatives of the same family and also holding that the amendment brought in by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010 will apply for assessment year 2010-11 and is prospective - whether the provisions will apply retrospectively or prospectively? - HELD THAT - As decided in M/S. ELEGANT ESTATES 2018 (6) TMI 1191 - MADRAS HIGH COURT relevant year would be the year of the actual sale and not the year when the revenue chooses to recognize the sale.finding of the Appellate Commissioner and the learned Tribunal that 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. Also in M/S. MANDAVI BUILDERS 2020 (9) TMI 1138 - KARNATAKA HIGH COURT exactly identical situation was considered and held that the clauses (e) and (f) to section 80IB(10) as inserted by Finance (No.2) Act, 2009 w.e.f. 01.04.2010 as prospective.- Decide against revenue.

Summary

Issues:
1. Deduction u/s.80IB(10) allowed for selling units to relatives.
2. Applicability of amendment to section 80IB(10) w.e.f. 01.04.2010.
3. Interpretation of retrospective or prospective application of provisions.

Issue 1: Deduction u/s.80IB(10) allowed for selling units to relatives:
The appeal by the Revenue challenged the order of CIT(A) allowing deduction u/s.80IB(10) despite the assessee selling three units to relatives of the same family. The AO disallowed the deduction based on the amended provision of section 80IB(10)(e)(f) inserted by Finance (No.2) Act, 2009 w.e.f. 01.04.2010, limiting the allotment to one flat per specified person. However, CIT(A) allowed the claim, emphasizing that the allotments were made prior to the amendment, hence not violating the conditions. The Tribunal concurred, noting the factual matrix and case laws supporting the non-retrospective nature of the provisions, leading to the deletion of the disallowed deduction.

Issue 2: Applicability of amendment to section 80IB(10) w.e.f. 01.04.2010:
The Revenue contended that the amended provision of section 80IB(10)(e)(f) applied for the assessment year 2010-11 as the assessee booked profit and claimed deduction in that year. However, the Tribunal analyzed the timeline of agreements and sale deeds, determining that the actual sales occurred before the amendment's effective date. Citing the judgment in CIT vs. Elegant Estates, the Tribunal held that the amendments were prospective from 01.04.2010, thus rejecting the Revenue's appeal based on the factual findings and legal precedents.

Issue 3: Interpretation of retrospective or prospective application of provisions:
The Tribunal, guided by judgments from the Madras and Karnataka High Courts, concluded that clauses (e) and (f) of section 80IB(10) inserted by Finance (No.2) Act, 2009 w.e.f. 01.04.2010, were prospective in nature. The decisions highlighted that the allotment date, not the revenue recognition date, determined the applicability of the provisions. With clear facts and legal principles in place, the Tribunal dismissed the Revenue's appeal, aligning with the established legal interpretations and factual assessments.

This comprehensive analysis of the judgment delves into the issues surrounding the deduction u/s.80IB(10) for selling units to relatives, the applicability of the amendment to section 80IB(10) from 01.04.2010, and the interpretation of retrospective or prospective application of the provisions, providing a detailed insight into the legal reasoning and conclusions drawn by the Tribunal.