2008 (8) TMI 453 - AT - Income Tax

Eligibility for deduction u/s 80IB - housing projects - assessee formed a single project by name 'Brigade Millennium' - claimed deduction for two blocks separately viz., Mayflower and Cassia among other 5 residential blocks - authorities like BESCOM, BWSSB and Fire Service Department duly inspected the plot and sanctioned plans for each of the blocks separately, after satisfying themselves - As could be seen, the project by name 'Brigade Millennium' as a whole does not qualify for deduction u/s. 80IB - Hence, the AO disallowed the claim of deduction u/s. 80IB for the whole project - CIT(A) allowed the claim. HELD THAT - In the case in hand, each of the blocks 'A' and 'C' constructed by the assessee, after obtaining plan sanction from the local authority namely BDA and plan approval from other departments, are within the conditions stipulated under the Act. This fact is not denied by the Revenue. Further, in view of the fact that the assessee was granted approval separately for each of the blocks 'A' and 'C' by the BDA shows that though it was a group project, the consideration therefrom is a separate and independent unit. We have had the benefit of each of the approvals, plan sanction and certificates issued by the Government authorities. Even though the projects of the assessee are bigger ones consisting of independent units, the assessee had claimed the benefit u/s 80IB only in respect of blocks 'A' and 'C' namely 'Mayflower' and 'Cassia', In respect of other units viz. Magnolia, Jacaranda and Laburnum the assessee did not avail or claim the benefit u/s. 80IB. The ld CIT(A), after having considered the facts in detail, is justified in concluding that 'Mayflower' and 'Cassia' are independent projects for the purposes of s. 80IB. Further, profits from the units will have to be arrived, based on the method of, accounting employed. Accounting principles would mandate recognition of profits from each unit separately. It is with reference to such profits that the deduction u/s. 80IB would be allowed. The manner of accounting for profits would also support a conclusion that the deduction u/s. 80IB is to be computed qua each residential unit. The cardinal rule for interpretation of any provision relating to exemption, allowance, deduction, rebate or relief is that they should be interpreted liberally and broadly so as to advance the object sought to be achieved and not frustrate it. Therefore, the deduction u/s 80IB(10) is available in respect of both the blocks and the ld CIT(A) was justified in upholding the claim of the assessee. It is ordered accordingly. In the result, the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Whether the Brigade Millennium project should be considered as a single project for the purposes of Section 80-IB(10) of the Income Tax Act.
2. Whether the blocks Mayflower and Cassia within the Brigade Millennium project can be treated as separate projects for claiming deduction under Section 80-IB(10).

Issue-Wise Detailed Analysis:

1. Single Project Consideration:
The revenue argued that the Brigade Millennium project, comprising multiple residential blocks and amenities, should be considered a single project under Section 80-IB(10). The assessing officer disallowed the deduction, stating that the entire project did not meet the section's stipulations. The departmental representative emphasized that the development plan approved by the BDA treated the entire 22 acres and 19 guntas as one group housing project, and thus, it could not be subdivided into separate projects for tax benefits.

2. Separate Projects for Mayflower and Cassia:
The assessee contended that the Mayflower and Cassia blocks should be treated as separate projects. They argued that each block had independent plan sanctions, commencement and completion certificates, and separate approvals from regulatory bodies. The Commissioner (Appeals) accepted this view, categorizing Mayflower and Cassia as individual projects eligible for deduction under Section 80-IB.

Legal Reasoning and Interpretation:
The Tribunal examined the facts and relevant documents, including approvals from various authorities. It noted that the group housing approval was a master plan and not a final plan sanctioned by local authorities. The Tribunal highlighted that each block had independent plan sanctions and clearances, supporting the assessee's claim that they were separate projects.

Interpretation of Exemption Provisions:
The Tribunal referred to several legal precedents emphasizing a liberal interpretation of exemption provisions to advance the legislative intent. It cited the Supreme Court's rulings in Union of India v. Wood Papers Ltd., CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd., and Bajaj Tempo Ltd. v. CIT, which supported a broader interpretation once the applicability of an exemption is established.

Pro Rata Deduction:
The Tribunal also considered cases like Arun Excello Foundations (P) Ltd. v. Asstt. CIT and Asstt. CIT v. Bengal Ambuja Housing Development Ltd., which allowed pro rata deductions for eligible residential units within a larger project. It concluded that profits from each residential unit should be calculated separately for the purpose of Section 80-IB deduction.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision, affirming that Mayflower and Cassia were independent projects eligible for deduction under Section 80-IB(10). The appeal by the revenue was dismissed, reinforcing that the deduction should be computed unit-wise, and each block's compliance with the section's conditions warranted the tax benefit.

Result:
The appeal filed by the revenue was dismissed.