2012 (4) TMI 54 - HC - Income Tax

Deduction u/s 80IB - Housing projects assessee constructed buildings A, B, C and D and did not claimed deduction on ground of approval being granted prior to 01.10.1998 approval for additional E building received on 11.10.2002 - Revenue contended that E building being continuation of A, B, C and D buildings, the project must be held to have commenced prior to 1st October 1998 hence no deduction deduction also denied on ground of area of plot and size of the flats Held that - Construction of E building constitutes an independent housing project and, therefore, the date on which the earlier housing project had commenced construction could not be applied to the housing project consisting of E building merely because the conditions set out while granting approval to the earlier housing project have also been made applicable to the housing project in question. In present case, total area of plot for 5 buildings is 2.36 acres Revenue contending proportionate vacant area for E building would be less than one acre Held that - Section 80IB(10) does not suggest that the plot of land must be vacant. Deduction is available on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. Further, as contended by Revenue that two flats were merged and size of flat exceeded 1000 sq ft It is found that there was no merger of flats. Therefore, Tribunal rightly allowed deduction u/s 80IB Decided in favor of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB (10) of the Income Tax Act.
2. Commencement of construction date.
3. Size of the plot of land.
4. Size of the residential units.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB (10):
The primary issue was whether the assessee firm was eligible for claiming deduction under Section 80IB (10) despite allegedly failing to meet the primary conditions laid down under the section. The Tribunal had held that the assessee was entitled to the deductions, which was challenged by the Revenue. The court examined the definition and common understanding of a "housing project" and concluded that constructing even one building with several residential units would constitute a "housing project" under Section 80IB (10).

2. Commencement of Construction Date:
The Revenue argued that the approval for the 'E' building, granted on 11th October 2002, was an extension of the approvals granted for buildings A, B, C, and D, which commenced from 1993. Therefore, the project must be held to have commenced prior to 1st October 1998, making it ineligible for deduction. The court rejected this argument, stating that the 'E' building was an independent housing project approved for the first time on 11th October 2002, and not an extension of the earlier project.

3. Size of the Plot of Land:
The Revenue contended that the plot of land, admeasuring 2.36 acres, should be proportionately divided among the five buildings, resulting in less than one acre per building, thus disqualifying the project from the deduction. The court held that Section 80IB (10) specifies the size of the plot of land but not the size of the housing project. It clarified that the plot of land must have a minimum area of one acre, and it need not be vacant. The court emphasized that multiple housing projects could exist on a plot of land with a minimum area of one acre, and each could qualify for the deduction if they meet other statutory conditions.

4. Size of the Residential Units:
The Revenue argued that two flats on the ground floor of 'E' building were merged into one, exceeding the 1000 square feet limit, thus violating Section 80IB (10)(c). The Tribunal found no evidence of such a merger, noting that the flats were neither sold nor any application for merger was made. The court upheld the Tribunal's decision, rejecting the Revenue's argument.

Conclusion:
The court answered the common question of law in favor of the assessee and against the Revenue, holding that the assessee firm was eligible for the deductions under Section 80IB (10) for the assessment years 2004-2005 and 2005-2006. The appeals were disposed of accordingly with no order as to costs.