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2012 (9) TMI 585 - AT - Income TaxDisallowance of deduction u/s. 80IB(10) - CIT(A) allowed the claim - Held that - As amendment brought under the section w.e.f. 1.4.2005 i.e. A.Y. 2005-06. Clause (d) introduced new condition of claim of deduction u/s. 80IB(10) of the Act restricting maximum commercial built up area of 2000 Sq. ft or 5% of aggregate built up area of the housing project whichever is less. Those housing project having commercial built up area of more than 2000 Sq. ft are not eligible for deduction u/s 80IB(10) and as the assessee has exceeded maximum permissible limit provided in the Act having a commercial built up area of 6415 Sq. ft., hence assessee s submissions cannot be accepted that prior to amendment there was no upper cap on construction of commercial area. As assessment year involved in the present case is 2006- 07 assessee claims is liable to be rejected - The contention of the assessee that the project was started keeping in mind the pre amended provisions of Sec. 80IB(10) and therefore any subsequent changes should not change the project profile cannot be accepted - findings of the CIT(A) are reversed and that of the AO are restored - against assessee.
Issues Involved:
1. Deduction under section 80IB(10) of the Income Tax Act. 2. Applicability of the amendment to section 80IB(10) from A.Y. 2005-06. 3. Commercial built-up area exceeding the permissible limit. 4. Retrospective application of the amendment. 5. Proportionate deduction for residential and commercial areas. Detailed Analysis: 1. Deduction under section 80IB(10) of the Income Tax Act: The Revenue challenged the order of the CIT(A) which directed the AO to allow deduction under section 80IB(10) despite the condition in section 80IB(10)(d) not being satisfied. The assessee, engaged in building construction, claimed a deduction for a project named "Amatulla" which included commercial units exceeding the permissible limit. 2. Applicability of the amendment to section 80IB(10) from A.Y. 2005-06: The amendment to section 80IB(10) introduced a condition restricting the commercial built-up area to 2000 sq. ft or 5% of the aggregate built-up area, whichever is less, applicable from A.Y. 2005-06. The AO disallowed the deduction because the commercial area exceeded this limit. The CIT(A) allowed the deduction, relying on the ITAT Mumbai decision in Saroj Sales Organisation, stating the project was approved before the amendment. 3. Commercial built-up area exceeding the permissible limit: The AO observed that the project had a commercial built-up area of 6450 sq. ft, which violated the amended section 80IB(10). The assessee argued that the project commenced in 2003 when there was no cap on commercial area, and the commercial units were meant for existing tenants as part of a rehabilitation program. 4. Retrospective application of the amendment: The Revenue argued that the amendment should apply to the assessment year beginning from A.Y. 2005-06. The CIT(A) and the assessee contended that the amendment should not apply retrospectively to projects approved before its introduction. The Bombay High Court in CIT Vs Brahma Associates held that the amendment is prospective and cannot be applied retrospectively. 5. Proportionate deduction for residential and commercial areas: The ITAT noted that prior to the amendment, there was no restriction on commercial area, and judicial authorities had allowed proportionate deduction for residential purposes. However, with the amendment, the cap on commercial area must be adhered to. The ITAT concluded that the assessee did not fulfill the conditions of section 80IB(10)(d) applicable from A.Y. 2005-06, thus reversing the CIT(A)'s decision and restoring the AO's findings. Conclusion: The ITAT ruled in favor of the Revenue, stating that the amendment to section 80IB(10) is applicable from A.Y. 2005-06, and the assessee's project, having a commercial built-up area exceeding the permissible limit, is not eligible for the deduction. The appeal filed by the Revenue was allowed, and the order pronounced on September 12, 2012, emphasized the prospective application of the amendment and the necessity to comply with the conditions set forth from A.Y. 2005-06.
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