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2012 (11) TMI 583 - AT - Income TaxEligibility of prorata claim u/s.80IB(10) with reference to area of residential portion of housing project Whether assessee s housing project undisputedly including some residential units, which are of an area exceeding 1,000 sq.ft. (built-up),the whole of the profit of the housing project is not eligible for deduction under section 80IB(10)- Deduction under section 80IB(10) allowed earlier is hereby withdrawn. Since the assessee has furnished inaccurate particulars of income and concealed the particulars of income, the penalty proceedings are initiated under section 271(1)(c) for wrong claim of deduction under section 80IB(10). As decided by Tribunal that, in case, some residential house have a built up area in excess of 1,000 sq.ft., the assessee would not lose the total exemption under section 80IB(10) in its entirety but will only lose the proportionate exemption, under section 80IB(10). Hon ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under section 80IB(10)even if the project had commercial element in excess of 10%. section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project.In the present case hold that assessee is entitled for deduction under section 80IB on pro-rata basis. The A.O. is therefore, directed to allow the deduction under section 80IB(10) on pro-rata basis as discussed above. This ground of appeal is allowed. In the result, Revenue s appeal is dismissed. Rectification order Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the High Court in the said case was that writ petition against order under s. 254(2) cannot be rejected on the ground of availability of alternate remedy. The Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under s.80IB(10) or not. the judicial result is the same that the High Court has upheld the reasonings and findings given by the Tribunal in its order. Lower authorities were not having advantage of above legal decision to apply to the facts of the assessee s case to reach a conclusion. So in the interest of justice Order of the CIT(A)is set aside on the issue and restore the same to the Assessing Officer with a direction to decide the same as per fact and law after providing due opportunity to the assessee of being heard - both the appeals filed by the assessee are allowed for statistical purposes.
Issues Involved:
1. Allowability of prorata claim under section 80IB(10) with reference to the residential portion of the housing project. Issue-wise Detailed Analysis: 1. Allowability of prorata claim under section 80IB(10) with reference to the residential portion of the housing project: The core issue in these appeals pertains to the allowability of prorata claims under section 80IB(10) concerning the residential portion of the housing project. Initially, the Tribunal had adjudicated this issue by following the decision of the Nagpur Bench in the case of ITO vs. Air Developers (2009), 123 TTJ (Nagpur) 359. However, the Tribunal's order dated 31.05.2011 was recalled to reconsider the applicability of the jurisdictional Bombay High Court's decision in CIT Vs. M.S.Brahma Associates & Ors. The Tribunal observed that the decision of the Hon'ble Bombay High Court in Brahma Associates had not been discussed, resulting in a mistake apparent from the record. Consequently, the Tribunal recalled its order on this limited point and directed the Registry to fix the appeal for hearing on ground No.2. The representative for the assessee argued that the issue of prorata claims under section 80IB(10) has been decided in favor of the assessee by various Tribunals, including the Mumbai Tribunal in DCIT Vs. Ekta Housing Pvt. Ltd. The Tribunal in Ekta Housing Pvt. Ltd. held that the assessee is entitled to proportionate deduction under section 80IB(10) if the conditions are satisfied for certain units, even if other units exceed the prescribed built-up area. The Tribunal referred to several decisions from different benches supporting the prorata deduction approach: - Nagpur Bench in AIR Developers: Directed the AO to allow proportionate deduction if some units exceed the built-up area limit. - Bangalore Bench in DCIT vs. Brigade Enterprises Pvt. Ltd.: Stated that deduction should be denied only for units not meeting the conditions. - Mumbai Bench in Sheth Developers Pvt. Ltd.: Allowed prorata deduction for units within the stipulated area. - Kolkata Bench in Bengal Ambuja Housing Development Ltd. vs. DCIT: Held that deduction is intended for smaller units, and prorata deduction should be allowed for qualifying units. The Tribunal also examined the applicability of the Bombay High Court's decision in Brahma Associates. It concluded that the High Court did not address the issue of prorata deduction for units exceeding the prescribed area. The High Court's decision focused on whether a housing project with a commercial element exceeding 10% could still claim deduction under section 80IB(10). The Tribunal noted that various decisions from co-ordinate benches favored the assessee, supporting prorata deductions. Consequently, the Tribunal upheld the finding of the Commissioner (Appeals) allowing prorata deduction and directed the AO to allow the deduction on a prorata basis. The Tribunal further referred to the case of Sanghvi Doshi Enterprises vs. ITO, where it was held that prorata deduction is permissible under section 80IB(10) for units within the stipulated area. Order: The Tribunal set aside the order of the CIT(A) and restored the matter to the Assessing Officer with a direction to decide the issue as per facts and law, providing due opportunity to the assessee. Conclusion: Both appeals filed by the assessee were allowed for statistical purposes, emphasizing the allowability of prorata claims under section 80IB(10) for qualifying residential units.
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