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2013 (8) TMI 596 - AT - Income TaxDeduction u/s 80IB of the Income Tax Act - Assessee-firm had constructed buildings A, B, C and D on a plot admeasuring 2.36 acres - Plot was proportionately divided between five buildings, the land pertaining to building E would be less than one acre and that two flats on the ground floor of building E were found to be merged into one flat and the area of the merged flat exceeded 1000 square feet Assessee constructed only residential block Eden Garden which was commenced on 30.2.2006 and completed on 16.10.2008 as per the date of commencement certificate and occupation certificate granted by the authority - The commercial project developed by M/s. Pyramid Developers, sanctioned by CIDCO has commenced on 18.10.2006 but completed after completion of this project, much later on 04.08.2010 - Held that - There is no definition of housing project in the provisions and there can be more than one approval for the project and even if there is common approval, assessee is entitled for deduction on the project undertaken by it, provided the project satisfies the other conditions - The project is separate and not contiguous to the part of the building developed by assessee. The same is entirely separate block and in no way connected to the assessee project, except approved on the same plot of land. Moreover, the development rights were sold in March, 2009 and other party developed much later. Nothing was brought on record to indicate that assessee developed commercial project as well - Assessee has completed the residential project which satisfies the conditions, it is eligible for deduction u/s 80IB(10). The AO after satisfying the conditions has in fact allowed deduction in A.Y. 2007-08 and AY 2008-09 on the same project - Thus, the AO and ld.CIT(A) erred in disallowing the claim this year on the reason that commercial project is part of the same housing project and that portion exceeded the 5% or 2000 sq ft whichever is less - Commercial building is a separate project and assessee project satisfies the conditions prescribed Deduction allowed Decided in favor of Assessee.
Issues Involved:
1. Entitlement to deduction under section 80IB(10) for the housing project. 2. Whether the commercial area is part of the housing project developed by the assessee. 3. Whether the commercial area exceeds the prescribed limit under section 80IB(10). Issue-wise Detailed Analysis: 1. Entitlement to Deduction under Section 80IB(10): The primary issue in this appeal is whether the assessee is entitled to a deduction under section 80IB(10) for the housing project. The assessee firm had acquired development rights from Centurion Bank Ltd. for the development of a plot in Kharghar, Navi Mumbai. The plot was initially granted for residential use, and a commencement certificate for the residential building was issued on 20.02.2006. The assessee claimed a deduction under section 80IB(10) for the residential project named Eden Garden, which was completed on 16.10.2008. The Assessing Officer (AO) had allowed the deduction in earlier assessment years (2007-08 and 2008-09), but disallowed it for the assessment year 2009-10, leading to this appeal. 2. Whether the Commercial Area is Part of the Housing Project: The dispute centers on whether the commercial area, which was later approved for construction by CIDCO and sold to M/s Pyramid Developers, is part of the housing project. The commercial area was approved on 18.10.2006 and developed separately by M/s Pyramid Developers, with the occupation certificate issued on 04.08.2010. The assessee argued that the commercial portion is not part of the housing project and was not developed by it. The AO and CIT(A) contended that the commercial area is part of the same project, thus exceeding the permissible limit under section 80IB(10). 3. Whether the Commercial Area Exceeds the Prescribed Limit: According to section 80IB(10), the commercial area should not exceed 2000 sq ft or 5% of the built-up area, whichever is less. The AO disallowed the deduction on the grounds that the commercial area exceeded this limit. The assessee relied on several case laws to support its claim that the commercial project is separate and the residential project satisfies the conditions for deduction. Judgment Analysis: 1. Entitlement to Deduction: The Tribunal referred to the case of CIT vs. Vandana Properties, where it was held that the construction of even one building with several residential units constitutes a 'housing project' under section 80IB(10). The Tribunal noted that the AO had allowed the deduction in earlier years for the same project, and the only dispute was whether the commercial project is part of the housing project. 2. Commercial Area as Part of the Housing Project: The Tribunal examined the facts and found that the commercial project was developed separately by M/s Pyramid Developers and was not contiguous to the residential project developed by the assessee. The Tribunal concluded that the commercial building is a separate project and not part of the housing project developed by the assessee. 3. Commercial Area Exceeding Prescribed Limit: The Tribunal referred to the case of DCIT vs. Neel Sidhi Enterprises, where it was held that if the commercial area is segregated and developed by another entity, the residential project qualifies for deduction under section 80IB(10). The Tribunal also cited the case of Saroj Sales Organisation vs. ITO, where it was held that independent units or blocks that satisfy the conditions should be eligible for deduction, even if other ineligible units are part of the same sanction plan. Conclusion: The Tribunal held that the residential project developed by the assessee satisfies the conditions prescribed under section 80IB(10) and is eligible for deduction. The commercial project developed by M/s Pyramid Developers is separate and does not affect the eligibility of the residential project for deduction. The Tribunal directed the AO to allow the deduction under section 80IB(10) for the residential project Eden Garden. Order: The appeal of the assessee is allowed, and the AO is directed to allow the deduction under section 80IB(10). Result: The appeal is allowed, and the order was pronounced in the open court on 14th August 2013.
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