2013 (10) TMI 707 - HC - Income Tax

Deduction u/s 80IB of the Income Tax Act ceiling of commercial construction in housing projects - Amendment in ceiling limit from 5% to 3% to apply retrospectively or prospectively Held that - Reliance has been placed upon the judgment in the case of Manan Corporation vs. Asstt. Commissioner of Income-Tax 2012 (9) TMI 700 - Gujarat High Court , wherein assessee had claimed deduction under section 80IB(10) of the Act for having developed a housing project. The assessee had conformed to the ceiling of the commercial construction in such housing project as was applicable when the housing project was approved. Subsequently, however, such ceiling was reduced. Revenue contended that since the housing project was not yet completed, the reduced ceiling of permissibility of commercial construction should be applied. This court held that such reduced limit could not be applied It was held in that case that there was no such restriction in taxing statute and the permissible ratio for commercial user made 5% to the total built up area by way of amendment and reduction of which by further amendment to 3% of the total built up area, has to be necessarily construed on prospective basis Decided against the Revenue.

Summary

Issues:
1. Appeal against the judgment of the Income Tax Appellate Tribunal regarding deduction u/s.80IB(10) for the assessment year 2006-07.
2. Whether the housing project completion date and the commercial area limit affect the eligibility for deduction u/s.80IB(10).
3. Interpretation of the statutory changes introduced in section 80IB(10) of the Income Tax Act, 1961 post-1-4-2005.

Analysis:
1. The case involved an appeal by the Revenue against the Tribunal's judgment on the deduction u/s.80IB(10) for the assessment year 2006-07. The primary issues were the completion date of the housing project and the commercial area limit exceeding 5%.

2. The Assessing Officer had disallowed the deduction, citing non-completion of the housing project by 31-3-2008 and the commercial area exceeding 5%. However, the Commissioner (Appeals) allowed the appeal, noting that units 'A' to 'F' were completed before 31-3-2007, and unit 'G' was not economically viable for construction. The Commissioner emphasized that the commercial area limit was not a statutory requirement when the project was approved.

3. The Tribunal upheld the lower authority's decision based on precedents and the commercial area not exceeding 10% of the total project. The Tribunal referred to relevant judgments and concluded that the assessee was eligible for deduction u/s.80IB(10) due to compliance with the commercial area limit.

4. The Court considered a similar case where the commercial construction ratio was reduced post-approval of the housing project. The Court held that retrospective application of such changes was unreasonable, emphasizing that the deduction aims to facilitate residential projects without imposing unforeseen restrictions.

5. The Court dismissed the revenue's objection regarding the completion of all units in type 'F,' noting that all units were completed with a granted completion certificate. The Court clarified that the approval and completion of the housing project before the introduction of commercial area restrictions were crucial for determining eligibility for the deduction.

6. While acknowledging the Tribunal's decision based on the Bombay High Court's judgment in a different context, the Court dismissed the appeal, emphasizing the importance of the statutory changes' prospective application and the completion status of the housing project for claiming deductions under section 80IB(10) of the Income Tax Act, 1961.