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2014 (1) TMI 103 - AT - Income TaxDisallowance of deduction u/s 80IB(10) of the Act Conditions not satisfied Entitlement for proportionate deduction Held that - High court dismissed the appeal of the revenue The court ordered the Tribunal to allow proportionate deduction to the assessee u/s 80IB(10) of the Act Following ITO vs. AIR Developers 2008 (5) TMI 333 - ITAT NAGPUR and ACIT vs. Sheth Developers (P)Ltd. 2009 (6) TMI 670 - ITAT MUMBAI - assessee is entitled for deduction u/s.80IB(10) in respect of flats having built up area not exceeding 1500 sq. ft and not entitled for deduction in respect of those flats having their built up area exceeding 1500 sq.ft. deduction u/s 80IB(10) allowed on pro-rata basis - the assessee is entitled for deduction on pro-rata basis u/s.80IB(10) of the Act for the flats having built up area less than 1000 sq.ft i.e. for 312 flats of 65% of the profit Decided in favour of Assessee.
Issues Involved:
1. Disallowance of deduction under Section 80IB(10) of the Income Tax Act, 1961. 2. Satisfaction of conditions under Section 80IB(10)(c). 3. Entitlement to proportionate deduction under Section 80IB(10). Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80IB(10): The assessee developed a housing project named "Ekta Meadows" and claimed a deduction of Rs. 11,37,50,000 under Section 80IB(10) for the assessment year 2007-08. The Assessing Officer (AO) disallowed the deduction, arguing that the project did not satisfy all the conditions laid under Section 80IB(10). The AO asserted that the deduction depends on the cumulative satisfaction of all conditions and cannot be allowed proportionately. Since 35% of the project's flats exceeded the prescribed built-up area, the AO concluded that the entire project was ineligible for the deduction. The assessee appealed to the CIT(A), who upheld the AO's decision. 2. Satisfaction of Conditions under Section 80IB(10)(c): The AO and CIT(A) concluded that the assessee did not meet the conditions under Section 80IB(10)(c), which specifies that the built-up area of each residential unit should not exceed 1000 sq. ft. The assessee had 216 flats exceeding this limit, constituting 35% of the project. The AO argued that since a portion of the project violated the conditions, the entire project was ineligible for the deduction. The CIT(A) agreed with this interpretation, rejecting the assessee's claim for proportionate deduction. 3. Entitlement to Proportionate Deduction under Section 80IB(10): The assessee contended that proportionate deduction should be allowed for the portion of the project that complied with the conditions. The assessee cited the ITAT Kolkata decision in Bengal Ambuja Housing Development Ltd., where proportionate deduction was allowed. The ITAT Mumbai examined similar cases, including decisions from various ITAT benches and the Hon'ble Kolkata High Court, which supported the concept of proportionate deduction. The ITAT Mumbai observed that the assessee's project had 312 flats with a built-up area less than 1000 sq. ft., which complied with Section 80IB(10). The ITAT concluded that the assessee was entitled to a proportionate deduction of Rs. 11,37,50,000, representing 65% of the project's profit. Conclusion: The ITAT Mumbai allowed the appeal, reversing the CIT(A)'s order and granting the assessee a proportionate deduction under Section 80IB(10) for the compliant portion of the project. The decision emphasized that the deduction should be allowed on a pro-rata basis for the qualifying units, aligning with previous judicial interpretations that advocate a liberal and beneficial interpretation of tax incentives. The appeal was pronounced in favor of the assessee on 28th September 2012.
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