2014 (6) TMI 667 - AT - Income Tax

Entitlement for deduction u/s 80IB(10) of the Act Effect of amendment Held that - CIT(A) rightly followed JCIT vs. Brahma Associated 2011 (2) TMI 373 - BOMBAY HIGH COURT - in case of housing project comprising of commercial area as permitted under the rules of the local authority, deduction u/s 80IB(10) cannot be denied - relying upon ACIT Circle -2, Kalyan Versus Shri Girdharilal K. Lulla, Shree Ganesh Builders & Osho Dhara Developers 2011 (5) TMI 867 - ITAT MUMBAI - the amendment is prospective in operation and for the projects which have commenced prior to the date the assessee is entitled to claim the benefit under section 80IB(10) of the Act there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues:
1. Interpretation of deduction under section 80IB(10) for a construction business.
2. Applicability of substituted provisions of section 80IB(10) by Finance Act (No.2), 2004.

Analysis:
1. The primary issue in this case revolved around the interpretation of deduction under section 80IB(10) for a construction business. The Revenue contended that the assessee was not entitled to the deduction as the total area of the shops exceeded the prescribed limit of 5% of the total built-up area or 2000 sq.ft. The CIT(A) allowed the deduction, citing the decision in the case of JCIT vs. Brahma Associated, where it was held that if a housing project includes commercial areas permitted by local authorities, the deduction cannot be denied. The CIT(A) directed the AO to allow the deduction on the commercial component of the project, even though the commercial area exceeded the 2000 sq.ft. limit. The Tribunal upheld the CIT(A)'s decision, stating that the issue was settled by previous decisions and dismissed the Revenue's appeal.

2. The second issue involved the applicability of substituted provisions of section 80IB(10) by Finance Act (No.2), 2004. The Revenue argued that the provisions were applicable retrospectively, thus disqualifying the assessee from claiming the deduction. However, the assessee contended that previous Tribunal orders had consistently approved their claim, stating that the amendment was prospective in operation. The Tribunal, in line with the previous decisions, found no fault in the CIT(A)'s order and dismissed the Revenue's appeal while allowing the cross objection filed by the assessee.

In conclusion, the Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80IB(10) for the construction business, emphasizing the importance of previous judicial precedents and consistent interpretations. The Tribunal also rejected the Revenue's argument regarding the retrospective applicability of the substituted provisions, maintaining that the amendment was prospective in nature.