2014 (7) TMI 97 - HC - Income Tax

Deduction of profits u/s 80IB(10) sub section (14) of the Act Scope of term Built up area Held that - the definition which has been brought on the statute book with effect from 1st April 2005, would not apply to such projects which are completed prior to 1st April 2005 - the balcony area would not therefore be includable - computation of built up area of the flat is concerned, the amendment having been brought in and introduced on 1st April 2005, then, in any housing project approved by the local authority prior to this date, balcony area cannot be included but will have to be excluded, is the conclusion reached by the Division Bench - the Assessee is an individual - after obtaining the development permission, the property was developed by constructing 97 flats - The details have been provided - the Assessee claimed the deduction by urging that it had completed the project and full occupation certificate was issued by the Municipal Corporation of Greater Mumbai as early as in 2004 - That being the case, the amended definition would not apply since that is relevant for the Assessment Year 2005-2006. - Decision in the case of M/s. Tinnwala Industries 2014 (7) TMI 90 - BOMBAY HIGH COURT followed. The profits booked by the Assessee is on sale of the flats as that would be the only manner in which he would derive profit and later on book them - he cannot take assistance of the position prevailing prior to the amendment or the Division Bench order - This is not a pure question of law and which can decide with reference to some chart - This is a mixed issue and ought to have been squarely raised for consideration - the undertaking developing and building housing project has set out, the dates of completion of the project and issuance of full occupation certificate, namely, 27th December 2004 thus, no substantial question of law arises for consideration - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 80IB(10) of the Income Tax Act for computing deduction of profits.
2. Applicability of the definition of "built-up area" introduced with effect from 01.04.2005.
3. Impact of the amendment on housing projects approved before 31.03.2008.
4. Consideration of the date of completion of the project for claiming deductions.
5. Relevance of the date of sale versus the date of completion of the project for profit calculation.

Analysis:

1. The High Court heard the Appeals filed by the Revenue against the Income Tax Appellate Tribunal's order regarding two Appeals by the Revenue and one by the Assessee concerning the Assessment Years 2005-2006 and 2006-2007 under Section 80IB(10) of the Income Tax Act.

2. The main issue raised was the interpretation of Section 80IB(10) and the applicability of the definition of "built-up area" introduced from 01.04.2005, specifically questioning if the provision would apply for computing deductions of profits for the Assessee.

3. The Counsel for the Revenue argued that the amendment to the definition of "built-up area" was clarificatory and should be applied to all housing projects completed after 01.04.2005. However, the Court referred to a previous Division Bench order that clarified the definition would not apply to projects completed before this date, excluding balcony areas from the calculation.

4. The Court found that the Assessee's project was completed and certified before the relevant date, making the amended definition irrelevant for the Assessment Year 2005-2006. The date of completion of the project was crucial in determining the applicability of the amendment for claiming deductions under Section 80IB(10).

5. The Revenue argued that the date of sale, not the completion of the project, should be considered for profit calculation. However, the Court rejected this argument, emphasizing that the relevant dates for deductions were the approval and completion of the project, as per the Division Bench order and legislative provisions. The Court dismissed the Appeals as they did not raise any substantial question of law, affirming the binding nature of the Division Bench's decision.

In conclusion, the judgment clarified the interpretation and application of Section 80IB(10) of the Income Tax Act, emphasizing the importance of the project completion date and the definition of "built-up area" for claiming deductions. The Court's decision was based on precedent and legislative provisions, dismissing the Appeals filed by the Revenue.