2014 (10) TMI 259 - AT - Income Tax

Deduction u/s 80IB(10) - Two contigoues flats purchase by buyers is only one residential unit which were having built up area more than 1000 sq. ft. or not Held that - Except the advertisement/pamphlet in question, the Revenue has not produced any evidence on the file that the flats in question have been adjoined by the assessee to make it a unit - the assessee has produced the documents, which forms part of the official records, the separate sale deeds were executed for each of the flats and separate electricity connections were obtained for each of the flats - The assessee has not sold the said flats as a single unit but as separate units to the purchasers - It is not the case of the Revenue that the assessee had violated any of the provisions of section 80IB(10) of the Act at the time or before the sale of flats in question - Even if we assume that end users might have joined the two flats on a floor so as to make it one unit, then no fault can be attributed on the part of the assessee. Following the decision in Emgeen Holdings (P.) Ltd. Versus Deputy Commissioner of Income-tax, Range 9(1) 2011 (7) TMI 199 - ITAT MUMBAI - the amendment has been brought with prospective effect i.e. from 1st day of April, 2010, and there is no indication whatsoever to suggest that these restrictions need to be applied with retrospective effect - The amendment seeks to plug a loophole but restricts the remedy with effect from 1st day of April, 2010, i.e. AY 2010-2011 - The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature - there was no need of the insertion of clause (f) to section u/s 80IB(10) - It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for -particularly as the amendment is not even stated to be for removal of doubts . On the contrary, this amendment shows that no such eligibility conditions could be read into pre-amendment legal position thus, the assessee is entitled to deduction u/s 80IB(10) of the Act in respect of the 94 flats Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under section 80IB(10) for the project "Neptune" due to the alleged merging of two contiguous flats into one residential unit exceeding 1000 sq.ft.
2. Proportionate deduction under section 80IB(10) for flats with an area less than 1000 sq.ft.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10) for "Neptune" Project:

The assessee, engaged in the development of housing projects, claimed deductions for two projects, "Neptune" and "Pluto," under section 80IB(10) of the Income Tax Act. During a survey, it was found that some flats in the "Neptune" project exceeded the 1000 sq.ft. limit due to merging of contiguous flats. The Assessing Officer (AO) denied the entire deduction claim for the "Neptune" project, arguing that the merging of flats violated the conditions of section 80IB(10).

The CIT(A) partially agreed with the AO, confirming that the merging of flats resulted in units exceeding 1000 sq.ft., thus disqualifying them for the deduction. However, the CIT(A) allowed proportionate deductions for the flats that individually met the 1000 sq.ft. limit.

Upon appeal, it was argued that the project was approved by competent authorities, and the flats were constructed and sold as per the approved plans. The separate sale deeds, electricity meters, and municipal records supported the claim that the flats were sold as independent units. The pamphlet found during the survey was dismissed as an advertising gimmick. The Tribunal noted that the AO did not provide evidence that the flats were merged by the assessee. The Tribunal emphasized that the law applicable at the time did not prohibit the purchase of multiple flats by an individual or their subsequent merging.

The Tribunal referred to a similar case (Emgeen Holdings Pvt. Ltd.), where it was held that as long as each flat was an independent residential unit as per approved plans, the deduction under section 80IB(10) could not be denied even if the end-users merged the flats. The Tribunal concluded that the assessee did not violate any provisions of section 80IB(10) and was entitled to the deduction for all 94 flats in the "Neptune" project.

2. Proportionate Deduction under Section 80IB(10) for Flats with Area Less Than 1000 sq.ft.:

The CIT(A) had allowed proportionate deductions for flats with an area less than 1000 sq.ft., which the Revenue contested. However, since the Tribunal allowed the deduction for all flats in the "Neptune" project, this issue became moot.

The Tribunal reiterated that the assessee was entitled to deductions for all flats as per the pre-amended provisions of section 80IB(10), which did not restrict the purchase or merging of multiple units by an individual.

Conclusion:

The Tribunal allowed the assessee's appeal, granting the deduction under section 80IB(10) for all 94 flats in the "Neptune" project. Consequently, the Revenue's appeal became infructuous and was dismissed. The order was pronounced in the open court on 17.09.2014.