2016 (1) TMI 502 - HC - Income Tax

Deduction under Section 80IB(10) denied - Held that - Tribunal was right in holding that the assessee will be entitled for deduction u/s 80IB(10) with respect to income from flats measuring less than 1500 sq ft limit and assessee will not entitled for deduction u/s 80IB(10) proportionately only with respect to the income from the 2 flats exceeding the limit of 1500 sq ft when the assessee had considered all the flats as forming part of single project on interpretation of the provisions of section 80IB(10)(c). As in CIT Vs. Arun Excello Foundations (P) Ltd, (2012 (12) TMI 415 - MADRAS HIGH COURT ), wherein, it has been held that the language used in the relevant provision of law does not bar a deduction claim altogether if some of the units sold exceed the specified dimensions. - Decided in favour of the assessee

Summary

Issues:
Interpretation of Section 80IB(10) of the Income Tax Act, 1961 regarding deduction eligibility based on square footage for residential units in a project.

Analysis:
The case involved a dispute regarding the denial of deduction under Section 80IB(10) of the Income Tax Act, 1961 to the assessee for building two flats exceeding 1500 square feet. The assessing officer had initially denied the deduction for the entire project due to the breach of the size limit. The Commissioner of Income Tax (Appeals) upheld this decision. However, the Income Tax Appellate Tribunal ruled that the deduction should only be denied proportionately for the two flats exceeding the limit, allowing deduction for other smaller units. The appellant challenged this decision before the High Court.

The appellant argued that the Tribunal erred in denying deduction proportionately for the larger flats and allowing it for smaller units. They contended that all units in the project should not exceed 1500 square feet to qualify for the deduction. On the other hand, the respondent supported the Tribunal's decision, citing precedent where some units exceeding specified dimensions did not bar the deduction claim altogether.

The High Court, considering the arguments and previous rulings, found the Tribunal's decision to be correct in law. They emphasized that the language of the law does not prevent a deduction claim if some units exceed specified dimensions. Therefore, the Court dismissed the Tax Case Appeal, ruling in favor of the assessee and against the Revenue based on the interpretation of Section 80IB(10) and relevant case law.

In conclusion, the judgment clarified the application of Section 80IB(10) concerning the eligibility for deductions based on the size of residential units in a project. The Court upheld the Tribunal's decision to allow deduction for units below 1500 square feet and deny it proportionately for units exceeding the limit, emphasizing that the law does not bar deductions if some units surpass specified dimensions.