2016 (2) TMI 231 - AT - Income Tax

Eligibility for the deduction u/s. 80IB(10) - non-completion of the few buildings - Held that - The assessee is entitled to pro-rata deduction in respect of the buildings/units of the housing project Kumar Padmalaya which have complied with the conditions laid down in section 80IB(10) of the Act. In other words, the AO cannot reject the claim of deduction u/s.80IB(10) of the entire project for non-completion of the few buildings. We therefore set aside the order of Ld.CIT(A) and direct the AO to allow pro-rata deduction claimed u/s.80IB(10) in respect of project Kumar Padmalaya . - Decided in favour of assessee

Issues Involved:
1. Disallowance of deduction under Section 80IB(10) for the housing project "Kumar Padmalaya."

Issue-Wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10) for the Housing Project "Kumar Padmalaya":

The appeal filed by the assessee challenges the order dated 30-03-2012 by the CIT(A)-III, Pune, which pertains to the Assessment Year 2007-08. The primary issue revolves around the disallowance of deduction under Section 80IB(10) for the housing project "Kumar Padmalaya."

Facts and Initial Findings:
The assessee claimed deductions under Section 80IB(10) for three projects: Padmalaya, Pragati, and Priyadarshan. The AO, upon verification by the Government-approved valuer, found that the "Padmalaya" project, which commenced on 11-12-2000, had not completed certain buildings (A02, B04, B05, and B06) by 31-03-2008. Since the project was sanctioned before 01-04-2004, it should have been completed by 31-03-2008. The local authority had not issued the final completion certificate by this date, leading the AO to question the eligibility for the deduction.

Assessee's Argument:
The assessee argued that if the incomplete buildings were segregated, the remaining portion satisfied all conditions of Section 80IB(10). They cited various decisions to support the claim for proportionate deduction.

AO's Decision:
The AO rejected the explanation, stating that Section 80IB(10) requires the entire project to fulfill all conditions as a single unit. Partial compliance disqualifies the entire project from the deduction.

CIT(A)'s Decision:
The CIT(A) upheld the AO's decision, distinguishing the cited cases and emphasizing that the entire project must comply with Section 80IB(10). The CIT(A) relied on the Chennai Tribunal's decision in ACIT Vs. Viswas Promoters Pvt. Ltd., which rejected pro-rata deductions for incomplete units.

Assessee's Appeal to ITAT:
The assessee appealed to the ITAT, citing the reversal of the Viswas Promoters Pvt. Ltd. decision by the Madras High Court, which allowed proportionate deductions for eligible units within a project. They also referenced the Pune Tribunal's decision in Padmavati Developers Vs. DCIT, which supported proportionate deductions.

Revenue's Argument:
The Departmental Representative relied on the CIT(A)'s order and the Bombay High Court's decision in CIT Vs. Brahma Associates, which held that Section 80IB(10) applies to the entire project, not parts of it.

ITAT's Analysis and Decision:
The ITAT considered various arguments and precedents, including the Madras High Court's decision in Viswas Promoters Pvt. Ltd., which allowed proportionate deductions within a composite housing project. The Pune Tribunal's decision in Padmavati Developers also supported pro-rata deductions for completed units.

The ITAT concluded that the assessee is entitled to pro-rata deductions for the "Kumar Padmalaya" project for the units that complied with Section 80IB(10) conditions. The AO cannot disallow the entire project's deduction due to the non-completion of a few buildings. The ITAT set aside the CIT(A)'s order and directed the AO to allow the pro-rata deduction.

Conclusion:
The appeal was partly allowed, granting the assessee pro-rata deductions under Section 80IB(10) for the eligible units within the "Kumar Padmalaya" project. The order was pronounced in the open court on 06-01-2016.

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