2016 (4) TMI 205 - AT - Income Tax

Eligibility of deduction u/s 80IB - whether CIT(A) is justified in treating WBIHDCO as Local Authority for allowing deduction u/s 80IB although it does not fall under the categories as defined in Section 10(20) of the I.T.Act? - Held that - The order of the CIT(A) does not call for any interference. The only reason assigned by the AO for not allowing deduction u/s.80-IB(10) of the Act was since the housing project in question was approved by WBHIDCO and since income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and the housing project of the Assessee, it cannot be said that the housing project was approved by local authority and therefore the deduction u/s.80-IB(10) of the Act is not admissible. As rightly contended by the Assessee and held by the CIT(A), the explanation below Sec.10(20) of the Act is only for the purpose of Clause (20) of Sec.10 and this has been made very clear in the said explanation itself. It cannot therefore be extended to the provisions of Sec.80-IB(10) of the Act. WBHIDCO has been appointed as a Planning authority in respect of the Planning area of Rajarhat pursuant to notification issued under the WB Town and Country (Planning & Development) Act, 1979. For the purpose of Sec.80-IB(10) of the Act it is natural that the authority in charge of planned developed in an area should be the proper authority to sanction plans for housing project keeping in view the need for planned and organized development. We are of the view that the AO misdirected himself in making reference to provisions of Explanation to Sec.10(20) of the Act which defines the term Local Authority only for the purpose of the purpose of Clause (20) of Sec.10. For the reasons given above, we confirm the order of the CIT(A) and dismiss the appeal by the Revenue. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether WBHIDCO qualifies as a "Local Authority" for the purpose of allowing deduction under Section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Facts:
The appeal was filed by the Revenue against the order of CIT(A)-XII, Kolkata, dated 15.07.2011, concerning the Assessment Year (A.Y.) 2006-07. The Assessee, engaged in the Real Estate business, developed a housing project at New Town, Rajarhat, Kolkata, in collaboration with West Bengal Housing Board (WBHB). The plans for the housing project were sanctioned by West Bengal Housing Infrastructure Development Corporation Ltd. (WBHIDCO). The Assessee claimed a 100% deduction under Section 80IB(10) of the Income Tax Act, 1961, for the income derived from this project.

2. Relevant Legal Provisions:
Section 80IB(10) allows a 100% deduction of profits derived from housing projects approved by a local authority. Section 10(20) defines the term "local authority" for the purpose of that specific section, including entities like Panchayats, Municipalities, and Cantonment Boards.

3. Argument by the Assessing Officer (AO):
The AO contended that since WBHIDCO's income is not covered by the explanation below Section 10(20) of the Act, it does not qualify as a local authority. Consequently, the housing project approved by WBHIDCO does not meet the criteria for deduction under Section 80IB(10).

4. Assessee's Submission:
The Assessee argued that:
- All conditions for claiming deduction under Section 80IB(10) were met.
- WBHIDCO was appointed as the Planning Authority for New Town, Rajarhat, by the Government of West Bengal under Section 13A of the West Bengal Town & Country (Planning and Development) Act, 1979.
- The term "local authority" in Section 80IB(10) should be interpreted based on its ordinary meaning and the specific context of the section, not by the definition provided in Section 10(20).

5. CIT(A)'s Findings:
The CIT(A) agreed with the Assessee, stating:
- Section 10(20) defines "local authority" specifically for that section.
- WBHIDCO, appointed as the Planning Authority by the Government of West Bengal, qualifies as a local authority for the purpose of Section 80IB(10).
- The notifications issued by the Government of West Bengal under due process of law support this interpretation.

6. Tribunal's Decision:
The Tribunal upheld the CIT(A)'s order, emphasizing:
- The explanation below Section 10(20) is limited to that section and cannot be extended to Section 80IB(10).
- WBHIDCO, as the Planning Authority for Rajarhat, is the appropriate authority to sanction housing projects for the purpose of Section 80IB(10).
- The AO's reference to Section 10(20) was misplaced.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming that WBHIDCO qualifies as a "local authority" for the purposes of Section 80IB(10), allowing the Assessee to claim the deduction.

Order Pronounced:
The appeal by the Revenue was dismissed, and the order was pronounced in court on 3.2.2016.