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2016 (5) TMI 312 - AT - Income TaxRevision u/s 263 - disallow deduction under section 80IB(10) - Held that - The project of the assessee was approved by the local authorities on 25.10.2002. This project was subsequently revised and approved on 3.1.2004. The assessee has claimed deduction under section 80IB(10) on this project for A.Y.2004-05 also 2012 (10) TMI 1093 - GUJARAT HIGH COURT . This deduction was disallowed to the assessee on the ground that there was commercial construction in the housing project comprised of 9.38% of the built up area. The Hon ble High Court has observed that prior to 1.4.2005, there was no ceiling prescribed for commercial construction. The assessee has also demonstrated that it has not claimed 80IB deduction qua the commercial space. Apart from above, this issue is now covered by the decision of the Hon ble Supreme Court rendered in the case of CIT Vs. Sarkar Builders (2015 (5) TMI 555 - SUPREME COURT ) wherein held that projects which were sanctioned and commenced prior to 1.4.2005 and completed by the stipulated date, then, 80IB(10)(d) would not be applicable on those projects. Therefore, even if the action of the CIT taken under section 263 is justified, then also on merit, the disallowance cannot be made - Decided in favour of assessee
Issues:
1. Challenge against order of ld.CIT under section 263 for disallowance under section 80IB(10). 2. Disallowance of deduction under section 80IB(10) due to exceeding commercial space. 3. Interpretation of section 80IB(10) regarding commercial construction in housing projects. 4. Applicability of section 80IB(10)(d) to projects approved before 31.3.2005 but completed after 1.4.2005. Analysis: Issue 1: The appeal challenges the order of the ld.CIT under section 263, directing the AO to disallow deduction under section 80IB(10) amounting to &8377; 29,17,359. The AO passed the order under section 143(3) r.w.s section 263, which led to this appeal. Issue 2: The dispute revolves around the disallowance of deduction under section 80IB(10) due to the assessee exceeding the permissible commercial space in the housing project. The ld.CIT set aside the assessment order and disallowed the claim made by the assessee under section 263 of the Income Tax Act. Issue 3: The interpretation of section 80IB(10) regarding commercial construction in housing projects is crucial. The ld.CIT contended that the assessee exceeded the permissible commercial space, making it ineligible for deduction under section 80IB. However, the Hon'ble High Court and the Bombay High Court rulings supported the assessee's claim for deduction under section 80IB(10). Issue 4: The applicability of section 80IB(10)(d) to projects approved before 31.3.2005 but completed after 1.4.2005 was a key point of contention. The Hon'ble Supreme Court held that projects sanctioned and commenced before 1.4.2005, and completed by the stipulated date, would not be subject to 80IB(10)(d). Consequently, the disallowance made by the CIT was deleted, and the assessment order dated 20.12.2007 was restored. The judgment highlights the meticulous examination of the facts and legal provisions surrounding the disallowance under section 80IB(10) and the subsequent restoration of the assessment order based on the interpretation and applicability of relevant sections and judicial precedents.
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