2016 (11) TMI 1246 - AT - Income Tax

Claim of deduction under section 80IB(10) - prorata deduction under section 80IB(10) on such flats which complied with the conditions laid down under the said section i.e. where the area was less than 1500 sq.ft. - whether the area of the flats is within limits prescribed under the Act in order to avail the deduction under section 80IB(10) of the Act and in case it is so, then the said deduction cannot be denied to the assessee? Held that - Assessee is entitled to prorata deduction of the completed flats, which fulfill the conditions laid down in section 80IB(10) of the Act. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue.See Income Tax Officer, Ward-2, Ratnagiri And Others Versus M/s. Paras Builders And Others 2015 (6) TMI 286 - ITAT PUNE The Assessing Officer had confronted the assessee with the report of the DVO, who in turn, submitted another report claiming that the measurements made by its Valuer were correct as against the approximation of the DVO. In the totality of the above said facts and circumstances and in order to meet the ends of justice, we are of the view that the issue needs to be looked into at the level of Assessing Officer, who shall direct the DVO to measure each of 16 flats which, according to him exceeds area of 1500 sq.ft. The Assessing Officer shall also consider the valuation report submitted by the assessee in this regard and after providing reasonable opportunity of hearing to the assessee decide the issue in accordance with law. The grounds of appeal raised by the assessee are thus, allowed for statistical purposes.

Summary

Issues Involved:
1. Eligibility of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Validity of prorata deduction under section 80IB(10) for flats that comply with the area condition.
3. Verification of the built-up area of flats exceeding 1500 sq. ft.

Issue-wise Detailed Analysis:

1. Eligibility of Deduction under Section 80IB(10):
The core issue in the cross appeals is the eligibility of the assessee to claim deduction under section 80IB(10) of the Income Tax Act, 1961. The assessee declared income from a housing project and claimed a deduction amounting to ?3,21,92,617/-. The Assessing Officer (AO) referred the project to a Government Approved Valuer (DVO), who reported that 16 flats exceeded the built-up area of 1500 sq. ft., a condition under section 80IB(10). Consequently, the AO issued a show cause notice and eventually disallowed the deduction for these flats, leading to an addition of ?3.39 crores to the income.

2. Validity of Prorata Deduction:
The CIT(A) upheld the AO's finding regarding the 16 flats exceeding the area limit but allowed prorata deduction for the remaining flats that complied with section 80IB(10). This decision was based on various Tribunal rulings and the Hon’ble Madras High Court's decision in Viswas Promoters Pvt. Ltd. Vs. ACIT. The Revenue appealed against this prorata deduction, arguing that section 80IB(10)(c) does not contemplate prorata relief and that the entire project must meet the conditions for deduction.

3. Verification of Built-up Area:
The assessee contested the DVO's report, claiming it was factually incorrect and based on incomplete verification. The assessee submitted an alternative valuation report from another Government Valuer, asserting that none of the flats exceeded the 1500 sq. ft. limit. The CIT(A) and AO did not accept this alternative report. The Tribunal, considering the conflicting reports, directed the AO to re-verify the built-up area of the 16 disputed flats through a detailed measurement process, ensuring a fair opportunity for the assessee to present their case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to allow prorata deduction for compliant flats, referencing consistent Tribunal and High Court rulings supporting such relief. For the 16 disputed flats, the Tribunal remanded the matter back to the AO for a thorough re-verification of the built-up area, emphasizing the need for accurate and just measurements.

Final Order:
The appeal of the assessee was allowed for statistical purposes, and the appeal of the Revenue was dismissed, reinforcing the principle of prorata deduction and ensuring accurate verification of compliance with section 80IB(10).