2018 (7) TMI 1412 - HC - Income Tax

Deduction u/s 80IB(10)(c) - Held that - CIT(A) with concurrent findings was of the view that the balconies raised could not be taken into account for calculating 1000 sq.ft. limit prior to 01.04.2005. This court finds no reason to interfere with such logic. Commencement of the project - Held that - The concurrent findings are based upon the actual commencement of the project. The Revenue urged that the date of approval is determinative and commencement has to be reckoned from that period this court is of the opinion that the ITAT cannot be faulted on this aspect for the simple reason that mere securing the approval does not lead to any step towards development. Rather that may be the foundation for various steps that may ultimately lead to obtain finances and starting construction activity. Therefore it is the actual date of construction which is determinative - no substantial question of law arises

Summary

Issues:
1. Entitlement to relief under Section 80IB(10)(c) of the Income Tax Act based on the reckoning of balconies in housing development.
2. Determination of the commencement of a project under Section 80IB(10)(c) based on local authority approval or actual development.

Analysis:

*Entitlement to Relief under Section 80IB(10)(c):* The main issue before the court was whether the balconies raised in housing development, resulting in each unit exceeding 1000 sq. ft., are entitled to relief under Section 80IB(10)(c) of the Income Tax Act. The CIT(A) had previously held that balconies raised could not be considered for calculating the 1000 sq. ft. limit before 01.04.2005. The court, in line with the concurrent findings, upheld this decision, stating that there was no reason to interfere with such reasoning. This conclusion was crucial in determining the applicability of the tax relief provision.

*Determination of Project Commencement:* The second issue revolved around whether the commencement of a project under Section 80IB(10)(c) should be linked to the approval granted by the local authority or the actual development. The Revenue contended that the date of approval should be determinative, while the court found that the actual commencement of the project should be the deciding factor. The court reasoned that securing approval does not necessarily signify progress towards development, as it is merely a preliminary step. The actual date of construction, according to the court, holds more weight in determining project commencement. Consequently, the court supported the ITAT's decision based on the actual commencement of the project.

*Conclusion:* The court, after thorough analysis, concluded that no substantial question of law arose in the case. Therefore, the appeal made by the Revenue was dismissed. The judgment highlighted the importance of considering actual construction activities and the interpretation of statutory provisions in tax matters. The decision provided clarity on the factors determining eligibility for tax relief under Section 80IB(10)(c) of the Income Tax Act, emphasizing the significance of the actual commencement of projects over mere approvals from local authorities.