2019 (1) TMI 1471 - HC - Income Tax

Deduction of section 80IB(10) - whether the restriction of maximum permissible unit area imposed for an assessee to claim deduction under Section 80IB(10)? - Held that - In the present case, taken a view that such amended provision would not be applicable to the housing project where the development of possession was granted earlier. The assessee however pointed out that such an issue has been decided by this Court in case of Commissioner of Income Tax Vs. Happy Home Enterprises and anr. (2014 (9) TMI 707 - BOMBAY HIGH COURT) hold that such modified requirement for claiming deduction under Section 80IB(10) cannot be enforced against those assessee where the housing project granted development permission prior to such date. We notice that Gujarat High Court in case of Maran Corporation 2012 (9) TMI 700 - GUJARAT HIGH COURT has also taken a similar view. In any case where issue has now been considered by the Supreme Court in case of Commissioner of Income-Tax Vs. Sarkar Builders (2015 (5) TMI 555 - SUPREME COURT). In that view of the matter it would be worthwhile to admit these appeals since no question of law can be stated to have arisen. Both the appeals are therefore dismissed.

Summary

Issues:
Interpretation of Section 80IB(10) of the Income Tax Act, 1961 regarding the maximum permissible commercial built-up area for deduction.

Analysis:

Issue 1:
The primary issue in this case is whether the restriction on the maximum permissible unit area for claiming deduction under Section 80IB(10) can be applied to housing projects that obtained development permission before the relevant amendment date.

Analysis:
The Court examined the applicability of the restriction on the commercial area in housing projects under Section 80IB(10) of the Income Tax Act, 1961. The amendment introduced on April 1, 2005, included clause (d) which imposed restrictions on the commercial area eligible for deduction. The Court emphasized that this condition is linked to the approval and construction of the housing project by the local authority. It held that the restriction in clause (d) operates prospectively, applying only to projects approved after April 1, 2005. The judgment highlighted that requiring compliance with clause (d) for projects approved before March 31, 2005, would be impractical and against the legislative intent of encouraging investment in housing projects. The Court concluded that the deduction under Section 80IB(10) is inseparably linked to the approval date of the project and not the year in which profits are taxed.

Issue 2:
The second issue involves the consideration of similar views by other High Courts and the absence of a legal question necessitating the admission of appeals.

Analysis:
The Court noted that the Gujarat High Court in the case of Maran Corporation and the Supreme Court in Commissioner of Income-Tax Vs. Sarkar Builders had also taken a similar view on the applicability of the restriction under Section 80IB(10). Given the consistency in judicial interpretation and the absence of a legal question requiring consideration, the Court dismissed the appeals. It emphasized that no question of law had arisen in the case, leading to the dismissal of the appeals challenging the Tribunal's judgment.

In conclusion, the judgment clarifies the prospective application of the restriction on commercial area under Section 80IB(10) and emphasizes the importance of linking such conditions to the approval date of housing projects. The decision aligns with previous judicial interpretations and upholds the legislative intent behind incentivizing investments in housing projects.