2019 (4) TMI 1678 - HC - Income Tax

Deduction u/s 80IB(10) - extension of project or new project - Assessee had constructed 4 residential buildings as A1, A2, B1 and B2 for which commencement certificate was issued by the local authority on 19/06/1997 and completed on the year 2002-2003 - on same plot of land undertook the construction of another building called 'Devpriya' and certificate for construction was issued after 01/10/1998 - similarly one more project on adjacent land - as alleged commencement of the said project are before the date of 01.10.1998 or thereafter as stipulated in section 80IB(10)(a) - breach of condition of the units not exceeding area of 1000 sq.ft. also - HELD THAT - Both the projects were independent from the original housing project where only 4 buildings were envisaged. The additional building called Devpriya and Kores Nakshatra were designed, envisaged and constructed later. There is no breach of the condition of Section 80IB(10) which required commencement of construction only after 01/10/1998. Merely because local authority had imposed conditions in relation to Devpriya as were originally imposed in case of earlier 4 residential buildings, would not necessarily mean that this was an extension of the existing project. In relation to the breach of condition of the units not exceeding area of 1000 sq.ft. also, we find that the Tribunal was perfectly justified in overruling the objection of the Revenue. The Revenue authorities agreed that each individual unit had built up area of less than 1000 sq.ft. CIT (Appeals), however, noted that in some cases, adjacent units were sold to the two members of the same family who had removed the partition wall between the units. CIT (Appeals) was of the opinion that this device was in breach of clause (f) of Section 80IB(10) of the Act which imposes a condition that in the same family not more than one unit would be allotted. He agreed that such condition was inserted by Finance Act, 2009 with effect from 01/04/2010. However, he commented that the said condition was procedural and therefore, would apply to the pending cases. Entire approach of the Revenue was erroneous. At the relevant time when the housing project was constructed and residential units were sold, admittedly that was no condition in Section 80IB(10) of the Act restricting allotment of more than one unit to the members of the same family. The Assessee, therefore, was free to allot more than one unit to members of the same family. The material on record would suggest that after such units were sold under different agreements, the allottees desired that the partition wall between the two units be removed. It was thus the decision of the members to remove the wall. It was not the case where the Assessee had, from the beginning, combined two residential units and allotted one such larger unit to one member. ITAT was justified in allowing deduction u/s 80IB(10) of the Income Tax Act, 1961 to the assessee in respect of the Kores Towers project

Summary

Issues:
1. Deduction under Section 80IB(10) for housing projects.
2. Commencement date of construction for eligibility.
3. Approval of additional building projects.
4. Breach of condition regarding unit size not exceeding 1000 sq.ft.
5. Interpretation of Section 80IB(10) conditions.

Analysis:
1. The Appeals concern the deduction under Section 80IB(10) of the Income Tax Act, 1961 for housing projects. The Respondent Assessee, a real estate development company, claimed this deduction for the Assessment Year 2009-2010, which was contested by the Revenue.

2. The main issue was the eligibility of the housing projects for the deduction based on the commencement date of construction. The Revenue argued that certain projects commenced before the stipulated date of 01/10/1998, making them ineligible. However, the Assessee contended that the subsequent projects were independent and not extensions of the original project.

3. Another contention was regarding the approval of additional building projects. The Revenue claimed that these projects were part of the original housing project, thus not qualifying for the deduction. The Tribunal, however, found that the additional projects were separate and not extensions of the initial construction.

4. The Revenue also raised concerns about a breach of the condition that each housing unit should not exceed 1000 sq.ft. It was noted that some units were combined by removing partition walls, exceeding the specified area. The CIT (Appeals) highlighted this breach but the Tribunal disagreed, stating that the condition was not violated as each individual unit met the size requirement.

5. The interpretation of Section 80IB(10) conditions was crucial in this case. The Tribunal upheld that the projects in question were independent, commenced after the specified date, and did not breach the unit size condition. The Court affirmed the Tribunal's decision, emphasizing that the Assessee followed the law as it stood during the construction period, and no legal issues warranted interference.

In conclusion, the High Court dismissed the Income Tax Appeals, finding no legal grounds for intervention as no questions of law arose from the Tribunal's decision.