2020 (10) TMI 568 - HC - Income Tax

Proportionate deduction u/s 80IB - profits attributable to the units, where the built up area is below 1500 sq.ft.- Whether Tribunal was right in law in holding that the assessee is entitled to claim deduction under Section 80IB in respect of profits derived from sale of residential units, wherein the built up area is below 1500 sq.ft. without appreciating the fact that the deduction under Section 80IB(10) is project based rather than unit and there is no concept of proportionate deduction u/s 80IB(10)? - HELD THAT - For the reasons assigned by us in the order passed 2020 (9) TMI 1137 - KARNATAKA HIGH COURT , the substantial questions of law are answered against the revenue and in favour of the assessee.

Summary

Issues Involved:
1. Interpretation of Section 80IB of the Income Tax Act, 1961 for deduction on profits from units below 1500 sq.ft.
2. Whether the deduction under Section 80IB(10) is project-based or unit-based.

Analysis:

Issue 1: Interpretation of Section 80IB for deduction on profits from units below 1500 sq.ft.
The High Court addressed the first substantial question of law regarding the Tribunal's decision on allowing proportionate deduction under Section 80IB for profits attributable to units with a built-up area below 1500 sq.ft. The Court examined the facts and circumstances of the case and found that the Tribunal's decision was upheld. The Court emphasized that the Tribunal's direction to the Assessing Officer to allow proportionate deduction under Section 80IB was justified. The Court's analysis focused on the specific provisions of Section 80IB and the applicability of the deduction in relation to the size of the units. Ultimately, the Court ruled against the revenue and in favor of the assessee, dismissing the appeal.

Issue 2: Whether the deduction under Section 80IB(10) is project-based or unit-based
The second substantial question of law revolved around the interpretation of Section 80IB(10) concerning the entitlement to claim deduction for profits derived from the sale of residential units below 1500 sq.ft. The Court deliberated on the Tribunal's decision allowing the assessee to claim deduction under Section 80IB without considering the project-based nature of the deduction. The Court highlighted that the deduction under Section 80IB(10) is project-based rather than unit-based. The Court's analysis emphasized the distinction between project-based deductions and unit-based deductions under the relevant provisions of the Income Tax Act. Ultimately, the Court ruled in favor of the assessee, affirming the Tribunal's decision and dismissing the appeal.

In conclusion, the High Court's judgment in this case clarified the interpretation of Section 80IB of the Income Tax Act, 1961 regarding deductions on profits from units below 1500 sq.ft. The Court's detailed analysis of the substantial questions of law provided clarity on the applicability of deductions under Section 80IB and emphasized the project-based nature of such deductions. The judgment favored the assessee, highlighting the importance of understanding the specific provisions of the Income Tax Act in determining the eligibility for deductions.