2020 (12) TMI 59 - HC - Income Tax

Entitlement for exemption u/s 80IB(10) on proportionate basis - ITAT allowed exemption on proportionate basis - whether ITAT was justified in not holding that all the units of the Appellant - assessee's housing project were compliant with Section 80IB(10), particularly in view of the fact that prior to 1/4/2010, there was no bar on adjacent units being sold to members of the same family? - HELD THAT - In this case the approvals were obtained by the assessee from the Local Authorities and the planning Authorities for putting up a housing project having residential units of less than 1500 square feet. If thereafter the allottees combined two residential units, the deduction under Section 80IB(10) can never be denied to the assessee. The view taken by the Commissioner (Appeals ) and the ITAT is quite consistent with the view taken by the High Courts of Madras, Delhi, and Karnataka. It was pointed out that even the Special Leave Petition against the Madras High Court's decision was dismissed by the Hon'ble Supreme Court. Accordingly, there is no good ground to interfere with the view taken by the Commissioner (Appeals ) and the ITAT on the issue of proportionate deduction, at the instance of the Revenue, in these matters.

Summary

Issues:
1. Common issue in multiple appeals related to the denial of deduction under Section 80IB of the Income Tax Act.

Analysis:
The judgment delivered by the High Court of Bombay pertained to various Tax Appeal cases involving the denial of deduction under Section 80IB of the Income Tax Act. The appeals were consolidated as the issue was common across different Assessment Years. The primary challenge was against the judgment and order of the Income Tax Appellate Tribunal (ITAT) regarding the denial of deductions for specific residential units in housing projects. The appellants and the Revenue both filed appeals, with some of the Revenue's appeals being withdrawn due to tax effect considerations.

The core issue revolved around the interpretation of Section 80IB(10) of the IT Act, specifically regarding the compliance of residential units with the prescribed conditions. The appellants argued that approvals were obtained for the housing projects with units under 1500 square feet, and any subsequent combination of units should not affect the deduction eligibility. The Revenue contended that certain units exceeded the specified area, leading to a breach of conditions for deduction under Section 80IB(10).

The Commissioner (Appeals) had directed a proportionate deduction, which was challenged by both parties before the ITAT. The ITAT ultimately dismissed all appeals, prompting further arguments before the High Court. The appellants relied on various High Court decisions supporting the concept of proportionate deductions under Section 80IB(10), emphasizing compliance with primary conditions.

The High Court upheld the decisions of the Commissioner (Appeals) and the ITAT, citing consistency with rulings from other High Courts. It highlighted the deliberate omission of specific language in the legislation, indicating the allowance of proportionate deductions. The judgment distinguished previous cases cited by the Revenue, clarifying their inapplicability to the current matter.

Consequently, the High Court dismissed the Revenue's appeals and accepted the appellants' statement not to press their appeals, subject to retaining rights for collateral proceedings. The final order dismissed specific appeals, clarified the appellants' rights for future contentions, and made no ruling on costs. The judgment provided a comprehensive analysis of the legal interpretations and precedents, resolving the issues raised in the Tax Appeals effectively.