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2021 (5) TMI 365 - HC - Income TaxDeduction under Section 80-IB(10) - denial of proportionate deduction - Whether the Tribunal was correct in holding that assessee was not entitled to deduction u/s 80-IB(10) when the assessee has constructed the building in accordance with the original plan and had sold six individual units each measuring below 1500 sq.ft. and each of the sale deed did not fall within the prohibition contained under Section 80- IB(10)(f) ? - HELD THAT - For the reasons assigned by this Court in the judgment M/s. S.N. Builders and Developers 2021 (1) TMI 789 - KARNATAKA HIGH COURT and taking into consideration the fact that the entire claim of the assessee has been disallowed by the Assessing Officer without adverting to the merits of the claim made by the assessee, the orders passed by the Tribunal, Commissioner of Income Tax (Appeals) and the Assessing Officer insofar it pertains to claim of the appellant under Section 80-IB(10) of the Act are hereby quashed and the matter is remitted to the Assessing Officer to adjudicate the claim of the assessee under Section 80-IB(10) of the Act afresh in accordance with law.
Issues:
Interpretation of Section 80-IB(10) of the Income Tax Act for deduction eligibility based on the construction and sale of residential units. Analysis: 1. Interpretation of Section 80-IB(10) Eligibility: The case involved an appeal under Section 260-A of the Income Tax Act, 1961, regarding the eligibility of the assessee for deduction under Section 80-IB(10) of the Act. The primary issue was whether the assessee was entitled to the deduction when constructing buildings in compliance with the original plan and selling individual units below 1500 sq.ft. without falling under the prohibition of Section 80-IB(10)(f) of the Act. The Tribunal, Commissioner of Income Tax (Appeals), and Assessing Officer had disallowed the claim without considering the merits. The Court referred to a previous decision in CIT vs. M/s. S.N. Builders and Developers to support the proportionate deduction under Section 80-IB(10) and remitted the matter to the Assessing Officer for fresh adjudication in accordance with the law. 2. Application of Percentage Completion Method: The assessee, engaged in housing projects, had constructed residential flats and followed the "Percentage Completion Method" based on Accounting Standard-7. The total income declared for the assessment year 2011-12 was &8377;6,93,890, with a claimed deduction of &8377;10,29,94,124 under Section 80-IB(10). However, the Assessing Officer disallowed the claim, stating no provision for proportionate deduction under the Act. The subsequent appeals were dismissed without delving into the claim's substance. The Court emphasized the need for a thorough evaluation of the claim under Section 80-IB(10) without a blanket disallowance. 3. Judicial Decision and Disposition: The Court's decision, based on the precedent in CIT vs. M/s. S.N. Builders and Developers, led to the quashing of previous orders by the Tribunal, Commissioner of Income Tax (Appeals), and Assessing Officer regarding the appellant's claim under Section 80-IB(10). The matter was remitted to the Assessing Officer for a fresh assessment in line with the law. Consequently, the Court disposed of the appeal, highlighting that answering the substantial questions of law was unnecessary due to the referenced decision. The interlocutory application was also disposed of accordingly as it no longer required consideration.
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