2021 (10) TMI 417 - AT - Income Tax

Proportionate deduction u/s.80IB(10) in respect of project of Sapphire Park - as in respect of some of the units, the built up area was more than 1500 sq. ft. - HELD THAT - As agreed by the Ld. CIT(Appeal) that in respect of some units, the built up area exceeds 1500 square feet on account of terrace garden as discussed in his findings. However, therefore, the Assessing Officer was directed to allow proportionate deduction u/s.80IB (10) of the Act in respect of Sapphire Park project after excluding the units where built up area exceeds 1500 square feet on account of terrace garden. Therefore, it is in conformity with the decision of DEVASHRI NIRMAN LLP., DEVASHRI NIRMAN LTD. 2020 (12) TMI 59 - BOMBAY HIGH COURT wherein such proportionate deduction u/s.80IB(10) of the Act would be allowed to those units which are having built up area less than or equal to 1500 square feet. It is also the settled position of law that principle of proportionality shall not be excluded while determining allowability of deduction u/s.80IB (10) (c) of the Act. - Decided against revenue.

Summary

Issues:
Whether proportionate deduction u/s.80IB(10) of the Income Tax Act, 1961 would be allowed to the assessee for the project "Sapphire Park."

Analysis:
The appeals by the Revenue stemmed from the orders of the Ld. CIT(Appeal) for the assessment years 2010-11 & 2011-12, focusing on the issue of allowing proportionate deduction u/s.80IB(10) for the "Sapphire Park" project. The Revenue contended that Section 80IB(10) grants deduction for the entire housing project, while the assessee argued for proportionate deduction, citing support from various Judicial Forums.

In the lead case of ITA No.2939/PUN/2017 for the assessment year 2011-12, the Ld. CIT(Appeal) reasoned that even if some units exceeded 1500 sq. ft., the deduction under 80IB(10) should not be disallowed for the entire project. The Ld. CIT(Appeal) directed the AO to calculate the deduction on a proportionate basis, excluding units with built-up areas exceeding 1500 sq. ft., in line with decisions from different forums.

Referring to a similar case before the Hon'ble High Court, it was established that the principle of proportionality should apply in determining the allowability of deduction under Section 80IB(10). The decision of the Ld. CIT(Appeal) in allowing proportionate deduction was affirmed, aligning with the settled legal position that proportionality cannot be disregarded in such cases.

Consequently, the Tribunal upheld the Ld. CIT(Appeal)'s decision, dismissing the Revenue's grounds for the assessment year 2011-12. The same rationale was applied to ITA No.2938/PUN/2017 for the assessment year 2010-11, leading to the dismissal of the Revenue's appeal in both cases. The judgments were pronounced on October 7, 2021, sustaining the relief provided to the assessee based on the principle of proportionate deduction under Section 80IB(10) of the Act.