2022 (8) TMI 528 - AT - Income Tax

Proportionate deduction u/s.80IB(10) - few residential units which undisputedly complied with the conditions of the said section - HELD THAT - As decided in COSMOS DEVELOPERS 2013 (11) TMI 425 - ITAT MUMBAI even if claim was to disallowed it should have been restricted to ten flats only. We also hold that AO was not justified in denying the entire claim made by the assessee. We find that the FAA had directed the AO to calculate disallowance on basis. In short, in our opinion, AO was not justified in disallowing the entire claim made u/s.80IB of the Act on both counts-delay in obtaining CC and size of flats. FAA has rightly held that assessee was eligible for proportionate deduction. - Decided against revenue.

Summary

Issues:
1. Entitlement to deduction u/s. 80IB(10) on a pro-rata basis for residential units exceeding the permissible limit.
2. Provision for pro-rata allowance of deduction u/s. 80IB(10) in case of violation of clause (c) of 80IB(10) of the Act.

Issue 1: Entitlement to deduction u/s. 80IB(10) on a pro-rata basis for residential units exceeding the permissible limit:
The case involved an appeal by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The Assessing Officer disallowed the exemption claimed u/s. 80IB(10) by the assessee due to violations observed in the construction of residential units. However, the Commissioner (Appeals) partly allowed the appeal, directing the Assessing Officer to calculate the deduction on a pro-rata basis for residential units that did not exceed the permissible limit of 1000 sq. ft. The Commissioner relied on precedents and judicial pronouncements to support this decision. The Tribunal, following similar decisions, dismissed the revenue's appeal and upheld the entitlement to a proportionate deduction for compliant residential units.

Issue 2: Provision for pro-rata allowance of deduction u/s. 80IB(10) in case of violation of clause (c) of 80IB(10) of the Act:
The second issue raised in the appeal concerned the absence of a provision for pro-rata allowance of deduction u/s. 80IB(10) in cases of clear violations of clause (c) of the Act. The Tribunal considered the arguments presented by both the revenue and the assessee. The Tribunal noted that the issue of proportionate deduction had been previously addressed in favor of the assessee in similar cases. Referring to a decision by the Hon'ble Madras High Court, the Tribunal emphasized that an assessee could claim proportionate relief for eligible units within a composite housing project, even if certain conditions stipulated by the section were not fully met. The Tribunal, in line with the precedent, dismissed the revenue's appeal and upheld the entitlement to a proportionate deduction for compliant residential units.

In conclusion, the Appellate Tribunal ITAT Mumbai upheld the entitlement of the assessee to a proportionate deduction u/s. 80IB(10) for compliant residential units, despite certain units exceeding the permissible limit. The Tribunal relied on precedents and judicial pronouncements to support its decision, ultimately dismissing the revenue's appeal and affirming the allowance of a proportionate deduction for eligible units within the housing project.