2023 (1) TMI 651 - AT - Income Tax

Deduction u/s. 80-IB(10) - sale of more than one flat to the members of a family - AO also held that the construction of the assessee s project was in such a way to facilitate the construction of staircase by having a large hole on the roof which was unusual in such projects - only single kitchen was provided for two flats and also the fact that the investors Shri Vimal Kumar Poddar and Mrs. Chaula Vimal Poddar had taken two adjacent flats shows that these flats were not meant for small and middle income groups - HELD THAT - It is observed that the tribunal in own case 2014 (12) TMI 561 - ITAT MUMBAI and 2015 (4) TMI 1351 - ITAT MUMBAI have decided this issue in favour of the assessee. The Tribunal held that the assessee has constructed the flat well in accordance with the approved plan and has also sold the said flats to the buyers with the same specification. Tribunal held that mere provision of a hole for staircase to convert the flats to duplex was only a marketing strategy adopted by the assessee to enhance the sale. It was considered a minor deviation as per the approved plan. It also held that the sale of more than one flat to the members of a family is not a ground for rejecting the claim of deduction u/s. 80IB. Thus we are of the considered opinion that the assessee is entitled to its claim of deduction u/s.80IB(10) of the Act. - Decided against revenue.

Issues involved:
Challenging order of CIT(A) regarding deduction u/s. 80-IB(10) for AYs 2011-12, 2013-14, and 2014-15.

Detailed Analysis:

1. Background:
The appeals were filed by the Revenue against the order of the CIT(A) pertaining to the deduction u/s. 80-IB(10) for the mentioned Assessment Years. The assessee, an Association of Persons, had declared income after claiming the deduction, which was disallowed during scrutiny assessment.

2. Project Details:
The project undertaken by the assessee, a joint venture, was named 'Garden Estate' in Mumbai. The project commenced in 2004 and was completed before 2009. The project involved construction of residential flats and claimed deduction u/s. 80-IB(10) of the Act.

3. Dispute Over Flats:
The Assessing Officer observed that some 1 BHK flats were converted into duplex flats, exceeding the 1000 sq. ft. limit, which was against the provisions of section 80-IB(10). The AO relied on a Bombay High Court decision and raised concerns over the project's compliance with the Act.

4. Assessee's Defense:
The assessee argued that the conversion to duplex was done by purchasers post-sale, not by the assessee. They contended that the project was in compliance with the Act, and the duplex conversion was a buyer's choice. The AO issued notices to flat purchasers, and responses indicated that some flats were converted by buyers, not the assessee.

5. CIT(A) Decision:
The CIT(A) allowed the deduction claim based on previous Tribunal decisions favoring the assessee for other years. The Tribunal held that minor deviations, like a hole for a staircase, were marketing strategies and did not disqualify the project from claiming the deduction.

6. ITAT Decision:
The ITAT upheld the CIT(A)'s decision, citing lack of direct evidence that the developer converted flats into duplexes. The Tribunal considered the conversion a marketing strategy and approved the deduction claim under section 80-IB(10).

7. Final Verdict:
The ITAT dismissed the Revenue's appeals for all three Assessment Years, following the precedent set by previous Tribunal decisions. The Tribunal concluded that the assessee was entitled to the deduction u/s. 80-IB(10) for the project, emphasizing that minor deviations for marketing purposes did not disqualify the project from claiming the deduction.

In conclusion, the ITAT upheld the CIT(A)'s decision, allowing the assessee's claim for deduction u/s. 80-IB(10) for the mentioned Assessment Years, based on the lack of evidence showing non-compliance with the Act and considering marketing strategies as minor deviations.

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