2016 (2) TMI 1260 - AT - Income Tax

Claim deduction u/s. 80IB(10) - allotment of multiple residential units to an individual - allottee have horizontally joined the flats on the respective floors - newly inserted provisions of section 80IB(10) were violated - HELD THAT - In the facts and circumstances of the case and the CBDT Circular clarifying the applicability of the amended provisions we are of the considered opinion that the provisions of Clauses (e) and (f) to section 80IB(10) of the Act cannot be applied to the transactions carried out before 19-08-2009 and accordingly deduction u/s. 80IB(10) cannot be denied to the assessee only for the reason that multiple residential units were allotted to an individual prior to the aforesaid date. Accordingly we find merit in the appeal of the assessee and the same is allowed. Prorata deduction u/s. 80IB(10) - contention of Revenue is that there is no concept of allowing proportionate deduction u/s. 80IB(10) to a housing project - HELD THAT - No merit in this plea of the Revenue. The Tribunal in numerous cases has allowed proportionate deduction u/s. 80IB(10) on eligible units of a housing projects and the same have been upheld by the Hon ble High Courts. Thus the question whether proportionate deduction can be allowed u/s. 80IB(10) to the eligible units of a housing project is no more res-integra In M/S. ARUN EXCELLO FOUNDATIONS PVT. LTD 2012 (12) TMI 415 - MADRAS HIGH COURT has granted proportionate deduction to the housing project u/s. 80IB(10). The Hon ble Madras High Court in the case of Viswas Promoters Private Limited Vs. ACIT 2012 (11) TMI 1117 - MADRAS HIGH COURT has held that the assessee is entitled to claim proportionate relief on the units satisfying the extent of built up area - assessee is eligible to claim deduction in respect of the residential units on which the Commissioner of Income Tax (Appeals) has denied proportionate deduction - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Applicability of amendments to Section 80IB(10) introduced by the Finance Act, 2009.
3. Concept of prorata deduction under Section 80IB(10).

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The assessee, a promoter and builder, filed a return for the assessment year 2010-11, declaring 'Nil' taxable income after claiming a deduction of Rs. 9,16,23,159/- under Section 80IB(10) for a housing project. During scrutiny, the Assessing Officer (AO) observed that several flats were horizontally merged and allotted to the same individuals or their family members, violating the conditions under Section 80IB(10)(e). Consequently, the AO denied the deduction and added Rs. 9,16,23,159/- to the assessee's income.

2. Applicability of Amendments to Section 80IB(10) Introduced by the Finance Act, 2009:
The assessee contended that the amendments to Section 80IB(10), specifically Clauses (e) and (f), were inserted by the Finance Act, 2009, effective from 01-04-2010. The assessee argued that since the agreements with the vendees were executed before this date, the amended provisions should not apply. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected this argument but allowed prorata deduction on eligible units.

3. Concept of Prorata Deduction under Section 80IB(10):
The Revenue appealed against the CIT(A)'s decision to allow prorata deduction, arguing that there is no concept of prorata deduction under Section 80IB(10). The Tribunal, however, noted that various High Courts and Tribunals have upheld the concept of prorata deduction. The Tribunal cited several cases, including CIT Vs. Arun Excello Foundation (P) Ltd., where prorata deduction was allowed for eligible units.

Tribunal's Findings:
The Tribunal found that the assessee had allotted multiple flats to individuals and their family members before the amendments introduced by the Finance Act, 2009, became effective. The Tribunal held that the amendments could not be applied retrospectively to transactions completed before 19-08-2009. The Tribunal also referred to CBDT Circular No. 5 of 2010, clarifying that the restrictions on allotment of multiple residential units would not apply to allotments made before 19-08-2009.

Conclusion:
The Tribunal concluded that the assessee is eligible for deduction under Section 80IB(10) for the entire project, as the transactions were completed before the amendments took effect. The appeal of the Revenue was dismissed, and the appeal of the assessee was allowed.

Order Pronounced:
The order was pronounced on Monday, the 15th day of February, 2016.