2014 (7) TMI 1166 - AT - Income Tax

Entitlement to claim deduction u/s 80IB(10) - Held that - Regarding the objection of the Assessing Officer in the website of assessee company the assessee itself has shown shops available in DSK Sundarban project. The issue is not relevant to decide whether the residential and amenity space are separate projects or one and the same. So long as the building plans are independently sanctioned two projects are separately and accordingly disallowance was not rightly rejected on this account. Accordingly the Assessing Officer was not justified in rejecting claim of the assessee under the provisions of section 80IB(10) of the Act in respect of DSK Sundarban. The Assessing Officer is directed accordingly. In the absence of any definition of housing project the Assessing Officer and the CIT(A) were not justified in holding that all the buildings sanctioned in the revised plan dated 15.10.2008 constitute the housing project as discussed above. In view of above discussion the choice is for the assessee to determine which buildings would form part of the housing project and the conditions laid down in Section 80IB(10) of the Act should be checked vis-a-vis those buildings with respect to which the deduction is claimed. Since the assessee has completed all the buildings for which sanction is received for parking 7 floors and all the conditions laid down in Section 80IB(10) of the Act were complied with the assessee is entitled for claiming deduction u/s.80IB(10) of the Act. It is settled legal position that beneficial provisions have to be interpreted liberally in favour of assessee. Regarding the contention of the Assessing Officer that the built up area of the row houses exceeded 1500 sq. ft. is not relevant since the row houses do not form part of the eligible housing project. In view of above discussion the Assessing Officer is directed to allow the assessee s claim of deduction u/s.80IB(10) of the Act in respect of Parking 7 floors of DSK Vishwa Phase-V Meghmalhar Phase-I project as independent project. - Decided in favour of assessee.

Issues Involved:
1. Deduction under Section 80IB(10) for profits derived from housing projects DSK Sundarban and Meghmalhar Phase-I.
2. Applicability of Section 80IB(10)(d) regarding the commercial area limit.
3. Consideration of Amenity Space as part of the housing project.
4. Separate projects versus integrated project for Meghmalhar Phase-I and Meghmalhar Phase-II.
5. Proportionate deduction under Section 80IB(10).
6. Revenue's appeal on disallowance of claim for DSK Vishwa-III and notional interest disallowance.

Detailed Analysis:

1. Deduction under Section 80IB(10) for DSK Sundarban:
The assessee claimed deduction under Section 80IB(10) for the profits derived from the housing project DSK Sundarban. The Assessing Officer and CIT(A) denied this deduction, stating that the commercial area in the project exceeded the limit prescribed under Section 80IB(10)(d). The CIT(A) held that the project included both residential and commercial areas due to a consolidated approval and common layout plan, thus disqualifying it from the deduction.

2. Applicability of Section 80IB(10)(d):
The CIT(A) and Assessing Officer argued that the commercial area exceeded the maximum limit prescribed under Section 80IB(10)(d), which restricts the built-up area of shops and other commercial establishments in housing projects. The assessee contended that the Amenity Spaces I and II were independent projects and not part of the residential project, thus the commercial area limit should not apply.

3. Consideration of Amenity Space:
The CIT(A) and Assessing Officer treated the Amenity Spaces I and II as part of the DSK Sundarban housing project, denying the deduction under Section 80IB(10). The assessee argued that these spaces were developed independently and were mandated by Development Control regulations for general public utility.

4. Separate Projects for Meghmalhar Phase-I and Phase-II:
The assessee claimed deduction for Meghmalhar Phase-I, stating it was a separate project from Meghmalhar Phase-II. The Assessing Officer and CIT(A) held that both phases constituted a single integrated project, and since Meghmalhar Phase-II was incomplete, the deduction was not allowable. The Tribunal found that the buildings for which sanction was received for Parking + 7 floors constituted an independent housing project and were eligible for deduction.

5. Proportionate Deduction:
The assessee argued for proportionate deduction if some parts of the project complied with Section 80IB(10). The Tribunal supported this view, stating that beneficial provisions should be interpreted liberally in favor of the assessee. It held that the eligible buildings in Meghmalhar Phase-I, which satisfied all conditions under Section 80IB(10), should be allowed the deduction.

6. Revenue's Appeal on DSK Vishwa-III and Notional Interest Disallowance:
The Revenue appealed against the CIT(A)'s decision to allow the deduction for DSK Vishwa-III and to delete the notional interest disallowance. The CIT(A) had followed previous Tribunal decisions and the jurisdictional High Court's ruling in Brahma Associates, which supported the assessee's claim. The CIT(A) also found that the notional interest disallowance was unjustified as it was not a specific expenditure under Section 35D(2). The Tribunal upheld the CIT(A)'s decisions, dismissing the Revenue's appeal.

Conclusion:
The Tribunal allowed the assessee's appeals, granting the deduction under Section 80IB(10) for the eligible housing projects. The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions on the DSK Vishwa-III deduction and the deletion of the notional interest disallowance.

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