2015 (7) TMI 1302 - HC - Income Tax

Disallowance of deduction u/s 80 IB(10) - proportionate deduction - out of 122 dwelling units constructed by the Respondent Assessee in one block 50 units exceeded the maximum limit and in the other project 26 units violated the maximum limit - claim of the assessee on pro rata basis - Held that - The interpretation placed on sub-clause (c) of clause (10) by the CIT (A) and affirmed by the ITAT is plausible. The provision is capable of being construed in a manner that is beneficial to the Assessee by allowing the deduction pro rata the number of residential units that have complied with the requirement in Section 80 1B(10)(c) viz. that the maximum build up area should not exceed 1000 sq.ft. It is not in dispute that as far as the units in the two blocks constructed by the Assessee all other requirements of Section 80 IB (10) (c) stand fulfilled. No substantial question of law

Summary

Issues:
1. Disallowance of deduction under Section 80 IB(10) of the Income Tax Act.
2. Interpretation of sub-clause (c) of clause (10) of Section 80 IB(10) regarding maximum build-up area for residential units.

Analysis:
1. The appeal before the Delhi High Court concerned the disallowance of deduction under Section 80 IB(10) of the Income Tax Act for the Assessment Year 2009-10. The Revenue contended that the disallowance could not have been restricted by the CIT(Appeals) and the ITAT to individual residential units that did not comply with the requirement under Section 80 IB(10)(c) of the Act.

2. The Respondent Assessee, a real estate developer and builder, faced a survey action under Section 133A, leading to additions in the assessment. The claim of the Assessee under Section 80 IB(10) was disallowed by the Assessing Officer due to non-compliance with the requirement of Section 80 IB(10)(c) related to the maximum build-up area for residential units. The CIT(Appeals) and the ITAT, following the decision of the Calcutta High Court, directed the AO to allow the deduction proportionately based on the number of flats complying with the specified requirement.

3. The High Court, after considering the arguments presented by the Senior Standing Counsel for the Appellant and examining Section 80 IB(10) of the Act, found the interpretation of sub-clause (c) of clause (10) by the CIT(A) and the ITAT to be reasonable. The Court noted that the provision could be construed favorably for the Assessee by allowing the deduction in proportion to the number of residential units meeting the requirement of not exceeding 1000 sq.ft. build-up area. It was acknowledged that all other conditions of Section 80 IB(10)(c) were fulfilled for the units constructed by the Assessee.

4. Consequently, the High Court concluded that no substantial question of law arose from the ITAT's order and dismissed the appeal by the Revenue. The judgment affirmed the decision of the lower authorities regarding the interpretation and application of Section 80 IB(10)(c) in allowing the deduction for compliant residential units.