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2015 (10) TMI 80 - ITAT HYDERABAD

2015 (10) TMI 80 - ITAT HYDERABAD - TMI - Claim of deduction u/s 80IB(10) - AO rejected assessee’s claim as the housing project has not been completed on or before 31/03/08 and some of the residential units have exceeded the prescribed built up area of 1500 sq.ft. - CIT(A) deleted the addition - Held that:- As held in case of CIT Vs. Vandana Properties [2012 (4) TMI 54 - BOMBAY HIGH COURT ] since the term ‘housing project’ has not been defined under section 80IB(10), meaning as per common parlan .....

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a building with several residential units having prescribed built up area would constitute a ‘housing project’ u/s 80IB(10). In view of the aforesaid, as approval by local authority for the four blocks, namely, Prime Rose, Lilly, Jasmine and Morning Glory was granted by local authority on 06/02/06, assessee, in our opinion, would be eligible to avail deduction u/s 80IB(10) since these four blocks were completed within the stipulated period of five years.

As far as the second allegat .....

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of deduction u/s 80IB(10) in respect of the residential units comprising housing project, which adhered to conditions of section 80IB(10). Since the provision contained u/s 80IB(10) is a beneficial provision, a liberal approach has to be taken as a literal interpretation would lead to a situation where the very intention of bringing such provision would be defeated.

The Hon’ble Madras High Court in case of CIT Vs. Arun Excello Foundation (P) Ltd. (2012 (12) TMI 415 - MADRAS HIGH COUR .....

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ANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For The Revenue : Shri Ramakrishna Bandi For The Assessee : Shri K.C. Devdas ORDER PER SAKTIJIT DEY, J.M.: This appeal by department is directed against the order dated 15/09/2014 of ld. CIT(A) - VI, Hyderabad for the AY 2010-11. 2. The only issue arising for consideration from the grounds raised by the department is in relation to the decision of ld. CIT(A) in accepting assessee s claim of deduction u/s 80IB(10). 3. Briefly the facts are, assess .....

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AO noticed that assessee was developing a housing project on a piece of land admeasuring 7.39 acres at Kompalli, Qutubullapur Mandal, R.R. Dist. Out of the total land, 5.8 aces is owned by assessee and balance 2.31 acres are owned by partners. He further noticed that HUDA has given a technical permission on 07/05/01 for construction of six blocks in the housing project. He further noticed that local authority i.e. Gram Panchayat, Kompalli has accorded permission for construction on 10/05/01 for .....

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blocks for which assessee has claimed deduction u/s 80IB(10) were not completed within the stipulated period. When this was brought to the notice of assessee, he submitted that permission for construction of the four blocks was granted by HUDA on 20/01/06 and construction of these four blocks were completed in the FY 2009-10 relating to AY 2010-11, therefore, assessee is eligible for claiming deduction u/s 80IB(10). AO, however, observed that as per the details submitted by assessee, the entire .....

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ties developed are common to all the blocks. All the blocks have common entrance and do not have any other way to any of the blocks. Land is not demarcated among the blocks and the club for which permission was obtained is common even to the blocks which were completed much earlier. Therefore, none of the blocks have separate entrance and the entire project has to be seen as a single unit. AO observed that construction of four blocks for which assessee is claiming deduction u/s 80IB(10) was star .....

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hority was on 07/05/01 that should be taken as the date of approval for the housing project. On the aforesaid premises, AO observed that since four blocks on which assessee is claiming deduction u/s 80IB(10) were not completed prior to 31/03/08, assessee is not eligible for deduction u/s 80IB(10). 3.1 Further, AO observed that, though, as per the provisions of section 80IB(10), one of the conditions for availing exemption is, none of the residential units (flats) should exceed the area of 1500 s .....

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u/s 80IB(10), but, AO rejected assessee s explanation by holding that even if one residential unit exceeds the prescribed limit of 1500 sq.ft., assessee will not be eligible for claim of deduction u/s 80IB(10). Accordingly, AO completed the assessment by rejecting assessee s claim of deduction u/s 80IB(10). Being aggrieved of the assessment order so passed, assessee preferred appeal before ld. CIT(A). 4. Reiterating the stand taken before AO, it was submitted by assessee before ld. CIT(A) that .....

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it was submitted by assessee that deduction u/s 80IB(10) can be proportionately restricted to residential units which are having built up area of less than 1500 sq.ft. 5. Ld. CIT(A) after considering the submissions of assessee in the context of facts and materials on record found that first approval granted by local authority i.e. Grampanchayat, Kompalli on 10/05/01 is in respect of two blocks, namely, Lotus and Daffodils- whose profits were allowed as deduction u/s 80IB(10) in the preceding A .....

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anchayat of Kompalli. Therefore, when Grampanchayat has granted approval on 06/02/06 on payment of development fees, that should be taken as date of approval for the four blocks, hence, AO s conclusion that project was not completed within the stipulated period of 80IB(10)(a) is not acceptable. Accordingly, he held that AO s finding cannot be accepted. As far as allegation of AO that assessee is not eligible to claim deduction u/s 80IB(10) as individual residential units have exceeded built up a .....

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Ld. DR strongly relying upon the reasoning of AO submitted before us, assessee s housing project approved by HUDA is an integrated housing project consisting of six blocks. He submitted, as the approval by HUDA for the entire housing project was granted on 07/05/2001 and the approval of the local authority i.e. Kompalli Grampanchayat was on 10/05/2001, therefore, for claiming deduction u/s 80IB(10)(a), assessee should have completed the project on or before 31/03/08. Since assessee did not compl .....

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entire integrated housing project was granted on 07/05/01, assessee should have completed the entire housing project on or before 31/03/08. Since assessee did not complete the entire housing project within the stipulated period, it is not eligible for deduction. Ld. DR submitted, even otherwise also, assessee is not eligible to claim deduction u/s 80IB(10) since one more condition has been violated by assessee. He submitted that as all the residential units in the housing project are not having .....

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essee has not fulfilled the conditions of section 80IB(10), AO was justified in rejecting assessee s claim of deduction u/s 80IB(10). 7. Ld. AR, on the other hand, relying upon the order of ld. CIT(A), submitted, AO was not justified in denying assessee s claim of deduction in respect of four blocks in respect of which approval was granted by local authority in February, 2006. It was submitted, as far as first two blocks, namely, Daffodils and Lotus are concerned, local authority granted its app .....

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with the provisions of section 80IB(10)(a), since the approval for other four blocks was granted by local authority i.e. Kompally Grampanchayat in February 06 and assessee has completed the housing project within five years as stipulated under 80IB(10)(iii), it is eligible to claim deduction u/s 80IB(10). Ld. AR submitted, argument of the department that first approval granted by HUDA on 07/05/01 should be taken as date of approval is totally unacceptable as it is not the approval of the local a .....

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entire housing project only because some of the units have exceeded the prescribed built up area. He submitted, assessee himself has disallowed the deduction proportionately in respect of residential units, which exceeded built up area of 1500 sq.ft., which constitute approximately 9% of the total housing project. He, therefore, submitted, there is no reason to interfere with the order of ld. CIT(A). 8. We have considered the submissions of the parties and perused the materials on record as well .....

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to bear in mind certain important factual aspects. It is not in dispute that the housing project conceived by assessee stands on an area of 7.9 acres consisting of six blocks and club house. The approval for the housing project was granted by HUDA on 07/05/01. As it appears from record, the local authority i.e. Kompally Grampanchayat granted approval for construction initially for two blocks, named, as Daffodils and Lotus on 10/05/01. It is further evident from record that as far as the aforesa .....

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essee is eligible for deduction u/s 80IB(10), as the project was completed within the stipulated period of 5 years from the end of FY in which housing project was approved by local authority. Whereas, it is the contention of the department that since the entire housing project is an integrated project and initial approval by HUDA was granted on 07/05/01 i.e. prior to 01/04/2004, assessee should have completed the project by 31/03/08 for availing deduction u/s 80IB(10). 8.2 In view of the aforesa .....

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d on or before 31/03/08. In the present case, there is no dispute that approval of the local authority i.e Kompalli Grampanchayat granted on 10/05/01 was only for two blocks namely, Daffodils and Lotus . As far as the other four blocks are concerned, approval was granted by local authority only on 06/02/06. Therefore, as per the provisions contained u/s 80IB(10)(a)(iii) for a housing project approved by local authority after 01/04/05, the project has to be completed within 5 years for claiming d .....

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h housing project is approved. That being the case, since approval by local authority for the four blocks was granted only on 06/02/06 that should be taken as the date of approval for the purpose of granting deduction u/s 80IB(10). As far as the argument of ld. DR that entire housing project is an integrated one consisting of six blocks, it is to be observed that the term housing project has not been defined u/s 80IB(10) of the Act. As held by the Hon ble Bombay High Court in case of CIT Vs. Van .....

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hat housing project would mean a building consisting of several units. Thus, the Hon ble Court ultimately held that construction of a building with several residential units having prescribed built up area would constitute a housing project u/s 80IB(10). In view of the aforesaid, as approval by local authority for the four blocks, namely, Prime Rose, Lilly, Jasmine and Morning Glory was granted by local authority on 06/02/06, assessee, in our opinion, would be eligible to avail deduction u/s 80I .....

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deduction u/s 80IB(10) in respect of those units. In our view, ld. CIT(A) was justified in allowing assessee s claim of deduction u/s 80IB(10) in respect of the residential units comprising housing project, which adhered to conditions of section 80IB(10). Since the provision contained u/s 80IB(10) is a beneficial provision, a liberal approach has to be taken as a literal interpretation would lead to a situation where the very intention of bringing such provision would be defeated. In fact, the .....

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