THE PR. COMMISSIONER OF INCOME TAX -4 PUNE vs. KUMAR BUILDERS CONSORTIUM

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ITXA/82/2018HC Bombay18 July 2022Bench: HON'BLE SHRI JUSTICE DHIRAJ SINGH THAKUR HON'BLE SHRI JUSTICE ABHAY AHUJA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that Section 80IB(10)(c) specifies the built-up area limit for a residential unit but does not explicitly state that non-compliance by even one unit would disqualify the entire project. The court interpreted the language of Section 80IB(10)(c) to mean that it qualifies an eligible residential unit, and if a unit conforms to the size requirement, the benefit of deduction cannot be denied for that unit, even if other units in the same project do not comply. The court found no provision remotely suggesting denial of deduction for eligible units at the cost of ineligible ones. Therefore, the ITAT's direction to the AO to work out pro rata deduction under Section 80IB(10) for eligible residential units was upheld. The appeal was dismissed as lacking merit.

What were the facts?

The assessee, Kumar Builders Consortium, filed its return for Assessment Year 2011-12 claiming a deduction of Rs. 28,49,87,583/- under Section 80IB(10) of the Income Tax Act, 1961, for two projects: Kumar Shantiniketan and Kumar Kruti. The Assessing Officer (AO) disallowed the deduction, finding that in Kumar Shantiniketan, two flats exceeded the 1500 sq.ft. limit, and in Kumar Kruti, eight flats exceeded this limit, and the project was part of a larger project sanctioned earlier. The CIT(A) allowed pro rata deduction based on previous ITAT orders for the assessee. The Revenue appealed to the ITAT, which dismissed the appeal, following its own prior decisions. The Revenue then filed the present appeal before the High Court.

What were the issues?

1. Whether, in law and in the facts and circumstances, the Income Tax Appellate Tribunal was justified in allowing the assessee's claim for deduction under Section 80IB(10) on a pro rata basis, considering that the assessee did not comply with the built-up area limit prescribed by Section 80IB(10)(c) for eligible flats in the projects 'Kumar Kruti' and 'Kumar Shantiniketan'? Assessee's Contention: The assessee argued, through its counsel, that the issue was covered by the High Court's judgment in Devashri Nirman LLP V/s. Assistant Commissioner of Income Tax & Another, which upheld proportionate deduction under Section 80IB(10). Revenue's Contention: The Revenue argued that Section 80IB(10) does not envisage pro rata deduction. It contended that if even a single flat in a housing project exceeds the permissible 1500 sq.ft. built-up area, the assessee should lose the deduction for the entire project.

Which sections of the Income-tax Act were involved?

Section 80IB(10),Section 260A

AI-generated summary — verify with the full judgment below

10 ITXA.82.2018 OS.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 82 OF 2018 The Pr. Commissioner of Income } Tax- 4, Pune, 3rd Floor, Room No. } 322, Bodhi Tower, Salisbury Park, } Gultekdi, Pune – 411 037. } .. Appellant Versus Kumar Builders Consortium, 10th } Floor, Kumar Business Centre, Bund } Garden, Opp. Pune Central, Pune- } 411 001. } .. Respondent **** Mr. Suresh Kumar, Advocate for the Appellant. Mr. Jitendra Jain a/w Mr. Sameer G. Dalal, Advocate for the Respondent. ****

CORAM : DHIRAJ SINGH THAKUR AND ABHAY AHUJA, JJ.

RESERVED ON : 30th JUNE, 2022 PRONOUNCED ON : 18th JULY, 2022 (PER DHIRAJ SINGH THAKUR, J.): . The present appeal has been preferred under Section 260 A of the Income Tax Act, 1961 (the Act, 1961), against the judgment and order dated 13th January, 2017, passed by the Income Tax Appellate Tribunal, Pune (for short “ITAT”) relevant to the assessment year 2011-12. By virtue of the order impugned, the ITAT, while allowing the appeal of the assessee has directed the Assessing Ofcer (for short ‘A.O.’) to workout the pro rata R.V. Patil 1 of 6 CNR No : HCBM020152882017 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04

10 ITXA.82.2018 OS.doc deduction under Section 80IB(10) of the Act, 1961. 2. Briefy stated material facts in the backdrop of which the present controversy has arisen, are as under: The assessee is a frm engaged in the business of developing residential projects in Pune. Returns of income for the assessment year 2011-12 was fled on 30th September, 2011, declaring a total income of Rs.18,83,540/- after claiming deduction of Rs.28,49,87,583/- under Section 80IB(10) of the Act, 1961. The deduction claimed was in respect of two projects namely (A) Kumar Shantiniketan and (B) Kumar Kruti. 3. The A.O., during the course of assessment proceedings noted that in regard to the project Kumar Shantiniketan, two fats were having an area in excess of the prescribed limit of 1500 sq.ft., which was a mandatory requirement for claiming deduction under Section 80IB(10). In regard to the project Kumar Kruti, the A.O. noted that eight fats were having an area in excess of permissible 1500 sq.ft. Besides this, the A.O. also noted that the assessee had failed to complete the project by 31 st March, 2008. It held that the project Kumar Kruti was part of a larger project Kumar City, which was sanctioned on 08th August, 2003. The A.O. accordingly, disallowed the claim of deduction under Section 80IB(10) of the Act, 1961. R.V. Patil 2 of 6 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04

10 ITXA.82.2018 OS.doc

4.

The order of the A.O. was challeged before the CIT(A) by the assessee. The appeal was allowed vide order dated 18th August, 2014, following the decision of 15th April, 2013 by the ITAT, Pune, in the case of the assessee for the assessment years 2008-9 and 2009-10, wherein the ITAT had directed the A.O. to allow the pro rata deduction in respect of eligible fats not exceeding prescribed limit of a covered area of 1500 sq.ft. 5. The order of CIT(A) was challenged by the Revenue before the ITAT, Pune, who vide order dated 13th January, 2017, dismissed the appeal by following the order of the ITAT in case of the assessee for the assessment years 2008-09 and 2009-10 and also the order dated 16th October, 2015 for the assessment year 2010-11 in case of the assessee. In the backdrop of the aforementioned facts, the following substantial question of law is proposed. Whether in the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was justifed in allowing the assessee’s claim of deduction under Section 80IB(10) on prorata basis considering the fact that the assessee did not comply with the limit on built-up area prescribed of Section 80IB(10)(c) of the Act in respect of eligible fats in the project ‘Kumar Kruti’ and ‘Kumar Shantiniketan’? 6. Mr. Samir G. Dalal, learned Counsel for the Respondent, however, R.V. Patil 3 of 6 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04

10 ITXA.82.2018 OS.doc stated that the issue is covered by a judgment of this Court in Devashri Nirman LLP V/s. Assistant Commissioner of Income Tax & Another

1 . What was held in Paragraph Nos. 19 and 20 of the judgment (supra) is as under: “19. On the issue of proportionate deduction under Section 80IB(10) of the Income-tax Act, we are satisfed that the view taken by the Commissioner (Appeals) as well as the Income-tax Appellate Tribunal calls for no interference. 20. The view taken by the Commissioner (Appeals) and the Income -tax Appellate Tribunal is quite consistent with the view taken by the High Court of Madras, Delhi and Karnataka. It was pointed out that even the special leave petition against the Madras High Court’s decision was dismissed by the Supreme Court. Accordingly, there is no good ground to interfere with the view taken by the Commissioner (Appeals) and the Income-tax Appellate Tribunal on the issue of proportionate deduction, at the instance of the Revenue.” 7. Section 80IB(10) of the Act, 1961, allows to an undertaking developing and building housing projects, hundred percent deduction of the profts derived from such housing projects subject to the fulfllment of inter alia the timeline as regards approval of the project, its commencement and completion as prescribed in Sub-clause ‘a’ of Section 80IB(10) of the Act, 1961. The fulfllment of the condition as regards the size of the plot of land in terms of Sub-clause ‘b’ of Section 80IB(10) of the Act, 1961, or the 1 (2020) 429 ITR 597 (Bom). R.V. Patil 4 of 6 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04

10 ITXA.82.2018 OS.doc compliance as regards the built-up area of the residential unit being not more than 1500 sq.ft. at any place other than the city of Delhi or Mumbai in terms of Sub-clause ‘c’ of Section 80IB(10) of the Act, 1961. 8. The argument advanced by the learned Counsel for the appellant was that Section 80IB(10), does not at all envisage a pro rata deduction, in respect of eligible fats. In other words, it is suggested that even if a single fat in a housing project is found to exceed the permissible maximum built- up area of 1500 sq.ft., the assessee would lose its right to claim the beneft of deduction in respect of the entire housing project under Section 80IB(10). In our opinion, a plain reading of the said section does not support that interpretation at all. Learned Counsel for the appellant would have been perfectly justifed, had the legislature in its wisdom, in clause ‘c’ used the words “each residential unit has a maximum built-up area ….”. This would then clearly indicate that the intention was to ensure that each and every residential unit in such a housing project confrms inter alia to the size prescribed with a view to make an assessee eligible for claiming the deduction. However, the words used in clause ‘c’ are as under: “(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty fve kilometers from the municipal limits of these cities and one thousand and fve hundred square feet at any other place” R.V. Patil 5 of 6 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04

10 ITXA.82.2018 OS.doc

It is a well settled principle of interpretation of statutes that when the language of a statute is unambiguous and admits of only one meaning, no question of construction of a statute then arises. Reliance in this regard can be placed on the Apex Court judgment in Nelson Motis V/s. Union

Of India And Another2. It, therefore, becomes clear that clause ‘c’ only qualifes an eligible residential unit and no more and further that if there is such a residential unit, which confrms to the requirement as to size in a housing project, all other conditions being fulflled, the beneft of deduction cannot be denied in regard to a such residential unit. Section 80IB(10), nowhere even remotely aims to deny the beneft of deduction in regard to a residential unit, which otherwise confrms the requirement of size at the cost of an ineligible residential unit with a built-up area of more than 1500 sq.ft. 9. For the reasons above, we are of the opinion that the order of the ITAT directing the A.O. to workout the pro rata deduction under Section 80IB(10) of the Act, 1961, in regard to the eligible residential units, merits no interference. The appeal is held to be without merit and is accordingly dismissed.

(ABHAY AHUJA, J.) (DHIRAJ SINGH THAKUR, J.) 2 AIR 1992 SC 1981. R.V. Patil 6 of 6 Uploaded on - 18/07/2022 Downloaded on - 27/10/2026 17:58:04 Powered by TCPDF (www.tcpdf.org)

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