DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2 (3), PUNE vs. M/S. SUKHWANI CHAWLA ERECTORS, PUNE

The only issue raised in this appeal is against allowing proportionate deduction u/s.80IB(10) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’).

Briefly stated, the facts of the case are that the assessee has been engaged in the business as Builders and Promoters. Receipts from sale of flats in project “Dynasty” located at Wakad, Pune, were shown at Rs.90.33 crore. The assessee computed profit from the same at Rs.33,56,49,265/- and claimed deduction u/s.80IB(10) on the same in the original return filed by it.

However, in the return filed u/s.153C of the Act, the assessee reduced the amount of deduction u/s.80IB(10) to Rs.33,40,76,218/- by suo motu disallowing deduction in respect of one flat which was sold for Rs.15.73 lakh. This was done for the raison d`etre that two flats, numbering, D-203 and F-903 were sold to Ms. Neelima Rane in violation of the provisions of section 80IB(10)(f). The AO held that the assessee was not eligible for deduction u/s.80IB(10) in entirety because of the violation in selling two flats to one person. The ld. CIT(A) upheld the assessee’s contention by holding that deduction u/s.80IB(10) was to be allowed on proportionate basis in respect of the portion of the total project to which there was no violation of the provisions.

We have heard the rival submissions in Virtual Court and gone through the relevant material on record. There is no dispute on the assessee’s otherwise eligibility to deduction u/s.80IB(10) in respect of the project “Dynasty”. The AO disallowed the entire deduction on the ground that the assessee contravened the provisions of section 80IB(10)(f) by selling two units to one person. If there was violation of the relevant provision, only the deduction pertaining to such violation ought to have been disallowed. The ld. CIT(A), in our opinion, was fully justified in allowing the deduction on the amount claimed because the assessee had suo motu claimed deduction u/s.80IB(10) on reduced amount. The view taken by the ld. CIT(A) accords with the judgment of the Hon’ble jurisdictional High Court in M/s. Kamat Constructions Pvt. Ltd. Vs. ACIT (2020) 429 ITR 609 (Bom.) in which identical facts were involved and the Hon’ble High Court approved the granting of deduction on proportionate basis. We, therefore, accord our imprimatur to the view taken by the ld. CIT(A).

Both the sides are in agreement that the facts and circumstances of the other two appeals are mutatis mutandis similar to those of the assessment year 2012-13. Following the view taken hereinabove, we affirm the impugned order for these years as well.

In the result, all the appeals stand dismissed. Order pronounced in the Open Court on 27th January, 2022.