ITO 33(1)(3), MUMBAI vs. E.B.R. ENTERPRISES, MUMBAI

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ITA 1618/MUM/2015Status: DisposedITAT Mumbai09 May 2017AY 2010-114 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the amendment to Section 80IB(10) by the Finance Act, 2004, introducing clause (d), applies prospectively from April 1, 2005, and does not affect projects approved prior to that date. Therefore, the assessee was eligible for the deduction.

What were the facts?

The assessee, a builder, claimed deduction under Section 80IB(10) for a housing project approved before April 1, 2005. The AO disallowed the claim, citing an amendment to Section 80IB(10) that restricted commercial area to 5% of the total built-up area, which the assessee's project exceeded.

What were the issues?

Whether the amendment to Section 80IB(10) restricting commercial area applies to housing projects approved before its effective date.

Which sections of the Income-tax Act were involved?

Section 80IB(10)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI

Before: Shri Saktijit Dey, JM & Shri Manoj Kumar Aggarwal, AM

For Appellant: Dr A K Nayak
For Respondent: Shri Prateek Jain
Hearing: 27.04.2017Pronounced: 09.05.2017

O R D E R Per Saktijit Dey, Judicial Member:

This appeal by the department is directed against order dated 14.11.2014, of learned CIT(A)-26 Mumbai, for the assessment year 2010-11.

2.

The only issue raised by the department in the present appeal is challenging the decision of the CIT(A) in allowing assessee’s claim of deduction u/s. 80IB(10).

3.

Briefly, facts are assessee – a partnership firm, is a builder, developer and dealer in real estate. For the assessment year under consideration, the assessee filed its return of income on 15.10.2010, declaring total income of `.1.27,78,328/-. Subsequently, the assessee filed revised return of income claiming deduction of amount of `.1,18,62,787/- u/s. 80 IB(10) for the housing project ‘Rock Enclave’ situated at Kandivali (W), Mumbai. In the course of assessment proceedings the AO, while examining the details of the said housing project, found that the housing project was approved on 12.10.2004 and was completed on 1.02.2008 on total area of 1,53,770 acres.

He further noticed the housing project consists of two buildings out of which, Building No.1 has six wings and Building No.2 has four wings. He further noticed that Building No.1 has 258 residential units and 45 commercial shops whereas, Building No.2 has 128 residential units and 20 commercial shops.

He further noticed that the total built-up area of the residential units is 2,72,102.53 sq. ft., and that of commercial unit is approximately 20,710 sq. ft. Thus, the built-up area of commercial unit works out to approximately 7.07% of the total built up area. The AO found that as per amendment brought into section 80IB(10) by Finance Act, 2004 by the introduction of sub-clause (d) w.e.f. 01.04.2005, the commercial area of a housing project if exceeds 5% of the total built-up area or 2000 sq. ft., whichever is less, the housing project would not be eligible for deduction u/s. 80IB(10). He therefore, called upon the assessee to justify its claim. Though the assessee relying upon certain judicial precedents submitted that the amended provisions of sub clause (d) to section 80IB(10) would not be applicable to a housing project approved before 01.04.2005, however, the AO did not find merit in the submissions of the assessee and held that said amended provisions would be applicable from assessment year 2005-06. Thus, ultimately, relying upon the said amended provisions the AO held that the assessee is ineligible to claim deduction u/s. 80IB(10) and, accordingly, disallowed the deduction claimed of `.1,18,62,787/-. The assessee challenged the disallowance before the CIT(A) by filing appeal.

4.

The learned CIT(A) after considering the submissions of the assessee and relying upon the judicial precedents cited before him held that the amended provisions of sub clause (d) of section 80IB(10) having been brought into statute w.e.f. 01.04.2005, would not be applicable to a project approved prior to 01.04.2005. Accordingly, he allowed the assessee’s claim of deduction.

5.

We have heard the parties and perused the materials on record. The learned counsels appearing for both the parties have agreed before us that the issue in dispute stands settled in favour of the assessee by the decision of Hon’ble Supreme Court in the case of CIT Vs. Sarkar Builders (2015) 375 ITR 392 (SC). On a careful reading of the aforesaid judgment of the Hon’ble Supreme Court, it is noticed that the Hon’bel Supreme Court has held that the amendment to section 80IB(10) by Finance Act, 2004 introducing clause (d) would apply prospectively from 01.04.2005, and will not apply to housing projects approved prior to 01.04.2005. In view of the binding principle of Hon’ble Supreme Court as referred to above, we do not find any infirmity in the order of the CIT(A) in allowing assessee’s claim of deduction u/s. 80IB(10). Grounds raised are dismissed.

6.

In the result, the department’s appeal is dismissed.

Order pronounced in the open court on 9th day of May, 2017.

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