ACIT, CHENNAI vs. ELEGANT ESTATES, CHENNAI

Both the appeals of the Revenue are directed against the respective orders of the Commissioner of Income Tax (Appeals)– 15, Chennai, dated 18.11.2015, for the assessment years 2011-12 and 2012-13. The assessee has filed cross-objections. Since common issue arises for consideration in both the appeals and both the cross-objections, we heard the appeals and cross-objections together and disposing of the same by this common order.

Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee claimed deduction under Section 80-IB(10) of the Income-tax Act, 1961 (in short 'the Act') in respect of the housing project. The Assessing Officer, however, found that two adjacent flats, viz. Flat Nos.403 and 404, are sold to the same persons, namely, Smt. Latha Ramachandran and Shri K. Ramachandran. The built-up area of the flat was 3225 sq.ft., which is excess of 1500 sq.ft. Therefore, according to the Ld. D.R., the Assessing Officer found that the assessee is not eligible for deduction under Section 80-IB(10) of the Act since the condition prescribed in Section 80-IB(10) was not complied with. However, on appeal by the assessee, the CIT(Appeals) found that the assessee sold the flats prior to amendment to Section 80-IB(10) of the Act, therefore, the amendment made in Section 80-IB(10) of the Act cannot be applied to deny the benefit of deduction under Section 80-IB(10) of the Act. The CIT(Appeals) referred to the order of this Tribunal in the assessee's own case for the assessment year 2010-11 in dated 27.02.2015 and found that the flats sold prior to the amendment cannot be subject matter of disallowance under Section 80-IB(10) of the Act. According to the Ld. D.R., the Revenue has already filed an appeal before the Madras High Court against the order of this Tribunal in the assessee's own case for assessment year 2010-11 and in fact, the High Court confirmed the order of this Tribunal by its judgment dated 07.12.2015. Now the Revenue has filed an appeal before the Apex Court and the same is pending.

On the contrary, Shri R. Sivaraman, the Ld.counsel for the assessee, submitted that an identical issue in respect of very same project was raised before this Tribunal for assessment year 2010-

This Tribunal found that the amendment made to Section 80- IB(10) of the Act by inserting clause (f) by Finance Act, 2009 with effect from 01.04.2010, was prospective in operation. Therefore, the residential unit transferred before the amendment may not be hit by clause (f) in Section 80-IB(10) of the Act. The Tribunal further found that flat Nos.403 and 404 measure more than 1500 sq.ft. It does not mean that there is a bar for allowing deduction altogether.

The Ld.counsel for the assessee further submitted that when the Revenue challenged before the Madras High Court in Tax Case Appeal No.1172 of 2015, the High Court found that in view of the earlier judgment of Madras High Court in CIT v. Arun Excellow Foundations (P) Ltd. (2013) 212 Taxman 342, the order passed by this Tribunal is correct in the eye of law. Accordingly, the order of this Tribunal was confirmed. Now the only contention of the Revenue before this Tribunal is that an appeal is pending before Apex Court. According to the Ld. counsel, mere pendency of an appeal before the Apex Court cannot be a ground for not following the judgment of Madras High Court and the decision of co-ordinate Bench of this Tribunal.

Referring to the cross-objections filed by the assessee, the Ld.counsel for the assessee submitted that the CIT(Appeals) has rightly not adjudicated the claim under Section 80-IB(10)(c) of the Act. During the year under consideration, according to the Ld. counsel, no flat was sold / allotted to any individual more than one residential unit. The flat Nos.403 and 404 were sold in the assessment year 2010-11, which was subject matter of appeal before this Tribunal in (supra). This Tribunal found that the assessee is eligible for deduction proportionately and that was confirmed by the High Court.

We have considered the rival submissions on either side and perused the relevant material available on record. The claim of deduction under Section 80-IB(10) of the Act was rejected by the Assessing Officer for both the assessment years on the ground that flat Nos.403 and 404 were sold to the same persons, namely, Smt.

Now coming to the flats exceeded 1500 sq.ft., a co-ordinate Bench of this Tribunal found that flat Nos.403 & 404, in fact, exceeded 1500 sq.ft. The language employed in Section 80- IB(10)(c) of the Act does not warrant deduction claim altogether if some of the units exceed the specific dimensions. The Tribunal in the earlier assessment year found that consequent disallowance has to be only on proportionate basis. This Tribunal placed its reliance on the judgment of Madras High Court in Arun Excello Foundations (P) Ltd. (supra). In view of the above, we find no reason to confirm the orders of the lower authorities and accordingly, the same are set aside.

In the result, both the appeals of the Revenue and both the cross-objections of the assessee are dismissed.