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Income Tax Appellate Tribunal, “ A ” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI S.S. GODARA
आदेश / O R D E R
PER S.S. GODARA, JUDICIAL MEMBER This assessee’s appeal for assessment year 2010-2011; emanates from order dated 07.10.2014 passed by the Commissioner of Income Tax(A)-V, Chennai, in sustaining I.T.A.No.2902/Mds/2014. :- 2 -: section 80IB(10) deduction’s disallowance/addition of �8,28,54,876/-, in proceedings u/s. 143(3) of the Income Tax Act, 1961 [in short the “Act”].
The assessee/ firm is engaged in the business of real estate development including sale of flats and civil construction. It had filed its ‘return’ on 15.10.2010 declaring ‘Nil’ income with claim of section 80IB(10) addition of �8,28,54,876/-. The same was ‘summarily’ processed.
The Assessing Officer took up ‘scrutiny’. The assessee had claimed deduction pertaining to its sixty four flats constructed in project ‘Elegant Estate-Palmere Gardens’. It had been recognizing the sales only after developing and handing over of flats. The assessee had sold two adjoining flats No.403 and 404 measuring 1653 and 1572 sq.feet to Shri and Smt K. Ramachandran. The Assessing Officer viewed it as a violation of clause (f) of the relevant provision reading as under:-
‘’(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any persons namely; (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, I.T.A.No.2902/Mds/2014. :- 3 -:
(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is a the karta;’’
The Assessing authority acted accordingly and treated the assessee’s action of allotting two residential units to a couple as violation of the statutory provision extracted hereinabove. This resulted in impugned disallowance/ addition in assessment order dated 20.03.2013.
The assessee preferred an appeal. It would inter-alia raise two folded substantive grounds i.e. claim of deduction u/s. 80IB(10) on merits with alternative proportionate relief; if the former plea fails.
The lower appellate authority has rejected both these pleas and affirmed the Assessing Officer’s action. It observes in para 5.1 that flats no.403 and 404 exceeded threshold limit of 1500 sq.feet as per section 80IB(10) (c) of the Act. This leaves the assessee aggrieved.
We have heard both parties and gone through the relevant findings. Admitted factual position is that assessee has sold two residential units jointly to Shri and Smt. K. Ramachandran on 16th and 17th July, 2008 i.e. much before the relevant previous year. Meaning I.T.A.No.2902/Mds/2014. :- 4 -: thereby that the residential units with all rights and title stood transferred much before insertion of clause (f) in section 80 IB(10) by the Finance Act, 2009 w.e.f. 01.04.2010 having prospective effect only. The assessee has recognized the said receipts in the relevant previous year as per its system of accounting regularly followed. We find that a co-ordinate bench of the ‘tribunal’ in Emgeen Holdings (P)
Ltd vs. DCIT (2011) 47 SOT 98 (Mumbai) has held that this amendment would only have prospective effect. It is an undisputed fact that the assessee’s residential units stood transferred to the aforesaid vendees well before the amendment. This makes us to observe that its act of merely recognizing the said receipts in subsequent assessment years would not turn the clock back to the year 2008 (supra). We reiterate that section 80IB(10) is a deduction provision to be liberally construed. Therefore, the assessee succeeds so far as application of clause (f) of section 80IB(10) is concerned.
Now, we come to other CIT(A)’s finding that assessee flats no.403 and 404 measure more than 1500 sq.feet i.e. 1653 and 1572 sq.feet respectively. The assessee fails to rebut this factual position.
Section 80IB(10)(c) prescribes measurement of a residential unit to be upto 1500 sq.feet only. We find that the language used in this specific I.T.A.No.2902/Mds/2014. :- 5 -: clause refers the residential unit. In other words, this expression does not bar a deduction claim altogether if some of the units sold exceed the specified dimensions. We observe that in such a case, the consequential disallowance has to be proportionate only. It has to be restricted to profits derived from the residential units violating section 80IB(10)(c). Case law CIT vs. ARUN EXCELLO FOUNDATIONS (P) LTD (2013) 212 TAXMAN 342 (Mad) is also quoted in support. The assessing authority is accordingly directed to make proportionate disallowance and pass its consequential order.
The assessee’s appeal is partly allowed.
Order pronounced on Friday, the 27th of February 2015, at Chennai.