The Tax Publishers2013 TaxPub(DT) 0373 (Mad-HC) : (2013) 051 (I) ITCL 0118 : (2013) 259 CTR 0362 : (2013) 212 TAXMAN 0342 : (2013) 086 DTR 0099

INCOME TAX ACT, 1961

--Deduction under section 80-IB(10)--Construction and development of housing project Commercial units vis-a-vis applicability of section 80-IB(10)--Assessee-company was engaged in business of developing and constructing housing projects. In return filed for relevant assessment years it claimed deduction under section 80-IB(10) on its two projects which inter alia includes residential as well as commercial units. Assessing officer and Commissioner (Appeals) disallowed assessee's claim as a whole after rejecting assessee's contention that proportionate deduction would be allowed. Tribunal allowed assessee's appeal and deduction on residential units on pro rata basis was granted. Disallowance was thus confirmed only as regard to commercial area being 9. 31 per concern. It was further pointed out that persons, to whom such area was allotted were non other than MD and his relatives. Held: Was rightly so. Since residential as well as commercial units were built up by assessee pro rata deduction under section 80-IB(10) was allowable.

Going by section 80-IB(10), as it stood during the assessment year, four things are clear, namely expression 'housing project' cannot receive a restricted meaning, as had been propounded by the revenue. The meaning of the expression 'housing project', as given under section 80HHBA, hence, would govern the case herein. Hence, the housing project would include commercial buildings also. Secondly, there is no restriction that the built-up area for the housing project cannot have any commercial units. Thirdly, the provision of law as it stood prior to the amendment in 2005 contained no such ceiling as to the extent of the built-up area of the shops and commercial units included in the housing project. Finally, this is made clear by the insertion of the clause (d) under the Finance Act in section 80-IB(10), which, for the first time spoke about the restriction on the commercial area in the housing project. Hence, the amendment makes clear that the law as it stood till 2005 did not contemplate any restrictions as to the extent that the commercial establishment should occupy in housing project. The only condition that the provision contemplated in clause (c) to section 80-IB(10), as it stood during the relevant assessment, was that if there be a housing unit in a housing project, the said unit shall not have a built-up area beyond what is contemplated under clause (c) of section 80-IB(10) which means, in a given project, even if the total built-up area occupied by the commercial establishment is 100% or 90% or more, but less than 100% and the residential unit occupied a minor area only, the assessee would nevertheless be entitled to the relief of 100% deduction under the said provision. The only condition is that where there is residential unit, in the case of cities like Delhi and Mumbai or places within twenty five kilometers from the municipal limits of these cities, the residential unit shall be of an extent of one thousand square feet or one thousand and five hundred square feet at any other place, as the case may be. [Para 39] Thus, in the face of the clear provisions and going by the strict construction, one cannot read any limitation into the expression 'housing project' to mean the residential project alone and that if and when the projects have mixed built-up area of commercial and residential, the question of disallowance will arise only if and when the residential flats are beyond the limit as provided under sub-clause (c) of section 80-IB(10) and not otherwise. Even herein, the disallowance could be only proportionate to the extent of units in violation of the area prescribed under clause (c). In a pure commercial housing project, the question of applicability of sub-clause (c) does not arise at all. [Para 40] Going by the background of the expression 'housing project' and various clauses contained in section 80-IB, read in the context of subsequent insertion of clause (d), inserted prospectively under the Finance Act, 2005, there is no hesitation in accepting the case of the assessee that 'housing project' has to be understood as a building project and need not be restricted to residential project alone, meaning thereby, user of the unit is not of relevance in the matter of grant of relief. The project may be either out and out residential project or commercial project or mix up of both for, a housing project, purely of commercial nature, approved by the Local Authority, is also a housing project, entitled to 100% deduction. So too, in projects containing residential units alone, where there is a partial compliance, proportionate to the compliance, the assessee would be entitled to have the deduction. In the case of mixed projects, the assessee's claim has to be allowed in full, if all the residential units satisfied clause (c); otherwise, to the extent of compliance, the relief has to be worked out. A housing project of commercial premises is entitled to 100% deduction, there being no necessity of looking at clause (c) for compliance. Thus, the assessee would be entitled to the benefit of deduction on satisfaction of clauses (a), (b) and (c) of section 80-IB(10) and that the requirement as regards clause (c) would arise, wherein, in a given building, where there is a residential unit, the same has to satisfy the maximum built-up area specified under sub-clause (c) of section 80-IB(10). Even though the provisions under sub-clauses (d), (e) and (f) of section 80-IB(10) are prospective in nature, yet, for the purpose of understanding the scope of deduction under the provisions of the Act, we do not have any hesitation in drawing assistance from these provisions to decide on the scope of section 80-IB, as it stood at the material point of time. [Para 47] As regards the reliance placed by the Revenue on the strict construction of the provision, as rightly pointed out by senior counsel for the assessee, there is no dispute on the fact that the section requires strict compliance of understanding. The section as it stood during the material time, does not allow a different interpretation from what had been stated to view the expression of 'housing project'. [Para 51] In the circumstances, the Revenue's appeal is rejected and the order of the Tribunal is confirmed. [Para 52]

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