ITAT Directs Re-adjudication for Deduction u/s 80IB(10) on Combined Residential & Commercial Project

Gajanana Developers Vs ITO (ITAT Pune)

Introduction: The case of Gajanana Developers vs. ITO is centered on an appeal that arises from an order issued by the National Faceless Appeal Centre (NFAC), Delhi, dated 25th March 2023, for the assessment year 2009-10. The central issue pertains to the disallowance of a deduction claimed under Section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis: The appellant, Gajanana Developers, had claimed a deduction of Rs. 18,23,653 under Section 80IB(10) of the Income Tax Act, 1961. This deduction is aimed at encouraging the development of housing projects. However, one of the key contentions raised by the tax authorities is that the appellant, while undertaking a residential project, also incorporated a commercial component comprising 11 shops with a built-up area exceeding 2000 sq. ft.

The debate revolves around the primary objective of Section 80IB(10) – promoting residential projects. While the provision does allow for certain commercial establishments within the project, there are limits imposed. The issue with the present case seems to stem from the lack of submission of specific details related to the residential units by the appellant. In the absence of such information, it becomes challenging to determine whether the deduction under Section 80IB(10) was validly claimed or if there was a violation of the provision.

The Order issued by NFAC indicates that the appellant did not furnish adequate details regarding the number of residential units. This has led to a situation where the Revenue authority denied the deduction on grounds of the violation. The absence of specific details on the residential units makes it difficult to assess compliance with Section 80IB(10). In light of this, the Tax Tribunal has opted to restore the matter to the NFAC for reevaluation in accordance with the law.

The Tribunal has directed the appellant to provide the requisite details about the residential units, and based on this information, NFAC is expected to issue a well-reasoned order. The essential point is that the deduction is intricately linked to “housing projects,” and the presence of commercial establishments within such housing projects must meet the requirements stipulated by the law.

Conclusion: The appeal by Gajanana Developers against the disallowance of the deduction under Section 80IB(10) highlights the importance of adhering to the provisions of the Income Tax Act. The absence of specific details regarding the residential units led to the denial of the deduction. The case underscores the need for precision and compliance with the law when making claims for deductions under Section 80IB(10). The matter has been referred back to the NFAC for a more thorough examination in light of the additional information to be provided by the appellant.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal preferred by the assessee emanates from the order of National Faceless Appeal Centre [NFAC], Delhi, dated 25.03.2023 for A.Y.2009-10 as per the grounds of appeal on record.

2. At the time of hearing, none appeared for the assessee. The submissions of the ld.DR are recorded and the case was heard on merits considering the documents/materials on record.

3. The grievance of the assessee in the present appeal is the disallowance of Rs.18,23,653/- deduction claimed u/sec. 80IB(10) of the Income Tax Act, 1961 (for short, ‘the Act’).

4. We have perused the assessment order as well as the order of NFAC. The main reason for denial of deduction u/sec. 80IB(10) by the Department is that assessee had developed a residential project with commercial built up area of 11 shops bearing built up area of more than 2000 sq.ft. (as per the Act in the year 2009-10). The contention of the Department is that the benefit of sec.80IB has to be given for development of housing projects. The object of this provision is to encourage residential projects, however, along with housing projects, there can be certain commercial establishments also, but should not exceed the prescribed limit as given in the concerned provision of the Act itself. That, from perusal of para 4 of the NFAC‟s order, it appears that assessee had not submitted the details about the residential units. Therefore, when no details have been submitted regarding the total residential units, in that case it cannot be said that the Revenue is correct in denying the deduction u/sec. 80IB(10) for the said violation, because only when it is categorically identified as to what is the area of housing project and what is the area of commercial project and whether it is in compliance with sec. 80IB(10) or not, then only it can be decided whether there is any violation. Since the assessee has not submitted any details about the residential units, in the interest of justice, we are of the considered view that the matter may be restored to the file of the NFAC for adjudication as per law and the assessee is directed to submit the details of residential units and considering these details, the NFAC shall come out with a speaking order. We order accordingly.

5. Before parting, we observe in sec. 80IB(10) that the word used is “housing project‟, therefore the entire deduction shall revolve around the allowability of deduction for developing/construction of such housing projects which is in fact the object for this provision. The commercial establishments constructed if any, within the said housing project has to comply with the requirements of the said provision of the Act. With these observations and as per our aforestated direction, the grounds of appeal stands allowed for statistical purposes.

6. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in open Court on 20th September, 2023.