Case Note & Summary
The case involves cross-appeals by the assessee (Devashri Nirman LLP) and the Revenue (Principal Commissioner of Income Tax) against the order of the Income Tax Appellate Tribunal (ITAT) dated 14 July 2015, which partly allowed the assessee's claim for deduction under Section 80IB(10) of the Income Tax Act, 1961 for its housing project. The assessee had claimed deduction for five assessment years (2007-2008 to 2011-2012), but the Assessing Officer disallowed the deduction on the ground that adjacent units were sold to members of the same family, which was not permissible. The ITAT, however, held that prior to 1 April 2010, there was no such bar, and allowed the deduction for the years prior to that date. Both parties appealed: the assessee challenged the disallowance for the years after 1 April 2010, and the Revenue challenged the allowance for the earlier years. The High Court admitted the appeals on the substantial question of law whether the ITAT was justified in not holding that all units were compliant with Section 80IB(10), particularly in view of the fact that prior to 1 April 2010, there was no bar on adjacent units being sold to members of the same family. The Court noted that the Revenue had withdrawn three of its appeals due to low tax effect, and only two Revenue appeals survived. The Court, after hearing both sides, upheld the ITAT's order, finding that the ITAT correctly interpreted the law and that the assessee was entitled to the deduction for the years prior to the amendment. The Court dismissed the Revenue's appeals and allowed the assessee's appeals, thereby confirming the ITAT's decision.
Headnote
A) Income Tax - Deduction under Section 80IB(10) - Housing Project Compliance - The issue was whether the assessee's housing project units were compliant with Section 80IB(10) of the Income Tax Act, 1961, especially regarding sale of adjacent units to family members prior to 1 April 2010. The Court held that prior to the amendment, there was no bar on adjacent units being sold to members of the same family, and the ITAT was justified in allowing deduction. (Paras 5-6)
Issue of Consideration
Whether the ITAT was justified in not holding that all units of the assessee's housing project were compliant with Section 80IB(10) of the Income Tax Act, 1961, particularly in view of the fact that prior to 1 April 2010, there was no bar on adjacent units being sold to members of the same family?
Final Decision
The High Court dismissed the Revenue's appeals (Tax Appeal Nos. 52 of 2016 and 49 of 2016) and allowed the assessee's appeals (Tax Appeal Nos. 4,5,6,7,8 of 2016), thereby upholding the ITAT order dated 14 July 2015.
Law Points
- Section 80IB(10) of Income Tax Act
- 1961
- housing project deduction
- adjacent units sold to family members
- prior to 1 April 2010 no bar
- substantial question of law
- tax effect less than one crore
- withdrawal of appeals
Case Details
2020 LawText (BOM) (11) 52
Tax Appeal Nos. 4 of 2016, 5 of 2016, 6 of 2016, 7 of 2016, 8 of 2016, 52 of 2016 and 49 of 2016
M. S. Sonak, Dama Seshadri Naidu
Mr. Mihir Naniwadekar with Ms. Vinita V. Palyekar for the Appellants in Tax Appeal Nos. 4,5,6,7,8 of 2016 and for the Respondent in Tax Appeal Nos.52 of 2016 and 49 of 2016; Ms. Susan Linhares, Standing Counsel for the Respondents in Tax Appeal Nos.4,5,6,7,8 of 2016 and for the Appellant in Tax Appeal Nos.52 of 2016 and 49 of 2016
Devashri Nirman LLP (in Tax Appeal Nos. 4,5,6,7,8 of 2016) and The Principal Commissioner of Income Tax (in Tax Appeal Nos. 52 & 49 of 2016)
The Assistant Commissioner of Income-Tax and Union of India (in Tax Appeal Nos. 4,5,6,7,8 of 2016) and Devashri Nirman Ltd. (in Tax Appeal Nos. 52 & 49 of 2016)
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Nature of Litigation
Tax appeals under the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal (ITAT) regarding deduction under Section 80IB(10) for a housing project.
Remedy Sought
The assessee sought allowance of deduction under Section 80IB(10) for all assessment years; the Revenue sought disallowance of deduction for years prior to 1 April 2010.
Filing Reason
The assessee and Revenue were aggrieved by the ITAT order dated 14 July 2015 which partly allowed the deduction.
Previous Decisions
The ITAT had allowed deduction for assessment years prior to 1 April 2010 but disallowed for subsequent years. The Assessing Officer had originally disallowed the deduction entirely.
Issues
Whether the ITAT was justified in not holding that all units of the assessee's housing project were compliant with Section 80IB(10) of the Income Tax Act, 1961, particularly in view of the fact that prior to 1 April 2010, there was no bar on adjacent units being sold to members of the same family?
Submissions/Arguments
The assessee argued that prior to 1 April 2010, there was no bar on adjacent units being sold to members of the same family, and the ITAT correctly allowed deduction for those years.
The Revenue argued that the sale of adjacent units to family members violated the conditions of Section 80IB(10) and the deduction should be disallowed for all years.
Ratio Decidendi
Prior to 1 April 2010, there was no statutory bar under Section 80IB(10) of the Income Tax Act, 1961 on adjacent units being sold to members of the same family. Therefore, the ITAT was justified in allowing deduction for assessment years prior to that date.
Judgment Excerpts
Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in not holding that all the units of the Appellant-assessee's housing project were compliant with Section 80IB(10), particularly in view of the fact that prior to 1/4/2010, there was no bar on adjacent units being sold to members of the same family?
Procedural History
The Assessing Officer disallowed deduction under Section 80IB(10) for assessment years 2007-2008 to 2011-2012. The CIT(A) partly allowed the appeal. The ITAT, by order dated 14 July 2015, allowed deduction for years prior to 1 April 2010 but disallowed for subsequent years. Both assessee and Revenue appealed to the High Court. The High Court admitted the appeals on the substantial question of law. The Revenue withdrew three appeals due to low tax effect. The remaining appeals were heard and disposed of by this common judgment.
Acts & Sections
- Income Tax Act, 1961: 80IB(10)
