Allotments to Relatives Disputed: ITAT Remands Section 80-IB(10) Deduction Claim for Verification [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) remanded a matter involving a claim for deduction under Section 80-IB(10) of the Income Tax Act, 1961, for verification of alleged allotments of residential units to relatives of existing flat owners, in possible violation of statutory conditions.

Aakash Nidhi Builders & Developers (assessee), a partnership firm engaged in real estate development, claimed full deduction under Section 80-IB(10) for profits derived from a housing project named Aakash Nidhi.

The Assessing Officer (AO) disallowed the deduction amounting to Rs. 13,68,005, alleging that several flats were allotted to spouses of existing flat owners, thereby contravening clause (f) of the Explanation to Section 80-IB(10) which restricts multiple allotments in a single housing project to the same individual or their immediate family, including spouse and minor children.

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The AO, during reassessment under Section 147, observed from the sale agreements and transaction records that certain units were sold to related persons, and thus held that the deduction was not allowable.

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Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) allowed partial relief by directing that the deduction be proportionately disallowed only for the units where such violations occurred. Both the assessee and Revenue were dissatisfied and filed cross appeals.

The assessee contended that the flats in question were sold to major children of other allottees and not their spouses or minors, thus falling outside the purview of clause (f). The assessee produced Sale agreements and supporting documents to substantiate this claim.

The two-member comprising Narendra Kumar Billaiya (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that the assessee’s claim that units were allotted to major children and not to restricted relatives.

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The tribunal observed that this claim required verification. The Tribunal held that it was appropriate to restore this issue to the AO for necessary examination of the details placed reliance upon by the assessee.

The Tribunal directed the AO to provide a fair opportunity to the assessee to present case and documents. The matter was restored to the AO for fresh adjudication with these directions. The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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