ITAT Grants S. 80-IB(10) Deduction for Timely Completed Wings, Holds Remaining Wing to Be Separate Project [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed deduction under section 80-IB(10) of the Income Tax Act, 1961, for profits derived from Wings A to F of a housing project completed within the prescribed time limit and held that the additional Wing-G, which was completed later, constitutes a separate project and is not eligible for deduction under the same section.

Aakash Nidhi Builders & Developers (assessee), a partnership firm engaged in real estate development, had undertaken a housing project named Aakash Nidhi. The assessee claimed deduction under section 80-IB(10) amounting to Rs. 2,51,07,390 on the entire profit of the project comprising Wings A to G.

Wings A to F were completed and received their respective occupancy certificates before 31.03.2008, but the completion certificate for Wing-G had not been obtained as of that date.

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The Assessing Officer (AO), during reassessment proceedings under section 147, denied the entire deduction, holding that the project was not completed in its entirety as per the requirement of section 80-IB(10)(a)(ii) and thus, the assessee was ineligible for the deduction.

Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)]. The CIT(A) upheld the disallowance of deduction claimed by the assessee.

Aggrieved by the order of the CIT(A), the assessee filed an appeal before ITAT. The assessee placed reliance on the order of the CIT(A) for A.Y. 2007–08, wherein deduction under section 80-IB(10) was allowed for Wings A to F and denied for Wing-G treating it as an independent project.

The assessee submitted that the coordinate bench of the Tribunal in assessee’s own case had upheld that order, and the Hon’ble Bombay High Court affirmed the Tribunal’s decision in CIT v. Aakash Nidhi Builders and Developers which was also confirmed by the Hon’ble Supreme Court by dismissal of the Revenue’s SLP.

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The two-member bench comprising Sandeep Singh Karhail (Judicial Member) and Narendra Kumar Billaiya (Accountant Member) observed the judicial precedents and held that the claim of deduction can be allowed for the wings of A to F under section 80 IB(10) of the Income Tax Act.

The Tribunal held that the assessee is entitled to claim deduction under section 80-IB(10) for Wings A to F which were duly completed before the cutoff date. The tribunal directed the AO to compute deduction claimed by the assessee.

The tribunal also set aside the levy of penalty under section 271(1)(c) of the Income Tax Act. The appeal of the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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