S.80-IB(10): Undertaking - Developing and building - Housing project – Commercial units- Proportionate
deduction to extent of compliance, would be allowed. (S.80HHBA, 133A).
The assessee, engaged in business of developing and constructing housing projects, claimed deduction under section 80- IB(10) in respect of two projects. Survey under section 133A revealed that built up commercial area was 9.31 per cent. Therefore, the Assessing Officer disallowed deduction since provisions under section 80-IB(10) were not satisfied in his opinion. The assessee, on appeal, before Commissioner (Appeals), submitted that disallowance made by Assessing Officer, at best, could be restricted to the area exceeding limit prescribed under section 80-IB(10) (c) and relief on pro rata basis should be granted. The Commissioner (Appeals) rejected the appeal on grounds that section 80-IB did not contemplate any flexibility till 2004-05 for partly residential and partly commercial projects. There could be no liberal construction of deduction provision even on pro rata basis. The Tribunal allowed the assessee's appeal and allowed deduction on residential units on a pro rata basis. Deduction was disallowed for the commercial area, being 9.31 per cent, as the residential units had been converted into commercial units by the Managing Director and his relatives. On appeal by revenue the Court held that, 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 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.
Going by the background of the expression 'housing project' and various clauses contained in section 80-IB of the Act, read in the context of subsequent insertion of clause (d), inserted prospectively under the Finance Act, 2005, the term '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, there is no 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. In the circumstances, the Revenue's appeal is to be rejected and the order of the Tribunal is to be confirmed. (A.Y. 2004-05)
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