Brahma Associates vs. JCIT
A.Y. : 2003-2004. Date of Order : 6.4.2009
Section 80IB(10) — Assessment Year 2003-04 — Whether in a
case where a project comprising residential housing units and also commercial
establishments has been approved by a local authority as a ‘housing project’,
deduction under S.80IB(10), as applicable prior to 1.4.2005, is admissible qua
the profits of the entire project i.e., including the profits on sale of
commercial units — Held : Yes.
Whether in a case where such a project is approved by the
local authority as a ‘residential-cum-commercial project’, deduction
u/s.80IB(10), as applicable prior to 1.4.2005, is admissible —Held : Yes, if
the commercial establishments are up to 10% of the built-up area. Whether in a
case where in such a project the area of commercial establishments is more
than 10% of the built-up area, but the profits of residential units can be
ascertained separately and also the size of the plot after excluding the area
utilised for construction of commercial establishment exceeds one acre and all
other conditions are satisfied by considering construction of residential
units as a separate project on a stand-alone basis, deduction u/s. 80IB(10),
as applicable prior to 1.4.2005, is admissible in respect of profits of
residential units — Held : Yes.
Facts :
The assessee was an AOP who constructed a project in Pune,
which project was started on 14th August, 2000 and was completed on 3rd Oct.,
2005. The total area of the plot was 34,209.79 sq. mts. The built-up area of
the residential units was 24,583.31 sq. mts, whereas built-up area of
commercial premises was 7,128.87 mts. The percentage of commercial area to the
total area was 20.83%. The Pune Municipal Corporation had approved the project
as a ‘New/Residential + Commercial’.
The assessee, at the assessment stage, claimed deduction
u/s.80IB(10) in respect of profits attributable to the residential units or
dwelling unit segment of the overall project. The Assessing Officer (AO)
rejected the claim of the assessee on the ground that prior to A.Y. 2005-06 a
project qualified for deduction u/s.80IB(10) only if it was a purely
residential project and did not involve construction of commercial areas at
all. He also noted that the commercial areas constructed in the project of the
assessee were far in excess of the limits prescribed in DC Regulations for
convenience shopping and also the commercial units constructed violated the
norms prescribed in DC Regulations as regards size and the purpose for which
the same could be used.
The Commissioner of Income-tax (Appeals) upheld the order
of the AO.
Aggrieved, the assessee preferred an appeal to the
Tribunal. The Division Bench noted that there were divergent views in various
decisions of the Division Benches and therefore, a Larger Bench was
constituted to consider the following questions :
1 Whether deduction u/s. 80IB(10), as applicable prior to
1st April, 2005, is admissible in case of ‘housing project’ comprising
residential housing units and commercial establishments ?
2 In case questions no.1 is answered in the affirmative,
whether considering the facts and circumstances of a particular case, a
propor-tionate deduction should be allowed ?
3 In case the answers to questions no. 1 and 2 are in
affirmative, whether the limit prescribed by clause (d) of S. 80IB(10)
should operate ?
Held :
The Special Bench held the amendment to S.80IB(10)
w.e.f. 1.4.2005 laying down the limit up to which a housing project can
have commercial areas to be prospective and not retrospective. It observed
that the 2005 amendment placed a restriction on commercial user and also shows
that commercial user was permissible even prior to that.
The Bench noted that this Section is aimed at promoting
construction of housing projects so as to address the problem of shortage of
dwelling units and it cannot be said that the object is to encourage house
building activity per se, irrespective of whether these are dwelling or
commercial units.
The Special Bench held that for a period prior to 1.4.2005,
(a) A project involving construction of commercial areas
along with dwelling units would qualify for deduction u/s. 80IB(10) if such
a project was approved by local authority as a ‘housing project’. Such an
approval by the local authority will be conclusive and no further inquiry
needs to be made on the extent of commercial use in such a project. Profits
of such a project, subject to satisfaction of other conditions specified in
S.80IB(10), will qualify for deduction u/s.80IB(10). The entire profits of
the project and not only profits attributable to dwelling units will qualify
for deduction u/s.80IB(10).
(b) Given that under the DC Rules (of Pune) there cannot
be a pure residential project and it is incumbent on the developer to
reserve a part of the plot for shopping, commercial use of area must be
regarded as an integral part of housing project and consequently in case a
project involved construction of dwelling units and commercial areas and the
project was approved by a local authority as ‘residential-cum-commercial
project’, such a project will qualify for deduction u/s.80IB(10) if the
commercial areas are up to 10% of the built-up area. Once such a project is
regarded as housing project qualifying for deduction u/s.80IB(10), subject
to satisfaction of other conditions stated in S.80IB(10), entire profits of
the project will be eligible for deduction and not only the profits
attributable to construction of residential dwelling units.
