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TMI Blog2012 (6) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the provisions of Finance Bill 2010; & (ii) that the CIT (A) failed to appreciate that the Circular No.1 of 2011 dated 6.4.2011 extending the period of completion from 4 to 5 years is to allow for extraordinary condition due to global recession and resultant slow down in housing sector in general and not in any particular builder/developer and applicable to all assesses. 3. The facts in brief, are follows: The assessee is a developer and is engaged in the business of construction. During the year under consideration, the assessee-company had claimed deduction u/s 80IB(10) of the Act, aggregating to Rs. 27.51 crores in respect of a housing property Yeshwantpur, Bangalore. The AO, in scrutiny assessment, after seeking details of approval of the Layout plan, commencement and occupancy certificates issued by the BBMP, Bangalore etc., and after considering the submissions of the assessee-company, denied the assessee's claim of deduction u/s 80IB(10) of the Act. The relevant finding of the AO reads as follows: "(On page 7) It is quite obvious from the above that the main conditions for claiming the deduction u/s 80IB (10) are that in case, if the approval of the local authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration. Moreover, the case of the assessee is not covered by the amended provisions of the Act for the reasons firstly that the assessee's case is not covered by substantive provisions of sec 80IB (10) as existed prior to amendment through the Finance Act, 2010 and secondly that amended provisions are made effective from AY 2010-11. therefore, the profits for FY 2007-08 (AY 2008-09) are not eligible for deduction u/s 80IB (10) even by virtue of amendment. Thirdly, in nut shell, it is vital to mention that if the case of the assessee does not fall within the ambit of substantive provisions of the Act as existed prior to the amendment, in that situation any further amendment will not be applicable to the case of the assessee by virtue of the fact that the substantive provisions are not applicable. Thus even the profits for 31.3.2010 will also not be eligible for deduction u/s 80IB (10), even though the amended provisions made effective from 01.04.2010. The assessee has submitted the copies of the blue print of the site plan, sanction drawing and approval of the project by the local authority i.e., BBMP vide LP No.ml/01/05-06 dated 15.10.2005. On verification of the Xerox copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee by virtue of the fact that the substantive provisions of sec. 80IB (10) are not applicable to the assessee. Therefore, the claim made by the assessee of deduction u/s 80IB (10) of Rs. 27,51,23,476/-is rejected and disallowed....." 3.1 With regard to lump-sum addition of Rs. 11.60 lakhs, the AO had reasoned that the expenditure claimed under the heads: (i) repairs and maintenance, (ii) general expenses, (iii) workman and staff welfare, (iv) carriage inwards, (v) watch and ward etc., were self-made vouchers and fully unverifiable. 4. Aggrieved, the assessee-company took up the issues with the learned CIT(A) for relief. The submission of the assessee-company was more or less what has been contended before the AO. The appellant had also placed reliance on a number of case laws to drive home its arguments. After due consideration of the contentions of the appellant, the learned CIT (A) had observed thus: "(On page 8) I have gone through the facts of the case, contents in the assessment order and written submissions of assessee including the case laws and Board Circular relied by the assessee. The fact is that the project to be completed and the occupancy certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be in the name of the developer as a pre-condition for allowance of deduction u/s 80-IB (10) is a stipulation outside what has been prescribed by law and, hence, not sustainable That the application for occupancy certificate refers to RNS Shanthi Nivas the subject by name; and that this is relevant as the deduction is in respect of an undertaking being a housing project so that the occupancy certificate is in respect of the project which is more relevant than the name of the party; (ii) With regard to the disallowance on the ground that the project completion was beyond the stipulated time limit, it was contended that - Explanation (ii) to s.80IB (10) implicitly subscribes: "The date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority" The inference of the AO that the occupancy certificate having been issued only on 22.4.2010 i.e., beyond the time stipulated u/s 80IB (10), the appellant was disentitled for deduction, is incorrect for the following reasons: (a) as per the law applicable to the AY 2008-09, the project should be completed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was drawn to the Board's Circular No. 1 of 2011 which specifically prescribes that 'the extension of time for project completion is available for housing projects approved on or after 1.4.2005 but on or before 31.3.2008.' (h) taking cue from the findings of the jurisdictional Tribunal in the case of DCIT v. M/s. Akshay Eminence Developers Pvt. Ltd in ITA Nos.387, 388 & 822/2010 dated 22.6.2011, it was claimed that the plan approval, a statutory requirement, dates back to the date of application and that the application for issuance of occupancy certificate was made on 21.1.2010, though the said certificate was dated 22.4.2010. applying this analogy, the occupancy certificate for the subject project was to be considered as dating back to the date of application, i.e., 21.1.2010 well before the project completion statutory due date of 31.3.2010. (i) it was the case of the appellant that the project was completed within four years and the architect certificate from the registered architect recording completion was recorded on 21.1.2010; and application for occupancy certificate was filed with the Joint Director of Town Planning, BBMP on 21.1.2010. There was a communication from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certifying that 'I certify that the erection of apartment building RNS Shanthinivas of M/s. Firebricks & Potteries Pvt. Ltd at Khatha No.4/6, 2275, Tumkur Road, Yeshwanthpur, Bangalore-560022 has been supervised by me and has been completed on 21.1.2010...." [courtesy: Page 43 of PB]. FPPL in its communication dated 21.1.2010 addressed to the Joint Director of Town Planning requested to issue occupancy certificate of the building. Both the communications have been duly acknowledged by the Joint Director of Town Planning, Bangalore, on 21.1.2010 vide his Office Seal with signature (Refer: Page 44 of PB). The BBMP was reminded by FPPL vide its letter 25.2.2010 to issue the occupancy certificate as per its earlier application submitted on 21.1.2010 along with necessary certificates [Refer: Page 47 of PB]. The Joint Director of Town Planning vide his Endorsement in No.JDTP/LP/01/05-06 dated 6.3.2010 had communicated as under: "Sub: Request for occupancy certificate for residential complex building - Property No.4/6, Tumkur Road, Old Ward No.2, Bangalore - reg - Ref: Your application dt.21.01.2010.............. With reference to the above mentioned subject and the reference request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the amended provisions made effective from 01.04.2010. Accordingly, the claim of the assessee-company was rejected. 6.1.2 However, on a careful perusal of the documents produced, it has been observed that the local authority had sanctioned the plan vide LP NO.01/05-06 dated 15.10.2005. Application of time frame prescribed under the Act for claiming deduction u/s 80IB (10) of the Act, the relevant portion of which, is extracted as under: "S.80IB 10)..................................................................................... (a)...................................................2.......................................... (i)................................................................................................. (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of financial year in which the housing project is approved by the local authority. Explanation............" In the case on hand, the local authority [BBMP] had issued the approval for the construction on 15.10.2005 and, thus, the date of commencement of the project in the appellant's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other salient feature noticed in the wordings of Explanation (ii) to s.80IB (10) (a) are that [of course, at the cost of repetition] - "Explanation: (i).............................................................................. (ii) The date of completion of construction of the housing project shall be taken to the date on which the completion certificate in respect of such housing project is issued by the local authority" 6.1.5 It is rather more significant to note that the Act subscribes only completion certificate in respect of such housing project issued by the local authority and NOT the occupancy certificate as clamoured for by the authorities below. In the instant case, the local authority -Joint Director of Town Planning -in its Endorsement in No.JDTP/LP/01/05-06 dated 6.3.2010 had unambiguously made it clear and duly acknowledged that "We have conducted a project site inspection and have found that the building construction is complete........" This Endorsement of the Competent Authority of BBMP cannot be brushed aside. This assertion of the local authority makes it abundantly clear that the construction of the subject project was complete in all respects well before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloping and building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to, inter alia, the following conditions: (a) the project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority. (b) ... 16.2 To allow for extraordinary conditions due to the global recession and the resultant slowdown in the housing sector, the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, has been increased from the existing 4 years to 5 years from the end of the financial year in which the housing project is approved by the local authority. This extension will be available for housing projects approved on or after 1.4.2005 but on or before 31.3.2008. 16.3 Further, --------------------- 16.4 Applicability - These amendments have been made applicable with retrospective effect from 15t April, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years. 16.5 Vide Instruction No.4/2009 dated 30.6.2009, the Board has already clarified regarding deduction under section 80-IB(10) in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions contained in subsection (10) of the aforesaid section, hundred per cent. deduction is available in respect of profits derived by an undertaking from developing and building housing projects approved by a local authority before 31st March, 2008. It is further provided in clause (a) that where a housing project has been, or, is approved by the local authority on or after 1st April, 2004, it should be completed within four years from the end of the financial year in which the housing project is approved by the local authority. It is proposed to increase the period for completion of a housing project, approved on or after 1st April, 2005, from four years to five years." (emphasis supplied) The reason for the amendment has been explained in the Memorandum explaining the provisions of the Finance Bill, 2010 (2010) 321 ITR (St.) 125-126 as under: To allow for extraordinary conditions due to the global recession and the resultant slowdown in the housing sector, it is proposed to increase the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, from the existing 4 years to 5 years from the end of the financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the land. The POA was worded keeping in line with the legal requirements to pass proper title to the prospective buyers of the flats. All the activities connected with development of land, including demolition, approval, preparation of scheme drawings and submission of plans to the Development Authority were undertaken by assessee, the developer. Although the fees were paid in the name of the owner, the construction was done by the assessee. All the activities connected with selling of flats like advertising, marketing, were carried out by the assessee in that case. The land owner after receiving the full consideration of the land did not spend anything towards its development activities. On these facts, for the AY 2005-06, the assessee claimed deduction u/s 80IB (10) of the Act, but the claim was not allowed mainly on the ground that the assessee was not the owner of the land and had also not developed the property. The CIT (A) held in favour of the appellant. On appeal, the Hon'ble Bench held that: "the assessee had not been awarded any such works contract by any person (including Central or State Government). After execution of the power of attorney when she had paid in fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the considered view, the appellant as a developer is entitled to claim deduction u/s 80IB (10) of the Act. It is ordered accordingly.
7. In respect of denial of claim of expenditure to the tune of Rs. 11.6 lakhs, we have duly considered the submission of the learned A R. The learned A R conceded that the expenses disallowed were supported only by self-made vouchers prepared by the appellant. On perusal of the impugned assessment order, it has been observed that the learned AO had resorted to make lump sum additions under each head, however, the basis or yardstick for such additions have not been spelt out. At the same time, the assessee-company had also failed to bring any documentary evidence on record to belie the AO's stand. Under these circumstances, we are of the view that there is no justifiable scope for us to interfere with the AO's action on this point. It is ordered accordingly.
7.1 Before parting with, we would like to reiterate that the case law on which the learned A R placed reliance is on the different footing and clearly distinguishable.
8. In the result, the appellant's appeal is partly allowed.
(Order pronounced in the open court on 4.5.2012.) X X X X Extracts X X X X X X X X Extracts X X X X
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