TMI Blog2012 (6) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is directed against the order of the learned CIT (A), Hubli dated 29.12.2011. The relevant assessment year is 2008-09. 2. Though the assessee-company has raised thirteen grounds under two distinctive heads in an illustrative and narrative manner, the issues are confined to two issues, namely: (i) Disallowance of deduction of ₹ 27,51,23,476/- u/s 80IB (10) of the Act; (ii) Disallowance of expenditure amounting to ₹ 11.60 lakhs. 2.1 The assessee had also raised additional grounds of appeal which, for appreciation of facts, are reformulated in a concise manner as under: (i) that the CIT (A) ought to have considered the fact that the amendment to provisions in the Act to extend the period of completion of housing project from four to five years as explained in the Memorandum explaining 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 applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project (5 years instead of 4 years) due to recession in the market. In this connection, it is mentioned that the amendment brought by the Government in respect of section 80IB (10) by increasing the period of completion of the project to five years vide Finance Act 2010 is w.e.f 1.4.2010 and is applicable for AY 2010-11 and onwards only. In this regard, it is significant to mention that the substantive provisions of the Act provided u/s 80IB (10), as existed prior to amendment are not applicable to the case of the assessee for the reason that assessee got approval for commencement of housing project on 15.10.2005 which is after 1.4.2005, and accordingly the project was required to be completed by 31.3.2010. but since the project is completed after 31.3.2010, therefore, the assessee company is not eligible for deduction for the year under consideration. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FBPPL is getting only the fixed percentage towards the cost of the land only out of the project. It is further contended that the FBPPL is assessed to tax separately and has offered capital gains. M/s. RNSIL is the sole developer and not works contractor. Considering the replies given, the assessee was asked to furnish the copies of the joint venture agreement entered between M/s FBPPL and M/s. RNSIL .. Considering all these facts and figures available on record and verifying all the details submitted by the assessee, it can be concluded that the project has not been completed before the due date i.e., 31.3.2010 and also that the amended provisions are not applicable to the case of 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 ₹ 27,51,23,476/-is rejected and disallowed .. 3.1 With regard to lump-sum addition of ₹ 11.60 lakhs, the AO had reasoned that the expenditure claimed under the heads: (i) repairs and maintenance, (ii) general expenses, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the name of the title-holder, the occupancy certificate would only be in the same name and such Governmental procedure cannot be faulted with. The claim of the appellant for deduction is in its capacity as a developer of the property and not as owner. In any case, the deduction allowable u/s 80IB (10) is in respect of the undertaking developing the housing project and is not based on ownership of land; Relies on: (a) the finding of the Chennai Tribunal in ACIT v. Smt. C. Rajini (2011) 9 ITR (Trib) 487 (Chennai) ; (b) CIT v. Radhe Developers 341 ITR 403 (Guj) Thus, the application for occupancy certificate in the name of the land owner could make no difference to the appellant s claim because occupancy certificate can be issued in the land owner s name only. The opinion of the AO that such certificate should 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 respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery fact that the date of the completion of project was well before the statutory due date of 31.3.2010; (f) Alternatively, if the date of completion was to be taken as 22.4.2010 -date of occupancy certificate -even then it was within the extended time limit of five years as per amendment by the Finance Act 2010; (g) With regard to AO s objection of date of completion was ultra-technical, it was contended that - at the time when the AO concluded the order, the provisions in its amended form were part of the Statute; and that if the law was to apply only for approval beyond the date of amendment i.e., 1.4.2010, it would mean that the amendment would have no effect because no approval was possible after 31.3.2008 so that the amendment would be still born and after the amendment, it is clear that it will cover all approvals on or after 1.4.2005; - that during the appellate proceedings, the learned CIT (A) s attention 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 cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch. 6. We have carefully considered the rival submissions and attentively perused the relevant case records. The assesseecompany derives income as developer of housing project and civil contractor entered into a joint development agreement dated 20.6.2006 with M/s.Firebricks Potteries Pvt. Limited [FPPL], the absolute owners of a land situated at No.4/6, Tumkur Road, Yeshwantpur, Bangalore for the development of the subject property. Subsequently, supplementary agreements to joint development were entered into between the parties concerned on 26.12.2006, 30.12.2006 and again on 30.3.2009. Accordingly, layout plan was approved on 15.10.2005 by the Bruhat Bangalore Mahanagara Palike [BBMP], the local authority [source: Page 41 of PB]. On completion of the project, the Registered Architect who had supervised the erection of apartments, furnished a Completion Certificate in the prescribed proforma -Schedule -VIII (Bye law No.5.5) dated 21.1.2010 to the Joint Director of Town Planning (BBMP) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the project is completed after 31.3.2010, therefore, the assessee company is not eligible for deduction for the year under consideration. 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. Accordingly, the claim of the assessee-company was rejected. 6.1.2 However, on a careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ref: 1) Your application dt.21.01.2010. 2) Proceedings of the Plan Scrutiny Committee sub.No.06. 3) Approval of Commissioner dated: 20.4.2010 The above narration goes to vouch that (i) the project has been completed on 21.1.2010 and, accordingly, a Completion Certificate was furnished to the Local Authority on 21.01.2010; (ii) on the basis of the Completion Certificate of the Architect, the Plan Scrutiny Committee of BMP conducted its proceedings on 26.2.2010; and (iii) the Local Authority, on physical inspection of the subject project, in its Endorsement dated 6.3.2010 acknowledged that the building construction is complete and awaiting for approval of the Commissioner, BBMP, for issuance of occupancy certificate. It is, therefore, quite obvious that the project was complete much before the due date of 31.3.2010 so as to qualify itself for deduction u/s 80IB (10) of the Act. 6.1.4 Another 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion taken to be only on 22.4.2010 (the date of occupancy certificate), it is still within the extended time limit of five years vide the amendment by the Finance Act, 2O10. (Please refer to the Additional Grounds filed on 27.03.2012). The extended time limit is available to all projects approved on or after 1.4.2005 so as to cover all projects pending on 31st March, 2010. The AO having taken the view that the project was pending completion on 31.3.2010, could not have legitimately taken the view that the amended provisions are not applicable to the appellant. The amendment has been explained in Board Circular No. 1 of 2011 dated 6.4.2011 [2011] 333 ITR (St.) 7 as under: 16. Deduction for developing and building housing projects 16.1 Under the existing provisions of section 80-IB(10),100 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is contrary to Law. 6.2.1 The AO s objection with reference to date of completion is ultra-technical. The very purpose of the amendment extending the period of construction completion from four to five years was because of the recession. The provision in sub-clause (iii) in clause (a) to sub-section (10) of section 801B after amendment reads as under: (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority (emphasis supplied) The Notes on Clauses to the Finance Bill, 2010 - reference (2010) 321 ITR (St.) 96 reads as under: Clause 27 of the Bill seeks to amend section 80-lB of the Income-tax Act relating to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Under the existing provisions 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 proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survive for consideration. 6.3.1 During the course of hearing, the learned A R made a specific submission that if the AO s assertion were to be taken up for consideration by this Bench, he earnestly averred that the AO s inference doesn t hold water in view of the recent finding of the Hon ble Chennai Tribunal reported in (2011) 9 ITR (Trib) 487 (Chennai) and the ruling of the Hon ble Gujarat High Court reported in 341 ITR 403 (Guj) . 6.3.2 We have duly considered the submission of the learned AR as well as the reasoning of the learned AO on the issue. At this juncture, we would like to recall the finding of the Hon ble A Bench of the Chennai Tribunal in the case of ACIT v. Smt.C Rajini and DCIT v. C. Subba Reddy (HUF) reported in (2011) 9 ITR (Trib) (Chennai) . The issue, in brief, was that the assessee was a property developer in the State of Tamil Nadu where it was the common practice for developers to obtain development projects through Power of attorney (POA) after making full payment of the settled consideration, for the land to the owner of the land. The POA was worded keeping in line with the legal requirements to pass proper title to the prospective buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty is not a condition precedent for granting deduction u/s 80IB(10). The relevant finding of the Hon ble Gujarat High Court reads as follows: That even in cases where the agreement provided that the assessee was to receive a remuneration, the assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. The entire profit flowing there-from was to be received by the assessee. The project was being developed by the assessee at its own risk and cost and not that of the land owners. The assessee thus was not working as a works contractor. Introduction of the Explanation to section 80-IB(10) in this case also would have no effect. The assessee was entitled to the benefit under section 80-IB(10) of the Act even where title to the land had not passed on to the assessee and the development permission may also have been obtained in the name of the original land owners. 6.3.4 Considering the facts of the issue as deliberated upon in the foregoing paragraphs and in conformity with the finding/ruling of the judiciary, we are of the considered view, the appellant as a developer is entitled to claim deduction u/s 80IB (10) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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