TMI Blog2013 (11) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipal Corporation of Hyderabad - As per certificate of assessee's architect the project was completed - The learned AR submitted before us that the assessee has completed the project by this date and the assessee is following contract completion method - The claim for deduction u/s. 80IB(10) was made by the assessee for the first time which was denied by the authorities on the reason that there was no completion certificate. The meaning of “date of completion” has been given in Explanation (ii) to clause (a) to section 80IB(10) - Date of completion of construction would mean date on which completion certificate in respect of housing project was issued by the local authority - To grant deduction u/s. 80IB(10) it was mandatory to furnish the completion certificate of the housing project - The year of the assessment of income and connected deduction shall fall in the same assessment year - If the Revenue was taxing the profit in the year under consideration on the ground that the assessee was adopting "Percentage Completion Method" then the natural corollary should be that the connected deduction ought to be granted simultaneously in this year or the other method of computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse, the assessee submitted that the project had been executed on a plot of 5130 sq. yards (4291 sq. mts). It was submitted that the approved plan FSI of 1:1.75 had been granted on the entire land of 5130 sq. yards and additional area was also granted on the land to be utilised for the roads on the East and West sides. The assessee submitted that the land on which proposed roads are expected to be laid is still in their possession. It was claimed that since they had constructed 1,18,250 sq. ft., it establishes that the area of land used for the project was in excess of 1 acre. 6. On a consideration of the assessee's explanation, however, the Assessing Officer found it unacceptable on the following reasons: (i)The approved municipal plan clearly earmarked the area of plot which is to be utilized for road widening. After taking out the area earmarked for road, the total area of the plot is less than one acre. (ii) The assessee has received the extra FSI of 1153.6 sft., to compensate the area which is acquired by the government for road widening. The Assessee has utilised the extra FSI and constructed the building utilizing the extra FSI. (iii) The Municipal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed on an area exceeding 1 acre. He reiterated that 1373 sq. yards of land earmarked for roads, has till date not been acquired by the MCH and is in the possession of the Developer /flat owners, and is being used for parking/play ground. 10. With regard to the Completion Certificate, which could not be furnished before the Assessing Officer, the assessee submitted that after completing the project by 1.10.2007, the assessee had applied to the MCH Authorities for issue of completion certificate on 30.09.2008, which has been acknowledged by them on 17.10.2008. This fact has been acknowledged by the Departmental Valuation Officer also in para 4 of his report. However, the MCH authorities have not issued the said certificate so far for the project as a whole, but have issued 15 certificates individually, either in favour of the assessee or flat owners, stating that those have been completed. The representative averred that this establishes that the project has been completed. He also mentioned that such certificates specifically state that those have been issued in lieu of Occupancy certificate. He maintained that the flats had been handed over to the buyers on different dates d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Regarding completion certificate it was submitted that the assessee duly applied for completion certificate vide application dated 30.9.2008 and duly acknowledged by MCH vide acknowledgement dated 17.10.2008 and also flats are fully completed in all respects which are duly connected by electricity and water supply and individual Distinct Number was allotted by MCH and they are assessed to municipal tax. According to the AR the area of plot is exceeding one acre and the area earmarked for roads cannot be excluded from the area of plot as decided by the Tribunal in the case of Vidhi Builders, Mumbai vs. ITO in ITA No. 1212/Mum/2009 for A.Y. 2005-06 dated 8th April, 2011 wherein the Tribunal held that the area earmarked for road setback, recreation open space and internal road setback cannot be excluded for the purpose of calculating the total plot area. While deciding the issue, the Tribunal placed reliance on the earlier order of the Mumbai Bench in the case of Umiya Enterprises vs. ITO in ITA No. 2750/Mum/2009 for A.Y. 2004-05. In view of this, we are inclined to hold that as per provisions of section 80IB(10) of the Act, the housing project should be on the size o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. No one can pass such a anomalous dictum while dealing with a legal problem. The Tribunal being final fact finding authority shall keep in mind an overall situation, factual as well as legal, so thereupon brings a dictum ought to be legally sustainable in the eyes of law. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on completion of the project. If the stand of the Revenue is accepted then only on completion of project an assessee would be entitled for deduction u/s. 80IB(10), then undisputedly an anomaly shall arise as to how and when the tax should be charged. This is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on certificate should not be so interpreted to mean that an assessee can claim exemption u/s. 80IB(10) only in the year of completion of whole of the housing project, even where the project stretches over a number of years and assessee returns its income based on percentage completion method. It would only mean that the assessee has to obtain such certificate on completion of the housing project, least it would lose the deduction already granted u/s. 80IB(10) for the earlier years if it is not so produced. As held by the Hon ble Supreme Court in the case of Bajaj Tempo (196 ITR 188) a provision in the taxing statutes granting incentives for promoting growth and development of the nation should be construed liberally. When such liberal interpretation is to be given, the restriction placed in such provision granting the incentives also has to be considered so as to advance the objectives of the provisions and not to frustrate. Clause (a) of section 80IB(10) species that such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is found that the condition of completing the project within the specified time-limit of 4 years as stated in s. 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn. 4. The above instruction will override earlier clarification on this issue contained in Member (R.) s D.O. Letter No. 58/Misc/2008/CIT (IT CT), dt. 29th April, 2008 and Member (IT) s D.O. Letter No. 279/Misc/46/ 2008-ITJ dt. 2nd May, 2008." 18. Now the objection of the Department is that the assessee has not produced the completion certificate. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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