TMI Blog2014 (2) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-2001, i.e. prior to 01-04-2005 – thus, the amended provisions of section 80IB(10) w.e.f. 01-04-2005 restricting the commercial area in a housing project are not applicable and the assessee is eligible for deduction u/s.80IB(10) of the Act. The assessee has applied to the PMC for issue of completion certificate and that possessions were given to all the respective flat owners before 31-03-2008, Corporation has started levying taxes to all the individual flat owners, electricity connections have been given to all the flat owners and the final completion certificate is also obtained by the assessee on 09-05-2008 – the decision in Runwal Multihousing Pvt. Ltd. Vs. ACIT [2014 (2) TMI 595 - ITAT PUNE] - the assessee cannot be denied the benefit of deduction u/s 80IB(10) for not obtaining the completion certificate before 31-03-2008 – thus, the order of the CIT(A) set aside and the Assessing Officer is directed to allow the claim of deduction u/s 80IB(10) to the assessee – Decided in favour of Assessee. - ITA No. 1560/PN/2011 - - - Dated:- 3-2-2014 - Shri Shailendra Kumar Yadav And Shri R. K. Panda,JJ. For the Petitioner : Shri Nikhil Pathak For the Respondent : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een upheld by the CIT(A) vide order dated 21-10-2008. Since the facts prevailing in the A.Y. 2005- 06 are similar and issues involved are identical, therefore, the Assessing Officer following the decision taken by the Assessing Officer for A.Y. 2005-06 which has been confirmed by the CIT(A) disallowed the deduction of Rs.49,35,654/- claimed u/s.80IB(10) and added the same to the total income of the assessee. 4. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer by observing as under : "3.3 I have carefully considered the facts of the case and the law as are apparent from record. The appellant is a builder and developer who has developed a project called "Potnis Project" at S.No.29/2 Hingne (B), Karvenagar, Pune, wherein six buildings having a built up area of 71,383.83 sq. mtrs was developed which included 843.43 sq.mtrs of commercial area. Therefore, the commercial area was found to be 11.77% of the total built up area. The first commencement certificate was apparently received by the appellant 12.10.2001 and the subsequent commencement certificate was taken by the appellant on 19.4.2002, 25.10.2002, 25.2.2004, 21.4.2004 and 4.8.2006. Income from this project a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the condition brought in the statute by an amendment brought on 1.4.2005 was clarificatory in nature and therefore, the same is applicable even for earlier assessment years. The Ld. CIT(A) has concurred with the above view in appeals filed by the appellant in A.Y. 2004-05 and 2005-06. The Hon'ble ITAT however has set aside the above referred issue to the file of the Assessing Officer in the aforesaid assessment years for examination by the Assessing Officer as to whether the project in respect of residential units fulfilled the conditions of 80IB(10) on stand alone basis or not. Therefore, on careful consideration, it is found that the claim of the appellant that the appeal was allowed is incorrect. The Assessing Officer on the above referred issue is therefore, directed to adopt the same finding as is arrived at by him in A.Y. 2005-06 for this project. In this respect, it is however, important to point out that the amendment brought in statute w.e.f. 1.4.2005 in respect of restriction on the commercial area will be directly applicable in this assessment year and therefore, this aspect has to be kept in mind. Now coming to the violation of other condition relating to completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be of nature which could serve any relevant purpose and therefore, it were not admitted. The appellant was explained about this decision on 23.2.2011 and the same is recorded in the order sheet. It is also relevant to point out on this issue that after considering the facts of the case and the law the appellant vide order sheet dated 13.1.2011 was given an opportunity to submit a certificate from the PMC to establish that the relevant project was complete before 31.3.2008, even though the certificate was issued subsequent to the said date to ensure whether the evidences submitted by the appellant in respect of handing over, electricity bills etc. etc. by implication could mean that the project was complete before 31.3.2008. However, the appellant admitted on 23.2.2011, as recorded in the order sheet that the aforesaid certificate is not possible to be submitted. In view of the discussions made herein above, it is clear that the claim of the appellant that the project was complete before 31.3.2008 in terms of the explanation (ii) of sec. 80IB(10) is found to be incorrect. For the aforesaid reason, the appeal fails. Ground No. 1 is dismissed." 5. Aggrieved with such order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as the second issue on which deduction u/s. 80IB(10) has been denied, i.e. on account of non receipt of completion certificate in respect of some of the flats before 31-03-2008 he submitted that before the CIT(A) the assessee had clarified that it had completed the entire project and had even applied to the Corporation for obtaining the completion certificate. He submitted that the assessee had incurred all the expenses by around F.Y. 2005-06 and no further expenditure on construction of the housing project was incurred by the assessee thereafter. 6.3 Referring to paper book page 25 he submitted that an application was filed with the PMC on 20-10-2005 for issue of completion certificate. Referring to the affidavit filed by the Director Shri Shrikrishna Vinchurkar (which was filed at the instance of the Bench and a copy of which is placed at Paper Book pages 1 2) he submitted that the Director in the said affidavit has stated that the assessee has completed construction of all flats and shops in the project as per sanctioned plans before 14-10-2005. Referring to the said affidavit he submitted that such completion certificate was not received despite regular follow up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the completion certificate is not issued by the Corporation within the prescribed time limit. 6.5 Referring to the decision of Coordinate Bench of the Tribunal in the case of Runwal Multihousing Pvt. Ltd. Vs. ACIT in ITA Nos.1015 to 1017/PN/2011 for A.Y. 2003-04 to 2005-06 vide order dated 27-11-2012 he submitted that the Tribunal in the said decision has allowed the claim of deduction u/s.80IB(10) on the ground that the assessee has duly applied to PMC for issue of completion certificate, handed over possession of the flats/ row houses to the respective buyers, PMC has started levying municipal tax and electrical bills paid by respective owners and therefore deduction u/s.80IB(10) cannot be disallowed. Since the facts of the assessee in the instant case are identical to the facts of the case decided by the Tribunal in the case of Runwal Multihousing Pvt. Ltd. (Supra), therefore, the assessee has to be allowed the deduction/s.80IB(10) for belated receipt of completion certificate. 7. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that since the assessee has constructed commercial area which is more than the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Opel Shelters Pvt. Ltd. (Supra) has decided the issue in favour of the assessee by observing as under : "17. Considering the above submissions, we find that there is no dispute on facts. The only issue for our adjudication is as to whether amended provisions of Section 80IB (10) came w.e.f. 1.4.2005 is also applicable on the project already approved and started in earlier years as per the then prevailing law.. The case of the assessee remained that the project in the case of D.S. Kulkarni Associates started in April 2001 and completed in November 2003. Similarly, the project in the case of Opel Shelters commenced on 23.2.2001 and was completed by 21.6.2002. The submission of Ld. A.R. also remained that the issue raised in the present appeals is fully covered by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V. v/s. DCIT (supra). The objection of the Ld. D.R. in this regard remained that the Special Bench in the case of Brahma Associates (supra) had decided the issue by holding that the amended provision will apply from A.Y. 2005-06. It was also contended by the Ld. D.R. that Co-ordinate Bench decision in the case of Hiranandani Akruti J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year relevant to AY 05-06. As per the change in law from AY 05-06 with regard to the area of commercial space in a housing project the Assessee would loose his eligibility to claim deduction. In such cases there is definitely grave hardship to the Assessee. The interpretation sought to be canvassed by the learned D.R will also lead to absurd situation. Let us assume an Assessee obtains approval of a housing project prior to 1-4-2005 say in previous year relevant to AY 02-03. He builds commercial space in excess of 2000 Sq.ft. in the housing project. He follows percentage completon method of accounting and offers profits in AY 02-03 to 04-05, claims exemption u/s. 80-IB(10) and is allowed exemption. On the same project in AY 05-06, the Assessee would not get the benefit of Sec. 80-IB(10). We therefore find no grounds to take a view different from the one taken by the co- ordinate bench of the Tribunal in the case of Saroj Sales Organization (Supra). 27. We are of the view that we are not supplying any words to the statute but are only holding that the law as it existed in the A.Y.04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio laid down by the Special Bench referred to above, while computing total income and if so to what extent. For statistical puroses, the appeal is treated as allowed." 18. The Hon'ble Bombay High Court has been pleased to approve the aforesaid decision of Special Bench in the case of Brahma Associates vide order dated 22.2.2011 in ITA No. 1194 of 2010. The concluding para no. 30 of the decision of the Hon'ble High Court is being reproduced hereunder : 19. We, thus, find that the issues raised in the present appeals are fully covered in favour of the assessee by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V v/s. DCIT (Supra). Respectfully followig the said decision in the case of Hiranandani Akruti J.V. (Supra), we decide the issues in favour of the assessees that a housing project will also consist of commercial area to a permissible limit, as settled by the Special Bench of the Tribunal in the case of Bramha Assocates (Supra) (now upheld by the Hon'ble Bombay High Court) as applicable upto A.Y. 2004-05. And secondly, the law as it existed in the Assessment Year when the assessee submitted its proposal of the project and permission f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved. As putting such assessees to complete the plan meeting out condition under clause (d) of the sub-section would lead into absurdity and impossibility for the assessee and in contradiction to the provisions u/s. 80 IB(10) as prevailed at the time of approval and commencement of the construction of the project well before 1.4.2005. Bombay Bench of the Tribunal in the case of Hiranandani Akruti J.V (supra) has discussed all these relevant aspects raised by the Department. In the case of Hiranandani Akruti J.V V/s. DCIT, it has been held that the law as existed when the assessee submitted its proposal and permission for carrying out the development was accorded and when the assessee commenced development is to be applied. In the present cases, as per page nos. 17 and 20 of the paper book in the case of Opel Shelter the project was commenced on 23.2.2001 and even completed on 14.5.2004, similarly as per the contents of page No.2 of the assessment order and page no. 41 of the paper book in the case of D.S. Kulkarni and Associates, the project was commenced on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 22-01-2004 has applied to PMC for occupancy certificate. (Page 119 of the Paper Book). The submission of the learned counsel for the assessee that the PMC has not yet rejected the said application till date could not be controverted by the Revenue. The further submission of the learned counsel for the assessee that all the flat owners/row house owners have been given possession between 26-10-2002 to 15-01-2007, i.e.prior to 31-03-2008 could not be controverted by the learned DR (Page 55 to 63 of the Paper Book). The learned DR also could not controvert the submission of the learned counsel for the assessee that PMC has started levying municipal taxes and the Electricity Meters are in the name of the flat owners who have started paying electricity bills. 20.1 We find the Pune Bench of the Tribunal in the case of City Development Corporation Vs. ACIT - ITA No. 57 and 1287/PN/2010 order dated 27-09-2012 has held as under : "12. We have carefully considered the rival submissions. Quite clearly, the dispute is with regard to the completion certificate of building 'E' having been issued by the local authority i.e. Pune Municipal corporation, on 5-5-2008. Sub-clause (i) of clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f clause (a) to section 80-IB(10) of the Act whereby the construction was to be completed on or before 31-3-2008. Somewhat similar situation was considered by our co-ordinate Bench in the case of Hindustan Samutha Awas Ltd. (supra) wherein also on the strength of architect's certificate, an application for obtaining completion certificate was moved to the local authority on 25-2-2008 but in actuality the completion certificate was issued by the local authority on 10-10-2008. The Tribunal noticed that the delay in issuing completion certificate was not attributable to the assessee as no objections were raised by the local authority. The Tribunal after considering its earlier decisions in the case of M/s. Satish Bohra Associates Vs. ACIT in ITA No. 713 and 714/PN/2010 for A.Y. 2004-05 and 2005-06 dated 7-1-2011; M/s. D.K. Constructions Vs. ITO ITA No. 243/PN/2010 for A.Y. 2006-07; dated 6-12-2010 and Sanghvi and Doshi Enterprises Vs. ITO and others ITA No. 259 to 263/MDS/2010 dated 19-5- 2011 for A.Y. 2005-06 and 2006-07 (TM) has concluded as follows: "From the above, once this is clear that the date that appears on the Architect's Completion certificate filed before the local auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has complied with the condition of completing the construction of the project within the mandated date of 31-3- 2008 even with regard to building 'E', following the parity of the reasoning lid down in the case of Hindustan Samutha Awas Ltd. (supra). . 14. Sub-clause (i) of clause (a) to section 80-IB(10) of the Act requires that the undertaking, developing and building a housing project "completes such construction" or before 31-3-2008. In the present case, assessee has factually asserted right from the stage of assessment proceedings, that the construction of building 'E' was complete in all respects as per sanctioned plan and all the flats were handed over to the actual users/customers prior to 31-3-2008. In the background of the aforesaid factual position which has remained uncontroverted, in our view, on a plain reading of sub-clause (i) of clause (a) to section 80-IB(10) the condition prescribed therein is fulfilled., inasmuch as the construction of building 'E' was complete before 31-3-2008. However, on the reading of clause (ii) of the Explanation below sec. 80-IB(10)(a) of the Act, it emerges that the completion of construction of a housing project is to be taken to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and actually occupied, and it also applied for BU permission to the local authority. The local authority, however, for technical reasons, at one stage rejected such application in the year 2006 and thereafter upon revised efforts from the assessee granted the same by order dated 19th March 2009. We have perused the detailed discussion of the CIT(Appeals) as well as the Tribunal on the issue. IN particular, the Tribunal noted that the construction was completed in 2006. Application for BU permission to the Municipal authorities was filed on 15-02-2006 which was rejected on 1-07-06. Several residential units were occupied since the same was done without necessary permission. The assessee had done without necessary permission. The assessee had also paid penalty and got such occupation regularised. Several tenements were sold long before the last date. In the present case, therefore, the fact that the assessee had completed the construction well before 31st March 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause (a) to section 80IB(10) links the completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative and find relevant paragraphs are required to be extracted for completion of the order. They are as follows. A. Extract from the decision of the Tribunal in the case of M/s. Satish Bora Associates vide ITA Nos. 713 714/pn/2010 "19. ....... 1. In the case of PMC, the completion certificate in prescribed form issued by the licensed architect etc. who has supervised the construction is furnished with four sets of completion plan under Rule 7.6 of the DC Rules of the PMC. Thereafter PMC is required to return one of the sets duly certified as Completion Plan to the owner along with the issue of full Occupancy Certificate after inspection of the work under Rule 7.7 of the DC Rules. Since Explation (ii) to Section 80IB(10)(a) of the I.T. Act requires Completion Certificate issued by the local authority to be taken as the date of Completion of the Construction, a general understanding in our view is that a Completion Certificate which is issued by the local authority after conducting inspections of construction by it. In case of PMC, it is only Occupancy Certificate which is issued alongwith certified completion plan after inspection of the construction by it, we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed on record. The Tribunal in paragraph 3.5 of its order stated that the project layout plan may be required to be approved by the CMDA but as far as the construction of the building is concerned, the local authority, i.e. the Corporation of Chennai is the appropriate authority to regulate the construction as per the building bye-laws and sanction plans. When it is not disputed that the Corporation is the local authority, certificate issued by it cannot be disregarded. The assessee has placed on record the completion certificate issued by the Corporation by way of additional evidence. Since the allowability of the entire deduction depends on all the conditions being fulfilled deduction depends on all the conditions being fulfilled, we admit this additional evidence. The certificate clearly mentions that the building was inspected on 23.11.2007 and that it is found to be satisfied the building permit conditions. We may also mentions that the role of CMDA is quite distinct from that of the Corporation. CMDA looks at the plans from the perspective of the development and urbanisation of the city as a whole. On the other hand, the role of the Corporation while issuing completion c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by the Local Authorities", it means Local Authorities is competent to certify the date of completion of Housing Project. The date of issue of such letter by the Local authorities is not so crucial but it should have clearly mentioned the date of completion of project. When the Project is completed on 31.3.2008 and the assessee has informed regarding such completion, the Local Authorities may take its own time for issue of certificate, which may be even after 6-7 months, but the letter so issued by the Local Authorities should clearly mention the date of completion of such project. Merely because such certificate is issued after gap of 8-9 months or even one year, will not adversely affect the assessee if it has mentioned clearly the date of completion of project prior to 31.3.2008. Once the letter for completion of project is given by the assessee to the Local Authority, it is the duty of the Local Authority to verify physically the Projects stated to be completed from its own parameters. This process may take time and, therefore, the date of issue of letter is not so crucial to determine the assessee's eligibility for claim of deduction as per Explanation (ii) of Section 80IB( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, handed over possession of the flats/row houses to the respective buyers, PMC has started levying municipal taxes and electricity bills paid by respective owners, therefore, deduction u/s.80IB(10) under the facts and circumstances of the case cannot be denied to the assessee for non-receipt of completion certificate from PMC before 31-03-2008 which was beyond the control of the assessee. This view of ours is fortified by our decision in the case of M/s. Ramsukh Properties Vs. DCIT vide ITA No.84/PN/2011 order dated 25-07-2012 for A.Y. 2007-08 (wherein both of us are parties) wherein it has been held as under: "6. After going through rival submissions and material on record, we find that the assessee is a firm engaged in business of builder and promoter. The issue before us is regarding allowability of deduction u/s.80IB(10) of the Act on partially complete project. The Assessing Officer has denied the deduction on the ground that project was not complete within the stipulated time. There is no dispute with regard to other conditions laid u/s.80IB(10) of the Act, i.e., commencement of project, area of land of project, etc. Assessee's housing project was approved vide commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for investigation of violation of urban land ceiling Act applicable to land in question at relevant point of time. This fact has not been disputed on behalf of revenue. Thus, assessee was prevented by sufficient reasonable cause which compelled the impossibility on part of the assessee to have completion certificate in time. It is settled legal position that the law always give remedy and the law does wrong to no one. We agree to proposition put forward by Ld. Departmental Representative that plain reading of section 80IB(10) of the Act suggests about only completion of construction and no adjective should be used alongwith the word completion. This strict interpretation should be given in normal circumstances. However, in case before us, assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. Assessee was incapacitated to complete the same in time due to reasons beyond his control. Assessee should not suffer for same. The revision of plan is vested right of assessee which cannot be taken away by strict provisions of statute. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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