TMI Blog2014 (6) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... on certificate in terms with Explanation - (ii) to clause (a) of section 80IB(10) - the AO cannot insist upon the assessee to furnish the completion certificate from the local authority for allowing claim of deduction u/s 80IB(10) of the Act - the assessee is able to prove that the housing project is complete in all respects within the prescribed period as provided u/s 80IB(10) and the assessee has fulfilled all other preconditions of the provision then the assessee will be entitled to claim deduction u/s 80IB(10) of the Act - the AO has disallowed deduction u/s 80IB(10) only for the reason that assessee has not furnished completion certificate from the local authority - all other conditions of section 80IB(10) are fulfilled by the assessee except the fact of completion of housing project - if the assessee will be able to prove completion of housing project within stipulated time by providing any other evidence, then claim of deduction u/s 80IB(10) cannot be denied to the assessee – thus, the AO is directed to verify the completion of the project without insisting upon a completion certificate from the local authority and thereafter decide the issue accordingly after affording reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion certificate. In response to the query made by the Assessing Officer, the assessee submitted that the disallowance of deduction claimed u/s 80IB(10) for the assessment year 2006-07 was subject matter of appeal before the ITAT, Hyderabad Bench in ITA No. 216/Hyd/2010. The ITAT in order dated 21/09/2012 disposed of the appeal by allowing assessee s claim of deduction u/s 80IB(10). It was submitted that in pursuance to the order passed by the ITAT, the Assessing Officer has also passed a consequential order by allowing the deduction claimed u/s 80IB(10) for the AY 2006-07. It was, thus, contended by the assessee that since deduction u/s 80IB(10) has been allowed for the same housing project for the AY 2006-07, it will not be correct to disallow similar deduction in the present assessment year. Further, it was submitted by the assessee that the assessee has already submitted enough evidence in the nature of property tax assessment, notices issued by the municipal authorities in support of its claim that the project was completed within the stipulated time of four years as prescribed u/s 80IB(10) of the Act. Hence, the Assessing Officer should not insist upon furnishing of compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Method it leads to an absolute 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 scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department. The accepted principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued 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) specifies that the development and construction of the project has to start before 1.4.2004 and the project has to be completed within four years from the end of the financial year in which approval for project was received from the local authority. Thus, a project can have a span of not more than 4 years from the end of the financial year it has received approval. Explanation under clause (a) only specified how to reckon the day of approval and date of completion. It would not mean that the assessee can have the benefit of section 80IB(1 0) only in the year of completion of the project, especially so, for an assessee not following project completion method for accounting its income. If otherwise interpreted, it would be equivalent to forcing an assessee to follow a particular method of accounting, which would never have been the intention of legislation. Intention would only have been that for the project as a whole, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar facts. Therefore, respectfully following the order of the honourable ITAT Hyderabad in the case of the appellant, the assessing officer is directed to allow the aforementioned deduction in the current year. 5. The learned Departmental Representative submitted that as per Explanation - (ii) to clause (a) of section 80IB(10), which is brought into the statute with effect from 01/04/2005 the mandatory requirement for claiming deduction u/s 80IB(10) is to furnish a completion certificate from the local authority. The learned Departmental Representative submitted that in view of such statutory provision deduction u/s 80IB(10) cannot be allowed to the assessee in absence of completion certificate from the local authority. In support of such argument, the learned Departmental Representative relied upon a decision of the ITAT Hyderabad Bench in case of M/s Sainath Estates Pvt. Ltd. V/s. CIT, 142 ITD 370 (Hyd.). 6. The learned AR, on the other hand, strongly supporting the order of the CIT(A) submitted that the housing project of the assessee was approved in the year 1999. Therefore, the provision u/s 80IB(10) which was in existence in the statute at the time of approval of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking developing and building housing projects approved [before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 ; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Section 80IB(10) in the post-amendment period: (10)The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 7[2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unamended provisions extracted hereinabove, it is to be seen, while in preamended provisions the requirement of furnishing a completion certificate from the local authority is not there, in the amended provision as per Explanation - (ii) to clause (a) of section 80IB(10) the assessee is required to furnish a completion certificate from the local authority. The Hon ble Delhi High Court in case of CIT Vs. CHD Developers Ltd., (supra) while considering identical issue of furnishing of completion certificate in case of a housing project approved prior to 01/04/2005 held as under: 8.9. If the aforesaid position of law existing at the time when the plan was sanctioned/ approval was granted to the assessee is analyzed, there was no condition like production of complete certificate. This is a settled legal proposition of law that the law existing at the particular point of time will be applicable unless and until it is specifically made retrospective by the legislature. The substitution so made, is therefore, applicable prospectively and not retrospectively. There is an uncontroverted fact that approval was granted to the assessee on 16-3-2005, consequently the assessee was expect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITA T in the case of M/s. Vishnu Builders v. ACIT (ITA nos. 178. 179 180/Vizag/20 11), order dated 27th July 2011. In that case also completion certificate was not filed before the Assessing Officer and the proof of municipal tax assessment of various flat owners establishing that the housing project was completed before September 2008 was filed. Since there was no practice of issuing the project completion certificate, therefore, it was held that it was not a condition precedent of filing the completion certificate for allowing deduction u/s 80-lB( 10) of the Act. 8.12 In the case of CIT v. Tarnetar Corpn. [2012] 210 Taxman 206 (Mag.)/26 taxmann.com 180 Hon'ble Gujarat High Court vide judgment dated 12-9-2012, observed that the confirmation issued by municipal authorities was filed on 15-2-2006 and was rejected on 1-7-2006. The assessee also paid penalty for regularization of the units. Since construction was completed well before 31st March 2008, the outer limit for such construction and the permission was not granted by the municipal authority, it was held that fulfilling of every condition is not mandatory and if there is a substantial compliance the minor deviation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng case in its favour. 8.16 Leave apart, we are of the considered opinion that the assessee is expected to complete the project as per the approved plan at a particular point of time and the assessee is not expected to do or to fulfil the conditions which are not in existence at the relevant point of time or made compulsory after making some amendment in the Act from the future date. Since the assessee was to complete the project on or before 31-3- 2009 and request was duly made with the Competent Authority on 5-11-2008 mentioning that the project has been completed and completion certificate may be issued and if the same is not issued by the Competent Authority the assessee should not be penalized for the same unless and until some contrary facts are brought on record evidencing that the assessee contravened the conditions contained in the approval granted by such Competent Authority. As per sub-section (10) of Sec. 80-IB. the housing project which were approved before 31st day of March. 2008, the benefit will be hundred per cent subject to fulfilment of certain conditions. However, this condition was substituted by the Finance (No.2) Act of 2009 with effect from 1-4-2009. whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertification by statutory auditor etc., has submitted to Bombay Stock Exchange and has issued the preferential share after getting approval from Bombay Stock Exchange. These are normal business transactions because these are issued as per SEBI and Stock Exchange guidelines. These shares are issued to a number of companies and individuals and not only to RGSL. Valuation of these shares are done as per SEBI and Stock Exchange guidelines which were as per average market rats and approved by Board of Directors and General Meeting of CHD. statutory auditor and Bombay Stock exchange approval. There is no close or remote nexus between CHD and RGSL. There is no common relation among the directors or major share holders. Since CHD is listed company it has no control over market rate or guidelines of SEBI and Stock Exchange. It is immaterial for CHD what its shareholder does not with their investments. As regard Assessing Officer's observation that the assessee has booked substantial sales with respect to non 80-lB project it was submitted that there are normal business transactions which CHD has undertaken during this year for earning profits in 80-lB project as well as non 80-lB projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose plans are sanctioned as per the prevalent rules and regulations by the local authority for denying the benefit of deduction of profit derived in the previous year relevant to the assessment year as made available otherwise under the statute. 23. It would be worthwhile to note at this stage that even though the facts before the Bombay High Court were different than those emerging from the present case, Revenue's submissions before the Bombay High Court that the amendment of Section 80lB(lO) and the insertion of clause (d) with effect from 1.4.2005 should be applied retrospectively was held to be without any merit in following words, in paragraph 32 of the Bombay High Court, which is reproduced as under: Lastly, the argument of the Revenue that section 80- IB(10) as amended by inserting clause (d) with effect from April 1, 2005 should be applied retrospectively is also without any merit. because. firstly. clause (d) is specifically inserted with effect from April L 2005 and, therefore. that clause (d) seeks to deny section 80-IB(10) deduction to projects having commercial user beyond the limit prescribed under clause (d), even though such commercial user is approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year basis where the assessee is showing profit from partial completion of the project in every year. (b) In a case it is late, found that the condition of completing the project within the specified time limit of 4 years as started in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn. 26. From the reading of the above instruction, it can be also said that the Government being aware of both the accounting methods has expected either of them to be followed in cases of individual assessee. However, in post amendment period, strict adherence to completion period of four years is insisted upon where project completion method is followed. This limitation of period did not exist prior to the amendment, what is vital to draw from this is that the amendment cannot discriminate those following project completion method if in the interregnum period, amendment is brought in the statute. The say of the assessee therefore gets further fortified when it says that only because it chose to follow the method of accounting of project completion basis, whose completion date falls after 1.4.2005, they can be denied the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the project, but, only on completion of the project. Similarly, in case of Sainath Estates Pvt. Ltd. V/s. CIT( (supra) a coordinate bench of this Tribunal held that furnishing of completion certificate from a local authority is mandatory to prove completion of project in view of Explanation - (ii) to clause (a) of section 80IB(10) for entitling the assessee to claim deduction under the said provision. However, in the facts of the present case, as the housing project of the assessee is approved prior to 01/04/2005 by applying the law laid down by the Hon ble Delhi High Court in case of CIT Vs. CHD Developers Ltd., ITA No. 298 of 2013, dated January 22, 2014 assessee is not required to furnish completion certificate in terms with Explanation - (ii) to clause (a) of section 80IB(10). Therefore, the Assessing Officer cannot insist upon the assessee to furnish the completion certificate from the local authority for allowing claim of deduction u/s 80IB(10) of the Act. In the event, the assessee is able to prove that the housing project is complete in all respects within the prescribed period as provided u/s 80IB(10) and the assessee has fulfilled all other preconditions of the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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