TMI Blog2014 (9) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... over before 31-03-2008 – relying upon M/s. Rahul construction Co. Vs. ITO [2012 (6) TMI 319 - ITAT PUNE] - whatever portion completed by the assessee which satisfies the conditions prescribed u/s.80IB(10) is eligible for deduction - the assessee is eligible for deduction u/s.80IB(10) in respect of building No. A,C,D, E and the 17 row houses – Decided in favour of assessee. Once it has been held that the assessee is entitled to claim deduction u/s.80IB(10) of the Act with regard to buildings 'A to F' which were completed before prescribed limit of time and complied all conditions laid down under the provisions of section 80IB(10) of the Act - The assessee's claim for deduction will not be effected even if the assessee has not constructed buildings G & I because the assessee claim u/s.80IB(10) of the Act is justified in respect of Buildings 'A to F' on standalone basis. The buildings J & H were retained by partners of the assessee and no question of claim u/s.80IB(10) of the Act arises - The claim of the assessee in respect of building cannot be denied in respect of buildings 'A to F' irrespective of the fact that area of buildings / Bungalows J & H exceeded 1500 sq. ft. in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'A to F' constituted a separate project and all the conditions of section 80IB(10) were duly complied with in respect of this project and hence, there was no reason to deny the deduction in respect of the profits arising from the sale of units in the said buildings. b. The assessee had decided not to construct buildings 'G' I and therefore, there was no question of treating the said buildings as part of the project of the assessee. c. The buildings 'J H' were retained by the partners and were not sold and hence, there was no reason to consider the same as part of the project eligible for deduction u/s 80IB(10). d. There was clear cut demarcation between the buildings 'A to F' and buildings 'J H' and hence, there was no reason to treat buildings 'J H' as part of the project consisting of buildings 'A to F'. 5. The appellant craves leave to addition, alter, amend or delete any of the above grounds of appeal. 3. The assessee is a firm engaged in the development and construction of residential projects. The Assessing Officer has disallowed the claim of deduction u/s.80IB(10) amounting to ₹ 1,45,90,93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved on 17.03.2004, was not completed within stipulated time limit by 31.03.2008 u/s.80IB(10) and hence the assessee failed to qualify for deduction u/s.80IB(10) of the Act. Further, the assessee also failed under the parameters prescribed under the provisions of section 80IB(10c) and (10d) of the Act as discussed above. The CIT(A) also rejected the request of proportionate deduction. 5. In appeal before us, the assessee contended that the CIT(A) was not justified in rejecting the claim of deduction of ₹ 1,45,90,939/- u/s.80IB(10) in respect of profits arising from construction of buildings 'A' to 'F', which constituted separate independent project entitled to deduction u/s.80IB(10) of the Act. 5.1 The CIT(A) was not justified in holding that the project of the assessee constituted of buildings 'A to J' and since the assessee had not completed all the buildings till 31.03.2008, the assessee was not entitled to claim the deduction u/s 80IB(10). 5.2 The CIT(A) erred in holding that the project of the assessee constituted of buildings 'A to J' and therefore, the claim of the assessee of proportionate deduction in respect of the buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this background, the learned Authorized Representative has submitted that the assessee should be granted deduction of ₹ 1,45,90,939/- u/s. 80IB(10) in respect of profits arising from construction of buildings 'A to F' on standalone basis which constituted separate independent project entitled for deduction in question. 5.9 On other hand, the learned Departmental Representative has submitted that the assessee was not entitled for claiming deduction because the assessee has constructed the project with buildings 'A to H' and the assessee has not completed the project and Completion Certificate has not been issued by the PMC in respect of 'J' building. The learned Departmental Representative has submitted that commercial unit shops exceeded the limit of 2000 sq. ft. on account of area shown in the plan although 'G' building containing such shops (with built up area of 231.27 sq. mtrs.) has not been actually built. The learned Departmental Representative also has submitted that the two residential units of the project namely H and J building (bungalows with built up area of 2690 sq. ft. and 3767 sq. ft.) respectively exceeded the limit of 1500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructed and the assessee has dropped the idea of construction of the same. It is also the submission of the learned counsel for the assessee that it has applied for completion certificate on 22-01-2004 and since the PMC has a legal problem, which is sub-judice, the PMC is not able to grant the completion certificate. It is also the submission of the learned counsel for the assessee that Corporation has started levying municipal taxes, the flat owners have started paying electricity bills and the project on which Building Nos. A, C, D and E and 17 row houses are constructed are on a plot of area of more than 1 acre. Therefore, the assessee is entitled to deduction u/s.80IB(10) on the 4 buildings and 17 row houses which it has completed. 19. We find the Managing Director Shri Pradeep Amrutlal Runwal in his statement recorded during the course of survey u/s.133A has replied to Question Nos. 7, 8, 9, 10 12 as under: Q.7. Have you received the Completion Certificate from PMC for Runwal Paradise Project? Ans. The Completion Certificate for Row Houses 7 to 18 was received. However for other buildings on Runwal Paradise Project we have not received the Completion Certificate as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained by the assessee before 31-03-2008 we find the assessee through his architect vide application 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as to whether in such a situation can it be said that the assessee's project did not comply with the condition prescribed in sub-clause (i) of 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee that denial of deduction u/s 80- IB(10) on such score is uncalled for. In conclusion therefore, in the instant factual background, we hold that the assessee 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 31-3-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement was not mandatory in nature. In the present case, the assessee had completed the construction well before the last date, namely 31st March 2008 and had also sold several units which was completed 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 dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 commencement certificate No.3837/04 dated 13.01.2005 out of which completion certificate was obtained and furnished before the Assessing Officer for 173 out of 205 flats. Same was rejected by the Assessing Officer and confirmed by the CIT(A). The request for granting whole deduction in respect of whole project has rightly been rejected because deduction u/s.80IB(10) could not be granted to assessee on incomplete construction at relevant point of time. Regarding proportionate deduction in respect of 173 of 205 flats of project completed as recognized by local authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. At the same time, restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. The provisions of taxing statute should be construed harmoniously with the object of statue to effectuate the legislative intention. In view of above facts and circumstances, we hold that assessee is entitled for benefit u/s.80IB(10) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. (ii) 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 very reading of above Explanation (i), it makes clear that for the eligibility of the deduction provided u/s. 80 IB (10) of the Act, the date on which building plan of such housing project has been firstly approved by the local authority will be treated as approval in respect of the housing project. When we read Explanation (ii) with Explanation (i) it makes clear that completion of construction of such building plan first approved by the local authority will be taken the date of completion of construction of such building plan when completion certificate has been issued by the local authority. In other words, in clause (i) of the Explanation, it has been made clear that would be the housing project, first approval of which, by the local authority would be taken as startin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul Nagar and buildings B1 to B6 in Rahul Nisarg Co-Operative Housing Society Ltd. , the assessing authority has to verify as to when the building plans for these buildings were firstly approved by the local authority and taking the said date of approval a starting point, he has to verify as to whether these buildings were completed within the prescribed time limit i.e. 31st March 2008 on the basis of the Completion Certificate in respect of such housing project issued by the PMC. When we examine the facts of the present case under the above background, we find that the authorities below have not disputed the fact furnished in this regard by the assessee that under the project Atul Nagar consisting of buildings A1 to A5, the first building plan for A type was approved by the PMC on 29.4.2003 vide Commencement Certificate No. 4269 (page No. 4 of the paper book). However, actual construction of A type building was executed as per the revised plan vide No. C.C. 4101/27/6/2003 (PAGE No. 5 of the paper book). The size of the plot on which the A type building i.e. A1 to A6 have been constructed is 1,39,466 sq.ft. The project A type building i.e. A1 to A5 consists of 360 residential un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect in an area of 22 acres 19 guntas consisting of 5 residential blocks, row houses, oak tree place, a club, a community centre, a school and a park and claimed deduction under s. 80IB(10) in respect of two residential units only which if taken separately, were eligible for the relief AO treated the entire project as a single unit and denied relief under s.80IB(10) in entirety CIT(A) allowed relief under s. 80IB(10) treating the said two units as independent units Justified Material on record showed that the various local authorities duly inspected the plot and sanctioned plan for each of the blocks separately Group housing approval was approval of a master plan as a concept Further, the use of the words residential units in cl.(c) of s.80IB(10) means that deduction should be computed unit-wise Therefore, if a particular unit satisfies the condition of s.80IB, the assessee is entitled for deduction and it should be denied in respect of those units only which do not satisfy the conditions Again, the accounting principles would also mandate recognition of profits from each unit separately . 21.3 In view of the above decisions, we are of the considered opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;A to F' which were completed before prescribed limit of time and complied all conditions laid down under the provisions of section 80IB(10) of the Act. The assessee's claim for deduction will not be effected even if the assessee has not constructed buildings G I because the assessee claim u/s.80IB(10) of the Act is justified in respect of Buildings 'A to F' on standalone basis. Now, coming to size of issue of buildings J H. As stated above, these buildings J H were retained by partners of the assessee and no question of claim u/s.80IB(10) of the Act arises. The claim of the assessee in respect of building cannot be denied in respect of buildings 'A to F' irrespective of the fact that area of buildings / Bungalows J H exceeded 1500 sq. ft. in respect to which, no claim has been made as discussed above. Moreover, buildings 'A to F' are clearly separated from 'G I' and 'J H' by road as stated above. In view of above discussion, we hold that the assessee is entitled for deduction of ₹ 1,45,90,939/- u/s. 80IB(10) of the Act in respect of profits arising from construction of buildings 'A to F' for A.Y. 2006-07 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the high cost of construction (Rs. 783 per sq. ft) for the Shivanand Garden Project as against ₹ 482/- per sq. ft. only for the Dayanand Garden Project) 5. For these and such other grounds as may be urged at the time of hearing, the order of the learned CIT (APPEALS) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves leave to add, alter or amend any or all the grounds of appeal. 9.1 The only issue pertains to Revenue's appeal in A.Y. 2005-06, the Assessing Officer has compared the figures of profitability from the project Shivanand Garden which was a project on which deduction u/s.80IB(10) was not available vis-a-vis the profitability of Dayanand Garden which was eligible for deduction u/s.80IB(10). The Shivanand Garden was sanctioned on 12.09.1994 on a plot admeasuring 10645 sq. mtrs. And additional FSI was brought into the project by purchase of TDR of 391 sq. mtrs. During F.Y. 2003- 04. The total built up area was 154075 sq.ft. and the construction cost per sq. ft. was worked out ₹ 783/- per sq. ft. by the Assessing Officer. On the other hand, Dayanand Garden Project was on a plot admeasuring 7311.57 sq. mtrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llocated in the ratio 40:60 instead of 70:30 between Shivanand Garden Project and Dayanand Garden Project and accordingly the profit from Shivanand Garden Project was computed at 86,38,709/- [Rs. 98,28,829/- (-) ₹ 11,90,120/- for allocation of indirect expenses]. The Assessing Officer also reallocated the indirect expenses in Dayanand Garden Project at 60% being ₹ 17,85,209/- in place of ₹ 8,92,604/- as shown by the assessee thereby recomputing the profit from the Dayanand Garden Project at ₹ 1,66,88,690/- in place of ₹ 1,75,81,295/- shown by the assessee, on which deduction u/s.80IB(10) was allowed. 9.3 In appeal, the CIT(A) held on this issue that the Assessing Officer has pointed out to only one main issue that the cost of construction for the entire duration of the project in case of Shivanand Garden Project was much higher than that of Dayanand Garden Project. On the other hand, it was observed by the CIT(A) that the Shivanand Garden Project was in operation since F.Y. 1993- 94 upto F.Y.2005-06 whereas the Dayanand Garden Project started from F.Y.2000-01 and was running till F.Y.2005-06. Another defect pointed out by the Assessing Officer was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Garden Project at 49.28% was incorrect since the closing WIP in the current year was wrongly taken by the Assessing Officer. Therefore, the gross profit rate for the current year i.e. A.Y.2005-06 was wrongly taken at 67.83% by the Assessing Officer whereas the correct gross profit rate should be 50.78% and accordingly the average gross profit rate of Dayanand Garden Project upto A.Y.2006-07 worked out to 44.18% instead of 49.28% taken by the Assessing Officer. 9.4 The assessee has explained the variation of the gross profit rate of the two projects from year to year. The Assessing Officer has adopted the gross profit rate of Dayanand Garden Project and applied it to Shivanand Garden Project on the presumption that the assessee was deliberately showing higher profit in Dayanand Garden Project since it was subjected to deduction u/s.80IB(10). However, it has been pointed out by the assessee that in many of the earlier years even in Shivanand Garden Project much higher profit rate was shown and in A.Y.2003-04 the gross profit rate of both the projects was same. Further, it was observed by the CIT(A) that in the immediately preceding year i.e.A.Y.2004-05 also in Shivanand Garden Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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