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2015 (8) TMI 266 - ITAT PUNE

2015 (8) TMI 266 - ITAT PUNE - TMI - Eligibility for claiming deduction u/s. 80IB(10) - incomplete housing project - Held that:- In the present case, it is an undisputed fact that the assessee had obtained no objection certificate from the local authority in the year 2007 and has thereafter applied for obtaining completion certificate to the local authority on 02-01-2007. The assessee had already obtained completion certificate in respect of 67 units in the year 31-03-2003 itself. There is nothi .....

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ccupation. As far as the deficiency pointed out by the ld. DR with regard to the drainage and septic tank is concerned we concur with the findings of the Commissioner of Income Tax (Appeals) that construction of soakpit which is required to drain excess water from the septic tank of venial nature. The septic tank has substantial capacity to hold the drainage water and it is only in the case of overflow that the water flows from septic tank to the soakpit. This discrepancy pointed out by the loca .....

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0IB(10) of the Act.

Thus non obtaining of completion certificate in respect of project approved prior to 01-04-2005 will not render the assessee ineligible for claiming deduction u/s. 80IB(10) in the impugned assessment years. In appeals for assessment years 2005-06 to 2007-08, the Revenue has raised ground with regard to commercial units in the project. Since, the same has not been pressed by the ld. DR. The same are dismissed as not pressed. - Decided in favour of assessee. - ITA No .....

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e appeals of the assessee. The assessee has also filed Cross Objections in the impugned assessment years. 2. The brief facts of the case as emanating from records are : The assessee is a builder and developer. The assessee developed a housing project under the name Paras Nagar comprising of 206 units. The project was approved by the local authority on 05-06-2000. Subsequently, the plan was modified and 7 more units were added to the original plan. The modified plan for 213 units was approved by .....

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ssued by local authority was in respect of partial completion of the project, i.e. with respect to 67 units only. 2.1 The Assessing Officer observed that since the condition with respect to obtaining of completion certificate as laid down u/s. 80IB(10) was not fulfilled, therefore, the assessee is not eligible to claim deduction u/s. 80IB(10) of the Act. Consequently, reassessment proceedings were initiated and notices u/s. 148 were issued to the assessee. In assessment orders passed u/s. 143(3) .....

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ase upheld the jurisdiction assumed by the Assessing Officer u/s. 148 of the Act. However, on merits the Commissioner of Income Tax (Appeals) held that the assessee is eligible to claim deduction u/s. 80IB(10) of the Act. Against the findings of Commissioner of Income Tax (Appeals), the Revenue has filed appeals for assessment year 2003-04 to assessment year 2007-08 and the assessee has filed Cross Objections for the corresponding assessment years. 3. Shri B.C. Malakar representing the Departmen .....

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ssee was required to obtain completion certificate on or before 31-03-2008. Initially, the assessee received completion certificate in respect of 67 units on 31-03-2003. Thereafter, the assessee applied for completion certificate on 02-01-2007 on the basis of certificate issued by the Architect on 31-12-2006. The completion certificate was not issued by the local authority to the assessee, as there was no proper drainage system and the construction of septic tank which is essential for residenti .....

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er submitted that in the appeals for the assessment years 2005-06, 2006-07 and 2007-08 there is ground relating to commercial area in the project. The same is not pressed. The ld. DR prayed for setting aside the impugned order and restoring the findings of the Assessing Officer. 4. Au contraire, Shri Sunil Ganoo and Shri Mayuresh Doshi appearing on behalf of the assessee submitted that the assessee has complied with all the conditions as set out in section 80IB(10) claiming deduction. Originally .....

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not completed. Finally, out of 213 approved units, 204 units could be completed, as space of 5 units was utilized for construction of septic tanks and 4 units were left out for proposed D P Road. The ld. AR contended that if 9 units are not constructed, it will not render the entire project ineligible for deduction u/s. 80IB(10). The ld. AR further submitted that since the project was approved much prior to 01-04-2004, the condition of obtaining completion certificate was not in the section at t .....

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f CIT Vs. Jain Housing & Constructions Ltd. reported as 30 taxmann.com 131 (Madras) and the judgment of Hon'ble Delhi High Court in the case of CIT Vs. CHD Developers Ltd. reported as 362 ITR 177 (Del). As far as Cross Objections filed on behalf of the assessee are concerned, the ld. AR stated at the Bar that the same are not pressed. 5. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also considere .....

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icate with respect to 67 units were obtained on 31-03-2003. The assessee applied for completion certificate to Grampanchyat/Local Authority on 02-01-2007. The completion certificate was granted to the assessee by local authority on 04-06-2008. However, occupancy certificate was issued on 31-12-2006 with respect to 204 units. Admittedly, the assessee could not complete 9 units, as area of 4 units was left for the proposed 9 mtr. D P Road and the area of 5 units was utilized for construction of se .....

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etion certificate was obtained after 31-03-2008, therefore, the project was completed after 31-03-2008. In first appeal, the Commissioner of Income Tax (Appeals) observed that in the year 2007, the Grampanchyat had issued no objection certificate to the assessee for getting individual electricity connection in all the residential units. The soak pit and drainage system connected thereto becomes relevant and operational only when the septic tank starts overflowing. The septic tank was already in .....

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ed w.e.f. 12-12- 2003 and accordingly it was required to be completed on or before 31-03- 2008. The Assessing Officer disallowed the claim of deduction u/s. 80IB(10) to the assessee on the ground that the completion certificate was given by the local authority after 31-03-2008. The Tribunal held that the assessee made application to the concerned authority for issuance of completion certificate before 31-03-2008. The assessee had taken all the necessary steps required to be done before seeking t .....

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rt in the case of CIT Vs. CHD Developers Ltd. (supra) and held that since the project was approved prior to 2005, the condition of obtaining completion certificate inserted by Finance Act, 2004 will not be applicable. The relevant extract of the order of Tribunal is as under: 7. We have carefully considered the rival submissions. The crux of the controversy in the present appeal relates to the provisions of sub-clause (i) of clause (a) to section 80-IB(10) of the Act read with Explanation (ii) t .....

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t provides that 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. 8. In the present case, it is an admitted position that the housing project of the assessee known as Runwal Daffodils commenced with effect from 12.12.2003 and therefore construction of such a housing project was required to be completed on or before 31.03.2008 as stipulated in sub-clau .....

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er to appreciate the aforesaid plea of the assessee, we may refer to the provisions of section 80-IB(10) of the Act as it stood prior to the amendment brought by the Finance (No.2) Act of 2004, w.e.f. 01.04.2005 :- (10) The amount of profits in case of an undertaking 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 proj .....

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hundred square feet at any other place. 9. Subsequently, Finance (No.2) Act of 2004, which was brought into force w.e.f. 01.04.2005, amended the provisions of section 80-IB(10) of the Act; and, post-amendment section 80-IB(10) of the Act read as under :- (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent. of the profits derived in the previous year relevant .....

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f April, 2004 but not later than the 31st day of March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority. (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. Explanation- For the purposes of this clause,- (i) in a case where the approval i .....

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of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential un .....

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cer has sought to disallow the deduction claimed by the assessee on the ground that the completion certificate in terms of Explanation (ii) has not been obtained. A similar situation had arisen before the Hon ble Delhi High Court in the case of CHD Developers Ltd. (supra). In the case before the Hon ble Delhi High Court, the project of the assessee was approved on 16.03.2005 and the Assessing Officer proceeded to disallow the deduction claimed for assessment year 2007-08 on the ground that the c .....

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certificate by the end of four years was brought into force, the claim of deduction could not be denied for the said reason. The case of the assessee before us is fully covered by the ratio of the judgement of the Hon ble Delhi High Court in the case of CHD Developers Ltd. (supra). In this background, we therefore find no reasons to uphold the objection of the lower authorities in order to disallowance claimed u/s 80-IB(10) of the Act. 7. The Hon'ble Madras High Court in the case of CIT Vs. .....

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e from the local authority in the year 2007 and has thereafter applied for obtaining completion certificate to the local authority on 02-01-2007. The assessee had already obtained completion certificate in respect of 67 units in the year 31-03-2003 itself. There is nothing on record to show that the residential dwelling units were not completed or not fit for occupation at the time when the assessee made application for issuance of completion certificate. It has also not been refuted by the Reve .....

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