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Om Sai Ram Developers Versus ITO 25 (2) (4) , Mumbai

2016 (1) TMI 357 - ITAT MUMBAI

Disallowance deduction u/s.80IB(10) - Held that:- No merit for declining of claim of deduction on the plea of completion certificate having been not obtained within a period of four years, in respect of projects which was approved prior to 1st April, 2005. Accordingly, the AO is directed to allow assessee’s claim for deduction u/s.80IB(10) for both the years under consideration. See case of Happy Homes Enterprises [2014 (9) TMI 707 - BOMBAY HIGH COURT ] - Decided in favour of assessee - ITA Nos. .....

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ct on the plea that completion certificate was not obtained within the stipulated period of four years. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a partnership firm engaged in the business of builders and developers. During the relevant period, the assessee undertook a project by name "Vrindavan Complex" and claimed deduction u/s 80IB(10). The A.O. completed the assessment originally u/s 143(3) accepting the claim of the assessee t .....

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rmation, the A.O. reopened the assessment u/s 148 on the ground that local authorities did not issue the occupation certificate before 31-3-08. In response to notices u/s.148 dated 25-3-09, the assessee filed letters dated 28-4-09, stating that returns already filed for both the assessment years might be treated as sufficient compliance. 5. In the re-assessment proceedings, the AO noticed that the assessee commenced the project on 28-10-02 and, therefore, the assessee ought to have completed the .....

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orporation did not issue the occupation certificate, the assessee could not penalized by denying deduction u/s 80IB(10). It was contended that the Municipal Corporation should have communicated the reason for not granting the occupation certificate in the absence of which it shall be deemed that the occupation certificate was granted. 6. Since the assessee could not produce the completion certificate, the AO declined the assessee s claim for deduction u/s.80IB(10) of the Act. 7. By the impugned .....

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certificate. 9. On merits, ld. AR drew our attention to the following certificates filed before the revenue authorities to substantiate its claim of completion before 31st March, 2008 :- i) Copy of the order No.s906 to 914 dated 17.05.2004 issued by Mira-Bhayander Corpn. Granting water connection to project Vrindavan Complex; ii) Copy of Bill-cum-receipt dated 09.08.2005 by Advocate being fees for registration of society; iii) Copy of Order No.TNA(TNA)/HSG/(TC)/16677/2005-2006/1830/Year 2005 dat .....

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. AR contended that assessee has completed the project within the stipulated period of four years. 10. We have considered rival contentions, gone through the orders of the authorities below and deliberated on the judicial pronouncements referred by lower authorities in their orders as well as cited by ld. AR and DR during the course of hearing before us. From the record we found that the impugned project of the assessee was approved prior to 1st April, 2005 and as per the provisions applicable f .....

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Finance Act, 2000 (10 of 2001), Section 39(e)(i) and (ii) ( w.e.f. 1.4.2001), by Finance Act, 2003 ( 32 of 2003), Section (c) (i) and (ii) (w.e.f. 1.4.2002). Sub-Section (10), before substitution by Finance (No.2) Act, 2004, stood as under :- "(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of Mach, 2005, by a local authority, shall be hundred per cent, of the profits derived in any previous year relevant to any ass .....

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ge 2 of 21 limits of these cities and one thousand and five hundred square feet at any other place.' 12. Soon after Finance (No.2) Act,2004 w.e.f. 1.4.2005, the amended provision reads as under :- "80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to[(11), (11A) and (11B)] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the .....

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sessment 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 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 20 .....

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l be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area 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 u .....

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ect does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.] The following clauses (e) and (f) shall be inserted after clause (d) of sub-section (10) of section 80-IB by the Finance (No.2) Act, 2009, w.e.f. 1-4-2010 : (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person bei .....

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that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).]" 13. From the perusal of clause (a) of section 80IB(10) as it stood prior to amendment w.e.f. 1-4-2005, there is mere condition for commencement of housing project on or after 1st October, 1998. However, there is no condition for completion of project. The Finance (No.2) Act, 2004 brought sub.cla .....

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s approved prior to 1-4-2005. 14. The Hon ble Bombay High Court in the case of Happy Homes Enterprises, 51 taxmann.com 281, clearly held that amendment brought in by Finance (No.2) Act, 2004 is applicable for the projects approved after 1-4-2005, and not for the projects approved prior to 1-4-2005. Precise observation was as under :- The provisions of section 80-IB(10) were substantially amended by way of the Finance (No. 2) Act, 2004 with effect from 1-4-2005. As can be noted from the amended p .....

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using projects were approved prior to 31-3-2005. It cannot be thought that the Legislature intended to give any retrospectivity to clause (d) of section 80-IB(10). This more so because it is clearly a condition that relates to and/or is linked with the approval and construction of the housing project. It would be highly unfair to require an assessee to comply with section 80-IB(10)(d) who has got his housing project approved by the local authority, before 31-3-2005 and has either completed the s .....

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ave any application to housing projects that are approved before 31-3-2005. The said clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the said clause operates only prospectively i.e. for housing projects approved after 1-4-2005. This is notwithstanding the fact that the profits were offered to tax by the assessee for the assessment year 2005-06 or thereafter. Thus, clause (d) of section 80-IB(10) is prospective in nature and would .....

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