TMI Blog2017 (8) TMI 1665X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities before the due date find in the case of CIT Vs. Hindustan Samuh Awas Limited [ 2015 (10) TMI 2306 - BOMBAY HIGH COURT] has held that when assessee undertook a Project which was completed on time and an application was moved for seeking completion certificate from Municipal Authority but the same was issued to the assessee after delay and then the delay could not be attributed to the assessee and the assessee is entitled for exemption u/s 80IB(10) of the Act. Before us, Revenue has not placed any contrary binding decision in its support nor has demonstrated as to how the ratio of decision in the case of Hindustan Samuh [ 2015 (10) TMI 2306 - BOMBAY HIGH COURT] is not applicable to the preset facts. In view of the aforesaid facts, we are of the view that assessee is entitled to deduction u/s 80IB(10) of the Act. We thus direct accordingly. Thus, this ground of the assessee is allowed. Disallowance in respect of compensation paid to flat owners - AO noticed that assessee had debited as compensation to flat owners and had claimed it as deduction - HELD THAT:- Whether the covenant for payment of compensation for delay in handing over of possession of flat is contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised the following grounds : 1. On the facts and in the circumstances of the cases and in law the honourable CIT (A)-I, Pune ought to have allowed the deduction of Rs. 3,60,25,316/- claimed under section 8018(10) of the Income Tax Act. The honourable CIT (A) erred in confirming disallowance of deduction made by learned assessing officer without appreciating the fact that the project was completed on 27th March 2012 i.e. before due date 31st March 2012. The appellant hereby prays that the deduction may please be granted. 2. On the facts and in the circumstances of the cases and in law the honourable CIT(A) erred in confirming the disallowance made by the learned assessing officer in respect of the compensation paid to flat owners of Rs. 30,34,185/- due to delay in handing over the possession of flats within stipulated time without appreciating the fact that a) The compensation paid is as per the agreement between the appellant and flat purchasers. b) The compensation is paid by account payee cheques. c) The appellant has produced confirmation of the flat purchasers in respect of compensation paid. d) The honourable CIT(A) and learned AO did not appreciate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. The point for determination on this issue is whether the profits derived from the Kamdhenu Siddhi' project (in short 'project') of the appellant qualify for deduction u/s.80IB(10) as the completion certificate for the entire project was not obtained from the Local Authority on or before stipulated date i.e. 31/3/2012. In the present case, it is not in dispute that the first commencement certificate for the project was received from Local Authority on 03.04.2006 by PMC Commencement Certificate No.CC/0019/06. The second revised approval for the project was received from PMC vide commencement certificate No.CC/0019/06 dated 25.07.2006. The third and final approval for revision of the plan was received by CC No.4664/06 dated 29.03.2007. Thus, the aforesaid housing project was originally approved vide PMC's commencement certificate No. CC/0019/06 dated 03.04.2006 the relevant portion of section 80IB(10) as it relates to the impugned assessment year, reads as under: 4.4.1 From a plain reading of the section, it is clear that in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; In ITA No.713 and 714/PN/2010 dated 07.01.2011, in the case of Hindustan Samuha Awas Ltd., ITA No.945 to 950/PN/2010 dated 30.08.2011 and in the case of Siddivinayak Shree, ITA No.883/PN/2010 dated 30.07.2013. The decisions of ITAT Pune relied upon by the appellant are carefully perused and the latest decision in the series is that of Siddivinayak Shree in ITA NO.883/PN/2010 dated 30.07.2013, wherein the Tribunal after considering the decision in the case of Satish Bora Associates and Hindustan Samuha Awas Ltd., held as under: XXXX 4.4.3 It may also be relevant to refer to the decision of ITAT Pune in the case of Hindustan Samuha Awas Ltd., (supra), wherein the Tribunal observed as under on identical issue: XXXX 4.4.4 Thus, in the cases decided by the ITAT Pune on this issue, it is clearly held that where the local authority, acting on the application of the builder/developer and the Architect for the issue of occupancy certificate, has not raised any objections or queries on the quality of construction of the building or the completion of the same. as per the plans approved by such authority, the completion certificate Issued by the local authority relates back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired as per the sanctioned plan for the project is clearly attributable to the appellant and therefore the occupancy /completion certificate issued by the PMC on 21.07.2012 does not relate back to the date of application filed by the appellant before PMC in March 2012 for issue of occupancy /completion certificate. In the circumstances, I am of the humble opinion that the decisions relied upon by the appellant do not render any assistance to the case of the appellant. Thus, the appellant failed to comply with one of the essential requirements i.e. obtaining completion certificate for the project in question on or- before 31.03.2012 for availing the deduction under sec. 80IB(10). As the conditions laid down in the sec. 80IB(10) have to be satisfied cumulatively, nonfulfillment of any of the conditions would render the project ineligible for deduction under the section. 4.4.6 In view of the foregoing, it is held that the project in question of the appellant is not entitled to claim deduction u/s 80IB(10) as the appellant failed to obtain the completion certificate from the local authority for the project in question on or before 31/3/2012, which is one of the statutory requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate is submitted to the Municipal Authorities accompanied by a completion certificate issued by the concerned Architect and when application is made in time, then the delay in issuance of completion certificate by the Municipal Authorities cannot be the ground for denial of claim of deduction u/s 80IB(10) of the Act, he relied on the decision of Pune Tribunal in the case of Hindustan Samuha Awas Limited Vs. ITO in ITA No.945 to 950/PN/2010 dt.30.08.2011. He submitted that against the decision of Tribunal in the case of Hindustan Samuha (supra), Revenue had preferred appeal before Hon ble Bombay High Court. The Hon ble Bombay High Court, Aurangabad Bench in ITA No.1 2/2012 dt.02.02.2015 had dismissed the appeal of Revenue. 6. Before us, assessee vide additional ground has raised an alternative plea that when project was completed before the due date, the proportionate deduction may be granted and that in case the assessee is held to have not completed the entire project, to the extent of the project completed, the assessee be granted proportionate deduction. He submitted that assessee had obtained first completion certificate dt.11.10.2010 with respect to 46 flats and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and had claimed it as deduction. The amount was paid to the flat owners of Kamadhenu Siddhi for the delayed possession of the flats. AO was of the view that in the agreement entered by the assessee, nowhere it was mentioned that if assessee failed to give possession to the flat purchasers, he would be liable to pay compensation. He further noted that the agreement for payment of compensation to the flat owners was on a plain paper. He also noted that an identical issue arose in assessee s own case in A.Y. 2010-11 and the ground was disallowed by AO. AO accordingly disallowed the claim of payment of compensation of Rs.30,34,185/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A) who upheld the order of AO by holding as under : 5.4 The arguments advanced by the appellant are carefully examined with reference to agreements entered into by the appellant with the flat buyers in the aforesaid project and minutes of the meeting stated to have been held with the buyers. The Assessing Officer disallowed the compensation paid to flat holders citing the reason that there is no covenant/condition in the agreements of sale for payment of compensation on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer or in the present proceedings. But, the claim of the appellant is that the payment of compensation was decided in the meeting held with the flat buyers on 04.01.2009 and 17.03.2009 to safe guard the goodwill of the company and out of commercial expediency. As per the details of compensation furnished by the appellant and the agreements of sale, the possession of the flats was to be given to the buyers of 31.05.2008, but the possession was given in most of the cases on 31.03.2010 and in a few cases in October / November 2010. As noticed from the minutes of meeting held with the flat buyers, if the delay in giving the possession is up to 31.03.2009, the appellant has to pay compensation of Rs. 40,000/- to each flat holder in whose case delay occurred. Thus, as per the minutes, even if the delay is reasonable delay i.e. only a few days from 31.05.2008, the appellant has agreed to pay compensation of Rs. 40,000/-, which is not in accordance with the terms conditions of the agreement as extracted hereinabove. It is also noticed from the details of compensation, the amount of compensation paid to the buyers is not uniform though the delay is the same, for instance in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate Bench of the Tribunal and the Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee by holding as under : 8. The second ground of appeal relates to disallowance of payment of compensation to flat owners for delay in handing over of possession to the flat owners. The authorities below have disallowed the claim of assessee for the following reasons : i. The original agreement executed between the assessee and the flat owners does not contain any covenant with respect to payment of compensation for delay in handing over of possession of flats. ii. The assessee has self assumed the liability of payment of compensation. The delay in possession of flat was for few days and for reasonable delay in handing over of possession of flats no compensation was required to be paid. iii. The assessee could not show commercial expediency for payment of compensation. iv. If at all there was liability to pay it was on account of Breach of contract for which the payment is in the nature of penalty and not compensation. 9. In so far as the objection raised by the Department that there was no covenant in the agreement for payment of compensation is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a well settled proposition that business expediency has to be decided by the assessee and not the Department. The ld. AR of the assessee has shown that under the provisions of Maharashtra Ownership Flat Act, 1963 the assessee would have been liable to refund the amount deposited by the allottees of the flats along with interest @ 9% from the date of deposit for delay in handing over of possession of flats, on the demand of flat owners. In that eventuality the liability of the assessee would have been much more than what has been paid by the assessee as compensation. The assessee was justified in compensating the flat owners as there was delay of more than 20 months in handing over of possession of flats from the date specified in the agreement between the assessee and the flat holders. As per the agreement the due date for handing over of possession was on or before 31-05- 2008, whereas, the assessee could give possession of the flats to the flat holders in February-March, 2010. 11. The Commissioner of Income Tax (Appeals) has observed that compensation paid by the assessee could have been avoided as the assessee could have got reasonable extension for completing the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this subsection shall not be barred by limitation provided under any law for the time being in force. (3) If the promoter fails to discharge any other obligations imposed on him under this Act or the rules or regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under this Act. Thus, the assessee was justified in compensating the allottees of the flats for delay in handing over of possession. The amount paid by the assessee was certainly on account of business expediency. 12. Another reason for disallowing the payment of compensation was that the amount paid by the assessee was in the nature of penalty for Breach of contract. The Delhi Bench of the Tribunal in the case of DCIT Vs. M/s. Achiever Builders (P) Ltd. (supra) where the Department disallowed the amount paid by the assessee to the customers fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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