2017 (1) TMI 1403 - AT - Income Tax

Claim of deduction under section u/s 80IB(10) - Held that - Where the allotment of flats has been made prior to 1.4.2009, the assessee shall be eligible to claim the tax deduction in respect of such flats even if there is violation of clause (e) & (f) of section 80IB(10) of the Act. However, where the allotments of flats have been made after 1.4.2009, the assessee will necessarily be required to demonstrate the satisfaction of clauses (e) and (f) of section 80IB(10) of the Act. On perusal of assessment order, it is noted that complete details of allotees were not furnished before the AO and the AO based on limited information provided by the assessee, has identified certain cases where violation of above said conditions have been noted. The assessee has responded to these limited cases and even ld CIT(A) has upheld the contention of the assessee that the allotment has either not being made or booking of flats has happened prior to insertion of clause (f) of section 80IB(10) of the Act in these limited cases. The legislature has used the expression allotment and not the expression booking of the residential unit which precede the allotment of residential unit as generally understood in the housing sector. Unless, in a given case, where the booking and allotment are same as demonstrated through the contractual understanding between the builder and the allottee of the residential unit, it would not be correct to use these terms inter-changeably. In light of above directions, we accordingly set-aside the matter to the file of the AO to examine the allotment of flats made by the assessee in entirety and examine the satisfaction of conditions under clause (e) and clause (f) of section 80IB(10) of the Act. Validity of assessment framed u/s 147 - Held that - It is noted that the assessment was reopened within the period of 4 years basis the completion of assessment for AY 2010-11 where the assessee s claim under section 80IB(10) was disallowed. The assessee was provided copy of reasons recorded for reopening and after disposing off the assessee s objections, the impunged reassessment order has been passed by the AO. The ld CIT(A) has upheld that the AO has sufficient material evidence/information prior to issuance of notice under section 148 and relying upon the decision of the Hon ble Supreme Court decision in case of Raymond Woollen Mills 1997 (12) TMI 12 - SUPREME Court , has upheld the action of AO in reopening of assessment u/s 147 of the Act.

Summary

Issues Involved:
1. Validity of assessment framed under Section 147.
2. Eligibility for deduction under Section 80IB(10).
3. Definition and role of "Local Authority" for approval and issuance of completion certificate.
4. Impact of delay in issuance of completion certificate.
5. Consideration of separate blocks within a housing project for ascertaining completion.
6. Impact of multiple allotments to the same individual or related persons on deduction eligibility.

Detailed Analysis:

1. Validity of Assessment Framed Under Section 147:
The assessee challenged the validity of the assessment framed under Section 147. The assessment was reopened within four years based on the disallowance of the assessee’s claim under Section 80IB(10) for AY 2010-11. The assessee was provided with the reasons for reopening, and after addressing the objections, the reassessment order was passed. The CIT(A) upheld the reopening, citing sufficient material evidence and the decision in Raymond Woollen Mills. The cross-objection by the assessee was rejected.

2. Eligibility for Deduction Under Section 80IB(10):
The primary issue was whether the assessee was eligible for deduction under Section 80IB(10) for AY 2009-10 and 2010-11. The AO disallowed the deduction, citing non-fulfillment of conditions under Section 80IB(10), specifically regarding the completion of the project within five years and the allotment of multiple units to the same individual or related persons. The CIT(A) allowed the deduction, which was contested by the Revenue.

3. Definition and Role of "Local Authority":
The term "Local Authority" was not defined in Section 80IB(10). The assessee argued that both the Gram Panchayat and Jaipur Development Authority (JDA) were competent authorities. The Tribunal examined the JDA Act, 1982, which established JDA as a deemed local authority for planning and development in the Jaipur Region. It was concluded that JDA was the appropriate authority for approving the housing project and issuing the completion certificate.

4. Impact of Delay in Issuance of Completion Certificate:
The Tribunal considered whether the delay in issuing the completion certificate by JDA should relate back to the date of application. The assessee applied for the completion certificate on 23-03-2012, but JDA issued it later. Citing various judicial precedents, the Tribunal held that the delay in issuing the certificate should not penalize the assessee if the project was completed on time. For Block H & I, the construction was deemed complete as of the application date, even though the certificate was issued later.

5. Consideration of Separate Blocks:
The Tribunal addressed whether each block within a housing project should be considered separately for determining the completion date. It was noted that JDA issued completion certificates for individual blocks. The Tribunal held that the assessee could claim proportionate deduction for the completed blocks, even if some blocks were not issued completion certificates due to pending environmental clearance.

6. Impact of Multiple Allotments:
The AO disallowed the deduction, citing multiple allotments to the same individual or related persons, violating Section 80IB(10)(e) and (f). The Tribunal examined the cases and found that many allotments were made before the insertion of these clauses and did not violate the conditions. It was held that the deduction should not be disallowed entirely but restricted proportionately to the units violating the conditions. The Tribunal set aside the matter to the AO to examine the allotments in detail.

Conclusion:
The Tribunal partially allowed the Revenue's appeal, directing the AO to re-examine the completion dates of certain blocks and the allotment details for compliance with Section 80IB(10). The assessee’s cross-objection regarding the validity of assessment under Section 147 was rejected. The Tribunal emphasized a fair and just approach, ensuring that undue delays by authorities do not penalize the assessee.