2011 (9) TMI 446 - AT - Income Tax

Deductions under 80IB - Built up area - Projects approved in Oct 98 - built up area given in the map approved by the local authority were adopted - Finance Act gave definition of Built up area - the appellant was not able to change the built up area or the prices fixed with customers or the prospective customers of the same bungalows in the same premises - AO denied exemption as built up exceeded the limit given in definition - Held That - In the present appeals, the projects were approved prior to amendments, therefore, if the definition is said to be applied to the projects already approved prior to 1.4.2005, it would mean that the assessee would be required to demolish its projects and again reconstruct the same so that the assessee fits into exemption. This is not the intention of the legislature because it may affect the vested rights of the assessee. The Section requires the assessee to build the project within this specified limit already approved when the amendment was not on the statute books, consequently, if the Section is interpreted to be applicable even to the existing projects, the same will lead to the absurdity and that is not the intention of the legislature because ultimately it will lead to a national loss. - Decided in favour of assessee.

Issues Involved:
1. Justification of withdrawal of deduction under Section 80IB(10) of the Income Tax Act.
2. Compliance with the conditions specified under Section 80IB(10).
3. Interpretation of "built-up area" under Section 80IB(14)(a).
4. Validity of completion certificate issuance dates.

Issue-wise Detailed Analysis:

1. Justification of Withdrawal of Deduction under Section 80IB(10):
The primary issue contested by the assessee was the upholding of the withdrawal of deductions under Section 80IB(10) for various assessment years by the CIT(A). The Assessing Officer (AO) denied the deduction on the basis that the built-up area of two bungalows exceeded the prescribed limit of 1500 sq. ft. and that the completion certificate was issued after the stipulated date. The Tribunal considered the rival submissions and the relevant provisions of Section 80IB(10), which mandates certain conditions for eligibility, including project approval dates and completion timelines.

2. Compliance with Conditions Specified under Section 80IB(10):
The Tribunal analyzed whether the conditions under Section 80IB(10) were met. The project was approved by the local authority on 22.3.2001, and the completion certificate was issued on 4.5.2010, with a clarification from the Municipal Corporation stating the completion date as 27.2.2008. The Tribunal concluded that the conditions of Section 80IB(10) were satisfied, emphasizing that the date of completion should be taken as the date on which the completion certificate is issued by the local authority.

3. Interpretation of "Built-up Area" under Section 80IB(14)(a):
The AO's denial of deduction was also based on the built-up area exceeding 1500 sq. ft. The Tribunal noted that the definition of "built-up area" was inserted w.e.f. 1.4.2005 and should not apply retrospectively to projects approved before this date. The Tribunal referred to various judicial pronouncements supporting the prospective application of the definition. It was highlighted that the assessee acted upon the provisions of Section 80IB as prevailing at the time of project approval, and the built-up area, as per the approved map, was within the prescribed limit.

4. Validity of Completion Certificate Issuance Dates:
The Tribunal addressed the issue of the completion certificate issuance date, which was crucial for determining compliance with Section 80IB(10). The assessee applied for the completion certificate on 16.1.2008, and the certificate was issued on 4.5.2010. However, a clarification from the Municipal Corporation dated 23.3.2011 confirmed the completion date as 27.2.2008. The Tribunal held that the delay in obtaining the completion certificate should not penalize the assessee, as the project was completed within the stipulated timeline.

Conclusion:
The Tribunal allowed the appeals, concluding that the assessees met the conditions under Section 80IB(10) and were entitled to the claimed deductions. The Tribunal emphasized a liberal interpretation of beneficial legislation and supported the prospective application of the definition of "built-up area" under Section 80IB(14)(a). The Tribunal also recognized the importance of the completion date as clarified by the Municipal Corporation, ensuring that the assessees were not unfairly penalized for delays beyond their control.

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