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2012 (8) TMI 619 - AT - Income TaxDenial of deduction u/s 80-IB(10) - the first plan was approved on 23.6.2003 and the project has not been completed before 31.3.2008 as per sub-clause (i) section 80-IB(10) - Held that - The assessee firm acquired further land of 20 R on the same date and revised the building lay-out, which were originally prepared by the erstwhile holder of rights and the plan so revised (inclusive of the additional land of 20R) got sanctioned by the PCMC on 31.7.2004 only. It is only after that date, the assessee thus commenced the development and construction of the housing project in question. Quite clearly, the project in question is quite distinct and separate from the project reflected by the PCMC sanction dated 23.6.2003, in view of the above features AO has been unduly influenced by the remark revised sanction contained in 11 PCMC approval dated 31.7.2004. In fact, the Explanation to section 80- IB(10)(a) pressed into service by the Revenue refers to the approval granted to the same housing project more than once and the said Explanation is not relevant in a case where the approval is granted to different housing projects. As project in question reflected by the sanction of PCMC dated 31.7.2004 is different than the project intended under PCMC approval dated 23.6.2003, the Explanation to section 80-IB(10) cannot be invoked so as to reckon the period of completion of construction as contained in clause (i) or (ii) clause (a) to section 80-IB(10) and the appellant is justified in asserting that it commenced development and construction of housing project on 31.7.2004 and not on 23.6.2003 and accordingly, the last date for completion of construction has to be calculated as per sub-clause (ii) of clause (a) to section 80-IB(10) in terms of which the assessee is required to complete the construction within four years from the end of the financial year in which the project was approved by PCMC, i.e. upto 31.3.2009 - in favour of assessee.
Issues Involved:
1. Eligibility of the assessee's claim for deduction under section 80-IB(10) of the Income-tax Act, 1961. 2. Determination of the correct date of approval of the housing project by the local authority for the purpose of section 80-IB(10). Issue-wise Detailed Analysis: 1. Eligibility of the Assessee's Claim for Deduction under Section 80-IB(10): The assessee, a partnership firm engaged in the business of promoters, developers, and builders, claimed a deduction under section 80-IB(10) of the Income-tax Act, 1961, for the profits derived from a housing project. The Assessing Officer (AO) denied this claim, which was upheld by the Commissioner of Income-tax (Appeals). The Tribunal examined whether the assessee met the conditions prescribed under section 80-IB(10), which allows a deduction for profits derived from housing projects approved before 31.3.2007, subject to certain conditions. 2. Determination of the Correct Date of Approval of the Housing Project: The crux of the dispute was whether the housing project was approved on 23.6.2003 or 31.7.2004. The assessee argued that the project was approved on 31.7.2004, thus allowing completion by 31.3.2009 under sub-clause (ii) of clause (a) of section 80-IB(10). The Revenue contended that the project was first approved on 23.6.2003, making the completion deadline 31.3.2008 under sub-clause (i). Analysis and Findings: - Approval Date and Completion Timeline: The Tribunal noted that the assessee acquired development rights for the land on 9.7.2004 and amalgamated two plots into a combined area of 104 R, which was approved by the Pimpri Chinchwad Municipal Corporation (PCMC) on 31.7.2004. The assessee received the certificate to commence construction on the same date. The Tribunal contrasted this with the earlier approval dated 23.6.2003, which was for a different project on 84 R of land. The Tribunal found that the project approved on 31.7.2004 was distinct and separate from the earlier project. - Explanation to Section 80-IB(10): The Tribunal emphasized that the Explanation to section 80-IB(10)(a) applies to cases where the same housing project is approved more than once. Since the project approved on 31.7.2004 was different from the one approved on 23.6.2003, the Explanation was not applicable. The Tribunal relied on the decision of the Hon'ble jurisdictional High Court in CIT v. Vandana Properties, which clarified that the Explanation refers to the same housing project being approved more than once, not different projects. - Revenue's Arguments: The Tribunal rejected the Revenue's argument that the approval on 31.7.2004 was merely a revised sanction of the earlier approval. The Tribunal found that the project approved on 31.7.2004 included additional land and a revised building layout, making it a new project. The Tribunal also dismissed the relevance of the development charges and the reference to the earlier approval in agreements with buyers, stating these were governed by local laws and not determinative of the issue. - Statement of Assessee's Partner: The Tribunal addressed the AO's reference to a partner's statement during a survey, where the partner seemed to admit the claim was untenable. The Tribunal stated that the merits of the issue should be decided based on prevailing legal positions, not the partner's understanding at a certain point. The Tribunal noted that the partner's readiness to pay tax was subject to the right to appeal, indicating the assessee had not given up its claim. Conclusion: The Tribunal concluded that the assessee commenced development and construction of the housing project on 31.7.2004, making the completion deadline 31.3.2009 under sub-clause (ii) of clause (a) of section 80-IB(10). The Tribunal directed the AO to allow the assessee's claim for deduction under section 80-IB(10) for both assessment years 2006-07 and 2007-08. The appeals were allowed in favor of the assessee. Decision: The appeals for the assessment years 2006-07 and 2007-08 were allowed, and the AO was directed to allow the claim of the assessee under section 80-IB(10) of the Act as per law. The decision was pronounced in the open Court on 26th June 2012.
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