2012 (10) TMI 362 - AT - Income Tax

Exemption u/S 80IB(10) - date of completion of project - Held that - In section 80IB(10) it has been made emphatically clear that if the housing project is approved before 1st April, 2004 and is completed before 31.3.2008, the assessee would be entitled for deduction under section 80IB(10) and through its Explanation (i) it has been made clear that the date of completion of construction of housing project shall be taken to be date on which completion certificate in respect of such housing project is issued by the local authority. Therefore, there is no iota of doubt in the interpretation of Explanation below section 80IB(10) and according to the said Explanation, the date of completion of the project in the instant case shall be taken to be the date of issuance of completion certificate by the local authority i.e. 23.10.2009. Since the housing project was completed after 31.3.2008, the assessee has not fulfilled the second requisite condition for claiming deduction under section 80IB(10) and therefore the assessee is not entitled for deduction under section 80IB(10). Instruction No. 4 of 2009 dated 30.6.2009 of the Board, through which it has been clarified by the Board that deduction under section 80IB(10) can be claimed on year-to-year basis where the assessee is showing profit from partial completion of the project in every year. It was also further clarified that in case it is late found that the condition of completing the project within the specified time limit of four years, as stated in section 80IB(10) has not been satisfied, deduction granted to the assessee under section 80IB(10)in earlier years should be withdrawn - Thus the Revenue is at liberty to take action with respect to the earlier years as provided in the law - against assessee.

Issues Involved:
1. Denial of exemption under section 80IB(10) of the Income Tax Act.
2. Judicial propriety and binding precedence.
3. Eligibility of the appellant for exemption under section 80IB(10).
4. Independent nature of the housing project.
5. Land area requirement for exemption.
6. Role of the appellant as a contractor.
7. Undertaking, developing, and building housing projects.
8. Local authority approval and completion certificate requirements.
9. Definition of 'local authority' and compliance with the law.
10. Timely obtaining of the completion certificate.
11. Interpretation of relief-giving enactments.
12. Timing and validity of the completion certificate.
13. Land acquisition and benefit of relief provisions.
14. Principles of natural justice.

Detailed Analysis:

1. Denial of Exemption under Section 80IB(10):
The appellant's claim for exemption under section 80IB(10) was denied by the CIT(A) on grounds that the housing project did not meet the prerequisites, including the completion of the project before the specified date and the project being developed on a single plot of land measuring more than one acre.

2. Judicial Propriety and Binding Precedence:
The appellant argued that the CIT(A) did not follow the binding precedence set by the ITAT in the appellant's own case for the same project. The Tribunal in earlier years had allowed the exemption under section 80IB(10), but the CIT(A) chose not to follow this precedent.

3. Eligibility of the Appellant for Exemption:
The CIT(A) held that the appellant was already in the business of construction and thus not eligible for exemption under section 80IB(10). However, the appellant contended that the project in question was its first independent housing project, separate from its other business activities.

4. Independent Nature of the Housing Project:
The appellant claimed that the project, "Fortuna Apartments," was undertaken independently and was eligible for exemption. The CIT(A) disagreed, stating that the appellant acted merely as a contractor and not as a developer.

5. Land Area Requirement for Exemption:
The project was developed on three contiguous plots with a combined area of more than one acre. The CIT(A) argued that since the plots were acquired and sanctioned separately, they did not meet the requirement of a single plot of one acre or more.

6. Role of the Appellant as a Contractor:
The CIT(A) denied the exemption on the grounds that the appellant acted as a contractor, with none of the sanctions or approvals being in the appellant's name, and the consideration was paid in kind.

7. Undertaking, Developing, and Building Housing Projects:
The essence of the claim under section 80IB(10) is that it applies to an undertaking developing and building housing projects. The appellant argued that it had undertaken and developed the "Fortuna Apartments" project and was thus entitled to the exemption.

8. Local Authority Approval and Completion Certificate Requirements:
The CIT(A) held that the Lucknow Development Authority (LDA) ceased to be a local authority following an amendment in section 10(20) of the Act, and therefore, the approval and completion certificate from LDA did not meet the legal requirements.

9. Definition of 'Local Authority' and Compliance with the Law:
The appellant argued that the LDA was the prescribed authority for granting approval under the UP Urban Planning and Development Act, 1973, and that it had duly complied with the law by obtaining approval from the LDA.

10. Timely Obtaining of the Completion Certificate:
The CIT(A) held that the completion certificate was not obtained within the prescribed limit and that it was issued in the name of a deceased person, making it invalid. The appellant contended that the completion certificate was obtained within the prescribed limit and should be considered valid.

11. Interpretation of Relief-Giving Enactments:
The appellant argued that the denial of exemption was based on irrelevant considerations and contrary to the rule of interpretation of relief-giving enactments, which should be construed liberally.

12. Timing and Validity of the Completion Certificate:
The CIT(A) noted that the completion certificate was obtained much after the close of the relevant accounting year and was issued in the name of a deceased person, which raised questions about its validity.

13. Land Acquisition and Benefit of Relief Provisions:
The appellant executed the project on land partly acquired under a Builder's Agreement from a deceased individual. The CIT(A) held that merely because the completion certificate was issued in the name of the deceased, the benefit of the relief provision could not be denied.

14. Principles of Natural Justice:
The appellant argued that the order appealed against was contrary to the facts, law, and principles of natural justice.

Conclusion:
The Tribunal, after considering all the issues and arguments, upheld the denial of exemption under section 80IB(10) of the Income Tax Act. The Tribunal found that the project did not meet the requisite conditions, including the timely completion of the project and the validity of the completion certificate. The appeal of the assessee was dismissed.

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