2012 (11) TMI 50 - AT - Income Tax

Disallowance of the exemption u/s 80IB(10) - assessee firm engaged in the business of civil construction developing building and housing projects alleged that since the assessee was not selling any constructed properties to customers and the sums so received were credited as construction receipt and further only the registry of the land was made, the assessee merely acted as a contractor, the deduction is not allowable Held that - Land for housing project was purchased by the assessee and subsequently conversion of the same was obtained for residential use by the assessee. The assessee thereafter constructed residential units and gave possession of such completed houses to the customers, therefore, the assessee acted as a builder and developer - housing project of the assessee was approved by the local authority on 3.1.2004 i.e. before 1.4.2004, therefore, the assessee was expected to complete the construction on or before 31.3.2008. The assessee was also supposed to get completion certificate from the local authority - no such certificate was issued by the local authority before 31.3.2008, therefore, it is clear that the assessee has not fulfilled the conditions laid down under the Act - Even till today, no evidence has been produced that the local authority issued the completion certificate to the assessee - appeals of the assessee are dismissed

Summary

Issues Involved:
1. Disallowance of exemption under Section 80IB(10) of the IT Act.
2. Levy of interest under Sections 234B and 234C of the IT Act.

Detailed Analysis:

1. Disallowance of Exemption under Section 80IB(10) of the IT Act:

The assessee firm, engaged in the business of civil construction and developing building and housing projects, claimed a deduction under Section 80IB(10) for an amount of Rs. 66,73,761/-. The case was selected for scrutiny, and the Assessing Officer (AO) disallowed the deduction on the grounds that the assessee was merely acting as a contractor and not as a developer. The AO also noted that the constructed area exceeded the maximum limit of 1500 sq.ft. and no completion certificate was issued by the local authority.

The learned Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision. The assessee appealed to the Tribunal, where it was argued that the completion certificate was applied for but not issued, and possession of the dwelling units was handed over to customers. The Tribunal referred to the case of M/s Agrawal Builders, where similar issues were discussed. The Tribunal noted that the built-up area exceeded the prescribed limit and no completion certificate was issued, thus disqualifying the assessee from claiming the deduction.

2. Levy of Interest under Sections 234B and 234C of the IT Act:

The assessee also contested the levy of interest under Sections 234B and 234C. However, since the primary issue of disallowance under Section 80IB(10) was upheld, the levy of interest was consequential and thus sustained.

Conclusion:

The Tribunal found no merit in the assessee's appeals. The assessee failed to meet the conditions stipulated under Section 80IB(10), particularly regarding the built-up area and the absence of a completion certificate. Consequently, the disallowance of the deduction and the levy of interest were upheld. The appeals were dismissed.