2012 (12) TMI 360 - AT - Income Tax

Deduction u/s 80IB Whether deduction u/s 80IB will be allowed in respect of whole project or on partial basis - Assessee is a firm engaged in business of builder and promoter - AO has denied the deduction on the ground that project was not complete within the stipulated time - Completion certificate was obtained and furnished before the AO for 173 out of 205 flats Held that - Assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. - Restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. Therefore, assessee is entitled for benefit u/s.80IB(10) in respect of 173 flats completed before prescribed limit. Issue decides in favour of assessee

Summary

Issues Involved:
1. Denial of deduction under section 80-IB(10) for incomplete housing project.
2. Denial of proportionate deduction under section 80-IB(10) for partially completed housing units.

Issue-wise Detailed Analysis:

1. Denial of Deduction Under Section 80-IB(10) for Incomplete Housing Project:

The assessee, a firm engaged in the business of builders and promoters, claimed a deduction of Rs. 7,87,49,450/- under section 80-IB(10) for the assessment year 2007-08. The Assessing Officer (AO) denied the deduction on the grounds that the housing project was not completed within the stipulated time. The project consisted of 205 flats, out of which completion certificates were obtained for only 173 flats. The assessee argued that 85% of the project was completed and that the completion certificate was issued by the local authority, Pune Municipal Corporation, on 31-03-2008. However, the AO and the CIT(A) rejected this claim, stating that the project was not fully completed within the stipulated time.

2. Denial of Proportionate Deduction Under Section 80-IB(10) for Partially Completed Housing Units:

The assessee argued for a proportionate deduction for the 173 flats that were completed within the stipulated time. The assessee cited several Tribunal decisions, including Bengal Ambuja Housing Development Ltd., Brigade Enterprises (P) Ltd., and G.V. Corporation vs. ITO, which allowed proportionate deductions for partially completed projects. The assessee also cited the principle that taxing statutes granting incentives for economic growth should be construed liberally, as established in Bajaj Tempo Ltd. Vs. CIT and CIT Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. The assessee contended that the delay in obtaining the completion certificate was due to external factors beyond their control, such as the intervention of the CID for investigating the Urban Land Ceiling Act violations.

Tribunal's Findings:

The Tribunal acknowledged that the project was not fully completed within the stipulated time, which is a basic condition for the allowability of deduction under section 80-IB(10). However, it noted that the delay was due to factors beyond the assessee's control, such as the CID's intervention. The Tribunal emphasized that the law should not compel the impossible and that the assessee should not suffer due to circumstances beyond their control. The Tribunal also highlighted that the provision for promoting economic growth should be interpreted liberally.

Conclusion:

The Tribunal concluded that the assessee is entitled to a proportionate deduction under section 80-IB(10) for the 173 flats that were completed within the stipulated time. The AO was directed to allow the deduction accordingly. The appeal of the assessee was partly allowed.