2013 (11) TMI 895 - AT - Income Tax

Deduction u/s 80IB(10) - Completion of project - Whether assessee is liable for deduction u/s 80IB(10) when some units are completed and some are not - Held that - Assessee has obtained permission for construction of four buildings H-1, H-2, H-3, H-4 and G building. The said G building was to be given to the PMC to be allotted to the weaker section of the society. The housing project was approved by the local authority on 28.05.2003 wherein plan for construction of whole project including H-1, H-2, H-3 & G building, and first floor of H-4 building was sanctioned. The assessee was planning to purchase further TDR for construction of remaining floors of H-4 building. As the project was sanctioned before 01.04.2004, the due date of completion of the project was 31.03.2008. It is undisputed that the assessee has received the completion certificate in respect of H-1, H-2, H-3 & G building on 19.03.2008 and 06.03.2007. However, in respect of the building H-4, the assessee submitted that the TDR could not be purchased and, therefore, the building H-4 could not be completed and hence the completion certificate was not issued by the PMC for the H-4 building having four flats. Assessee has received the completion certificate with regards to buildings H-1, H-2, H-3 and G as stated above. So assessee is entitled for claim of deduction u/s.80IB(10) in the stipulated time in respect of completed buildings of the project in question. The construction on H-4 building could not be completed for the conditions beyond the control of the assessee for which assessee is not claiming the deduction u/s.80IB(10). In such situation the assessee should not be denied claim of deduction u/s.80IB(10) in respect of completed buildings and claim of the assessee should not be completely denied - Following decision of Dy.CIT Vs. Brigade Enterprises (P) Ltd. 2008 (8) TMI 453 - ITAT BANGALORE-A - Decided in favour of assessee.

Issues Involved:
1. Denial of deduction under Section 80IB(10) for the project Harsh Paradise due to non-completion by 31st March 2008.
2. Completion certificate not received from the local authority by the stipulated date.
3. Whether partial completion of the project allows for proportionate deduction.
4. Eligibility for deduction for completed buildings within the project.
5. Interpretation of Section 80IB(10) and its application to projects with delayed completion certificates.

Detailed Analysis:

1. Denial of Deduction Under Section 80IB(10):
The appellant, a firm engaged in the business of promoters and builders, contested the denial of a deduction of Rs. 93,93,614/- under Section 80IB(10) by the CIT(A). The project in question, Harsh Paradise, was not completed by the stipulated date of 31st March 2008. The Assessing Officer (AO) assessed the total income at Rs. 1,33,96,580/- and rejected the deduction claim, which was upheld by the CIT(A).

2. Completion Certificate Not Received:
The appellant argued that the project Harsh Paradise, consisting of buildings H-1, H-2, H-3, H-4, and G, was substantially completed, and completion certificates for buildings H-1, H-2, H-3, and G were received before the deadline. However, due to the inability to purchase Transferable Development Rights (TDR), building H-4 was not completed, and hence, the completion certificate was not issued by the Pune Municipal Corporation (PMC).

3. Partial Completion and Proportionate Deduction:
The appellant submitted that the firm should be allowed a proportionate deduction for the completed buildings H-1, H-2, H-3, and G, which met the completion criteria. The AO rejected this claim, stating that the entire project was not completed within the stipulated time frame, thus disqualifying the entire deduction under Section 80IB(10).

4. Eligibility for Deduction for Completed Buildings:
The appellant relied on several judicial precedents, including the ITAT Pune Bench decisions in Runwal Multihousing Pvt. Ltd., City Development Corporation, and others, which supported the view that deductions under Section 80IB(10) should be allowed for the portions of the project that were completed on time. The appellant argued that the completed buildings H-1, H-2, H-3, and G, which were on a plot area of 6,722 sq.mtrs and completed before 31st March 2008, should be eligible for the deduction.

5. Interpretation of Section 80IB(10):
The Tribunal considered various case laws, including decisions from the Gujarat High Court in CIT Vs. Tarnetar Corporation Pvt. Ltd., ITAT Pune Bench in Hindustan Samuha Awas Ltd., and others, which emphasized that the date of application for a completion certificate and the substantial completion of the project should be considered. The Tribunal noted that the delay in issuing the completion certificate by the local authority should not penalize the assessee if the project was substantially completed and the delay was beyond the control of the assessee.

Conclusion:
The Tribunal concluded that the appellant was entitled to the deduction under Section 80IB(10) for the completed buildings H-1, H-2, H-3, and G, despite the non-completion of building H-4. The Tribunal emphasized a liberal interpretation of the taxing statute to promote economic growth and development, and directed the AO to allow the deduction for the completed portions of the project.

Final Judgment:
The appeal filed by the assessee was allowed, and the AO was directed to grant the deduction under Section 80IB(10) for the completed buildings H-1, H-2, H-3, and G, excluding the incomplete building H-4.

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