2014 (1) TMI 1232 - AT - Income Tax

Eligibility for Deduction u/s 80IB of the Act Project not completed within stipulated time Completion certificate not furnished Held that - The building plan approval was obtained on 10.3.2004 and there is no dispute - As is evident from the substitution of Section 80IB(10)(a) of the Act, prior to the amendment, there was no such requirement as regards furnishing of completion certificate and the deduction provision pointed out to the grant of 100% deduction on the profits derived from a housing project, if the undertaking had commenced development and construction of the housing project on or after 1st October, 1998 - Thus, till 2005, there was no clause dealing with completion, in which event, one cannot read into the provision as a condition, which is not specifically provided. Though the assessee s case is related to A.Ys. 2007-08 and 2008-09, the project was got approved by the concerned local authority before 1.4.2004 - The provisions of section 80IB as stood prior to the amendment are applicable to the assessee s case - As the substitution of Explanation to clause (a) to subsection (10) of section 80IB of the Income-tax Act, 1961 was brought in under Finance (No. 2) Act of 2004, effective from 1.4.2005 - Thus, in the absence of any such requirement read into the section, it would be difficult to accept the observation of the AO that the claim for deduction was rejected on the ground that the assessee had not furnished the completion certificate Relying upon Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd. 2012 (11) TMI 588 - MADRAS HIGH COURT the order of the CIT(A) upheld Decided against Revenue.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
2. Requirement of completion certificate for claiming deduction.
3. Admissibility of additional evidence under Rule 46A of the Income-tax Rules, 1962.
4. Validity and relevance of certificates issued by local authorities.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The core issue was whether the assessee was eligible for deduction under Section 80IB(10) despite not producing a completion certificate by the stipulated deadline of 31/03/2008. The assessee firm, engaged in the construction and sale of flats, had claimed deductions for previous years which were allowed. However, for the assessment years 2007-08 and 2008-09, the Assessing Officer (AO) rejected the deduction due to the absence of a completion certificate. The CIT(A) observed that the assessee had complied with all other conditions laid down under Section 80IB(10), such as the size of the plot, the approval date, and the size of the residential units. Therefore, the CIT(A) directed the AO to allow the deduction, which was contested by the Revenue.

2. Requirement of Completion Certificate:
The Revenue argued that the assessee did not furnish the completion certificate by 31/03/2008, a requirement under Section 80IB(10). The CIT(A) admitted additional evidence, including a letter from the Zonal Commissioner, GHMC, certifying that the project was completed before 31/03/2008. The CIT(A) found that the AO's reliance on a letter from the Deputy Commissioner, which stated that the construction was still in progress, was not substantiated with specific details. The CIT(A) concluded that the certificate from the Zonal Commissioner was sufficient to prove compliance with Section 80IB(10).

3. Admissibility of Additional Evidence under Rule 46A:
The CIT(A) admitted additional evidence under Rule 46A, which included sale documents, municipal tax assessments, and an application for regularization filed before GHMC. This evidence was forwarded to the AO for a remand report, which was duly furnished. The CIT(A) considered this additional evidence crucial in establishing that the project was completed by the stipulated date, despite the AO's objections.

4. Validity and Relevance of Certificates Issued by Local Authorities:
The CIT(A) and later the Tribunal placed significant weight on the certificate issued by the Zonal Commissioner, GHMC, which confirmed the project's completion by 31/03/2008. The Tribunal noted that as per the provisions of Section 80IB(10) applicable at the time of the project's approval, there was no explicit requirement for a completion certificate. This view was supported by the judgment of the Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd., which held that the absence of a completion certificate requirement in the pre-amended Section 80IB(10) meant that the deduction could not be denied on this ground.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was eligible for the deduction under Section 80IB(10). The Tribunal dismissed the Revenue's appeals, emphasizing that the completion certificate issued by the Zonal Commissioner was valid and that the AO's reliance on the Deputy Commissioner's letter was insufficient to deny the deduction. The Tribunal also highlighted that the provisions applicable at the time of the project's approval did not mandate a completion certificate, aligning with the Madras High Court's judgment in a similar case. The appeals were dismissed, and the order was pronounced in the open court on 22nd January 2014.