2016 (2) TMI 566 - AT - Income Tax

Disallowance of deduction claimed u/s. 80IB(10) for non-completion of project before the due date - incomplete housing project - Held that - As decided in Income Tax Officer Vs. M/s. Paras Construction 2015 (8) TMI 266 - ITAT PUNE non obtaining of completion certificate in respect of project approved prior to 01-04-2005 will not render the assessee ineligible for claiming deduction u/s. 80IB(10) in the impugned assessment year. Thus, in the facts of the case and the well settled law discussed above, we are of the considered opinion that the assessee is eligible to claim deduction u/s. 80IB(10) in respect of its project, Laxmi Vihar at Hadapsar, Pune. - Decided in favour of assessee

Summary

Issues Involved:
1. Withdrawal of certain grounds of appeal.
2. Disallowance of deduction claimed under section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis:

1. Withdrawal of Certain Grounds of Appeal:
The assessee filed applications to withdraw specific grounds in their appeals for the assessment years 2003-04 to 2006-07. The Tribunal accepted these applications, and the mentioned grounds were dismissed as withdrawn.

2. Disallowance of Deduction Claimed Under Section 80IB(10):
The primary issue in all appeals was the disallowance of the deduction claimed under section 80IB(10) of the Income Tax Act, 1961. The facts of the case reveal that the assessee, a partnership firm engaged in real estate development, developed a housing project named 'Laxmi Vihar' in Pune. The project commenced with a certificate from Pune Municipal Corporation (PMC) on 01-02-2002 and was allegedly completed before 31-03-2008. The assessee claimed deductions under section 80IB(10) for profits from the sale of flats for the assessment years 2003-04 to 2006-07.

Initially, the returns were accepted, but following a survey action under section 133A on 06-06-2008, the assessments were reopened, and the deduction claims were disallowed on the grounds of non-completion of the project before the due date. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the current appeals before the Tribunal.

The assessee argued that the requirement for a completion certificate was effective only from 01-04-2005, and since the project was approved before this date, the completion certificate was not mandatory. They contended that the project was completed on 16-05-2005, and the delay in completion of six flats was resolved before the due date. The application for the completion certificate was made on 16-05-2005, and the certificate for the six flats was issued on 09-10-2009. The assessee relied on several judicial precedents to support their claim.

The Department, however, argued that the completion certificate was issued on 09-10-2009, beyond the stipulated date of 31-03-2008, making the assessee ineligible for the deduction. They cited the decision of the Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax Vs. Global Reality, which mandated obtaining the completion certificate before the cutoff date.

Upon reviewing the submissions, the Tribunal noted that the project was indeed commenced before 01-04-2004 and the final completion certificate was issued on 09-10-2009. The Tribunal observed that the delay in issuing the completion certificate by PMC could not be attributed to the assessee, as there were no objections from PMC, and the flats were occupied before 31-03-2008. The Tribunal also considered the amendments to section 80IB(10) effective from 01-04-2005, which introduced the requirement for a completion certificate, and the Supreme Court's decision in Commissioner of Income Tax Vs. Sarkar Builders, which held that such amendments could not be applied retroactively.

The Tribunal found that the issue was covered by the decision of the Coordinate Bench in Income Tax Officer Vs. M/s. Paras Construction, which held that non-obtaining of a completion certificate for projects approved before 01-04-2005 did not render the assessee ineligible for the deduction. The Tribunal also noted that the Hon'ble Delhi High Court and the Hon'ble Madras High Court had ruled in favor of the assessee in similar cases. Following the principle that when two views are possible, the view favorable to the assessee should be adopted, the Tribunal allowed the appeals of the assessee.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals of the assessee, granting the deduction under section 80IB(10) for the respective assessment years. The decision was pronounced on 15th January 2016.