2013 (7) TMI 1123 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for Deduction u/s 80IB(10)
2. Completion Certificate Requirement
3. Commercial Area Exceeding Limit

Summary:

1. Eligibility for Deduction u/s 80IB(10):
The assessee, an AOP engaged in construction, claimed deduction u/s 80IB(10) for profits from the "Sun Shree" project, which was denied by the Assessing Officer (AO) on grounds of non-fulfillment of conditions regarding commercial area and completion certificate. The CIT(A) accepted that the assessee had two separate projects (Project A and Project B) but upheld the AO's denial of deduction due to non-receipt of the completion certificate before the stipulated date and excess commercial area.

2. Completion Certificate Requirement:
The AO and CIT(A) denied the deduction citing the lack of a completion certificate from the Pune Municipal Corporation (PMC) before 31-03-2008. The assessee argued that the project was completed before this date, and the delay in obtaining the certificate was due to technical reasons beyond their control. The Tribunal referred to various judicial precedents, including the Hon'ble Gujarat High Court in the case of CIT Vs. Tarnetar Corporation, which held that substantial compliance should be considered, and minor deviations should not vitiate the purpose of the deduction. It was established that the assessee had applied for the completion certificate on 04-04-2006, and the delay in issuance by PMC was not attributable to the assessee.

3. Commercial Area Exceeding Limit:
The AO and CIT(A) also denied the deduction because the commercial area exceeded the limit prescribed u/s 80IB(10). The Tribunal noted that the project was approved before 31-03-2005, and as per the Hon'ble Bombay High Court in CIT Vs. Brahma Associates and Hon'ble Gujarat High Court in Manan Corporation Vs ACIT, the amendment restricting commercial area to 5% or 2000 sq.ft. is prospective and not applicable to projects approved before this date. Therefore, the assessee was entitled to the deduction despite the commercial area exceeding the limit.

Conclusion:
The Tribunal allowed the appeals, holding that the assessee was entitled to the deduction u/s 80IB(10) for both Project A and Project B. The completion certificate issued on 31-03-2010 was deemed to relate back to the application date of 04-04-2006, and the commercial area restriction was not applicable retrospectively. The Tribunal emphasized that the assessee had substantially complied with the conditions and should not be penalized for delays beyond their control.