2015 (10) TMI 2820 - AT - Income Tax

Deduction u/s 80IB - Denial of deduction as assessee has not obtained the completion certificate from the local authority before 31/03/2008, which is mandatory as per explanation-2 to section 80IB(10) - HELD THAT - We note that section 80IB (10) of the Act was substituted by the Finance (No.2) Act, 2004, w.e.f. 01/04/2005 and prior to its substitution sub-section (10), as amended by the Finance Act, 2000, w.e.f. 01/04/2001 and Finance Act, 2003, w.r.e.f. 01/04/2002 provides 100% of the profit derived in any previous year relevant to any assessment year from such housing project approved before 31/03/2005. Thus, time project completion time limit is not provided in the section. The project of the assessee commenced in the financial year 2003-04 i.e. before 01/04/2005. Circular no.772 dated 23/12/1998 with respect to tax incentive provision/tax holiday supports the case of the assessee. There is uncontroverted finding in the impugned order that identical issue was decided for A.Y. 2008-09 on 28/03/2011 holding that the project under taken by the assessee had not commenced prior to 01/10/1998, wherein, the Assessing Officer was directed to allow the claimed deduction. No contrary decision was brought to our notice contradicting the finding recorded in the impugned order, thus, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) on these issues raised by the Revenue, consequently, the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deduction under section 80IB(10) of the Income Tax Act.
2. Requirement of completion certificate from the local authority.
3. Applicability of amended provisions to projects approved before 01/04/2005.
4. Competence of Gram Panchayat to issue completion certificates.
5. Charging of interest under sections 234B and 234C of the Act.

Issue-wise Analysis:

1. Deduction under section 80IB(10) of the Income Tax Act:
The Revenue challenged the deduction under section 80IB(10) granted by the First Appellate Authority, arguing that the assessee did not obtain the completion certificate from the local authority before 31/03/2008. The Tribunal noted that the project was approved before the insertion of the requirement for a completion certificate effective from 01/04/2005. The Tribunal referenced several judicial precedents, including the Delhi High Court's affirmation that projects approved before 01/04/2005 are not subject to the completion certificate requirement. Consequently, the Tribunal allowed the deduction under section 80IB(10).

2. Requirement of completion certificate from the local authority:
The Tribunal examined whether the completion certificate was mandatory for projects approved before 01/04/2005. Citing the decision in CIT vs. CHD Developers and other relevant cases, the Tribunal concluded that the completion certificate requirement did not apply to projects approved before the amendment date. The Tribunal emphasized that the assessee could not be expected to fulfill conditions not present in the statute when the project was approved.

3. Applicability of amended provisions to projects approved before 01/04/2005:
The Tribunal reiterated that the amended provisions requiring a completion certificate, which came into effect on 01/04/2005, do not apply to projects approved before this date. This position was supported by multiple judicial decisions, including those from the Delhi High Court and the Madras High Court. The Tribunal found that the project in question was approved on 05/03/2004, thus falling under the pre-amendment provisions.

4. Competence of Gram Panchayat to issue completion certificates:
The Tribunal addressed the issue of whether a completion certificate from the Gram Panchayat suffices. It was noted that the Gram Panchayat is considered a local authority under the Income Tax Act, as supported by the decision in Krishna Harubhau Lohokare vs. ITO. The Tribunal accepted the completion certificate issued by the Gram Panchayat, aligning with the precedent that Gram Panchayats are competent to issue such certificates for the purposes of section 80IB(10).

5. Charging of interest under sections 234B and 234C of the Act:
The Tribunal stated that the charging of interest under sections 234B and 234C is consequential and dependent on the primary issue of the deduction under section 80IB(10). Given the Tribunal's decision to allow the deduction, the interest charges would be adjusted accordingly.

Conclusion:
The Tribunal allowed the appeal of the assessee, granting the deduction under section 80IB(10) and recognizing the completion certificate issued by the Gram Panchayat. The Tribunal dismissed the Revenue's appeal, affirming that the amended provisions requiring a completion certificate do not apply to projects approved before 01/04/2005. The charging of interest under sections 234B and 234C was deemed consequential.