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2016 (5) TMI 1268 - HC - Income TaxDeduction under Section 80IB(10) denied - date of completion - selection of relevant date - ITAT held that the assessee should be deemed to have commenced the work of development and construction, from the time even when the preliminary works started - Held that - From the finding recorded by the Tribunal it is clear that certain expenses incurred by the assessee in removing the hut dwellers, digging of bore well, getting electricity connection, putting up compound walls and security cabins, etc. have all been taken by the Tribunal to be part of construction activity. If the Tribunal was of the concrete opinion that all these activities would constitute an activity of construction, the Tribunal ought to have first disallowed the findings recorded by CIT (Appeals) that the actual date of commencement of construction was 15.10.1998. But, unfortunately, the Tribunal agreed in paragraph 14 of its order that the actual date of commencement of construction was 15.10.1998. However, the Tribunal held that all pre-construction activities should be taken to be part of development, so as to pre-pone the date of development and construction. This, in our considered view, is not the correct interpretation to be offered to the composite expression development and construction of the housing project. - Decided in favour of assessee
Issues:
1. Interpretation of Section 80IB of the Income Tax Act regarding entitlement to relief. 2. Determination of the commencement date of development and construction for claiming deductions. 3. Consideration of evidence and submissions by the Income Tax Appellate Tribunal. 4. Assessment of errors in the order of the Income Tax Appellate Tribunal. 5. Correct interpretation of the expression 'development and construction' under Section 80IB of the Income Tax Act. Analysis: Issue 1: Interpretation of Section 80IB of the Income Tax Act The case involved questions regarding the appellant's entitlement to relief under Section 80IB of the Income Tax Act for a housing project. The main focus was on whether the appellant met the conditions specified in Section 80IB(10) for claiming deductions based on the commencement of development and construction after 01.10.1998. Issue 2: Determination of Commencement Date The Assessing Officer and the Commissioner of Income Tax (Appeals) disagreed on the commencement date of construction for the housing project. The Commissioner recorded a finding that construction began on 15.10.1998, which was not disputed by the Assessing Officer. However, the dispute centered around whether development of the project commenced before 01.10.1998, as this was crucial for determining eligibility for deductions under Section 80IB(10). Issue 3: Consideration of Evidence The Commissioner of Income Tax (Appeals) examined a timeline of events related to the project to determine the commencement dates of various activities. The Tribunal, while assessing the case, considered the definition of 'development' from the Tamil Nadu Town and Country Planning Act, 1971, which was deemed as an extraneous aid in statutory interpretation. Issue 4: Assessment of Errors The Tribunal's decision was challenged based on errors in interpreting the requirement of both development and construction under Section 80IB(10). The Tribunal's view that pre-construction activities should be considered part of development to pre-pone the commencement date was deemed legally incorrect. The Tribunal's failure to distinguish between development and construction as separate requirements under the statute was highlighted. Issue 5: Correct Interpretation of 'Development and Construction' The High Court concluded that the Tribunal's interpretation of 'development and construction' was flawed. The Tribunal's decision to treat pre-construction activities as part of development to advance the commencement date was deemed incorrect. The Court emphasized the distinct requirements of development and construction under Section 80IB(10) and ruled in favor of the assessee, allowing the appeal and answering the questions of law in favor of the appellant.
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