2017 (3) TMI 1307 - AT - Income Tax

Benefit of deduction u/s. 80IB(10) - assessee could not furnish occupancy/completion certificate from the competent authority before the due date i.e. 31-03-2012 - Held that - It is an undisputed fact that the assessee received commencement certificate from PMC in respect of its housing project on 27-07-2006. However, till that time permission for use of land for nonagriculture purpose was not received from the Collector. As per the provisions of section 42 of Maharashtra Land Revenue Code, 1966 the land used for agricultural purpose cannot be used for any nonagricultural purpose unless permission is granted by the Collector. Under such circumstances even if the housing project of the assessee is approved by the PMC, the assessee could not have started construction of the project unless NA permission is received from the Collector. In the present case, since, the permission from Collector was received subsequent to the issuance of commencement certificate by PMC, the later date shall be deemed to be the date of approval of project and accordingly the period of 5 years for completion of project as envisaged u/s. 80IB(10)(a)(iii) shall be computed from the date NA permission is granted. Accordingly, for claiming deduction u/s. 80IB(10) the due date of completion of assessee s housing project is 31-03-2013. Thus, in view of our above findings ground raised in the appeal by the Department is dismissed. The housing project of the assessee was approved for total 128 flats. 72 flats in Building A (Wings A and B) and 56 flats in Building B (Wings C and D). Architect under whose supervision housing project is constructed, had certified that 36 flats in Wing A and equal numbers of flats in Wing B including lower and upper parking are complete. Thus, it is evident that the assessee had applied for issuance of occupancy certificate in respect of 72 flats of Building A, well before the due date. The PMC granted partial occupancy letter in respect of 40 flats, i.e. 26 flats in Wing A and 14 flats in Wing B on 27-07-2012. Again vide communication dated 27-12-2013 the PMC granted occupancy letter in respect of 19 flats, i.e. 3 flats in Wing A and 16 flats in Wing B. Thus, out of 128 flats, the assessee received completion/occupancy certificate in respect of 115 flats. The final occupancy certificate in respect of 13 flats was withheld by the PMC for non-handing over of amenity space. There is no document on record to show that occupancy/completion certificate was not issued by the PMC on account of incomplete flats. The assessee had applied for grant of completion/occupancy certificate in respect of entire 128 flats well before due date. Delay caused in issuance of completion/occupancy certificate by PMC cannot be attributed to the assessee. - Decided against revenue

Summary

Issues Involved:
1. Determination of the commencement date for the housing project for claiming deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Eligibility for proportionate deduction under section 80IB(10) if completion certificates for some flats are obtained before the due date.
3. Impact of not obtaining the final occupancy certificate for all flats on the eligibility for deduction under section 80IB(10).

Detailed Analysis:

1. Determination of the Commencement Date for the Housing Project:
The Department contended that the commencement date should be the date when the Pune Municipal Corporation (PMC) granted the commencement certificate (27-07-2006). The assessee argued that the commencement date should be when the Non-Agricultural (NA) permission was received from the Collector, Pune (11-06-2007). The Tribunal upheld the assessee's view, stating that construction could not commence without NA permission. Therefore, the commencement date was considered as 11-06-2007, making the due date for completion 31-03-2013. The Tribunal dismissed the Department's ground on this issue.

2. Eligibility for Proportionate Deduction:
The Department argued that section 80IB(10) does not allow for proportionate deduction if completion certificates for some flats were obtained before the due date, but not for all. The Tribunal noted that the assessee had applied for completion certificates for all 128 flats before the due date. The PMC issued partial occupancy certificates for 115 flats, and the delay for the remaining 13 flats was due to PMC's procedural delays, not the assessee's fault. The Tribunal cited the Hon'ble Bombay High Court's decision in Commissioner of Income Tax Vs. Hindustan Samuh Awas Ltd., which held that delays by municipal authorities should not penalize the assessee. Therefore, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to grant the deduction.

3. Impact of Not Obtaining Final Occupancy Certificate:
The Department argued that the absence of a final occupancy certificate for 32 flats disqualified the assessee from claiming the deduction. The Tribunal found that the assessee had completed the project and applied for the completion certificate within the prescribed time. The delay in issuing the final occupancy certificate was due to PMC's procedural issues, such as the reservation of space for a telephone exchange, which was beyond the assessee's control. The Tribunal referenced the Hon'ble Gujarat High Court's decision in Commissioner of Income Tax Vs. Tarnetar Corporation, which supported the assessee's position. The Tribunal concluded that the assessee was entitled to the deduction under section 80IB(10), despite the delay in obtaining the final occupancy certificate.

Conclusion:
The Tribunal dismissed the Department's appeal and upheld the Commissioner of Income Tax (Appeals)'s order granting the deduction under section 80IB(10) to the assessee. The Tribunal emphasized that delays caused by municipal authorities should not penalize the assessee and that the project was completed within the required timeframe as per the applicable legal provisions. The appeal of the Department was dismissed for being devoid of merit.