2017 (3) TMI 1329 - AT - Income Tax

Disallowance u/s 80IB(10) - lack of completion certificate - AO noted that the appellant firm has allotted more than one unit to an individual and his spouse which is violated to section 80IB(10)(f) - Held that - As regards the evidences in support of completion of the project in time the assessee has submitted evidences from the Gram Panchayat. The Gram Panchayat has been accepted as competent authority in several case laws including that from Hon ble jurisdictional High Court. As examined the evidences submitted by the assessee regarding the completion of the project find that the evidences duly established that the project has been duly completed for the deduction being claimed. Hence find that adverse inference drawn on account of lack of completion certificate cannot be sustained. Another adverse inference has been drawn on account of allotment of one flat to spouse of existing allottee. In this regard it is the contention of the learned counsel of the assessee that the said provision is not applicable in the case of the assessee inasmuch as the concerned provision was not applicable. Further more learned counsel has contended that the payments for the said flats were duly received prior to the applicability of the concerned provision. Alternatively learned counsel of the assessee has placed reliance upon the decision of Hon ble High Courts where it has been held that in all fairness the claim of the assessee with regard to proportionate relief has to be read into the provisions so that deduction provisions are sustained and denial of the entire claim on the basis of some units which had not complied with the conditions is not justified. Direct the AO to examine the contentions of the assessee and if required, disallow the exemption qua the sale of flat which is attracted by the concerned provisions. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80IB(10) due to non-submission of the completion certificate.
2. Allotment of more than one unit to an individual and his spouse violating Section 80IB(10)(f).

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10):
The appellant, a builder, claimed a deduction of ?42,20,301 under Section 80IB(10) of the Income Tax Act, 1961, for a housing project approved by the Gram Panchayat on 01-03-2006. The Assessing Officer (AO) disallowed the claim on two grounds: failure to submit the completion certificate and allotment of more than one unit to an individual and his spouse. The AO noted that the appellant did not mention the date of completion in Form No. 10CCB and failed to produce the completion certificate from the local authority. Despite the appellant submitting various documents like Gram Panchayat tax receipts, NOC for electrical connection, valuation certificates, and possession letters, the AO was not convinced and held that the appellant did not comply with the basic conditions of Section 80IB(10).

Upon appeal, the CIT(A) upheld the AO's decision, emphasizing that the completion certificate is mandatory for claiming the deduction. The CIT(A) noted that the appellant failed to furnish the completion certificate even after almost three years from the due date of 31-03-2011, thus violating the basic condition stipulated under Section 80IB(10).

The appellant argued before the ITAT that the Gram Panchayat is a competent authority and submitted various evidences to support the project's completion by 31-03-2011. The appellant relied on several case laws, including ITA No. 35 & 36/Nag/2014 in the case of ITO vs. M/s Swapnashilp Developers, where similar issues were decided in favor of the assessee. The ITAT referred to these precedents, especially the decision of the jurisdictional High Court, which accepted the Gram Panchayat as a competent authority. Consequently, the ITAT found that the adverse inference drawn due to the lack of a completion certificate could not be sustained.

2. Allotment of More Than One Unit to an Individual and His Spouse:
The AO also disallowed the deduction on the ground that the appellant allotted more than one unit to an individual and his spouse, violating Section 80IB(10)(f). The AO identified cases where multiple units were allotted to Shri Dhananjay Ramlalji Choudhary and to Shri Ravindra R. Akulwar and his wife Smt. Ashwini Akulwar. The CIT(A) confirmed this finding, stating that the appellant violated the amended provisions of Section 80IB(10)(f), effective from 01-04-2010, which prohibit allotting more than one residential unit in a housing project to an individual or their spouse.

The appellant contended that the provision was not applicable to them and relied on various case laws supporting the proportionate relief approach. The ITAT acknowledged the appellant's arguments and referred to the jurisdictional High Court's decision in CIT vs. Cajetano Mario Pereira, which supported the appellant's case. The ITAT directed the AO to examine the appellant's contentions and, if necessary, disallow the exemption only for the units that violated the concerned provisions.

Conclusion:
The ITAT allowed the appeal for statistical purposes, directing the AO to re-examine the completion of the project based on the Gram Panchayat's evidence and to consider the proportionate relief approach for units violating Section 80IB(10)(f). The order emphasized that the adverse inference due to the lack of a completion certificate could not be sustained, and the jurisdictional High Court's decisions were in favor of the appellant.