2018 (12) TMI 401 - AT - Income Tax

Disallowance of deduction u/s 80IB(10) - demonstration of completion of the project - Held that - Hon ble Jurisdictional High Court in the case of Ambey Developer Pvt. Ltd. 2017 (12) TMI 1008 - PUNJAB AND HARYANA HIGH COURT has categorically held that the assessee having demonstrated completion of the project and having applied for completion certificate well within stipulated date, it shall be entitled to claim deduction u/s 80IB(10) and as per the facts in the present case the assessee had demonstrated completion of the project in the year 2009 and had also shown to have applied for completion certificate in 2009 itself while it was required to obtain the certificate by 31.3.2011, it can be safely said that the assessee had applied with the conditions of having obtained completion certificate within five years from the date of approval of the project and hence was entitled to claim deduction of profits u/s 80IB(10) of the Act. - decided in favour of assessee. Expenditure claimed under Travelling Expenses - Held that - Issue has neither been considered nor argued with reference to the relevant facts. In the interests of justice, parties are directed to refer to specific visits specifying the persons travelling and the countries travelled to as mere filing of bills raised by travel agent cannot be said to be sufficient compliance. The issue is restored to the AO to decide the same on the basis of facts and evidences. The expenses of children or personal expenses, it goes without saying, have to be disallowed. The assessee in its own interest is directed to place full facts and evidences on record. The documents filed admittedly are not sufficient and complete - set aside the issue back to the file of the AO directing the assessee to place supporting facts and evidences as relying upon generalized arguments would be of no help. The ground No. 3 allowed for statistical purposes

Issues Involved:
1. Disallowance of deduction under Section 80IB(10) of the Income Tax Act.
2. Disallowance of traveling expenses under Section 37(1) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Under Section 80IB(10):

The primary issue in both appeals pertains to the disallowance of deduction under Section 80IB(10) amounting to Rs. 1,51,10,390/-. The assessee, a company engaged in the development and building of housing projects, had its assessment order dated 13.12.2011 set aside by CIT, Patiala u/s 263 on 20.03.2014. Subsequently, the AO denied the deduction claimed u/s 80IB in the assessment order dated 19.03.2015, noting that the first approval from the competent authority was dated 14.10.2005, and the Completion Certificate should have been obtained on or before 31.03.2011.

The assessee argued that the approval granted by PUDA on 14.10.2005 was not by a competent authority as it was not a "local authority" as required by the Income Tax Act. They contended that the relevant approval was by Zirakpur Municipality on 24.10.2007, making the Completion Certificate obtained on 01.06.2012 and 17.10.2012 within the permissible time frame. However, the tax authorities discarded this second approval, emphasizing that the first approval was operative, and the assessee should have obtained the Completion Certificate by 31.03.2011.

The Tribunal referred to the jurisdictional High Court's decision in Pr. CIT Vs Ambey Developers Pvt. Ltd., which held that if the assessee had completed the construction within the stipulated period and applied for the completion certificate in time, the delay in issuance by the competent authority should not disentitle the assessee from claiming the deduction. The Tribunal found that the project was substantially completed within the stipulated period based on third-party evidence, such as possession certificates, electricity connections, fire safety certificates, and pollution control certificates, among others.

Given the facts and the legal precedent, the Tribunal allowed the deduction u/s 80IB(10) for both assessment years, stating that the assessee had demonstrated substantial compliance with the statutory requirements.

2. Disallowance of Traveling Expenses Under Section 37(1):

In ITA 637/CHD/2017, the assessee's claim of Rs. 20,23,712/- under traveling expenses was disallowed. The AO found that the travel expenses, which included foreign trips by the Director and her family, were not substantiated with evidence proving their business purpose. The assessee's explanation that the trips were for updating the Directors on the latest design and technology in real estate was not accepted due to the lack of supporting documentation.

The CIT(A) upheld this disallowance, noting that the appellant had only made general claims without providing specific evidence of the business purpose of the trips. The Tribunal agreed that the issue needed further elaboration and directed the AO to re-examine the matter. The assessee was instructed to provide detailed evidence of the business purpose of the trips, specifying the persons traveling and the countries visited. The Tribunal emphasized that personal expenses, including those of the Director's children, should be disallowed.

The issue was set aside to the AO for re-evaluation based on the complete and relevant facts and evidence, with the Tribunal allowing the ground for statistical purposes.

Conclusion:

The Tribunal allowed the deduction under Section 80IB(10) for both assessment years, recognizing the substantial compliance by the assessee. However, the disallowance of traveling expenses was remanded back to the AO for a detailed examination with specific instructions to the assessee to provide adequate evidence. The final order pronounced on 30.11.2018 concluded with ITA 635/CHD/2017 being allowed and ITA 637/CHD/2017 being partly allowed for statistical purposes.

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