2021 (1) TMI 914 - AT - Income Tax

Deduction under Section 80IB(10) - non completion of the housing project for claiming deduction - HELD THAT - In the present case, the assessee made an application on 30 November 2011; therefore, on this ground also the completion date is within the five years limitation - for assessment year 2013 14 identically the deduction u/s 80 IB 10 was disallowed by the learned assessing officer however on appeal before the learned and CIT- A allowed the claim of the assessee wide order dated 23 January 2018 - similarly for assessment year 2014 15 also the learned CIT appeal allowed the claim of the assessee as per order dated 10 May 2018. However, both these orders are in challenge before the coordinate bench - reasons given therein are required to be considered. An interesting fact has been recorded by the learned CIT A for assessment year 2013 14 that during the financial year 2010 11 five of the units got registered in favour of the customers by the appellant company and another 291 units were transferred in financial year 2011 12 out of the total 346 units constructed by the assessee. Thus 86% of the total units were registered in the name of the ultimate customers before the end of the financial year 2011 12, which is also the cut-off date for getting the completion certificate. Therefore, it was held that that the project of the assessee was completed much before the cut-off date as per the provisions of the act i.e. 31st of March 2012. In view of this, we hold that the date of completion of the project has correctly been claimed that 21st of February 2011 and it is in accordance with the provisions of Section 80 IB (10) - we allow ground number 1 of the appeal of the assessee. Non-fulfillment of the condition laid down as per clause (f) of Section 80 IB (10) - AO has disputed the eligibility to claim deduction u/s 80 IB (10) on the ground that appellant has violated the provisions of clause (f) by allotting more than one residential unit to persons belonging to the same family - AR submitted that only proportionate disallowance could be made - HELD THAT - This issue is now squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in Kamat Constructions Pvt. Ltd. Vs ACIT , 2020 (12) TMI 90 - BOMBAY HIGH COURT . Accordingly, we hold that only proportionate deduction to the extent of violation of the provisions of Section 80 IB (10) (f) can be made with respect to allotment of the units to the family members/relatives of the allottees. Accordingly, ground number 2 of the appeal of the assessee is allowed Charging of the interest u/s 234C and 234B - HELD THAT - According to the proviso to provisions of Section 234C (1) (a) itself provides that nothing contained in the provisions of Section 234C shall apply to any shortfall in the payment of tax due on the returned income whereas such shortfall is on account of Under estimate or failure to estimate the amount of capital gain. Further, the case of the assessee is also supported by the decision of Smt. Premlata Jalani 2003 (7) TMI 62 - RAJASTHAN HIGH COURT as well as Kumari Kumar Advani. 2016 (7) TMI 1600 - ITAT MUMBAI assessing officer is directed to compute interest u/s 234C in accordance with the above decisions. As the assessee has earned capital gain as on 30th of March 2012, i.e. before the close of the year, the interest is chargeable u/s 234B of the act. Further, the interest u/s 234B of the act arises only at the close of the financial year, by that time the income from capital gain arose to the assessee and interest u/s 234B is chargeable to tax in accordance with the law. AO is directed to recompute the interest chargeable u/s 234C and 234B of the act.

Summary

Issues Involved:
1. Disallowance of deduction claimed under Section 80IB(10) of the Income Tax Act, 1961.
2. Non-fulfillment of the condition laid down under clause (f) of Section 80IB(10).
3. Charging of interest under Section 234B of the Income Tax Act, 1961.
4. Charging of interest under Section 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claimed under Section 80IB(10):
The assessee, a builder company, claimed a deduction under Section 80IB(10) for the Assessment Year 2012-13, which was disallowed by the Assessing Officer (AO). The AO noted that the completion certificate for the housing project was issued by the Ghaziabad Development Authority (GDA) on 21.02.2013, beyond the prescribed time limit of 31.03.2012. The AO held that the date of completion should be the date on which the completion certificate is issued by the local authority, not the date accepted by the GDA as 21.02.2011. The CIT (Appeals) upheld this view, referencing the Madhya Pradesh High Court decision in CIT Vs. Global Reality, which stated that issuance of completion certificate after the cut-off date does not fulfill the required condition of Section 80IB(10). However, the ITAT found that the project was indeed completed within the stipulated time, supported by various documents and certificates, including the architect's certificate and the GDA's letter. The ITAT allowed the assessee's claim, stating that the project completion date was correctly claimed as 21.02.2011.

2. Non-fulfillment of Condition under Clause (f) of Section 80IB(10):
The AO disallowed the deduction on the grounds that the assessee allotted multiple units to related parties, violating clause (f) of Section 80IB(10). The assessee admitted to three such instances and surrendered the proportionate deduction amount. The CIT (Appeals) rejected the assessee's contention for proportionate disallowance. The ITAT, referencing the Bombay High Court decision in Kamat Constructions Pvt. Ltd. Vs ACIT, held that only proportionate disallowance should be made for the units allotted to related parties. Therefore, the ITAT allowed the assessee's appeal on this ground.

3. Charging of Interest under Section 234B:
The AO charged interest under Section 234B, as the assessee did not pay advance tax on the capital gains from the sale of shares. The CIT (Appeals) upheld this, stating that the assessee could not dispute the interest liability if the advance tax liability was not contested. The ITAT found that the capital gain arose on 30.03.2012, and thus, the interest under Section 234B was chargeable as the tax liability arose before the financial year's end. The ITAT upheld the charging of interest under Section 234B.

4. Charging of Interest under Section 234C:
The AO also charged interest under Section 234C. The assessee argued that the capital gain arose on 30.03.2012, and thus, there was no advance tax liability before that date. The ITAT agreed, referencing various judicial precedents, including the Rajasthan High Court decision in Commissioner of Income-tax v. Smt. Premlata Jalani, that shortfall in advance tax due to capital gains arising late in the financial year should not attract interest under Section 234C. The ITAT directed the AO to recompute the interest accordingly, allowing the assessee's appeal on this ground.

Conclusion:
The ITAT allowed the assessee's appeal on the disallowance of deduction under Section 80IB(10) and the proportionate disallowance under clause (f). It upheld the charging of interest under Section 234B but directed the AO to recompute the interest under Section 234C, allowing the appeal in part. The appeal was thus partly allowed.