2008 (1) TMI 420 - AT - Income Tax

Deduction u/s 80IB - Housing Projects - Construction of 6 wings of the same building treated as a separate independent housing project - two blocks Nisarg and Breezy Corner are a combined project and some of the flats in Breezy Corner have a built-up area of more than 1, 000 sq. ft. - Permissible shopping area of housing project exceeds 5 per cent - failure to obtain a completion certificate in respect of 6 wings in the block Nisarg - HELD THAT - There is no dispute that the housing project in the case of Nisarg is approved before 31st March 2005. The substituted section extended the benefit of 100 per cent deduction of income derived from housing projects approved upto 31st March 2007 but simultaneously imposed a restriction on the area of shopping complex that is permissible to be Included in the housing project by inserting the sub-s. 80-IB(10)(d) w.e.f. 1st April 2005. The legislature nowhere provided the definition of a housing project either in the section or anywhere in the IT Act. Is it open for the Revenue to consider all the housing activities undertaken by the assessee as one project or different projects. All the above wings are part of Nisarg block and independently satisfies the necessary approval of a housing project. It really makes no difference whether M/s Conwood Agencies had applied for or the assessee had applied to the municipal corporation to make any difference in deciding the assessee s claim for deduction under s. 80-IB(10) of the Act. It must be appreciated that the main developer was M/s Conwood Agencies (P) Ltd. The sanction plan have only approved the construction of the dwelling units of less than 1, 000 sq. ft. in all the wings of the said project. There is no dispute that all the flats in these wings contain the eligible units. It is not open to the Revenue to conclude the next project as part of the earlier housing project just to deny the statutory relief which the assessee is entitled in respect of the eligible housing project. In our view combining these two projects into one will lead to a result which manifestly will be unjust and absurd and defeat the very provisions of deduction sections. Unless there is a clear intention of the legislature the Revenue cannot be permitted to do so. After all the assessee have obtained different commencement certificates and started on different periods of time. They are separate by time space and statutory approvals and even in designs maintenance of separate books of account. The Revenue in our view is not right in treating both the projects as one and integrated without the facts warranting for such conclusion. The ratio laid down by this Tribunal order in Bengal Ambuja Housing Development Ltd. in our view based on the same set of facts as exist in our present case are equally applicable and the assessee s claim for deduction of s. 80-IB(10) in respect of the eligible units of this housing project is therefore deserves to be accepted. Area of shopping complex exceeded 5 per cent of the limit prescribed - We are of the view that the housing project were approved before 31st March 2005 and for such project which were so approved there was no stipulation as to the shopping complex area is permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing project approved upto 31st March 2007 the denial of deduction in our view is clearly not in accordance with law. Failure to obtain a completion certificate in respect of 6 wings in the block Nisarg from which it has returned the income in the asst. yr. 2005-06 - It was explained that since the housing project in this case has been approved by the local authorities before 1st April 2004 and the construction is required to be completed before 31st March 2008. As the occupation certificate in respect of the wings F F1 and G have been issued on 20th Dec 2006 i.e. prior to 31st March 2008 the condition relating to completion of the construction as prescribed in s. 80-IB(10)(a) should also be taken to be satisfied. Therefore assessee s claims for deduction under s. 80-IB(10) are accepted and the appeal is to be treated as allowed - AO is directed to allow the deduction as claimed by the assessee in the light of the above discussions.

Issues Involved:
1. Disallowance of deduction claimed under Section 80-IB(10) of the IT Act.
2. Determination of whether the construction of 6 wings by the assessee constitutes a separate housing project.
3. Compliance with the built-up area requirements under Section 80-IB(10)(c).
4. Compliance with the permissible shopping area under Section 80-IB(10)(d).
5. Requirement of obtaining a completion certificate under Section 80-IB(10)(a).

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claimed Under Section 80-IB(10) of the IT Act:
The main dispute in this appeal is the disallowance of the deduction claimed by the assessee under Section 80-IB(10). The assessee, a partnership firm engaged in building and development, claimed this deduction for the assessment year 2005-06. The AO rejected the claim on multiple grounds, which were subsequently upheld by the CIT(A).

2. Determination of Whether the Construction of 6 Wings by the Assessee Constitutes a Separate Housing Project:
The assessee argued that the AO was incorrect in treating the two blocks, 'Nisarg' and 'Breezy Corner', as a single housing project. The sub-development rights for 'Nisarg' were obtained through two agreements dated 29th May 2000 and 29th January 2001, while the rights for 'Breezy Corner' were obtained through a third agreement dated 9th February 2002. The assessee maintained separate books of account, engaged different contractors, and had distinct designs and infrastructure for the two projects. The Tribunal agreed with the assessee, noting that the projects were separate by time, space, statutory approvals, and even in designs and maintenance of separate books of account.

3. Compliance with the Built-Up Area Requirements Under Section 80-IB(10)(c):
The AO contended that if 'Nisarg' and 'Breezy Corner' were treated as a single project, some flats in 'Breezy Corner' exceeded the 1,000 sq. ft. limit, violating Section 80-IB(10)(c). The assessee clarified that it did not claim deductions for 'Breezy Corner' and only claimed for 'Nisarg', where all flats were below 1,000 sq. ft. The Tribunal supported this view, emphasizing that combining the two projects would lead to an unjust and absurd result, defeating the purpose of Section 80-IB(10).

4. Compliance with the Permissible Shopping Area Under Section 80-IB(10)(d):
The AO also denied the deduction on the grounds that the shopping area in 'Nisarg' exceeded the 5% limit prescribed in Section 80-IB(10)(d). However, the Tribunal noted that the restriction on shopping area was introduced by the Finance (No. 2) Act, 2004, effective from 1st April 2005, while the 'Nisarg' project was approved before 31st March 2005. Therefore, the restriction did not apply to 'Nisarg', and the assessee was entitled to the deduction.

5. Requirement of Obtaining a Completion Certificate Under Section 80-IB(10)(a):
The AO objected to the deduction on the grounds that the assessee had not obtained a completion certificate for the six wings in 'Nisarg'. The assessee provided completion certificates for three wings (C, D, and E) before filing the return and applied for certificates for the remaining wings (F, F1, and G) on 17th August 2004. The certificates for these wings were issued on 20th December 2006, before the 31st March 2008 deadline. The Tribunal accepted that the condition relating to the completion of construction was satisfied as the certificates were issued within the prescribed time frame.

Conclusion:
The Tribunal concluded that the assessee was entitled to the deduction under Section 80-IB(10) for the 'Nisarg' project, as it met all the conditions prescribed by the statute. The AO's objections were not upheld, and the appeal was decided in favor of the assessee.

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