2004 (8) TMI 370 - AT - Income Tax

Eligibility for deduction u/s 80-IB(10) - Meaning of Commencement date of development and construction of the housing project - HELD THAT - In our view, the activities, viz., approval of the plan, marketing for booking the residential units, availing of finance, receipt of advance booking money, etc., could not be construed to mean commencement of development and construction of housing project. As per the certificate of architect, the project of constructing housing units commenced after 1st Oct., 1998. The assessee had also opened bank account in the name of housing project, Nirmiti Vihar, on 29th Oct., 1998. All these facts indicate that development and construction commenced after 1st Oct., 1998. It is also seen that the assessee had incurred a sum of Rs. 6,000 towards the cleaning of land and also incurred an expense of Rs. 1,140 towards Pooja expense. In our considered view, these expenses do not indicate that development and construction of housing project had been commenced before 1st Oct., 1998. Rs. 6,000 was incurred for cleaning the land, so that correct measurement of the land could be done. As per the provisions of the Maharashtra Land Revenue Code, 1966, mentioned hereinabove, there is a procedure for conversion of use of land from one purpose to another and there is a provision for penalty also for violating the provisions of s. 44 of the said Code. There is no material on record to show that the assessee had made any material change on the land before 1st Oct., 1998. Thus, it would be clear that the assessee had commenced the development and construction of the housing project after 1st day of October, 1998, and completed the same before the specified date. There is no dispute that the assessee had fulfilled the remaining conditions under the law for claiming deduction u/s 80-IB(10) of the Act. Accordingly, we reverse the findings of the CIT(A) and direct the AO to allow the deduction to the assessee. In the result, the appeal is allowed.

Summary

Issues Involved:
1. Eligibility for deduction u/s 80-IB(10) of the IT Act, 1961.
2. Commencement date of development and construction of the housing project.

Summary:

1. Eligibility for Deduction u/s 80-IB(10):
The assessee, engaged in house building construction, claimed a deduction of Rs. 4,40,049 u/s 80-IB(10) for its project 'Nirmiti Vihar'. The AO disallowed the deduction, stating that the project had commenced before the specified date of 1st Oct., 1998. The CIT(A) upheld this disallowance, noting that the development agreement, irrevocable power of attorney, and preliminary sanctions were obtained before 1st Oct., 1998. The CIT(A) concluded that the development had commenced prior to the specified date, making the assessee ineligible for the deduction.

2. Commencement Date of Development and Construction:
The assessee argued that the development and construction started after 1st Oct., 1998, and that preliminary activities such as obtaining permissions and converting agricultural land to non-agricultural land were preparatory steps. The Tribunal noted that the actual construction work began after the building permission was sanctioned on 23rd July, 1999. The Tribunal found that the expenses incurred before 1st Oct., 1998, were minimal and related to land cleaning and Pooja expenses, which did not constitute commencement of development and construction.

Conclusion:
The Tribunal concluded that the development and construction of the housing project commenced after 1st Oct., 1998, and the assessee fulfilled all other conditions for claiming the deduction u/s 80-IB(10). Therefore, the Tribunal reversed the findings of the CIT(A) and directed the AO to allow the deduction to the assessee.

Result:
The appeal was allowed.