2011 (1) TMI 1215 - AT - Income Tax

Deduction u/s 80IB Date of completion of project Pune Municipal Corporation has not issued Occupancy Certificate on or before 31/3/2008 - PMC has failed to issue objection within 21 days of receipt of the Completion Certificate Held that - The objections raised after expiry of 21 days no major deviation or unauthorised construction if any has been shown, it would be just and proper to treat the date after expiry of 21 days from receipt of Completion Certificate as date of completion for the purpose of meeting the requirement of Explanation (ii) below Sec. 80IB(10)(a) with this understanding that PMC will continue with its action against the assessee to set the stated objections if any, at right. Treat the date of issuance of such Occupancy Certificate along with Certified Completion plan as the date of Completion Certificate of the construction for the requirement of Explanation (ii) to Section 80IB(10)(a). Since in fact PMC do not issue Occupancy Certificate generally in time and with this understanding the Legislature have also introduced a deeming provision of 21 days to put constraint upon PMC, we after detailed deliberation in preceding paragraphs have come to a conclusion that in case of small objections of PMC raised after expiry of deeming period of 21 days under Rule 7.7 of DC Rules under PMC, the date when the applicant acquired deeming sanction will be treated as the date of Completion (occupancy) Certificate to meet out the requirement of Explanation (ii) to Section 80IB (10)(a) In favour of assessee

Issues Involved:
1. Disallowance of deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Authority to issue the completion certificate for the housing project.
3. Delegated authority of an architect to issue the completion certificate.
4. Relevance of the occupancy certificate in fulfilling the conditions of Section 80IB(10).
5. Deemed approval of the occupancy certificate.
6. Completion of the housing project before the statutory deadline.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10):
The assessee claimed deductions under Section 80IB(10) for the profits earned from a housing project. The Assessing Officer (A.O.) disallowed these deductions on the grounds that the Pune Municipal Corporation (PMC) did not issue a completion certificate within the statutory time limit, which was a mandatory requirement for claiming the deduction. The appellate authority upheld this disallowance.

2. Authority to Issue the Completion Certificate:
The A.O. and the appellate authority held that the authority to issue the completion certificate vested with the PMC. The assessee argued that due to the statutory provisions and Development Control Rules (DCR) of the PMC, obtaining a completion certificate from the PMC was an impossibility, and a certificate issued by an architect should suffice.

3. Delegated Authority of an Architect:
The assessee contended that under Rule 7.6 of the DCR for PMC, an architect who supervised the construction could issue a completion certificate, which should be considered equivalent to a certificate issued by the local authority. The assessee supported this argument by citing various legal precedents and statutory provisions, including the Bombay Provincial Municipal Corporation Act, 1949.

4. Relevance of the Occupancy Certificate:
The appellate authority held that the issuance of an occupancy certificate by the PMC was relevant for deciding the fulfillment of conditions under Section 80IB(10). The assessee argued that the completion certificate issued by an architect should be sufficient compliance and that the statutory requirement of obtaining a completion certificate from the local authority was directory, not mandatory.

5. Deemed Approval of the Occupancy Certificate:
The assessee argued that since the PMC did not communicate any objections within the statutory period of 21 days after the application for the occupancy certificate, the certificate should be deemed to have been granted. The assessee cited Rule 7.7 of the DCR for PMC and Section 263 of the Bombay Provincial Municipal Corporation Act, 1949, to support this argument.

6. Completion of the Housing Project Before the Statutory Deadline:
The assessee claimed that the entire project was completed before the statutory deadline of March 31, 2008, and that the completion certificate requirement should be interpreted liberally. The assessee argued that the project was substantially compliant with the statutory provisions, and the ultimate purchasers were already enjoying their respective flats as owners.

Tribunal's Findings:

Completion Certificate Issued by Local Authority:
The tribunal held that the completion certificate issued by an architect could not be equated with a certificate issued by the local authority. The tribunal emphasized that the statutory requirement under Section 80IB(10) was mandatory, and the completion certificate issued by the local authority was necessary to ensure compliance with all statutory requirements.

Deemed Approval:
The tribunal accepted the assessee's argument regarding deemed approval. It held that if the PMC failed to issue or refuse the occupancy certificate within 21 days of receiving the completion certificate, the certificate would be deemed to have been approved. The tribunal noted that the objections raised by the PMC after the 21-day period were minor and did not affect the main project.

Conclusion:
The tribunal directed the A.O. to allow the claimed deduction under Section 80IB(10) for the assessment years in question. It treated the date of deemed approval (20.11.2005) as the date of completion for the purpose of claiming the deduction. The tribunal emphasized the need for a fair approach to interpreting statutory provisions to achieve the legislative intent of providing affordable housing.

Order:
The appeals were allowed, and the tribunal set aside the orders of the lower authorities, directing the A.O. to grant the claimed deduction under Section 80IB(10). The tribunal appreciated the quality of assistance provided by both parties during the proceedings.

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