2013 (10) TMI 1123 - AT - Income Tax

Deduction u/s 80IB of the Income Tax Act Held that - Approved building plan as per which total area of the project is 4310.89 sq. metres, East side road widening area is 1089.21 sq. metres, West side road widening area is 8439 sq. metres and the net plot area is 3127 sq. metres - Total plot area is 5130 sq. yards which more than one acre - If a portion of the plot area is earmarked for roads after the assessee entered into development agreement and the plan was duly sanctioned by the competent authority, deduction u/s 80IB can not be denied - Area of the plot available to the assessee for housing project is more than 1 acre. Accordingly, the claim of the assessee cannot be denied on this ground if it is available at the time of entering into development agreement and deduction u/s. 80IB(10) is to be given to the assessee Decided against the revenue. Production of completion certificate for availing deduction u/s 80IB of the Income Tax Act - Objection of the Department is that the assessee has not produced the completion certificate Held that - Reliance has been placed on the judgment in the case of Keerthi Estates Pvt. Ltd 2012 (11) TMI 467 - ITAT HYDERABAD - Proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only Project Completion Method it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on completion of the project. If the stand of the Revenue is accepted then only on completion of project an assessee would be entitled for deduction u/s. 80IB(10), then undisputedly an anomaly shall arise as to how and when the tax should be charged. This is not the scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department. The accepted principle is that the year of the assessment of income and connected deduction shall fall in the same assessment year Decided against the Revenue.

Summary

Issues Involved:
1. Eligibility for deduction under section 80IB(10) of the Income Tax Act.
2. Requirement of minimum plot size for 80IB deduction.
3. Necessity of obtaining a completion certificate for claiming deduction under section 80IB(10).

Detailed Analysis:

1. Eligibility for deduction under section 80IB(10) of the Income Tax Act:
The assessee filed its return of income for the assessment year 2009-10, claiming a deduction under section 80IB(10). The Assessing Officer denied this deduction, citing two reasons: the total area of the plot was less than one acre, and the assessee had not furnished a completion certificate. The CIT(A) allowed the assessee's claim by following the ITAT's decision for the assessment year 2008-09, where the Tribunal had rejected the Assessing Officer's view on both aspects and allowed the deduction under section 80IB(10). The Tribunal upheld the CIT(A)'s order, finding that the issue in dispute was covered by the Tribunal's earlier decision in the assessee's own case.

2. Requirement of minimum plot size for 80IB deduction:
The Tribunal noted that the deduction under section 80IB(10) was denied by the Assessing Officer on the grounds that the project was executed on a plot area measuring less than one acre. However, the Tribunal found that the project was executed on an area exceeding one acre, with a portion of the land earmarked for road acquisition by the Municipal Corporation of Hyderabad (MCH), which was still in the possession of the assessee. The Tribunal referenced the case of Vidhi Builders vs. ITO, where it was held that areas earmarked for road setbacks and recreation spaces should not be excluded from the total plot area calculation. The Tribunal concluded that the assessee's plot area exceeded one acre and that the deduction under section 80IB(10) should be granted.

3. Necessity of obtaining a completion certificate for claiming deduction under section 80IB(10):
The Tribunal addressed the issue of non-production of a completion certificate. The assessee had applied for the completion certificate, and the project was completed in all respects, with flats connected to electricity and water supply and assessed for municipal tax. The Tribunal cited the Gujarat High Court's judgment in Manan Corporation vs. ACIT, which held that strict interpretation of section 80IB(10) was unnecessary as it is a beneficial provision. The Tribunal also referenced its decision in Keerthi Estates Pvt. Ltd., which stated that the purpose of granting deduction under section 80IB(10) is to promote housing projects and that the completion certificate requirement should not lead to an absurd situation where developers following the Percentage Completion Method are denied the deduction. The Tribunal concluded that the completion certificate should be obtained on the completion of the housing project as a whole and not necessarily for each year of the project's span.

Conclusion:
The Tribunal upheld the CIT(A)'s order allowing the assessee's claim for deduction under section 80IB(10), finding that the issues in dispute were materially identical to those decided in the assessee's favor for the assessment year 2008-09. The Tribunal dismissed the revenue's appeal, affirming that the assessee met the requirements for the deduction, including the plot size and completion certificate conditions. The order was pronounced in the open court on 16th September 2013.