2014 (2) TMI 982 - AT - Income Tax

Disallowance of claim of deduction u/s 80IB(10) of the Act Entire project not eligible for deduction Project not completed - Housing project Leela Garden - Held that - The assessee has obtained the completion certificate before the statutory due date - the assessee has obtained the completion certificate before 31-03-2008 and out of the 83 flats the assessee has claimed deduction u/s.80IB(10) in respect of 61 flats where the built up area is less than 1500 sq.ft. - thus, the deduction u/s.80IB(10) has to be allowed on proportionate basis with reference to the qualified residential units and that the assessee would not be denied claim of deduction u/s.80IB(10) of the Act - the assessee is entitled to deduction u/s.80IB(10) in respect of the 61 flats of the housing project Leela Garden . Housing project Hill View Residency Held that - Out of the 5 Buildings, the assessee was able to obtain completion certificates for 4 Buildings and therefore it is the case of the assessee that the deduction u/s.80IB(10) should be allowed in respect of the 4 Buildings The decision in Runwal Multihousing Pvt. Ltd. Vs. ACIT 2014 (2) TMI 595 - ITAT PUNE Followed - It is the case of the Revenue that since the completion certificate for Building D has not been obtained before 31-03-2008, therefore, deduction u/s.80IB(10) should not be allowed. There was substance in the contention of the AR that approval of the housing project and approval of building plan are two different concepts - plan for development is only a work order and not final plan sanctioned by the local authority - the assessee has claimed deduction u/s.80IB(10) in respect of Buildings A, B, C on which profit has been earned on sale of units and the completion certificate has been obtained before the statutory date and none of the units in the above building is in excess 1500 sq.ft. - thus, the assessee is entitled to deduction u/s. 80IB(10) in respect of buildings A, B and C of the project Hill View Residency thus, the order of the CIT(A) set aside and the AO is directed to allow the claim of deduction u/s 80IB(10) in respect of the housing projects Leela Garden and Hill View Residency Decided in favour of Assessee.

Summary

Issues Involved:
1. Eligibility for deduction under section 80IB(10) for the project "Leela Garden."
2. Eligibility for deduction under section 80IB(10) for the project "Hill View Residency."

Issue 1: Eligibility for deduction under section 80IB(10) for the project "Leela Garden"

The assessee, a partnership firm engaged in the business of Builders/Promoters and Developers, filed its return of income declaring a total income of Rs.1,23,11,186/-. The Assessing Officer (AO) disallowed the deduction claimed under section 80IB(10) for the project "Leela Garden" on the grounds that some residential units exceeded 1500 sq. ft., and the final completion certificate was not issued. The AO referred the project to a Registered Valuer, who confirmed that 25 out of 81 flats exceeded 1500 sq. ft. and the final completion certificate was not issued. The assessee argued that the part completion certificate should be treated as the final completion certificate and cited the Supreme Court decision in Bajaj Tempo Vs. CIT for a liberal interpretation of tax incentives. However, the AO rejected the claim, stating that all conditions under section 80IB(10) must be cumulatively satisfied and disallowed the deduction of Rs.4,90,97,647/-.

Upon appeal, the CIT(A) upheld the AO's decision. The assessee then appealed to the ITAT, arguing that only 22 out of 83 flats exceeded 1500 sq. ft. and that proportionate deduction should be allowed for the remaining flats. The ITAT referenced several decisions, including those of the Pune Bench in M/s. Rahul Construction Co. and the Calcutta High Court in Bengal Ambuja Housing Development Ltd., which allowed for proportionate deduction under section 80IB(10). The ITAT concluded that since the assessee had obtained the completion certificate before the statutory due date and had claimed deduction only for the flats under 1500 sq. ft., the assessee was entitled to proportionate deduction for the project "Leela Garden."

Issue 2: Eligibility for deduction under section 80IB(10) for the project "Hill View Residency"

The AO disallowed the deduction claimed under section 80IB(10) for the project "Hill View Residency" because the final completion certificates for Buildings D and E were not obtained before the statutory date of 31-03-2008. The assessee argued for proportionate deduction for Buildings A, B, C, and E, which were completed before the statutory date, citing several decisions supporting proportionate deduction.

The CIT(A) upheld the AO's decision, leading the assessee to appeal to the ITAT. The ITAT referenced its own decision in Runwal Multihousing Pvt. Ltd., which allowed for proportionate deduction when part of a project met the statutory requirements. The ITAT also cited other decisions, including those of the Bangalore Bench in Dy.CIT Vs. Brigade Enterprises (P) Ltd., which supported the principle of proportionate deduction.

The ITAT concluded that since the assessee had obtained completion certificates for Buildings A, B, C, and E before the statutory date and none of the units in these buildings exceeded 1500 sq. ft., the assessee was entitled to deduction under section 80IB(10) for these buildings. The ITAT set aside the order of the CIT(A) and directed the AO to allow the claimed deduction for the project "Hill View Residency."

Conclusion:

The ITAT allowed the appeal filed by the assessee, granting proportionate deduction under section 80IB(10) for both projects, "Leela Garden" and "Hill View Residency," based on the completion certificates obtained and the built-up area criteria. The grounds raised by the assessee were accordingly allowed, and the order was pronounced in the Open Court on 03-02-2014.