2014 (2) TMI 983 - AT - Income Tax

Denial of deduction u/s 80IB(10) of the Act Effect of amendment - Non receipt of completion certificate - Held that - The decision in Opel Shelters (P) Ltd. Vs. ACIT 2014 (2) TMI 593 - ITAT PUNE followed - The law as it existed in the A.Y.04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the Assessee commenced development is to be applied - the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of Sec. 80-IB(10) as amended by the Finance Act, 2005, w.e.f. 1-4-2005 - By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005, the Legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved - The project was approved on 12-10-2001, i.e. prior to 01-04-2005 thus, the amended provisions of section 80IB(10) w.e.f. 01-04-2005 restricting the commercial area in a housing project are not applicable and the assessee is eligible for deduction u/s.80IB(10) of the Act. The assessee has applied to the PMC for issue of completion certificate and that possessions were given to all the respective flat owners before 31-03-2008, Corporation has started levying taxes to all the individual flat owners, electricity connections have been given to all the flat owners and the final completion certificate is also obtained by the assessee on 09-05-2008 the decision in Runwal Multihousing Pvt. Ltd. Vs. ACIT 2014 (2) TMI 595 - ITAT PUNE - the assessee cannot be denied the benefit of deduction u/s 80IB(10) for not obtaining the completion certificate before 31-03-2008 thus, the order of the CIT(A) set aside and the Assessing Officer is directed to allow the claim of deduction u/s 80IB(10) to the assessee Decided in favour of Assessee.

Summary

Issues Involved:
1. Refusal to admit additional evidence proving project completion before 31-03-2008.
2. Disallowance of deduction u/s 80IB(10) due to commercial area exceeding the prescribed limit.
3. Disallowance of deduction u/s 80IB(10) due to non-receipt of completion certificate before 31-03-2008.
4. Denial of proportionate deduction for residential units completed before 31-03-2008.

Issue-wise Detailed Analysis:

1. Refusal to Admit Additional Evidence:
The CIT(A) refused to admit additional evidence submitted by the appellant, which included expenditure statements, electricity statements, a certificate by an architect, and an affidavit by one of the directors. The CIT(A) concluded that these evidences were not relevant for proving project completion before 31-03-2008. The appellant's request for additional evidence was denied on the grounds that it did not serve any relevant purpose and the appellant failed to submit a certificate from the PMC confirming project completion before the due date.

2. Disallowance of Deduction u/s 80IB(10) Due to Commercial Area Exceeding the Prescribed Limit:
The Assessing Officer (AO) disallowed the deduction claimed u/s 80IB(10) on the grounds that the commercial area of the project was 11.77% of the total built-up area, exceeding the limit specified in the section (5% or 2000 sq.ft., whichever is less). The CIT(A) upheld this disallowance, stating that the amendment restricting commercial area, effective from 01-04-2005, was applicable. The appellant argued that the project commenced before this amendment and thus, the restriction should not apply. The Tribunal referred to various judicial decisions, including the case of Opel Shelters Pvt. Ltd. and Hiranandani Akruti J.V., which held that the amendment does not apply to projects started before 01-04-2005. The Tribunal concluded that the amendment restricting commercial area is not applicable to the appellant's project, which was approved on 12-10-2001.

3. Disallowance of Deduction u/s 80IB(10) Due to Non-receipt of Completion Certificate Before 31-03-2008:
The AO and CIT(A) denied the deduction on the grounds that the completion certificate for some flats was received after the statutory deadline of 31-03-2008. The appellant argued that the project was completed well before the deadline, and the delay in obtaining the completion certificate was due to administrative reasons beyond their control. The Tribunal referred to several cases, including Runwal Multihousing Pvt. Ltd. and Hindustan Samutha Awas Ltd., which held that if the project was completed and possession handed over before the due date, the delay in obtaining the completion certificate should not disqualify the deduction. The Tribunal found that the appellant had completed the project, handed over possession, and applied for the completion certificate before the deadline. Thus, the delay in receiving the certificate was not attributable to the appellant, and the deduction should not be denied.

4. Denial of Proportionate Deduction for Residential Units Completed Before 31-03-2008:
The CIT(A) denied the appellant's claim for proportionate deduction for the residential units completed before 31-03-2008. The Tribunal, however, did not need to adjudicate this issue separately as it had already decided to allow the full deduction u/s 80IB(10) based on the resolution of the previous issues.

Conclusion:
The Tribunal allowed the appeal, directing the AO to grant the deduction u/s 80IB(10) for the entire project, as the commercial area restriction did not apply to the project commenced before 01-04-2005, and the project was completed before the statutory deadline despite the delay in obtaining the completion certificate. The Tribunal did not address the proportionate deduction issue separately, as the appellant succeeded on the primary grounds.