2015 (8) TMI 266 - AT - Income Tax

Eligibility for claiming deduction u/s. 80IB(10) - incomplete housing project - Held that - In the present case, it is an undisputed fact that the assessee had obtained no objection certificate from the local authority in the year 2007 and has thereafter applied for obtaining completion certificate to the local authority on 02-01-2007. The assessee had already obtained completion certificate in respect of 67 units in the year 31-03-2003 itself. There is nothing on record to show that the residential dwelling units were not completed or not fit for occupation at the time when the assessee made application for issuance of completion certificate. It has also not been refuted by the Revenue that in the year 2007, the Grampanchyat had issued no objection certificate to the assessee for getting individual electricity connection in all the residential units. Thus, we are of the considered opinion that the units were completed in all respect and ready for occupation. As far as the deficiency pointed out by the ld. DR with regard to the drainage and septic tank is concerned we concur with the findings of the Commissioner of Income Tax (Appeals) that construction of soakpit which is required to drain excess water from the septic tank of venial nature. The septic tank has substantial capacity to hold the drainage water and it is only in the case of overflow that the water flows from septic tank to the soakpit. This discrepancy pointed out by the local authority was also removed by the assessee. As far as the objection of the Revenue that against 213 units approved the assessee has constructed only 204 units, we do not find any merit in the same. Four units were not constructed as space was left for 9 mtr. Proposed D P Road and 5 units were left out to make space for construction of septic tank. The non-construction of 9 units, in our considered view will not render 204 completed units in-eligible for the claim of deduction u/s. 80IB(10) of the Act. Thus non obtaining of completion certificate in respect of project approved prior to 01-04-2005 will not render the assessee ineligible for claiming deduction u/s. 80IB(10) in the impugned assessment years. In appeals for assessment years 2005-06 to 2007-08, the Revenue has raised ground with regard to commercial units in the project. Since, the same has not been pressed by the ld. DR. The same are dismissed as not pressed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under section 80IB(10) of the Income Tax Act.
2. Validity of reassessment proceedings under section 148.
3. Compliance with the conditions for obtaining a completion certificate.
4. Impact of non-construction of some units on the eligibility for deduction.
5. Relevance of commercial units in the project.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue was whether the assessee, a builder and developer, was eligible for deduction under section 80IB(10) for the housing project 'Paras Nagar'. The project was initially approved for 206 units on 05-06-2000, and later modified to 213 units on 23-11-2000. The assessee claimed the deduction, which was initially allowed. However, a survey conducted on 03-06-2008 revealed that the completion certificate was not issued by the local authority before the due date of 31-03-2008. The Assessing Officer disallowed the deduction on the grounds that the completion certificate, issued on 04-06-2008, was obtained after the stipulated date. The Commissioner of Income Tax (Appeals) upheld the jurisdiction assumed by the Assessing Officer but allowed the deduction on merits, stating that the assessee had complied with other conditions of section 80IB(10).

2. Validity of Reassessment Proceedings under Section 148:
The reassessment proceedings were initiated based on the findings of the survey conducted under section 133A. Notices under section 148 were issued, and the assessment orders disallowed the deduction under section 80IB(10). The Commissioner of Income Tax (Appeals) upheld the jurisdiction assumed by the Assessing Officer under section 148, indicating that the reassessment proceedings were valid.

3. Compliance with Conditions for Obtaining Completion Certificate:
The assessee applied for the completion certificate on 02-01-2007, which was eventually issued on 04-06-2008. The delay was attributed to minor discrepancies, such as the lack of a proper drainage system and septic tank construction. The Commissioner of Income Tax (Appeals) and the Tribunal found that these discrepancies were of a venial nature and did not render the project incomplete. The Tribunal noted that the requirement for obtaining a completion certificate was introduced by the Finance Act, 2004, effective from 01-04-2005, and thus, was not applicable to projects approved before this date.

4. Impact of Non-Construction of Some Units on Eligibility for Deduction:
Out of the approved 213 units, only 204 units were constructed. The remaining 9 units were not built due to space being allocated for a proposed road and the construction of septic tanks. The Tribunal held that the non-construction of these 9 units did not affect the eligibility for deduction under section 80IB(10) for the completed 204 units.

5. Relevance of Commercial Units in the Project:
For the assessment years 2005-06 to 2007-08, the Revenue raised concerns regarding commercial units in the project. However, this ground was not pressed by the Departmental Representative, and thus, the Tribunal dismissed these grounds as not pressed.

Conclusion:
The Tribunal concluded that the assessee was eligible for deduction under section 80IB(10) despite the completion certificate being issued after 31-03-2008, as the project was approved before 01-04-2005. The reassessment proceedings were valid, but the minor discrepancies and non-construction of a few units did not affect the eligibility for deduction. All appeals and cross objections were dismissed.