2017 (12) TMI 1008 - HC - Income Tax

Deduction u/s 80IB - completion of construction within stipulated period - Held that - The purport of the Explanation (ii) to section 80- IB(10)(a) of the Act is to safeguard the interests of the Revenue wherever the construction has not been completed within the stipulated period. Thus, it cannot mean that the requirement is mandatory in nature and would disentitle an assessee to the benefit of section 80-IB(10)(a) of the Act even in respect of those cases where the assessee had completed the construction within the stipulated period and had made an application to the local authority within the prescribed time. The issuance of the requisite certificate was within the domain of the competent authority over which the assessee had no control. From the findings recorded by the Commissioner of Income-tax (Appeals) as affirmed by the Tribunal, it was clear that the construction had been completed before the stipulated date, i.e., March 31, 2010. It was also not disputed that the certificate of completion was applied on March 29, 2010 which was issued to the assessee on December 31, 2011. The assessee in such circumstances could not be denied the benefit of section 80-IB(10)(a) of the Act. The Commissioner of Income-tax (Appeals) and the Tribunal had rightly adjudicated the issue in favour of the assessee-respondent.

Issues Involved:
1. Interpretation of Explanation (ii) to section 80-IB(10)(a) of the Income-tax Act, 1961.
2. Whether the completion certificate date is mandatory for claiming deduction under section 80-IB(10) of the Act.
3. Procedural delays by municipal authorities affecting the issuance of completion certificates.
4. Applicability of the Gujarat High Court judgment in CIT v. Tarnetar Corporation.
5. Relevance of the Full Bench judgment in CIT v. Punjab Financial Corporation.

Issue-wise Detailed Analysis:

1. Interpretation of Explanation (ii) to section 80-IB(10)(a) of the Income-tax Act, 1961:
The primary question was the interpretation of Explanation (ii) to section 80-IB(10)(a) of the Act, which states, "the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority." The court examined whether the term "shall" used in the provision is mandatory or directory. It concluded that the intent of the Legislature, rather than the language used, should guide the interpretation. The purpose of the provision is to ensure that the construction is completed within the stipulated period to safeguard the interests of the Revenue.

2. Whether the completion certificate date is mandatory for claiming deduction under section 80-IB(10) of the Act:
The court held that although the word "shall" is used, it does not necessarily mean that the requirement is mandatory in every case. The court emphasized that if the construction is completed within the stipulated period and the application for the completion certificate is made on time, the issuance of the certificate by the local authority, which is beyond the control of the assessee, should not disentitle the assessee from claiming the deduction.

3. Procedural delays by municipal authorities affecting the issuance of completion certificates:
The court noted that the delay in issuing the completion certificate was due to procedural stages within the municipal authorities and was beyond the control of the assessee. The assessee had applied for the completion certificate along with the necessary documents within the stipulated period. The Municipal Corporation, Patiala, confirmed that the delay was due to the various stages involved in the process and not attributable to the assessee.

4. Applicability of the Gujarat High Court judgment in CIT v. Tarnetar Corporation:
The court relied on the Gujarat High Court judgment in CIT v. Tarnetar Corporation, which held that if substantial compliance is established, minor deviations should not vitiate the purpose of the deduction. The court observed that the assessee had completed the construction and applied for the completion certificate within the stipulated period, and the delay in issuance was not due to any fault of the assessee.

5. Relevance of the Full Bench judgment in CIT v. Punjab Financial Corporation:
The court referred to the Full Bench judgment in CIT v. Punjab Financial Corporation, which dealt with whether section 32AB(5) of the Act was mandatory or directory. It held that the provision was not mandatory, and the Assessing Officer had the discretion to entertain the audit report even if filed late. The court found this principle applicable to the present case, supporting the view that procedural delays should not disqualify the assessee from claiming the deduction.

Conclusion:
The court dismissed the appeals, affirming that the assessee was entitled to the deduction under section 80-IB(10) of the Act. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal were upheld, confirming that the construction was completed within the stipulated period, and the delay in issuing the completion certificate was beyond the control of the assessee. The court concluded that no substantial question of law arose in the appeals.

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