2020 (9) TMI 611 - AT - Income Tax

Deduction u/s 80-IB(10) - project was not completed within 4 years from the date of commencement of the project - HELD THAT - As held in the case of CIT vs. Tarnetar Corporation 2012 (10) TMI 803 - GUJARAT HIGH COURT the requirement of formal issue of completion certificate from local authority within the time period is not mandatory in nature and if the project is found to be completed within the time period on evidence, the claim of the assessee for deduction u/s 80IB cannot be denied on this technical ground. Case of Siddhivinayak Kohinoor Venture vs. ACIT 2013 (10) TMI 1295 - ITAT PUNE for the assessee, this Tribunal allowed the claim of the assessee for deduction u/s 80IB on the basis of the certificate of Architect confirming the construction of building within the stipulated time and the fact that the application for obtaining completion certificate was moved by the assessee before the local authority well within the stipulated period. As observed by the Tribunal that the delay in issuing of completion certificate by the local authority was not attributable to the assessee or to any noncompletion of constriction and, therefore, the claim of the assessee u/s 80IB could not be denied. Claim of the assessee of having completed the project comprising of building A, B and C was duly supported and substantiated by the details and documents furnished by the assessee and since the assessee had substantially complied with the requirement of section 80IB(10), the Assessing Officer was not justified in denying his claim for deduction under the said provisions merely on technical ground that the completion certificate was not issued by the local authority before the due date of completion. In this view of the matter, we uphold the impugned order of the ld. CIT(A) directing the Assessing Officer to allow the claim of the assessee of deduction u/s 80IB(10) in respect of the project comprising of building A, B and C and dismiss this appeal of the Revenue.

Issues Involved:
1. Whether the deduction under section 80-IB(10) of the Income Tax Act, 1961, can be allowed if the housing project was not completed within the specified period of four years from the date of commencement.
2. Whether the deduction under section 80-IB(10)(f) was correctly allowed.

Issue-wise Detailed Analysis:

1. Deduction under Section 80-IB(10) and Completion Period:

The primary issue was whether the assessee was entitled to a deduction under section 80-IB(10) despite the completion certificate for the housing project not being issued within four years from the commencement date. The assessee, engaged in the business of promoters, builders, and land developers, filed returns declaring a total income of ?21,37,560/- after claiming a deduction of ?1,98,14,321/- under section 80-IB(10) for a housing project. The Assessing Officer (AO) disallowed the deduction, citing that the completion certificate for buildings A, B, and C was not issued by the local authority by 31st March 2012, the stipulated date.

The assessee argued that all flats in buildings A, B, and C were sold, and possession was handed over before the due date. The necessary NOCs were obtained, and an application for the completion certificate was submitted on 14th March 2012. The assessee contended that the delay in issuing the completion certificate by the local authority should not invalidate the deduction claim, supported by judicial precedents indicating that the formal issue of the completion certificate was not mandatory if substantial evidence showed the project was completed on time.

The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's arguments, noting that the project was indeed completed on time, supported by an architect's certificate, sale deeds, possession receipts, and utility bills. The CIT(A) referred to several judgments, including the Supreme Court's decision in Bajaj Tempo Ltd., which emphasized a liberal interpretation of incentive provisions like section 80-IB.

The Tribunal upheld the CIT(A)'s decision, agreeing that the requirement for a formal completion certificate from the local authority was not mandatory if substantial compliance with section 80-IB(10) was demonstrated. The Tribunal cited cases like CIT vs. Tarnetar Corporation and Siddhivinayak Kohinoor Venture vs. ACIT, where similar claims were allowed based on substantial evidence of project completion and timely application for the completion certificate.

2. Deduction under Section 80-IB(10)(f):

The second issue involved the correctness of allowing the deduction under section 80-IB(10)(f). The AO had disallowed the deduction, partly based on the revision of the project plan in 2014, which he claimed violated section 80-IB(10)(f). However, the CIT(A) found that buildings A, B, and C were completed before the due date, supported by the architect's certificate and other evidence.

The Tribunal, after reviewing the submissions and evidence, concluded that the assessee had substantially complied with the requirements of section 80-IB(10). The Tribunal noted that the delay in issuing the completion certificate was not attributable to the assessee and that the project was completed within the stipulated period based on the evidence provided. Therefore, the deduction under section 80-IB(10)(f) was correctly allowed.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under section 80-IB(10) for the assessee's housing project. The Tribunal emphasized that substantial compliance with the section's requirements, supported by adequate evidence, was sufficient for claiming the deduction, even if the formal completion certificate was delayed by the local authority. The appeal was dismissed, and the order was pronounced on 9th September 2020.

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