2023 (2) TMI 688 - AT - Income Tax

Deduction u/s 80IB(10) - cut of date for claiming deduction u/s 80IB(10) - deduction derived from the business of execution of housing project under the provisions of section 80IB(10) - HELD THAT - The object behind enactment of provisions of section 80IB(10) is to provide 100% of deduction of profits derived by undertaking for development of building and housing project. In the present case, assessee sought the approval of building plan, housing project and land admeasuring 25,340 sq.mtrs. to construct 8 buildings and the said approval was granted on 29.03.2007. The housing project was required to be completed on or before 31.03.2012 in order to avail the benefit of deduction u/s 80IB(10) of the Act. However, in the present case, admittedly, the position of the building A was totally incomplete as on 31.03.2012 and the buildings B, C D were completed partly upto floor no.9, 10 11 respectively, which clearly indicates that the housing project of buildings A, B, C and D were not completed upto 31.03.2012. As carefully gone through the order of CIT(A) and find that the CIT(A) had ignored the fact that the buildings B, C D were not completed as on 31.03.2012, which is the cut of date for claiming deduction u/s 80IB(10) - It is beyond anybody imagination as to how the Municipal Authority had issued completion certificate in respect of buildings B, C D even without knowing the fact that the construction was not completed as on 31.03.2012. No provision under the Municipal Corporation Act of Maharashtra Government was shown to us, which empowers the local authorities to issue completion certificate even without completion of construction of the entire building. CIT(A) had grossly fell in error in allowing the deduction in respect of buildings B, C D overlooking the plain provisions of the Act and without examining case in detail. Eligibility of deduction in respect of buildings E, F, G H - We are unable to discern that the ld. CIT(A) had satisfied himself that the respondent-assessee had fulfilled the necessary conditions precedent for availing the deduction u/s 80IB(10) of the Act. Therefore, we are of the considered opinion that the order of the ld. CIT(A) suffers from voice of perversity and it is bereft of factual discussion on facts of the case and also failed to construe the provisions of relevant section in accordance with settled legal principles discussed above. Ordinarily, we would have remanded the matter back to the file of the Assessing Officer to examine the allowability of deduction u/s 80IB(10) in respect of buildings E, F, G H, but even before us the respondent-assessee had not led any material on record before us satisfying the conditions precedent for availing benefit u/s 80IB(10) in respect of buildings B, C D, therefore, keeping in view the well settled principle, that remand cannot be made in order to improve case of either party to the litigation. Accordingly, we decline to do so. Thus, the grounds of appeal filed by the Revenue stand allowed.

Summary

Issues Involved:

1. Deletion of addition due to disallowance of deduction under Section 80IB(10).
2. Allowing deduction under Section 80IB(10) for an incomplete housing project.
3. Allowing deduction on partial completion of the housing project.
4. Conditions for allowing deduction under Section 80IB(10).
5. Proportionate deduction for completed units.

Issue-wise Detailed Analysis:

1. Deletion of Addition Due to Disallowance of Deduction under Section 80IB(10):

The Revenue contested the deletion of an addition of Rs. 33,74,41,473/- made by the Assessing Officer (AO) on account of disallowance of the deduction claimed under Section 80IB(10) of the Income Tax Act, 1961. The AO had disallowed the deduction on the grounds that the assessee had not fulfilled the condition of completing the project before 31.03.2012 as prescribed in Section 80IB(10).

2. Allowing Deduction under Section 80IB(10) for an Incomplete Housing Project:

The CIT(A) allowed the deduction under Section 80IB(10) for the housing project "Alcove," which was approved on 26.03.2007 but was still incomplete on 31.03.2012. The AO found that buildings A, B, C, and D were not fully completed by the stipulated date, and no completion certificate for building A was produced. The CIT(A) allowed the deduction based on the completion certificates for other buildings and proportionate completion.

3. Allowing Deduction on Partial Completion of the Housing Project:

The CIT(A) allowed the deduction on a proportionate basis for the units that were completed before 31.03.2012. The AO had denied this claim, arguing that the entire project must be completed to qualify for the deduction. The CIT(A) relied on judicial precedents to support the proportionate deduction for eligible units.

4. Conditions for Allowing Deduction under Section 80IB(10):

The AO argued that the conditions set in Section 80IB(10) must be satisfied for the entire project, and partial completion does not qualify for the deduction. The CIT(A) found that the assessee had complied with the conditions for the completed units and allowed the deduction. The AO also noted violations of clauses (e) and (f) of Section 80IB(10) regarding the sale of flats, which the CIT(A) dismissed based on additional evidence and judicial precedents.

5. Proportionate Deduction for Completed Units:

The CIT(A) directed the AO to allow the deduction on a proportionate basis for the units that were completed and for which completion certificates were obtained before 31.03.2012. The CIT(A) relied on several judicial precedents, including decisions from the Hon'ble Madras High Court, Gujarat High Court, and Bombay High Court, to support this view.

Conclusion:

The Tribunal examined the provisions of Section 80IB(10) and the conditions required for availing the deduction. The Tribunal noted that the CIT(A) failed to consider that buildings B, C, and D were not fully completed by 31.03.2012 and that no provision under the Municipal Corporation Act allowed for issuing completion certificates without full completion. The Tribunal found that the CIT(A)'s order lacked factual discussion and did not satisfy the conditions precedent for the deduction. Consequently, the Tribunal allowed the Revenue's appeal and denied the deduction under Section 80IB(10).

Order:

The appeal filed by the Revenue is allowed. The Tribunal found that the CIT(A) erred in allowing the deduction under Section 80IB(10) without ensuring that the necessary conditions were met. The Tribunal emphasized the need for strict compliance with the statutory conditions for claiming the deduction.