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TMI Blog2011 (1) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... n of 21 days to put constraint upon PMC, we after detailed deliberation in preceding paragraphs have come to a conclusion that in case of small objections of PMC raised after expiry of deeming period of 21 days under Rule 7.7 of DC Rules under PMC, the date when the applicant acquired deeming sanction will be treated as the date of Completion (occupancy) Certificate to meet out the requirement of Explanation (ii) to Section 80IB (10)(a) In favour of assessee - ITA No. 713 & 714/PN/2010 - - - Dated:- 7-1-2011 - SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO JJ. Appellant by Shri Suni Ganoo Respondent by Shri Hareshwar Sharma ORDER PER I.C. SUDHIR JM In these appeals, the assessee has questioned first appellate order on the following common grounds: 1. In the facts and circumstances of the case and in law, the learned Assessing Officer has erred in disallowing the deduction (of Rs.3,43,18,380 in A.Y. 2004-05 and Rs. 1,49,06,223/- in A.Y. 2005-06) as claimed by the appellant u/s 80IB[10] of the I.T. Act 1961, in respect of the Profits earned by the appellant from the Housing Project namely Pinnac Dhavalgiri Pune at S.No.13/1/7+13/1/14 at Pashan Pune. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been granted to the appellant for the Housing Project namely Pinnac Dhavalgiri Pune at S.No.13/1/7+13/1/14 at Pashan Pune and consequently the appellant is entitled for deduction u/s 80IB[10] in respect of the Profits of the said housing Project. All the observations / conclusions / findings of the learned C.I.T.[A] in this regarding being patently illegal, arbitrary, perverse and devoid of merits the same may please be vacated. 6. It may please be held that since the entire project was complete in all respects, before 31/03/2008, the appellant is entitled for deduction u/s 80IB[10] of the I.T. Act 1961, in respect of the Profits of the said project as the condition of obtaining Completion certificate from the local authority is of a directory nature and in any case the provisions of Section 80IB[10] of the I.T. Act 1961 being of benevolent nature the same are to be liberally interpreted in view of the fact that there is a substantial compliance of the provisions as the project was completed in every respect before 31/03/2008 and the ultimate Purchasers were enjoying their respective flats as owners. 7. The appellant craves the permission to add, amend, modify, alter, revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the owner along with the issues of full occupany certificate. Rule 7.7 of the Development Control Rules for Pune Municipal Corporation(DC Rules) talks about the procedure for issuance of occupancy certificate. The Ld. A.R. referred page No. 11 of the paper book filed on 20.8.2010 showing that the assessee had applied for occupancy certificate as per Rule 7.6 of D.C. Rules for PMC along wth 3 copies of Completion plans and Certificate (dated 28.10.2005) on 29.10.2005. The Ld. A.R. pointed out that the assessee has constructed the said residential project during the years relevant to the A.Ys. 2004-05 and 2005-06. The Ld. A.R. submitted that in spite of his application dt. 29.10.2005 for occupancy certificate, for the first time, the assessee received letter dt. 23.12.2005 from the Asstt. Engineer, Building Control Department, PMC, pointing out therein survey objection / deficiencies whereby the grant of occupancy certificate could not be considered as applied for by the assessee. The Ld. A.R submitted that in view of provisions of Section 263 of the Bombay Provincial Municipal Corporation Act 1949 and as per the Rule 7.7 of the D.C Rules as applicable to Pune, if within 21 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is to be required to be kept in mind. A building may be complete but may be unfit for occupation. A building may be fit for occupation but may not be complete, for example, in the absence of tiling work of the flooring, the building may be fit for occupancy, but may not be called as complete. The words completion and occupation have different connotation under different situation and are not synonymous . The Ld. A.R. pointed out that in its letter dt. 23.12.2005, the Asstt. Engineer, Building Control, PMC has pointed out the defects and required the assessee to remove the same for issuance of occupany certificate. In this letter, the discrepancies shown are that inside margin, watchman shed is constructed, unauthorised use was there and unauthorised parking sheds are constructed. Besides, there is difference in actual work on site and has shown in the record plan, D.P. used certificate is not filed and final N.O.C has not been filed. The Ld. A.R. submitted that some of the requirements have been complied with, and other likes watchman shed and parking sheds are temporary in nature and cannot be termed as unauthorised construction or deviation from the approved plan. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 (SC). (5) State of Rajasthan v/s. Basant Nahata, appeal (Civil ) 7800 (2001) dt. 7.9. 2005 (SC) (copy supplied) (6) Church's Auxiliary For Social Action and Another v/s. Director General of Income Tax (Exemptions) (WPC No. 1791/2007 and Others) dt. 22.1.2010 (Delhi High Court). (7) Promoters and Builders Association of Pune v/s. Pune Municipal Corporation Others (2007) (006-SCC-0143). (8) Nodi Exports v/s. ACIT (2008), 12 DTR 1 (Del.) (9) ITO v/s. Khyati Financial Services, ITA 3740/Mum/2008 (A.Y. 2005-06). 6. The Ld. A.R. submitted that in the case of State of Rajasthan Others v/s. Vasant Nahata (supra), the Hon'ble Supreme Court has been pleased to hold of delegated legislation that necessitated of the legislatures delegating its powers in favour of the Executive is a part of legislative function. It is a constituent element of legislative power as a whole under Article 245 of the Constitution. Such delegation of powers, however, cannot be wide and uncannalised or unguided. The Legislature while delegating such power is required to lay down the criteria or standard so as to enable the delegatee to act within the framework of the Statue. It is also trite law tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Certificate on 18.1.2008 after having completed the building which was a last and final wing of the building. It was also submitted that construction of work was now completed and application for Completion Certificate was made by the Architect vide his letter dt. 18.1.2008. Thus, the assessee had completed the construction prior to 31.3.2008 (Architect had also certified it) and had applied for Completion Certificate before 31.3.2008 and the proof of the same was produced before the Tribunal in the shape of Paper Book. The Tribunal remitted the issue to the file of the A.O to assertain as to whether the assessee had concluded construction prior to 31.3.2008 after perusing the letter from Municipal Corporation of Greater Mumbai i.e. letter dt. 18.1.2008 issued by Architect. It was directed by the Tribunal that the A.O on the basis of the facts on records shall decide whether condition regarding completion of the project as per the requirement clause (a) of Section 80 IB(10) is satisfied and give relief to the assessee. In para No. 18 of the order, the Tribunal has agreed with the Ld CIT(A) that relief u/s. 80 IB(10) cannot be denied in the case of the assessee merely because compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure for issuing certificate NO. 2 If not, what should be treated as completion certificate? As per Rule no. 7.6 of Development Control Rule Licensed Architect submits Completion Certificate to P.M.C. On Receipt of Completion Certificate from Licensed Architect PMC inspects issues Occupancy Certificate as per Rule No. 7.7 of D.C. Rules and U/s 263 of BPMC Act 1949. 3 Whether occupation certification and completion is the same. No. 4. Whether certified completion plan as per Rule 7.6 of Development Control Rule can be treated an completion certificate. No. 5 Whether Licensed Architect have been authorised to issue completion an behalf of PMC. No. The Ld. D.R. submitted that unless a Statute uses the word "shall, prima facie it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. The Ld. D.R. submitted further that the aim of introduction of S. 80 IB(10) was to provide the housing to the masses at an affordable price. The concept of Completion Certificate issued by the local authority has been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons raised by PMC, it is clearly seen that Occupancy Certificate was not granted because of violation of certain Rules. 8. Against the argument advanced by the Ld. A.R. that since S. 80IB(10) is an incentive provsionm it should be interpreted liberally, the Ld. D.R. submitted that the incentive provision were brought into the Statute to overcome the shortage of mass housing and providing affordable accommodation to common man; the legislature also wanted to safeguard the interest of this class of people and for that purposes, certain clauses like Completion Certificate issued by local Authority was brought into the Statute. It shows that the incentive deduction u/s. 80IB has been given for promoting social cause of providing legal occupation o the housing projects developed. 9. As regards the claim of proportionate deduction, the Ld. D.R. submitted that there is no provision whatsoever for allowing proportionate deduction u/s. 80 IB (10) of the I.T. Act. He submitted that ratio laid down in Bengal Ambuja Housing Developers Ltd v/s. DCIT, ITA NO. 1595/KOL/2005, by the Calcutta Tribunal regarding proportionate deduction has been ignored by Chennai Bench of the Tribunal in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Certificate issued by local authority to support the claimed date of completion of the construction of the Housing Project under the provisions of Sec. 80IB(10)(a), Explanation (ii). The contention of the Ld. A.R. remained that there is no such provision in the D.C. Rules for PMC for issuance of Completion Certificate by it, thus assessee cannot be expected to get Completion Certificate issued by the PMC which is beyond power and control of the assessee. The argument of the Ld. A.R. in this regard has been discussed in detail hereinabove in his submissions. It also remained his argument that the PMC has delegated its power to issue Completion Certificate to licensed architect, engineer, structural engineer, as the case may be, who has supervised the construction for them and on their behalf to the assessee. In support, the Ld. A.R. also cited the decision of Hon'ble Supreme Court in the case of State of Rajasthan Others v/s. Vasant Nahate (supra). We, however, do not find this decision relevant for the present issue because that case is having distinguishable facts and the issue involved therein was as to whether necessity of Legislators delegating its powers in favour of Execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be who has supervised the construction, shall give notice to the Authority regarding completion of work described in the building permission. The completion certificate shall be submitted in the prescribed form by four sets of completion Plan. One of the sets, duly certified as Completion Plan shall be returned to the owner along with the issue of full occupancy certificate (see rule No. 7.7)" "7.7 Occupancy Certificate - The Authority, on receipt of the completion certificate, shall inspect the work and sanction or refuse an occupancy certificate, in the proforma given in Appendix K within 21 days from the date of receipt of completion certificate, after which period it shall be deemed to have been approved by the Authority for occupation provided the building has been constructed as per the sanctioned plans. Where the occupancy Certificate is refused, the various reasons shall be quoted for rejection, at the first instance itself." As it is evident from very reading of the above Rules, the owner through the licenced architect, engineer, structrual engineer as the case may be, who has supervised the construction gives notice to the authority regarding completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced hereunder: "(ii) 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." 13. Before parting with the issue, we would like to record our observation that to avoid such debatable situation and litigation, the authority concerned is expected to remove such ambiguity in the related provision for achieving the very object of the incentive provision u/s. 80IB(10) of the Act in time. It is worth noting over here that in the State of Maharashtra itself different modes for issuance of Completion Certificate by the local authority have been provided in different Municipal Corporations. The mode for issuance of Completion Certificate by the Licensed architect provided in DC Rules of PMC is exception to generally provided mode wherein Completion Certificate is issued by the local authority after inspection of the construction. 14. The alternative submission of the assessee that the Housing Project was completed well before 31.3.2008 i.e. the date marked for availing the deduction u/s. 80IB(10)(a) of the Act, that the PMC after receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te by the PMC, it shall be deemed that the PMC has approved the Completion for occupation. In such a situation, the date 20.11.2005 under the deeming provision under Rule 7.7 of D.C. Rules of PMC can be treated as the date of Completion Certificate issued by the PMC for the purpose of deduction u/s. 80IB(10) of the Act. 15. The Ld. A.R. also referred the decision of Mumbay Bench of the Tribunal in the case of ITO v/s. Khyati Financial Services (supra) wherein the assessee alongwith Completion Certificate issued by achitect had applied for Occupation Certificate on 18.1.2008 after having completed the building which was the last and final wing of the building but the Municipality had not issued Occupany Certificate, the Tribunal held that the Sec. 80IB(10) does not require the Completion Certificate to be obtained before 31st day of March 2008. The Tribunal observed further that it is well known that even after Completion of building , it will take some time to obtain the Completion Certificate from the local authority, who may inspect the building before giving the Certificate. It does not mean that construction is over. The facts of that case are distinquishing from the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied any such building, or use or permit to be used the building or part thereof affected by any work until - (a) permission has been received from the Commissioner in this behalf, or (b) the Commissioner has failed for twenty-one days after receipt of the notice or completion to intimate his refusal of the said permission." As per the above provision, a person shall not occupy or permit to be occupied any such building or used or permit to be used the building or part thereof affecting any work until- (a) permission has been received from the Commissioner in this behalf or, (b) the Commissioner had failed for 21 days after receipt of the notice of completion to intimate his refusal of the said permission. We thus find that in the Bombay Provincial Municipal Corporation Act, 1949 there is no such condition that the building has been constructed as per the sanctioned plan for acquiring the deeming approval of occupancy and use by the authority. The deeming provision as Revenue want to read, if accepted, then, the whole purpose of the legislature to put some constraint on the PMC to issue Occupancy Certificate within prescribed time limit would frustrate. It cannot be read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MC with unfettered discretion. We have also seen S. 263 of B.P.M. Act 1949, reproduced hereinabove where there is no such condition with deeming provision as in the PMC. In any way it is not within our jurisdiction to read an Statute beyond its wording or what is not written but try to understand the same and its applicability with the assistance of aim and object of the legislature behind it. Keeping in mind the above discussion, in our view a balance and fair approach would be to understand purpose of the issuance of Completion Certificate meeting the object of S. 80 IB(10) of I.T. Act, 1961 by combined reading of Rule 7.6 and Rule 7.7 of D.C. Rules of PMC. By doing so, we come to the conclusion that it would be just and proper to draw a fair approach on the basis of existing Rules 7.6 7.7 of D.C. Rules of PMC as to what would be the date of completion of the sanctioned plan for the purpose of meeting out the requirement of S. 80 IB(10) Expl. (ii) of I.T.Act in the following situations where the assessee/applicant has complied the requirement of the said Rule 7.6 by furnishing the necessary copies of Completion plan etc. through its licensed architect who has supervised its wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructed by the plaintiffs being temporary construction without having any foundation will not fall within the provisions of Section 253. Similarly in the case of Mathubhai M. Shah v/s. Emperor (Supra) the Hon'ble Bombay High Court has been pleased to agree with the authority below that although under Section 3(7) "building" would include any hut, shed or other enclosure, whether used as a human dwelling or otherwise, it does not follow that the word "building" is used in the Act, it includes a hut or a shed. The Ld. A.R has also made available at Page no. 14 of the paper book no. I a copy of Final N.O.C dated 17.3.2005 issued by PMC regarding fire protection system. We thus find no reason to disagree with the contention of the ld A.R tha the objections raised by the PMC for issuance of the Occupancy Certificate are not of such nature to question the validity of the construction of the main project as not fit for occupation. Considering the totality of the facts and circumstances of the present case especially keeping in mind that in this case PMC has failed to issue objection within 21 days of receipt of the Completion Certificate and that in the objections raised after expiry of 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the date when the applicant acquired deeming sanction will be treated as the date of Completion (occupancy) Certificate to meet out the requirement of Explanation (ii) to Section 80IB (10)(a) of the Act. We have already discussed hereinabove what would be the small objections. In brief those objections which do not affect the main project and are generally temporary constructions. 20. We thus while setting aside orders of the authorities below direct the A.O to allow the claimed deduction u/s. 80IB(10) of the I.T. Act 1961 in the assessment years under consideration treating the required date of completion of construction of the housing project as the date when above discussed deeming provision period of 21 days expired i.e. 20.11.2005. 21. At the end, we would like to record our high appreciation and admiration about the quality of assistance we have received from the Ld. A.R Shri Sunil Ganoo and Ld. D.R. Shri Hareshwar Sharma, who made their full effort to present their respective cases in a better possible wayj with supporting documents and citations before us. 22. The grounds are thus allowed. 23. In result, appeals are allowed. Order pronounced in the open Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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