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TMI Blog2015 (10) TMI 2384X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Local Authority must bear the date of having been issued before the cut off date. The provision in the form of Section 80IB(10)(a), applies uniformly to all the assessees - be it following work in progress accounting method or otherwise. The benefit of deduction under this provision can be availed by the assessee following the work in progress accounting method, provided he has complied with the stipulation of having produced completion certificate issued by the Local Authority before the cut off date, as may be applicable in his case. In other words, if the housing project was approved by the Local Authority before 1st April, 2004, he must submit completion certificate issued by the Authority having been issued before the 31st March, 2008. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. If this condition is not fulfilled, the assessee who maintains work in progress accounting method and has claimed deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer on 24.12.2008. Further, a letter was issued by the Municipal Corporation dated 18.12.2008, pursuant to the enquiry made in that behalf stating that completion certificate has not been issued to the assessee till that date and that the application of the assessee was still being processed. On these facts the Assessing Officer proceeded to complete the Assessment proceedings and disallowed the deduction claimed by the assessee under Section 80IB (10) (a). Notably, the completion certificate issued by the Local Authority is of subsequent date and not issued within the stipulated date. 3. Being dissatisfied, the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals)-II, Bhopal and thereafter before the Income Tax Appellate Tribunal, Indore Bench, Indore by way of appeals being I.T.A. Nos. 145/Ind/2011, 434/Ind/2010 and 86/Ind/2011. 4. The Tribunal by the impugned judgment decided all the three appeals of the present assessee as also of another assessee (M/s Global Estates) together. 5. The Assessee's claim for deduction under the amended provision of Section 80IB on other count was also allowed on the finding that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before 1st April, 2004, it was required to be completed before 31.03.2008 irrespective of the date of approval. In respect of housing projects approved on or after 01.04.2004, the same were required to be completed within four years from the end of the financial year in which the housing project is approved by the Local Authority. As per clause (ii) of the Explanation below Section 80IB (10) (a), compliance of this condition has been made mandatory. Any other interpretation would result in rewriting the amended provision and render the legislative intent of expressly providing for the date on which completion certificate is issued by the Local Authority , otiose. By the very nature of this amended provision, it cannot be construed as having retrospective effect. Further, the developers of the concerned housing projects have been treated evenly by giving four years' time frame from the coming into force of the amendment to complete their project(s) and for obtaining completion certificate from the Local Authority within the same time. Any other interpretation would be flawed, as it would result in treating similarly placed persons unequally. In that, housing projects approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing projects approved prior to 01.04.2014, if the assessee had submitted application to the Local Authority prior to 31.03.2008 for issuance of completion certificate and the Local Authority finally issued completion certificate after 01.04.2008 indicating that the project was in fact completed before the cut off date, must be accepted on its face value for considering the claim for deduction. Even such cases will and must get the benefit under Section 80IB(10)(a). Taking any other view would result in asking the assessee to do something which is impossible and not within his control. The delay caused by the Local Authority in processing and issuing completion certificate cannot be the basis to deny the benefit to the assessee. It is also contended that in cases where it was impossible for the assessee to complete the project for good reason, the benefit of deduction offered to the housing project under the unamended provision cannot be taken away. Besides relying on two Supreme Court decisions, the assessee also relied on the decisions of different High Courts in the case Commissioner of Income Tax Vs. Happy Home Enterprises (2015) 372 ITR (Bom), Commissioner of Income Tax Vs. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profits derived in any previous year relevant to any assessment year from such housing project if,- (a) Such undertaking has commenced or commences development and construction of the housing project on or after 1st day of October, 1998; (b) The project is on the size of a plot of land which has a minimum area of one acre; and (c) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place. (Emphasis Supplied) 12. Section 80IB (10) was again amended by Finance Act No.2 (2004) w.e.f. 01.04.2005. The amended provision reads thus :- (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended clause (a), as was in force prior to 01.04.2005, the assessee was entitled for deduction of profits in case of housing projects approved before 31.03.2005 by the Local Authority. The only condition in clause (a) at the relevant time was, that the development and construction of the housing project had commenced or commences on or after 01.10.1998. This stipulation has been modified by the amended clause (a). As per amended clause (a), with which we are concerned, the housing project approved before 31.03.2007 by a Local Authority would receive the benefit of deduction -provided the development and construction of the housing project has commenced or commences on or after 01.10.1998 and is completed within specified time. In that, housing projects approved by the Local Authority before 01.04.2004 must be completed before 31.03.2008; and the housing project approved on or after 01.04.2004 but before 31.03.2007 should be completed within four years from the end of the financial year in which the housing project was approved by the Local Authority. The amendment further postulates that, the date of completion of construction of the housing project shall be reckoned on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the relevant DC Rules. For such projects, which were commenced and completed within the specified time, the position would become irreversible. In paragraph 20 (a) to (g) of the decision, the Court observed thus :- 20. Having regard to the above, let us take note of the special features which appear in these cases : (a) In the present case, the approval of the housing project, its scope, definition and conditions, all are decided and dependent by the provisions of the relevant DC Rules. In contrast, the judgment in Reliance Jute and Industries Ltd. (supra) was concerned with income-tax only. (b) The position of law and the rights accrued prior to enactment of Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible. (c) The provisions of S.80-IB(10) mention not only a particular date before which such a housing project is to be approved by the local authority, even a date by which the housing project is to be completed, is fixed. These dates have a specific purpose which gives time to the developers to arrange their affairs in such a manner that the housing project is started and finished within those stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 1st April, 2005 and completed by the stipulated date, though such stipulated date is after 1st April, 2005. (Emphasis Supplied) 15. The Supreme Court approved the dictum of the Bombay High Court in the case of Happy Home Enterprises (supra) which had noted as follows :- 36. There is yet another reason for coming to the aforesaid conclusion. Take a scenario where an Assessee following the project completion method of accounting, has completed the housing project approved by the local authority complying with all the conditions as set out in section 80-IB(10) as it stood prior to 1st April, 2005. If we were to accept the argument of the Revenue, then in that event, despite having completed the entire construction prior to 1st April, 2005 and complying with all the conditions of section 80-IB(10) as it stood then, the Assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent considerations would arise. However, we are not called upon to decide any such condition and hence we are not laying down any general proposition of law, save and except that clause (d) of section 80-IB(10) being a condition linked to the date of the approval of the housing project, would not apply to any housing project that was approved prior to 31st March, 2005 irrespective of the fact that the profits of the said housing project are brought to tax after the said provision was brought into force. (Emphasis Supplied) 16. The other decisions of the Bombay High Court as well as Karnataka High Court relied by the assessee also deal with the issue ascribable to Clause (d) of Section 80IB, for which it is not necessary to dilate any further on those authorities. The only decision, on the scope of Section 80IB (10) (a), in particular, clause (ii) of the explanation relied by the assessee, is of the Delhi High Court in the case of CHD Developers Ltd. (supra) and of Gujarat High Court in the case of Tarnetar Corpn. (supra). 17. Reverting to the decision of the Delhi High Court, it is seen that the Court extensively referred to the exposition in cases dealing with the eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated regarding the built up area of the project by way of amendment, which the assessee could not have complied at all; and even though the construction of his housing project was otherwise in full compliance of all conditions set out in the approval given by the Municipal Authority as per the relevant Rules in that behalf. 19. The provision such as clause (a) as amended, sensu stricto, cannot be considered as a new condition and that too incapable of compliance. Inasmuch as, clause (a) deals with the time frame within which the housing project was expected to be completed, to get the benefit of the prescribed deduction. Notably, the amended Section 80IB (10) (a) extends the benefit even to the housing projects approved by the Local Authority before 31.03.2007, instead of 31.03.2005 - as was provided in the unamended provision. Therefore, necessity was felt to make distinction between the two classes of housing projects for specifying the time frame for completion. The one approved by the Local Authority before 1st day of April, 2004; and the other class of housing project approved by the Local Authority on or after 1st April 2004 till 31.03.2007. In either case, the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay with. However, by amendment which came into effect from 1st April, 2005, the condition for completion of project within specified time has been reintroduced, while giving sufficient time (four years) to the assessee to comply for being entitled to get deduction. 22. A priori, it is not a case of imposing new condition, much less, with retrospective effect as has been argued before us; unlike introduction of new condition in the shape of clause (d) - which obviously could be applied only prospectively, as held by the Supreme Court in the aforesaid decisions. Clause (a) stands on a completely different pedestal. It cannot be treated as a new condition linked to the approval and construction or having retrospective effect as such. For, it gives at least four years' time frame to both class of housing projects; to wit, housing projects approved prior to 1st April, 2004 or after 1st April, 2004. The four years period obviously has prospective effect, albeit limiting the period for completion of the project, to avail of the benefit. Four years' time frame for completion of the project, by no standards, can be said to be unreasonable, harsh, absurd or incapable of compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to rely on other circumstances or evidence to plead that the housing project is complete - requiring enquiry into those matters by the Tax Authorities - sans a completion certificate issued by the Local Authority in that behalf. A priori, the argument of substantial compliance is sufficient, would lead to uncertainty about the date of completion of the project which is the hallmark for availing of the benefit of tax deduction. Only with this intent the legislature in its wisdom has predicated that, the completion of construction of the housing project is taken to be the date on which the completion certificate is issued by the Local Authority. To interpret it to include an ex post facto certificate or such certificate issued by the Local Authority after the cut off date, would not only result in rewriting of the express provision and run contrary to the unambiguous position pronounced in the Section, but also doing violence to the legislative intent. For, Explanation (ii) will then have to be read as date of completion of construction of the housing project shall be taken to be the date as certified by the Local Authority in that behalf , irrespective of the date of iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfil the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder. We reject the argument of the assessee that the effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005, has retrospective effect or that it is unjust in any manner or incapable of compliance at all. Similarly, the requirement of securing completion certificate issued by the Local Authority before the cut off date is not directory, in view of the express provision in Section 80IB(10)(a) and the Explanation (ii) thereunder. The completion certificate granted by the Local Authority must bear the date of having been issued before the cut off date. 27. That takes us to the argument of the assessee that the stipulation in Section 80IB(10)(a) of completion certificate issued by the Local Authority before the cut off date, cannot be applied in the case of assessee following the work in progress accounting method. In our opinion, the provision in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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