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TMI Blog2017 (1) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression “booking” of the residential unit which precede the allotment of residential unit as generally understood in the housing sector. Unless, in a given case, where the booking and allotment are same as demonstrated through the contractual understanding between the builder and the allottee of the residential unit, it would not be correct to use these terms inter-changeably. In light of above directions, we accordingly set-aside the matter to the file of the AO to examine the allotment of flats made by the assessee in entirety and examine the satisfaction of conditions under clause (e) and clause (f) of section 80IB(10) of the Act. Validity of assessment framed u/s 147 - Held that:- It is noted that the assessment was reopened within the period of 4 years basis the completion of assessment for AY 2010-11 where the assessee’s claim under section 80IB(10) was disallowed. The assessee was provided copy of reasons recorded for reopening and after disposing off the assessee’s objections, the impunged reassessment order has been passed by the AO. The ld CIT(A) has upheld that the AO has sufficient material evidence/information prior to issuance of notice under section 148 and rely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chayat and on 26-03-2014 to Jaipur Development Authority. The various dates relating to the filing of the application, approval of MAP and the dates relating to the completion of the different blocks of the housing project and the issue of completion certificate by the Local Authority is as under:- S.No. Particulars Particulars of project Khasra no. 1 to 8 11 to 17 (Block A to G) Khasra No.9, 10 18 (Block H I) Dates relating to the approval of Housing Projects 1 Date of application for approval of Map of the proposed residential project to Gram Panchayat 25-03-2007 25-03-2007 2 Date of Approval of Map by Sarpanch, Gram Panchayat and communication thereof 10-04-2007 10-04-2007 3 Date of application for approval of Map of the proposed residential project to JDA 26-03-2007 26-03-2007 4 Date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company filed its return of income declaring an income of ₹ 16,43,530/- after claiming deduction u/s 80-IB at ₹ 91,68,155/-. This deduction was revised in assessment proceeding to ₹ 1,41,53,488/- but restricted to ₹ 1,08,11,680/- i.e. to the extent of available profit. 4. The AO disallowed the claim of deduction for the reason that assessee has not fulfilled the following conditions prescribed u/s 80-IB(10):- (i) As per section 80-IB(10)(a), the project must be completed within five years from the end of the financial year in which it is approved by the Local Authority. The period of five years expired on 31-03-2012. As per explanation (ii) to this section, date of completion of construction of the housing project is to be taken to be the date on which the completion certificate is issued by the Local Authority. Such certificate is issued by JDA after 31-03-2012 and therefore this condition is violated. For drawing this inference, AO made following observations:- (a) The assessee filed the copy of the completion certificate dated 01-08-2012 issued by the JDA in respect of Khasara No. 9, 10 18. No completion certificate was filed in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the findings given in AY 2010-11, the AO issued notice u/s 148 for AY 2009-10 on 07.08.2013 and disallowed claim of deduction u/s 80-IB of ₹ 1,16,92,294/-. 6. The Ld. CIT(A) allowed the claim of deduction u/s 80-IB to the assessee in AY 2010-11 and following the same, it was allowed for AY 2009-10 also which has now being contested before us. 7. The relevant provisions of section 80-IB(10) which are under consideration are as under: The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March 2008 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 after the 1st day of October, 1998 and completes such construction, - (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] 8. There is no dispute as to the fact that assessee has complied with the conditions stated in sub clause (b), (c) (d). The dispute remains only with reference to the conditions stated is sub clause (a), (e) (f). In present case, to decide the fulfillment of condition referred in clause (a), (e) (f), following issues needs to be considered:- (i) Who is the Local Authority to approve the housing project and to issue the completion certificate of the housing project? (ii) When the application for issue of the completion certificate is made within the prescribed time, any delay in issue of the completion certificate would relate back to the date of making of application or not? (iii) Whether each block of housing complex in the project is to be considered separately or all block of the housing complex in the project is to be considered together for ascertaining the date of completion of the construction of the housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building permits to all the buildings including CMDA's special buildings, after the planning permits were issued by CMDA. Hence, deduction u/s 80-IB(10) is allowed to the assessee as Corporation of Chennai has given completion certificate. (e) From the above it can be noted that the Gram Panchayat is the competent authority for approval of the Housing Project and for issue of the completion certificate in respect of the housing project. (f) In the present case, approval of the Housing project from Gram Panchayat was obtained on 10-04-2007. Thus, the period of five year from the end of the financial year in which the project is approved ends on 31-03-2013. The housing project was completed in Feb. 2012. Therefore, assessee moved an application for issue of the completion certificate to Gram Panchayat on 01-03-2012. The Sarpanch of the Gram Panchayat has issued the completion certificate on 27-03-2012. The AO has recorded the statement of the Sarpanch on 21-03-2013 where she stated that the certificate was issued in good faith without site verification. However, the statement of the Sarpanch was not confronted to the assessee. Therefore, such statement recorded at the back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of completion certificate on 23-03-2012. The JDA after completing its formalities issued the completion certificate on 01-08-2012/23-03-2013 but all these certificate would relate back to the date of the application dated 23-03-2012 as discussed below. From the above discussion it is evident that assessee has completed the housing project prior to 31-03-2012 and also obtained the completion certificate from Local Authority and therefore, the condition specified in clause (a)(iii) to section 80-IB(10) is fully satisfied. Therefore, the Ld. CIT(A) considering all these evidence has rightly held that the project was completed prior to 31.03.2012. 9.3 We have heard the rival contentions and pursued the material available on record. The term local authority has not been defined u/s 80IB(10) of the Act. Therefore, the expression local authority has to be examined in the context of section 80IB(10) of the Act where it has been used. This section requires that the deduction shall be available to an undertaking developing and building the housing project which has been approved by the local authority and completes such construction within a period of five years from the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajasthan Act 37 of 1959) in Jaipur Region. Section 3(1) talks about establishment of an authority to be called Jaipur Development Authority for the purposes of this Act as notified by the State Government. Section 3(3) states that the authority shall be deemed to be a local authority within the meaning of the term Local Authority as defined in the Rajasthan General Clauses Act, 1955. Section 4 talks about composition of the Jaipur Development Authority which shall consist of the following members:- (i) a Chairman, who shall be the Minister-in-charge of Urban Development of the State of Rajasthan or a nominee of the Governor during President s Rule; (ii) a Vice-Chairman, who shall be State Minister of Urban Development of the State of Rajasthan, or a nominee of the Governor during President s Rules; (iii) Secretary to the Government, Urban Development and Housing Department; (iv) Jaipur Development Commissioner (appointed under this Act); (v) Chairman, Rajasthan Housing Board; (vi) Chief Engineer, Public Health Engineering Department; (vii) Chief Engineer, Public Works Department; (viii) District Collector, Jaipur; (ix) Chief Engineer, Rajasthan State E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangements with any person or organization as the Authority may deem necessary for performing its functions; (m) to prepare Master Plan for traffic control and management, devise policy and programme of action for smooth flow of traffic and matters connected therewith; (n) to perform functions designated by the State Government in the areas of urban renewal, environment and ecology, transport and communication, water energy resource management directly or through its Functional Boards or other departments/agencies as the State Government may specify; (o) regulating the posting of bills, advertisement hoardings, signpost, and name boards in Jaipur Region or in any part thereof as specified by the Authority; (p) regulating the erection or re-erection of buildings and projections, making material alterations therein and providing for open spaces in Jaipur Region or in any part thereof as specified by the Authority; (q) removing obstructions and encroachments upon public streets, open spaces and properties vesting in the Government or the Authority; (r) to do all such other acts and things which may be necessary for or incidental or conducive to, any matters which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order made thereunder, relating to any matters other than the requirement of obtaining permission of the Authority before undertaking or carrying out any improvement under this Act. (4) Any authority or person aggrieved by the decision of the Authority under sub-section (3), may, within thirty days, appeal against such decision to the State Government whose decision shall be final: Provided that, where the aggrieved authority submitting such appeal is under the administrative control of the Central Government, the appeal shall be decided by the State Government after consultation with the Central Government. (5) In case any person or authority does anything contrary to the decision given under this section, the Authority shall have power to pull down, demolish or remove any development undertaken contrary to such decision and recover the cost of such pulling down, demolition or removal from the person or authority concerned. 9.7 In light of above, it is clear that the authority which has been authorized and mandated to approve the development and construction of housing projects in the Jaipur region is the Jaipur Development Authority. Further, in terms of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as under: (a) In case JDA is considered to be local authority for approval in issue of completion certificate, it can be noted that the assessee has also moved an application for approval of the map of the housing project to JDA on 26.03.2007 (PB 2 15) but the approval was conveyed on 26.08.2008 (17 months delay) for Block A to G (PB 2-3) and on 01.10.2008 (18 months delay) for Block H I (PB 15-16). From the date of conveying the approval, the period of 5 years ends on 31.03.2014. However, as the project was completed in February, 2012, assessee moved application on 23-03-2012 to JDA for issuing the completion certificate. The completion certificate is issued by JDA for Block H I on 01-08-2012 (PB 21), for Block A to E on 21-03-2013 (PB 13) but the completion certificate for Block F G was not issued for want of environment clearance certificate. However, the fact remains is that the flats in these blocks are occupied and used for residence by its owners. (b) The AO at Pg 7 of the order has stated that he has inspected the file of the assessee with JDA on 15-03-2013 and found that on 0805-2012 (PB 10), JDA wrote a letter to the assessee in response to its applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the ground that construction was not completed but on some other technical ground. Thus, granting the benefit of deduction could not be held to be illegal. CIT v. Radomir Dzelatovic 206 ITR 320 (Bom.): The assessee, a foreign technician, filed an application before the Central Government claiming exemption from payment of tax under section 10(6)(viia)(I)(B) of the Income-tax Act, 1961. The Central Government granted the approval on May 26, 1972, for a period of two years. On March 25, 1974, the assessee applied for extension of the exemption which was granted on October 4, 1975, i.e., beyond October 1, 1975, resulting in a delay of three days on the part of the Central Government. The Tribunal held that the assessee could not be denied the benefit of exemption for the assessment year 1975-76 for the delay on the part of the Central Government, that the approval, once accorded, related back to the date of the application and that hence the assessee was entitled to the exemption for the assessment year 1975-76. On a reference the court affirming the order of the Tribunal, held that the assessee was entitled to exemption under section 10(6)(viia)(1)(B) of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion. The intention of the legislature in providing explanation to fix the date of completion of a project is quite helpful when this provision is utilized in practice. In our view the explanation has introduced an unnecessarily strictness in the provision which is in the nature of exemption and not in the nature of charging. Sub-section (10) mentions that a housing project should be complete before 31.03.2008 so as to get the exemption. Completion of housing project is a physical act. It can be demonstrated on the spot and also through a certificate issued by an architect who is appointed for supervising the construction work. He is a professional who would declare that the project is complete. Unfortunately, Sub-section (10) and the explanation do not give any importance to the issuance of such Completion Certificate by the concerned architect. It gives importance only to the certificate of Municipal authority. It is common knowledge that an application for Completion Certificate submitted to the Municipal Authorities is accompanied by a Completion Certificate issued by the concerned architect. No doubt, the Municipal authorities then cause inspection of the site and verify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons that the work of block A to D is almost complete and the civil work of block E, to G is in progress. The letter does not specify the nature of civil work which is in progress. This letter was never received by the assessee. As against this, the Chief Fire Brigade Officer vide its letter dated 2305-2012 (PB 8-9) have stated that block A to G has been constructed for which no objection certificate is issued. How the fire fighting department could have issued no objection certificate on 23-05-2012 if the construction of block A to G were incomplete on 8-05-2012. This shows that the letter dated 08-05-2012 of JDA is vague and can t be relied upon. (e) The JDA vide letter dated 05-10-2012 (PB 11) has communicated that the issue of the completion certificate was put in the Building Map Committee on 08-08-2012 where it is stated that assessee has constructed more than 20,000 sq. mt. than the approved construction for which environment clearance is to be produced and it is to give an undertaking that the space below the water tank would not be used for residential or any other use. If the civil construction was in progress on 08-05-2012, in respect of block E to G, how in the meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Local Authority u/s 80-IB(10), the condition referred in clause (a)(iii) of section 8IB(10) stands satisfied. In these facts and circumstances, the Ld. CIT(A) has rightly held that condition referred to in section 80-IB(10)(a)(iii) is fulfilled. 10.2 We have heard the rival contention and perused the material available on record. In this regard what is relevant to examine is firstly, when the housing project was approved by the JDA and secondly when the housing project was completed and completion certificate issued by the JDA. 10.3 Here it would be relevant to look at the provisions of section 80IB(10)(a)(iii) which provides that the amount of deduction in the case of an undertaking developing and building housing projects approved before 31.03.2008 by a local authority shall be 100% of the profits derived in the previous year relevant to any assessment year from such housing project where such undertaking commences development and construction of housing project on or after the 1st day of October, 1998 and completes such construction within 5 years from the end of the financial year in which the housing project is approved by the local authority. Further, explanation (i) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w coming to the issue of completion certificate issued by JDA, the ld. AR has submitted that the assessee has moved an application for approval of the map of the housing project to JDA on 26.03.2007 in respect of blocks A to G and Block H I respectively. The JDA conveyed the approval on 26.08.2008 for the blocks A to G and on 01.10.2008 for the block H I and from such date of conveying the approval, the period of 5 years for completion of the housing project ends on 31.03.2014. However, as the project was completed in February, 2012, the assessee moved application on 23.03.2012 to JDA for issuing the completion certificate in respect of blocks A to G as well as blocks H I. Thereafter the completion certificate for blocks A to G was issued on 21.03.2013 and for blocks H I on 01.08.2012. In respect of blocks F G the completion certificate was not issued by JDA for want of environmental clearance certificate however, the facts remains that the flats in these blocks were occupied and used for residence by owners. 10.6 In this regard, firstly, as we have stated above, the housing project was approved on 29.03.2007, therefore the period of five years from the end of the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 05.10.2012 has stated that the matter relating to the application filed by the assessee was taken up in the 122nd meeting of building plan committee held on 28.08.2012 wherein the assessee was asked to take certain actions steps. Firstly, it was stated that solar energy equipments have been installed in four towers, however, in respect of remaining 3 towers, solar energy equipment needs to be installed before the completion certificate is issued by JDA. Secondly, it was stated that the built up area is more than 20,000 sq. meters and therefore, environmental clearance from the environmental department needs to be produced. Thirdly, it was stated that in all the blocks, 2.90 ft. columns have been build on the terrace for water tank which were not approved earlier. In this regard, an undertaking was sought from the assessee that the area under the said columns on the terrace will not be used for housing or any other purposes. Thereafter, another letter was issued by JDA on 07.01.2013 wherein the assessee was again reminded about obtaining the environmental clearance which was still not been obtained and submitted to JDA and thereafter, finally on 21.03.2013, the JDA issued a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us to take a view in the matter. In the interest of justice and fair play, the matter require to be set-aside to the file of AO for fresh examination so that all relevant facts and documents are brought on record to determine the actual date of completion of blocks A to G. 10.10 In light of above, it is clear that in respect of bock H I, the construction has been completed as on 31.03.2012 even though the approval has been granted on 11.07.2012 and completion certificate issued by JDA on 1.08.2012. The delay in issuance of completion certificate cannot be attributed to the assessee and the assessee cannot be penalized by way of denial of tax deduction which it is otherwise eligible to and solely on the ground of delay in issuance of completion certificate. As held by Hon ble Bombay High Court in case of Hindustan Samuh Awas ltd (supra), the explanation has introduced an element of unnecessary strictness in the provision which is in the nature of exemption and not in the nature of charging and the completion of the housing project is a physical act which can be demonstrated on the spot. We are accordingly of the view that in respect of Block H I, the assessee satisfies the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner (Appeals) allowed the deductions under section 80-IB(10) in respect of the residential units with an area of less than 1500 sq. ft. On appeal by the Department, the Tribunal allowed the appeal by holding that the eligibility conditions under section 80-IB are that the built-up area should not exceed 1500 sq. ft. in the context of cities other than Delhi and Mumbai and the profits must be derived in the previous year from the housing project. This restriction is applicable for the entire project. If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit could not be extended to the project. On further appeal, Hon ble Court held that within a composite housing project where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area. Further, Gujarat High Court in case of ITO Vs. Saket Corporation (2015) 234 Taxman 435 where assessee claimed deduction u/s 80-IB with respect to housing project consisting of 43 units which was disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice, he has given reference to six instances. The assessee explained that out of these six cases except in case of M/s Rajasthan Patrika Pvt. Ltd., allotments were made prior to insertion of clause (e) (f). It was further stated that even in these five cases, ultimately not more than one flat is allotted or two units were combined to make one unit, area of which does not exceeds 1500 sq. ft. The AO however, has not accepted the explanation given by the assessee. The AO further observed that certain flats were allotted to husband and wife and therefore condition of section 80-IB(10)(f) is violated. He therefore held that deduction of sec. 80-IB(10) is not available and therefore denied the claim of deduction. (b) It may be noted that in all, AO has referred to 8 instances which according to him violates the condition of section 80-IB(10)(f). The explanation of the assessee in respect of these 8 instances is as under:- S.N . Flat No. Name of the customer Explanation 1 C-801 C-802 R. P. Saini The flat was blocked tentatively for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two or more flats but ultimately not more than one flat is allotted to such person, the condition of clause (f) would not be violated. Further, this clause inserted from 01.04.2010 has prospective effect. Therefore, where the flats are allotted in respect of booking which is made prior to 01.04.2009, clause (f) would not apply. Gujarat High Court in case of Mannan Corporation Vs. ACIT (2013) 214 Taxman 373 and Bombay High Court in case of CIT Vs. Jogani Constructions Ltd. 217 Taxman 95 (Mag.) with reference to amendment made to section 80-IB(10)(d) w.e.f. 01.04.2005 held the same to be prospective in nature for the purpose of claim of deduction by assessee u/s 80-IB(10). On the same analogy, insertion of clause (e) and (f) w.e.f. 01.04.2010 are prospective in nature and therefore if more than one flat is booked in the name of same individual or in the name of spouse or minor children prior to 01.04.2009, the condition of clause(e)/(f) cannot be applied on the same. (d) Otherwise also, if there is any violation of the conditions specified in clause (e) (f) of section 80-IB(10), the deduction can t be disallowed in entirety but should be restricted only with reference to tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q. ft. Sanghvi and Doshi Enterprise v. Income-tax Officer Sri Mahalakshmi Housing v. Income-tax Officer Sri Mahalakshmi Builders v. ITO 18 ITR 608 (Trib.)(Chennai) In these cases, by following the decision of Calcutta High Court in case of CIT Vs. Bengal Ambuja Housing Development Limited in I.T.A.No.458 of 2006 dated 5 January 2007, it was held that a pro rata deduction is permissible u/s 80-IB where some residential units exceeds 1500 sq. ft. Sreevatsa Real Estate P. Limited 41 DTR 497 (Chennai)(Trib.) In this case it was held that where the built up area of some of the housing units are more than 1500 sq. ft., assessee is entitled for deduction u/s 80-IB(10) on pro rata for housing units having built up area less than 1500 sq. ft. (e) The Ld. CIT(A) after considering these evidences at Pg 34 of the order has rightly held that assessee has not violated requirement of sec. 80-IB(10)(f). 12.2 We have heard the rival contentions and pursued the material available on record. Firstly, regarding the contention of the ld AR that the clauses (e) and (f) inserted by the Finance Act, 2009 w.e.f 1.04.2010 is prospective in nature, we refer to notes to clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue by the Finance Act, 2009 to aid and supplement the existing condition of limiting the size of the residential unit (less than 1500 sq. Ft) with an ultimate objective of ensuring tax benefit for housing projects for low and middle income households. Here we refer to the decision of the Hon ble Gujarat High Court in case of Manan Corpn. vs. Assistant Commissioner of Incometax, Circle-5 [2013] 29 taxmann.com 15 (Guj.) where in the context of amendment by way of insertion of clause (d) to section 80IB(10), the Hon ble High Court has held that the criteria to hold the amendment in question retrospective are absent as there is no explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication, the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation. Drawing an analogy in the instant case, where the allotment of the flats has already been done prior to 1.04.2009, it would be unreasonable to expect the builder to cancel such allotment and refund the amount or forfeit the tax benefit for the non-fulfillment of such conditions which ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which precede the allotment of residential unit as generally understood in the housing sector. Unless, in a given case, where the booking and allotment are same as demonstrated through the contractual understanding between the builder and the allottee of the residential unit, it would not be correct to use these terms inter-changeably. In light of above directions, we accordingly set-aside the matter to the file of the AO to examine the allotment of flats made by the assessee in entirety and examine the satisfaction of conditions under clause (e) and clause (f) of section 80IB(10) of the Act. 12.7 In light of above discussions and taking into consideration the entirety of facts and circumstances of the cases including the arguments and legal authorities quoted before us, the Revenue s appeal for both the years is partly allowed with above directions for statistical purposes. Assessee s C.O. No. 39/JP/2015. 13. In assessee s cross objection for AY 2009-10, the assessee has challenged the actions of the ld CIT (Appeals) in upholding the validity of assessment framed u/s 147 of the Act and has relied upon the written submissions made before the ld CIT(A). On perusal of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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