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TMI Blog2018 (5) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act amounting to Rs. 16,99,10,673/- as claimed by the appellant. 2. The learned CIT(A) ought to have appreciated the spirit of the circular No.4/2009 dated 30.6.2009 issued by CBDT permitting allowance of deduction on a year to year basis on the profits from partial completion of the project. As the appellant followed percentage of completion method about which there is no dispute, the deduction should have been allowed since the appellant had produced necessary certificate for completion. 3. The learned CIT(A) ought to have appreciated that the provisions u/s.801B(10) being incentive provisions, a liberal interpretation of the provision will make the provision otiose instead of advancing the purpose of legislation in the light of this accepted principle enunciated the Apex Court. The learned CIT(A) ought to have allowed deduction in respect of completed blocks for which the claim was made for which necessary certificate was obtained from the municipality duly supported by other evidences. 4. The learned CIT(A) ought to have appreciated the spirit of the above circular which has the effect of diluting the provisions of section 801B(10) to remove the hardship caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I & J only and no certificate was furnished regarding the remaining 3 blocks. 5. In order to verify the allowability of assessee's claim during the relevant A.Y, AO made a reference to the District Valuation Officer of the Department to inspect the housing project and verify its eligibility for deduction u/s 80IB(10) of the Act. The DVO, after inspection of the housing project, vide valuation report dated 22.03.2013, submitted a detailed report. As per the said report, the measurements of only 241 flats constructed at Manjeera Diamond Towers, Phase-I, were given by the assessee and the assessee had submitted that the occupancy certificate is yet to be obtained for F, K & L blocks and the application for issuance of completion certificate before the GHMC is yet to be filed. As regards the status of the project in March, 2013, the DVO reported that; i) 4 buildings are completed in respect of which occupancy certificate was obtained; ii) 3 buildings are stated to be completed but no efforts have been made to obtain the completion certificate from the local authority; and iii) the balance buildings are in skeleton shape or are yet to be started. Further, it was reported that, and out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial flats, each block has to be considered as a housing project and since the assessee has completed seven blocks out of the whole project, the assessee is eligible for claiming deduction u/s 80IB(10) of the Act on the profits of these blocks on percentage completion method. He placed reliance upon the CBDT Instruction No.04/2009 dated 30.06.2009 wherein the Board has clarified that (a) the deduction can be claimed on a year to year basis, where the assessee is showing profit from partial completion of the project in every year; (b) in case it is late and found that the condition of completing the project within the specified time limit of 4 years as stated in section 80IB(10) has not been satisfied, the deduction granted to the assessee in the earlier A.Ys should be withdrawn. Therefore, according to the learned Counsel for the assessee, since the assessee has completed the construction of 4 buildings containing various residential units, each block also can be considered as a separate housing project and the assessee is eligible to claim the deduction u/s 80IB(10) of the Act on the profits from buildings which are completed. For this proposition, he placed reliance upon the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s eligible for deduction u/s 80IB(10) of the Act on the income from these buildings too. In support of this contention, he placed reliance upon the following decisions: a) CIT vs. Hindustan Samuh Awas Ltd (2015) 377 ITR 150 (Bom.) b) M/s. Sriram Constructions, Hyderabad vs. DCIT, Hyderabad in ITA No.1300/2001 & Others dated 29.4.2016. c) CIT vs. M/s. Ittina Properties (P) Ltd in ITA No.556 of 2013 & others dated 15.7.2014 of the Hon'ble Karnataka High Court. 10. As regards the objection of the Revenue that some of the flats exceeded the area of 1500 sft, he submitted that the proportionate deduction is to be disallowed and not the entire claim of deduction. Thus, according to him, the assessee is eligible for deduction u/s 80IB(10) of the Act for all the blocks completed by it. 11. As regards the interest income which has been claimed as a deduction u/s 80IB(10) of the Act, the learned Counsel for the assessee submitted that these deposits were kept as margin money with the Banks for completion of the project and therefore, they are inextricably linked to the project and interest therefrom is also linked to the project and therefore, the assessee is eligible for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they were also completed in all respects and the application for issuance of completion certificate along with necessary enclosures such as Architect's Certificate etc., was filed on 30.03.2013. 16. From the facts and circumstances of the case before us, the question before us is whether the entire project is to be completed before 31.03.2013 or each block can be considered as an independent housing project and deduction u/s 80IB(10) can be allowed in respect of such completed blocks?. The assessee has received the approval for all the blocks as one housing project as is evident from the Municipal proceedings No.G/1272/BP/581/ 2007 dated 4.2.2008 (at page 2 of the paper book filed by the assessee) but the assessee has been able to complete only seven buildings out of the whole project. The CBDT instruction No.04/09 dated 30.06.2009 had clarified that the assessee can claim the deduction u/s 80IB(10) on a year to year basis when it is following percentage completion method and such a deduction so granted in each of the years can be withdrawn if the condition of the completing the project within the stipulated period is not fulfilled. 17. In the case before us, the assessee has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 80IB(10) of the act. 22. The provisions of section 80IB(10) as applicable to the relevant A.Y reads as under: "[80IB(10) 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 the 1st day of April, 2004 [but not later than the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority; (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)." 23. From a literal reading of the above provision, the relevant conditions to be fulfilled in the case before us are that the project (i) shall have been approved by the local authority; (ii) should be on a minimum area of one acre; (iii) each residential unit should not exceed the specified area; (iv) should have been completed within the stipulated period; and (v) the project shall be taken to be completed on the date on which the completion certificate is issued by the local authority. 24. As far as the 4 blocks are concerned, all the above, except condition No.(iv) are fulfilled and as far as 3 blocks are concerned, both the conditions (iv) and (v) are not fulfilled. In respect of some of the flats, there is a violation of condition No.(iii) as well. Therefore, it is to be examined, if the deduction is not to be allowed in toto even if one of the above condition is not fulfilled. 25. The Hon'ble Bombay High Court in the case of CIT vs. Vandana Properties reported in (2013) 355 ITR 36 (Bom.) has cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IB(10). 26. The Hon'ble Madras High Court in the case of CIT vs. Voora Property Developers (P) Ltd reported in (2015) 373 ITR 317 (Mad) was considering the case of an assessee, who received approval of the local authority in respect of a composite housing scheme and had obtained separate plan permits for six blocks on one acre and 6.5 cents of land. The AO therein had denied the deduction u/s 80IB(10) on the ground that the assessee had developed six separate projects in one single piece of land measuring 1.065 acres and therefore, the assessee did not fulfil the essential conditions of the minimum area of one acre for a single project as laid down u/s 80IB(10). The Hon'ble High Court held that if the conditions specified u/s 80IB are satisfied, then the deduction is allowable on the entire project and since the assessee constructed six blocks in a land measuring 1 acre and 6.5 cents, the assessee was entitled to deduction. 27. The Coordinate Bench of this Tribunal in the case of M/s. Sriram Constructions vs. Dy.CIT in ITA No.1300/Hyd/2011 vide orders dated29.04.2016 has also considered similar situation and has held that the assessee will not automatically loose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed per cent of the profits derived in the previous year relevant to the assessment year from such housing project complying with the condition, each block in the larger project by name "Agrini" and "Vajra", has to be taken as an independent building and hence a housing project, for the purpose of considering a claim of deduction. Section 80IB(10) begins by stating: Thus the undertaking qualifying for deduction under Section 80IB of the Act is an "undertaking developing and building housing projects" and the deduction is in respect of "profits and gains derived from" such housing project, satisfying the conditions stipulated in the clause therein. Thus, 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. 14. On the facts admitted by the Revenue, in the projects "Agrini" and "Vajra", there are number of flats which are below 1500 sq.ft., and the relevant built-up area requirement is specified under Section 80IB(10)(c) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the occupancy certificate dated 29.3.2012. Therefore, the assessee is clearly eligible for deduction u/s 80IB(10) on the profits earned from these buildings. 30. The next question to be considered is whether the assessee is entitled to deduction u/s 80IB(10) on the profits from blocks F, K & L for which the assessee has not obtained the occupancy certificate from GHMC, Hyderabad as on 30.03.2013 but has already submitted an application for the same. It is seen that according to the Architects' certificate, the assessee has completed the construction in all aspects and that the assessee has submitted the application for issuance of occupancy certificate as on 30.3.2013 by paying the requisite fees. The learned Counsel for the assessee has relied upon the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Hindustan Samuh Awas Ltd reported in (2015) 377 ITR 150 (Bom.) wherein under similar circumstances, it was held that where the assessee has applied for the issuance of completion certificate by paying the fees within the specified time, the delay by the Municipal Corporation in issuance of certificate cannot be attributed to the assessee and the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80IB(10) of the Act, the learned Counsel for the assessee has placed reliance upon the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Indo Aquatics Ltd reported in (2014) 369 ITR 589 (T&AP) wherein the Hon'ble High Court has held that the interest earned on deposits for opening letters of credit is entitled to exemption and that it is an essential activity for undertaking exports as the deposit of amounts for that purpose is a condition precedent. In the case before us also, the assessee was required to keep the deposits as margin money with the Banks for completion of the project and hence is attributable to the project and the assessee is eligible for deduction u/s 80IB(10) on such interest income. The AO is accordingly directed to allow the same. Ground of appeal No.6 is also allowed. ITA No.1230/Hyd/2015 A.Y - 2011-12 & ITA No.1082/Hyd/ 2016 - A.Y 2012-13 33. For these two appeals, the grounds raised by the assessee are the same as in A.Y 2010-11 except for the quantum. For the detailed reasons given above, these appeals are also allowed. 34. In the result, assessee's appeals are allowed. Order pronounced in the Open Court on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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