2012 (9) TMI 1022 - AT - Income Tax

Assessee wins appeal for section 80-IB(10) deduction, Tribunal rules on completion certificate delay

Asstt. Commissioner of Income-tax Versus M/s City Development Corporation, Pune And Vice-Versa

The Tribunal allowed the assessee's appeals, granting the deduction under section 80-IB(10) for the housing project and dismissed the Revenue's appeals. ... Disallowance of deduction u/s 80-IB(10) - Held that:- If there is no evidence that the builder has combined the flats and the adjoining flats are combined by the customers, there was no reason to compute the built up area as required for clause (i) of section 80-IB(10) of the Act after combining the flats. In this view of the matter, we are therefore, of the opinion that the built-up of the flats have to be considered independently, as rightly concluded by the CIT(A). If so done, in the present case, we find that the condition prescribed in clause (c) to section 80-IB(10) of the Act is met. Therefore, on this aspect, the order of the CIT(A) is affirmed. Issues Involved:1. Disallowance of deduction under section 80-IB(10) of the Income-tax Act, 1961.2. Combining of two adjoining flats into one unit for the purpose of built-up area calculation.Detailed Analysis:1. Disallowance of Deduction under Section 80-IB(10):The primary issue revolves around the disallowance of deduction under section 80-IB(10) of the Income-tax Act, 1961, concerning a housing project named 'Ten Kasturkunj' in Pune. The assessee, a partnership firm engaged in the business of promoters and builders, claimed a deduction under section 80-IB(10) for the assessment years 2006-07 and 2007-08. The Assessing Officer (AO) disallowed the deduction on the grounds that the completion certificate for one of the buildings ('E') was issued after the stipulated date of 31-3-2008. The AO emphasized that the entire project must be completed within the stipulated time, not just individual buildings or units.The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO's decision, citing the provisions of Explanation (ii) below section 80-IB(10)(a), which states that the date of completion of construction shall be the date on which the completion certificate is issued by the local authority. The CIT(A) concluded that since the completion certificate for building 'E' was issued on 5-5-2008, the condition prescribed under section 80-IB(10)(a)(i) was not met.Upon appeal, the Tribunal considered the assessee's argument that the construction of building 'E' was completed before 31-3-2008, and the delay in issuing the completion certificate was not attributable to the assessee. The Tribunal referred to the decision in Hindustan Samutha Awas Ltd., where it was held that the delay in obtaining the completion certificate, if not attributable to the assessee, should not result in the denial of deduction under section 80-IB(10). The Tribunal concluded that the assessee had complied with the condition of completing the construction before 31-3-2008 and allowed the deduction under section 80-IB(10).2. Combining of Two Adjoining Flats:The second issue pertains to the AO's objection regarding the combining of two adjoining flats into one unit, which allegedly resulted in exceeding the built-up area limit of 1500 sq.ft. as prescribed under section 80-IB(10)(c). The AO contended that the construction of a lobby in front of two adjacent flats, giving a common entrance, effectively made them a single unit, thus violating the built-up area limit.The CIT(A) accepted the assessee's explanation that the common lobby area was not sold to anyone and was enclosed for security purposes. The CIT(A) noted that the combining of flats was done by the buyers themselves after the sale and handing over of possession, and there was no evidence to show that the assessee had combined the flats before selling them.The Tribunal upheld the CIT(A)'s decision, stating that the built-up area of the flats should be considered independently, and there was no material to show that the assessee had combined the flats. The Tribunal cited precedents where it was held that if the builder did not combine the flats and the adjoining flats were combined by the customers, the built-up area should not be computed after combining the flats.Conclusion:The Tribunal allowed the assessee's appeals, granting the deduction under section 80-IB(10) for the housing project, and dismissed the Revenue's appeals. The Tribunal emphasized that the delay in issuing the completion certificate was not attributable to the assessee and that the built-up area of the flats should be considered independently, adhering to the conditions prescribed under section 80-IB(10).