2012 (9) TMI 1100 - AT - Income Tax

Tribunal decision on Section 80-IB(10) deduction eligibility & revenue's appeals

The tribunal partly allowed the revenue's appeal and fully allowed the assessee's appeal. It upheld the eligibility for deduction under Section 80-IB(10) ... Admission of additional evidence and compliance with appellate inquiry powers - Eligibility for deduction under Section 80-IB(10) - built-up area ceiling and completion certificate - Construction of 'built-up area' excluding common areas - Prospective operation of statutory amendment and applicability of law at time of plan approval - Principle of consistency in successive assessment years and objection to 'U-turn' by revenue - Apportionment of head office expenses to project accounts - Allowability of depreciation for computer peripherals within computer blockAdmission of additional evidence and compliance with appellate inquiry powers - Whether the CIT(A) erred in allowing/addmitting additional evidence in contravention of Rule 46A and without giving opportunity to the Assessing Officer. - HELD THAT: - The Tribunal found no specific identification by Revenue of any new evidence admitted before the CIT(A) which was not placed during assessment. The impugned order does not record admission of fresh evidence; the computation of built-up area relied upon was part of assessment proceedings. The CIT(A) possesses co-terminus inquiry powers and may either make inquiries or direct the Assessing Officer to inquire; it is not powerless to decide appeals without consulting the Assessing Officer. In absence of any positive showing of breach of Rule 46A or prejudice to the Assessing Officer, the Revenue's contention was dismissed. [Paras 2]Rejection of Revenue's challenge to the CIT(A)'s handling of evidence; ground dismissed.Construction of 'built-up area' excluding common areas - Eligibility for deduction under Section 80-IB(10) - built-up area ceiling and completion certificate - Whether Type-A flats exceeded the 1500 sq. ft. built-up area limit and whether the assessee was entitled to deduction under section 80-IB(10). - HELD THAT: - On consideration of the sanctioned plan and room-wise dimensions, the Tribunal recorded that the built-up area per Type-A unit as per approved plan is 1386.03 sq. ft. and the saleable/super area is 1492.43 sq. ft., both below the 1500 sq. ft. threshold. The staircase is a common area and cannot be included in the built-up area of an individual unit under the definition in sub-section (14)(a). The Assessing Officer included the staircase in computation for the first year, but Revenue produced no positive material to controvert the sanctioned-plan measurements. Consequently the assessee was held entitled to the deduction. [Paras 3]Assessee entitled to deduction under section 80-IB(10) for units in question; addition deleted and impugned order affirmed on this point.Apportionment of head office expenses to project accounts - Whether the apportionment of administrative, selling and financial expenses to the Krishna Lok project was incorrect and whether additions on account of such apportionment were justified. - HELD THAT: - Books of account and audited schedules showed bifurcation (Schedules J, K, L) and the break-up was available before the Assessing Officer. The Assessing Officer's finding that no amounts were debited to Krishna Lok was contradicted by ledger prints and project-specific debits. However, certain expenses (audit fee and director remuneration) related to the assessee as a whole and were only partially allocable; accordingly small portions (allocated sums) were sustained as additions. The balance of the disallowed apportionment was deleted. [Paras 4]Partial allowance of assessee's appeal on apportionment: deletion of majority of additions; limited addition sustained for corporate-level audit fee and director remuneration allocation.Allowability of depreciation for computer peripherals within computer block - Whether depreciation claimed on computer peripherals/accessories in the computer block was allowable. - HELD THAT: - Assessee had included computer peripherals in the computer block and claimed depreciation; the CIT(A) deleted the Assessing Officer's disallowance. No contrary material was brought before the Tribunal to justify interference. The Tribunal sustained the deletion by the CIT(A). [Paras 5]Deletion of addition on account of extra depreciation upheld in favour of the assessee.Prospective operation of statutory amendment and applicability of law at time of plan approval - Principle of consistency in successive assessment years and objection to 'U-turn' by revenue - Eligibility for deduction under Section 80-IB(10) - built-up area ceiling and completion certificate - For A.Y. 2007-08, whether the assessee was entitled to deduction under section 80-IB(10) despite absence of a completion certificate and in view of post-approval amendments to the statute. - HELD THAT: - The project received approval on 16-3-2005, prior to the Finance (No.2) Act, 2004 amendments effective from 1-4-2005 and prior to later substitutions effective from 1-4-2009. The Tribunal held that the law in force when approval was granted governs entitlement; subsequent prospective amendments imposing additional conditions (such as specification about completion certificate) do not apply retrospectively. The assessee had applied for completion certificate on 5-11-2008 and non-issuance by the local authority was beyond its control. Earlier identical allowance of deduction for A.Y. 2006-07 further supported consistency; Revenue produced no fresh material to justify reversing position. Reliance on judicial decisions was noted to support prospective operation and substantial compliance where completion certificate practice was not uniformly enforced. [Paras 8]Assessee's appeal allowed; deduction under section 80-IB(10) granted for A.Y. 2007-08.Final Conclusion: The Tribunal partly allowed the Revenue's appeal (sustaining only a limited addition relating to corporate-level expenses) and allowed the assessee's appeal regarding entitlement to deduction under section 80-IB(10) for the years in question, holding that sanctioned-plan measurements (excluding common areas) and the law applicable at time of approval govern eligibility and that non-issuance of a completion certificate by the competent authority, where beyond the assessee's control, does not defeat the deduction. Issues Involved:1. Admission of additional evidence at the appellate stage.2. Eligibility for deduction under Section 80-IB(10) based on built-up area.3. Apportionment of expenses between different units.4. Depreciation on computer peripherals/accessories.5. Requirement of completion certificate for claiming deduction under Section 80-IB(10).Issue-wise Detailed Analysis:1. Admission of Additional Evidence at the Appellate Stage:The revenue contended that the first appellate authority erred in allowing additional evidence during the first appellate stage, contravening Rule 46A of the Rules. The revenue argued that the Assessing Officer (AO) was not given an opportunity to examine the additional evidence. However, the tribunal found no mention in the impugned order that additional documents were filed which were not presented before the AO. The tribunal noted that the CIT(A) has co-terminus power with the AO and can make inquiries or direct the AO to do so. The tribunal concluded that there was no violation of Rule 46A and dismissed this ground of the revenue.2. Eligibility for Deduction Under Section 80-IB(10) Based on Built-up Area:The revenue argued that the built-up area of Type 'A' flats exceeded 1500 sq. ft., making the assessee ineligible for deduction under Section 80-IB(10). The tribunal examined the sanction plan and found that the total built-up area, excluding common areas like staircases, was 1386.03 sq. ft., which is below the prescribed limit of 1500 sq. ft. The tribunal emphasized that common areas shared with other residential units should not be included in the built-up area. Consequently, the tribunal upheld the CIT(A)'s decision allowing the deduction and dismissed the revenue's ground.3. Apportionment of Expenses Between Different Units:The revenue contended that head office expenses were not properly apportioned to the Krishna Lok unit. The assessee argued that expenses were booked separately in audited books of accounts, and a detailed break-up was provided to the AO. The tribunal found that the expenses were indeed bifurcated, and the AO's contention was without basis. However, the tribunal sustained a minor addition of Rs. 2,92,290 for audit fees and director remuneration, which were deemed common expenses. The tribunal upheld the deletion of the remaining expenses and allowed this ground partly.4. Depreciation on Computer Peripherals/Accessories:The AO denied the assessee's claim of 60% depreciation on computer peripherals/accessories. The CIT(A) deleted the addition of Rs. 7,425, and the tribunal found no justification to interfere with this decision, as nothing contrary was brought to their notice. This ground was dismissed.5. Requirement of Completion Certificate for Claiming Deduction Under Section 80-IB(10):For A.Y. 2007-08, the assessee's primary issue was the disallowance of deduction under Section 80-IB(10) due to the non-issuance of a completion certificate. The assessee argued that the completion certificate was not issued due to reasons beyond their control and that the project was completed within the stipulated time. The tribunal noted that the approval for the project was granted before the amendment requiring a completion certificate and that substantial compliance with the conditions should suffice. Citing various judicial precedents, the tribunal concluded that the requirement of a completion certificate was directory and not mandatory. The tribunal allowed the assessee's appeal, emphasizing that the assessee should not be penalized for the delay in issuing the completion certificate by the authorities.Conclusion:The tribunal partly allowed the revenue's appeal and fully allowed the assessee's appeal, emphasizing the principles of substantial compliance and consistency in judicial decisions. The tribunal upheld the assessee's eligibility for deduction under Section 80-IB(10), considering the built-up area and the non-issuance of the completion certificate.