Housing project completion proof u/s80IB(10) where occupancy certificate delayed; deemed 21-day approval upheld, deduction allowed.

The dominant issue was whether the statutory "completion certificate" requirement under s. 80IB(10) was satisfied where the local authority did not issue a completion/occupancy certificate within time. The ITAT held that under the municipal development control rules, inspection culminates in issuance of an occupancy certificate with a certified completion plan, which functions as the "completion certificate" for Explanation (ii) to s. 80IB(10)(a). Given the deeming provision that treats approval as granted if no objection is raised within 21 days, belated minor objections could not defeat the claim; the deemed date on expiry of 21 days was treated as the completion date. The assessment orders denying deduction were set aside and deduction u/s 80IB(10) was directed to be allowed.

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Issues: (i) Whether, for the purpose of Explanation (ii) to Section 80IB(10)(a) of the Income-tax Act, 1961, the date of completion of construction of a housing project in the Pune Municipal Corporation area should be treated as the date when (a) the licensed architect furnished the completion certificate to PMC, (b) the PMC issued an occupancy certificate after inspection, or (c) the deemed approval under Rule 7.7 of the PMC Development Control Rules (expiry of the 21-day period) applies where only minor objections are raised after that period.

Analysis: Rule 7.6 requires the owner, through the licensed architect/engineer who supervised construction, to give notice and submit completion certificate and four sets of completion plans to the authority; Rule 7.7 requires the authority to inspect and sanction or refuse an occupancy certificate within 21 days, failing which the application is deemed approved. Explanation (ii) to Section 80IB(10)(a) treats the date of completion as the date on which the completion certificate is issued by the local authority. The PMC practice is that an architect furnishes the certified completion plan but PMC issues an occupancy certificate after inspection. Where PMC fails to object within the 21-day deeming period, the deeming provision constrains PMC's discretion. A balanced approach is required so that statutory incentive benefits are not defeated by administrative delay. In cases where the applicant complied with Rule 7.6 and PMC either (i) inspects and decides within 21 days, (ii) does not respond at all within 21 days, or (iii) raises only minor and remediable objections after expiry of the 21-day period, the date when the 21-day deeming period expires is a just and proper date to treat as the date of completion for the purposes of Explanation (ii) to Section 80IB(10)(a). In the present case the assessee filed the architect's completion certificate on 29.10.2005, PMC raised objections only after the 21-day period and those objections were minor; therefore the deeming date after expiry of 21 days is the appropriate completion date.

Conclusion: The date when the 21-day deeming period under Rule 7.7 expired (i.e., 20.11.2005) is to be treated as the date of completion of the housing project for the purpose of Explanation (ii) to Section 80IB(10)(a) of the Income-tax Act, 1961; the assessee is entitled to the claimed deduction under Section 80IB(10) for the assessment years under consideration, and the appeals are allowed in favour of the assessee.

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