Tribunal allows deduction under Section 80IB(10) for completed project with road-widening area

The Tribunal ruled in favor of the assessee, directing the AO to allow the deduction under Section 80IB(10) of the Income-tax Act. The Tribunal held that the project met the minimum plot size requirement when considering the entire plot area, including the road-widening area. Additionally, the non-production of the completion certificate did not invalidate the deduction claim as the project was completed, and the assessee followed the Percentage Completion Method. Therefore, the appeal was allowed in favor of the assessee.

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Issues Involved:
1. Non-granting of deduction under Section 80IB(10) of the Income-tax Act, 1961.
2. Whether the project was executed on a plot area of less than one acre.
3. Non-production of the completion certificate.

Issue-wise Detailed Analysis:

1. Non-granting of Deduction under Section 80IB(10):
The primary grievance of the assessee was the denial of deduction under Section 80IB(10) of the Income-tax Act, 1961, amounting to Rs. 62,85,119. The assessee claimed this deduction on the basis that it had undertaken the construction of a residential complex, 'Sri Niketan,' on a plot of 5130 sq. yards. However, the Assessing Officer (AO) disallowed the deduction, concluding that the project did not meet the minimum plot size requirement of one acre as stipulated under Section 80IB(10)(b).

2. Whether the Project Was Executed on a Plot Area of Less Than One Acre:
The AO's investigation revealed that the actual plot size was 3871 sq. yards, considering 1373 sq. yards were earmarked for road widening, thus reducing the effective plot size to 3575 sq. yards. The AO argued that the project did not meet the minimum one-acre requirement. The assessee contended that the entire 5130 sq. yards were still in their possession and used for the project, arguing that the FSI (Floor Space Index) granted was based on the total plot area.

The CIT(A) upheld the AO's decision, stating that the plot size, after excluding the road-widening area, was indeed less than one acre. The Tribunal, however, noted that the approved building plan indicated a total project area exceeding one acre and emphasized that the area earmarked for roads should not be excluded from the plot size calculation. The Tribunal referenced previous cases (Vidhi Builders, Mumbai vs. ITO and Umiya Enterprises vs. ITO) where similar interpretations were made, supporting the assessee's claim.

3. Non-production of the Completion Certificate:
The AO also denied the deduction on the grounds that the assessee had not furnished a completion certificate from the Municipal Corporation of Hyderabad (MCH). The assessee argued that they had applied for the certificate, which was acknowledged by MCH, and individual certificates for completed flats were issued, indicating project completion.

The Tribunal highlighted that the assessee followed the Percentage Completion Method, a recognized method under the Income-tax Act, and that the requirement for a completion certificate should be interpreted liberally. The Tribunal cited the Gujarat High Court's judgment in Manan Corporation vs. ACIT, which held that strict interpretation of Section 80IB(10) was unnecessary for beneficial provisions. The Tribunal also referenced the CBDT's Instruction No. 4 of 2009, clarifying that deductions could be claimed on a year-to-year basis under the Percentage Completion Method and that the completion certificate could be obtained upon the project's total completion.

Conclusion:
The Tribunal concluded that the assessee's project met the minimum plot size requirement, considering the entire plot area, including the earmarked road-widening area. Additionally, the Tribunal held that the non-production of the completion certificate did not invalidate the deduction claim, given the project was completed and the assessee followed the Percentage Completion Method. Consequently, the Tribunal directed the AO to allow the deduction under Section 80IB(10) and ruled in favor of the assessee, allowing the appeal.

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