2014 (1) TMI 1542 - HC - Income Tax

Court affirms Section 80IB(10) benefits despite no completion certificate, law applies at project approval (10)

Commissioner Income Tax-I Versus CHD Developers Ltd.

Commissioner Income Tax-I Versus CHD Developers Ltd. - [2014] 362 ITR 177 Issues Involved:1. Interpretation and application of Section 80IB(10) of the Income Tax Act, particularly Section 80IB(10)(a)(ii) read with the Explanation.2. Validity of the Income Tax Appellate Tribunal's (ITAT) decision to grant the benefit of Section 80IB(10) despite the absence of a project completion certificate issued by the local authority.Issue-wise Detailed Analysis:1. Interpretation and Application of Section 80IB(10):The core issue revolves around the interpretation of Section 80IB(10) of the Income Tax Act, particularly the requirement for a completion certificate as per Explanation (ii). The section provides a 100% deduction on profits for housing projects approved by a local authority before March 31, 2008, subject to certain conditions, including the completion of the project within a specified period. The amendment effective from April 1, 2005, introduced a requirement that the completion certificate must be issued by the local authority within four years from the end of the financial year in which the project was approved.2. Validity of ITAT's Decision:The ITAT granted the benefit of Section 80IB(10) to the assessee despite the absence of a completion certificate issued by the local authority. The Tribunal reasoned that the requirement for a completion certificate was merely directory and not mandatory. The ITAT considered the fact that the assessee had applied for the completion certificate within the stipulated time but the certificate was not issued due to reasons beyond the assessee's control. The Tribunal also noted that for the assessment year 2006-07, the deduction was allowed to the assessee on similar grounds, and consistency in judicial decisions should be maintained.Detailed Analysis:1. Interpretation and Application of Section 80IB(10):The court examined the pre and post-amendment provisions of Section 80IB(10). Before the amendment by the Finance (No.2) Act of 2004, there was no requirement for a completion certificate. The amendment effective from April 1, 2005, introduced a requirement that the completion certificate must be issued by the local authority within four years from the end of the financial year in which the project was approved. The court noted that the law existing at the time of project approval (March 16, 2005) did not mandate a completion certificate, and the amendment was prospective, not retrospective.2. Validity of ITAT's Decision:The ITAT's decision was based on several factors:- The assessee applied for the completion certificate within the stipulated time (November 5, 2008), but the certificate was not issued due to reasons beyond the assessee's control.- Consistency in judicial decisions, as the deduction was allowed for the assessment year 2006-07 on similar grounds.- The principle that the law applicable at the time of project approval should govern the case unless explicitly stated otherwise by the legislature.The ITAT relied on various judicial precedents, including decisions by the Karnataka High Court and the Gujarat High Court, which held that the requirement for a completion certificate was prospective and not applicable to projects approved before April 1, 2005. The Tribunal concluded that the assessee should not be penalized for the local authority's failure to issue the completion certificate.Conclusion:The court upheld the ITAT's decision, agreeing that the stringent conditions introduced by the amendment should not apply retrospectively. The court emphasized that the application of such conditions would lead to hardship and absurdity, as the issuance of the completion certificate was beyond the assessee's control. Consequently, the court dismissed the revenue's appeal, affirming that no substantial question of law arose for consideration.