2014 (6) TMI 709 - AT - Income Tax

Assessee's Deduction Claim Upheld under IT Act; Completion Certificate Not Required

Income Tax Officer Versus M/s. Kura Homes Pvt. Ltd.

The ITAT allowed the assessee's claim of deduction under section 80IB(10) of the IT Act, directing the Assessing Officer to verify the completion of the ... Deduction u/s 80IB of the Act – Requirement to file completion certificate – Held that:- The housing project for which deduction is claimed by the assessee u/s 80IB(10) was approved by the competent authority in the year 1999 - the assessee has claimed that the housing project was complete in all respect during the FY 2005-06 relevant to the AY 2006-07 - Relying upon CIT Vs. CHD Developers Ltd. [2014 (1) TMI 1542 - DELHI HIGH COURT] -for a housing project which is approved by the competent authority prior to 01/04/2005 there is no requirement under the un amended provision u/s 80IB(10) to furnish a completion certificate from the local authority because law requiring furnishing of such completion certificate was brought into the statute only with effect from 01/04/2005 and would apply prospectively - the assessee is following percentage of completion method the assessee cannot be expected to furnish a completion certificate in each year of continuation of the project, but, only on completion of the project. Assessee is not required to furnish completion certificate in terms with Explanation - (ii) to clause (a) of section 80IB(10) - the AO cannot insist upon the assessee to furnish the completion certificate from the local authority for allowing claim of deduction u/s 80IB(10) of the Act - the assessee is able to prove that the housing project is complete in all respects within the prescribed period as provided u/s 80IB(10) and the assessee has fulfilled all other preconditions of the provision then the assessee will be entitled to claim deduction u/s 80IB(10) of the Act - the AO has disallowed deduction u/s 80IB(10) only for the reason that assessee has not furnished completion certificate from the local authority - all other conditions of section 80IB(10) are fulfilled by the assessee except the fact of completion of housing project - if the assessee will be able to prove completion of housing project within stipulated time by providing any other evidence, then claim of deduction u/s 80IB(10) cannot be denied to the assessee – thus, the AO is directed to verify the completion of the project without insisting upon a completion certificate from the local authority and thereafter decide the issue accordingly after affording reasonable opportunity of being heard to the assessee in the matter – Decided against Revenue. Issues Involved:1. Erroneous order of CIT(A) on facts and in law.2. Granting relief to the assessee under section 80IB.3. Necessity of filing a completion certificate.4. Ignoring the decision of ITAT in a similar case.Detailed Analysis:1. Erroneous Order of CIT(A) on Facts and in Law:The Revenue contended that the CIT(A)'s order was erroneous both factually and legally. The CIT(A) had allowed the assessee's claim of deduction under section 80IB(10) of the IT Act, which the Revenue disputed.2. Granting Relief to the Assessee Under Section 80IB:The CIT(A) granted relief to the assessee by allowing the deduction under section 80IB(10), referencing the ITAT's order in the assessee's own case for AY 2006-07. The ITAT had allowed the deduction for the same housing project, establishing that if the project is completed within the stipulated time and other conditions are met, the deduction should be granted. The CIT(A) followed this precedent and directed the Assessing Officer to allow the deduction for the current year as well.3. Necessity of Filing a Completion Certificate:The Revenue argued that as per Explanation (ii) to clause (a) of section 80IB(10), which was effective from 01/04/2005, it was mandatory to furnish a completion certificate from the local authority to claim the deduction. The CIT(A) and ITAT disagreed, noting that the housing project was approved in 1999, and the requirement for a completion certificate was not applicable to projects approved before 01/04/2005. The ITAT cited several judgments, including CIT Vs. CHD Developers Ltd., which supported the view that the amended provision applies prospectively and not to projects approved before the amendment.4. Ignoring the Decision of ITAT in a Similar Case:The Revenue cited the ITAT's decision in M/s Sainath Estates Pvt. Ltd., which required a completion certificate for claiming the deduction. However, the ITAT distinguished the present case by noting that the housing project was approved before the amendment requiring the completion certificate. The ITAT emphasized that the law applicable at the time of project approval should govern the requirements, not subsequent amendments.Conclusion:The ITAT directed the Assessing Officer to verify the completion of the housing project without insisting on a completion certificate from the local authority. If the assessee could prove the project's completion within the stipulated time using other evidence, the deduction under section 80IB(10) should be allowed. The appeal by the Revenue was allowed for statistical purposes, meaning the matter was remanded for further verification and decision.Order Pronounced:The order was pronounced in the open court on 09/06/2014.