Completion certificate delay and purchaser compensation were both treated as business-related, allowing deduction and expense relief.

A developer was found entitled to deduction under section 80IB(10) where the housing project was substantially complete and the completion-certificate application had been filed on time, even though the local authority issued the certificate later; the statutory completion condition was treated as satisfied because the delay was not attributable to the assessee. Compensation paid to flat purchasers for delayed possession was also treated as a business expense, since it arose from the developer's contractual and commercial obligations and was compensatory rather than penal. Relief was therefore available on both the deduction claim and the expenditure claim.

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Issues: (i) Whether deduction under section 80IB(10) was allowable where the housing project was substantially completed and the application for completion certificate had been made before the prescribed date but the certificate was issued later by the local authority; (ii) Whether compensation paid to flat purchasers for delayed possession was an allowable business expenditure.

Issue (i): Whether deduction under section 80IB(10) was allowable where the housing project was substantially completed and the application for completion certificate had been made before the prescribed date but the certificate was issued later by the local authority.

Analysis: The project had been approved in phases, but the relevant completion application for the remaining flats was filed before 31.03.2012. The reasoning adopted in prior decisions on the same project was followed, namely that where the assessee has completed the project and has timely applied for completion certificate, delay by the municipal authority in issuing the certificate cannot be attributed to the assessee. The completion certificate was therefore treated as relating back to the date of application for the purpose of the statutory condition.

Conclusion: Deduction under section 80IB(10) was allowed and the disallowance was deleted.

Issue (ii): Whether compensation paid to flat purchasers for delayed possession was an allowable business expenditure.

Analysis: The agreements, the governing flat ownership law, and the factual delay in handing over possession showed that the assessee faced a liability connected with its business as a developer. The payment was held to be commercially justified and compensatory in character. It was also held that the expenditure was not in the nature of a penalty but was incurred to meet business obligations arising from delayed possession.

Conclusion: The compensation paid to flat purchasers was held to be allowable as a business expenditure.

Final Conclusion: Both substantive grounds succeeded, and the assessee obtained relief on the deduction claim as well as on the compensation expenditure claim.

Ratio Decidendi: Where a developer files the completion-certificate application within time and the local authority issues the certificate later without the delay being attributable to the assessee, the statutory completion condition under section 80IB(10) is satisfied; similarly, compensation paid to purchasers for delayed possession, when commercially incurred in the course of business, is deductible and not penal.

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