2014 (7) TMI 1366 - AT - Income Tax

Tribunal affirms deduction under section 80IB(10) for real estate project

The Tribunal upheld the CIT(A)'s decision to allow the assessee's claim for deduction under section 80IB(10) of the Income Tax Act. Despite the sale of ... Admissibility of deduction under section 80IB(10) - effect of sale of open plots on eligibility for housing-project deduction - multiple building plan sanctions and piecemeal approvals - minimum area requirement for a housing project - date of approval of first building plan as the commencement date for completion period - statutory completion period for housing projects approved on or after 01.04.2005Effect of sale of open plots on eligibility for housing-project deduction - admissibility of deduction under section 80IB(10) - Sale of certain open plots from the originally approved layout does not by itself defeat the assessee's entitlement to deduction under section 80IB(10) where the profits from those plot-sales have not been included in the claim and the residual project satisfies statutory conditions. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the AOP had excluded profits from sale of certain open plots from its claim for deduction and proceeded to examine the residual development. After exclusion of plots sold (totaling 5829.71 sq.m.), the remaining land exceeded the one-acre threshold; therefore the sale of some plots did not affect eligibility. The Tribunal endorsed the view that deduction under section 80IB(10) is available so long as the conditions in that section are satisfied qua the residual housing project and noted precedent supporting this approach. The Assessing Officer's categorical disqualification of the claim merely because some plots were sold was rejected. [Paras 11]Claim under section 80IB(10) could not be denied solely on account of sale of certain open plots; the assessee remained eligible as conditions were satisfied for the residual project.Multiple building plan sanctions and piecemeal approvals - minimum area requirement for a housing project - admissibility of deduction under section 80IB(10) - Obtaining multiple building-plan approvals does not disentitle the assessee to deduction under section 80IB(10), and the one-acre minimum is to be tested with reference to the housing project as a whole and not against each individual sanction. - HELD THAT: - The Tribunal relied on Explanation (i) to clause (a) of section 80IB(10), which treats the date of the first approved building plan as the date of approval and implicitly recognises multiple approvals for the same housing project. Consequently, the Assessing Officer's approach of treating individual commencement certificates as separate 'projects' and applying the one-acre test to each was contrary to the legislative scheme. The size requirement must be assessed with reference to the overall housing project; on that basis the project here exceeded one acre and multiple sanctions were not fatal to eligibility. [Paras 12]Multiple building-plan approvals and piecemeal sanctions do not defeat eligibility; the one-acre requirement is to be satisfied by the housing project as a whole.Date of approval of first building plan as the commencement date for completion period - statutory completion period for housing projects approved on or after 01.04.2005 - admissibility of deduction under section 80IB(10) - The housing project was completed within the statutory time-limit applicable to projects approved after 01.04.2005, and a completion certificate issued after sale of a plot to a third party did not affect that conclusion. - HELD THAT: - Explanation (i) to clause (a) of section 80IB(10) fixes the date of approval as the date of the first building-plan approval; here the first approval was on 31.05.2006, so the five-year completion period ran to 31.03.2012. The Tribunal found, on uncontroverted material including a certificate from the Municipal Council, that the assessee's construction was completed by 31.03.2011. The Assessing Officer's reliance on a later completion certificate dated 02.09.2011 related to construction on a plot sold to a purchaser who obtained approval in his name; that factual circumstance did not displace the finding that the assessee's project was completed within the statutory period. [Paras 13]The project was completed within the statutory five-year period from the first building-plan approval; a subsequent completion certificate relating to a sold plot did not vitiate eligibility.Final Conclusion: The Tribunal affirmed the CIT(A)'s allowance of the deduction under section 80IB(10) for the housing project 'Flora City' for assessment years 2009-10 and 2010-11, holding that sale of some plots, multiple building-plan sanctions and the completion-certificate chronology did not defeat the assessee's entitlement where the residual project met statutory conditions; both Revenue appeals are dismissed. Issues Involved:1. Eligibility for deduction under section 80IB(10) of the Income Tax Act, 1961.2. Impact of mixed project and sale of open plots on eligibility.3. Compliance with the completion timeline stipulated under section 80IB(10)(a)(iii).4. Multiple building plan sanctions and their effect on the project's eligibility.5. Minimum plot size requirement under section 80IB(10)(b).Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10):The primary grievance of the Revenue was that the CIT(A) erred in holding that the assessee satisfied all the conditions stipulated in section 80IB(10) of the Income Tax Act. The respondent-assessee, an Association of Persons (AOP), claimed a deduction u/s 80IB(10) for the profits derived from the housing project 'Flora City'. The Assessing Officer denied this claim, arguing that the project did not comply with certain conditions prescribed in section 80IB(10). The CIT(A), however, allowed the claim, leading to the Revenue's appeal.2. Impact of Mixed Project and Sale of Open Plots:The Assessing Officer contended that the project was a mixed one involving piece-meal sanctions and the sale of plots, which disqualified it from section 80IB(10) benefits. The CIT(A) found that the sale of some plots did not affect the eligibility for deduction, as the profits from these sales were not included in the deduction claim. The CIT(A) concluded that the project remained eligible as long as the conditions stipulated in section 80IB(10) were met for the remaining part of the project. The Tribunal upheld this view, noting that the sale of some plots did not defeat the assessee's entitlement to the deduction.3. Compliance with Completion Timeline:The Assessing Officer argued that the project should have been completed by 31.03.2011, based on the last completion certificate dated 02.09.2011. The CIT(A) clarified that, according to the amended section 80IB(10)(a)(iii), the project needed to be completed within five years from the end of the financial year in which it was first approved (i.e., by 31.03.2012). The CIT(A) found that the project was completed within this timeline, and the Tribunal affirmed this conclusion, noting that even the last completion certificate dated 02.09.2011 fell within the stipulated period.4. Multiple Building Plan Sanctions:The Assessing Officer's objection regarding multiple building plan sanctions was also addressed. The CIT(A) and the Tribunal noted that the Income Tax Act allows for multiple sanctions and that the date of the first building plan approval is considered the date of approval for the entire project. Therefore, obtaining multiple sanctions did not disqualify the project from section 80IB(10) benefits.5. Minimum Plot Size Requirement:The Assessing Officer argued that each unit should be considered a separate project, failing the minimum plot size requirement of one acre. The CIT(A) and the Tribunal rejected this view, stating that the project should be considered in its entirety. The Tribunal emphasized that the requirement of a minimum plot size of one acre should be examined concerning the housing project as a whole, not individual plots.Conclusion:The Tribunal found that the CIT(A) correctly allowed the assessee's claim for deduction under section 80IB(10). The project met all the stipulated conditions, including the minimum plot size, completion timeline, and eligibility criteria, despite the sale of some plots and obtaining multiple building plan sanctions. Consequently, both appeals by the Revenue were dismissed.