2017 (4) TMI 774 - HC - Income Tax

Court dismisses Assessee's appeals for non-compliance with exemption conditions under Section 80IB(10).

The Commissioner of Income Tax-I, Lucknow Versus M/s Fortuna Foundation Engineers & Consultants Pvt. Ltd. And Vice-Versa

The court allowed the Revenue's appeals and dismissed the Assessee's appeals. The Assessee failed to meet the conditions for exemption under Section ... Fulfillment of condition laid down in Section 80IB(10)(b) - area of the plot of land being minimum one acre - Held that:- Explanation (i) is clarificatory in nature and, therefore, subsequent approvals obtained by Assessee in view of addition of land to its credit, will not make any difference. In view thereof, question answered in favour of Revenue and against Assessee and we hold that Assessee did not satisfy the requirement of area of plot of land being minimum one acre. Since the project approved for the first time on 24.11.01 was in respect of land which measured only 2657 sq. mtrs. and even second approval when granted on 22.6.2003, total area of 2 plots was only 2657 sq. mtrs. and 52.44 sq. mtrs. which was again less than one acre. - Decided in favour of Revenue Filing of audit report in form 10CCB - If it is not filed alongwith return but filed before assessment, will it amount to non-compliance of Section 80IB (13) read with Section 80IA (7)? - Held that:- We answer question in favour of Assessee and against Revenue, holding that it is not mandatory and only directory and Assessee cannot be made to suffer if it filed audit report in form 10CCB in the course of assessment proceedings and not alongwith return.- Decided against Revenue Issues Involved:1. Whether the Assessee fulfilled the conditions laid down in Section 80IB(1) of the Income Tax Act, 1961.2. Whether furnishing the report in form No. 10CCB is mandatory or directory under Section 80IB(13) read with Section 80IA(7).3. Whether the Assessee complied with the requirement of submitting the completion certificate before the stipulated date for claiming exemption under Section 80IB(10).4. Whether the substituted Section 80IB(10) applies to projects approved before 1.4.2004.5. Whether there was any material to deviate from the findings recorded in earlier judgments regarding the completion of the project by the stipulated date.Detailed Analysis:Issue 1: Fulfillment of Conditions under Section 80IB(1)The court examined whether the Assessee met the condition of having a plot size of at least one acre. The Assessee's project was initially approved on a plot of 2657 sq. mts., which is less than one acre. The court held that the Assessee did not satisfy the requirement of the plot size being a minimum of one acre since the project was approved on a smaller plot and subsequent approvals did not retroactively apply to the entire land. Therefore, the Assessee did not fulfill the conditions laid down in Section 80IB(1).Issue 2: Furnishing of Report in Form No. 10CCBThe court considered whether the requirement to submit the audit report in form No. 10CCB along with the return is mandatory. It was held that filing the audit report along with the return is not mandatory but directory. The Assessee cannot be denied the benefit of Section 80IB(10) if the report is filed during the assessment proceedings. This view was supported by precedents from the Karnataka, Delhi, and Madras High Courts and confirmed by the Supreme Court in Commissioner of Income Tax Vs. G.M. Knitting Industries (P) Ltd.Issue 3: Compliance with Completion Certificate RequirementThe court examined whether the Assessee complied with the requirement of submitting the completion certificate before the stipulated date. It was found that the Assessee did not submit the completion certificate by 31.03.2008, which is a mandatory requirement for claiming exemption under Section 80IB(10). The court noted that the completion certificate was issued on 21.10.2009, and there was no evidence to show that the project was completed by the stipulated date. Therefore, the Assessee's claim for exemption was disqualified.Issue 4: Applicability of Substituted Section 80IB(10)The court addressed whether the substituted Section 80IB(10) applies to projects approved before 1.4.2004. It was held that the amended provisions, except for clause (d), apply to projects approved before 1.4.2004. The court referred to its judgment in Commissioner of Income Tax v. M/s Arif Industries Ltd., which stated that the requirement of completion of the project within the stipulated period applies to all projects irrespective of their approval date.Issue 5: Material to Deviate from Earlier FindingsThe court considered whether there was any material to deviate from the findings in earlier judgments regarding the completion of the project by the stipulated date. It was found that the Assessee did not provide valid evidence to show that the project was completed by 31.03.2008. The court highlighted discrepancies such as the submission of applications by a deceased person, which rendered the documents non-est in law. Therefore, the court upheld the findings of the CIT (A) and Tribunal that the Assessee did not complete the project within the stipulated period.Conclusion:The court allowed the Revenue's appeals (ITA No. 73 of 2010 and ITA No. 6 of 2012) and dismissed the Assessee's appeals (ITA No. 1 of 2013 and ITA No. 29 of 2014). The judgments of the Tribunal were set aside to the extent they were inconsistent with the court's findings. The Assessee did not meet the conditions for exemption under Section 80IB(10) due to non-compliance with the plot size requirement and failure to submit the completion certificate on time. The filing of the audit report in form 10CCB was deemed directory, not mandatory.