2019 (4) TMI 417 - AT - Income Tax

Tribunal upholds CIT(A) decision on pro-rata deductions, clarifies criteria for claiming deductions

The Tribunal upheld the CIT(A) decision, allowing a pro-rata deduction for completed units but denying it for unauthorized additional floors, stating ... Deduction claimed u/s 80IB(10) - entitled to the prorata deduction - profits being earned on the sale of additional seven floors constructed in building-B of approved project - direction to exclude profits on prorata basis on seven additional floors in building-B and allow the claim of deduction on remaining profits - HELD THAT:- When the originally sanctioned units were completed by assessee and it sought completion certificate, the same was not issued by PMC as the assessee had violated the provisions of section 80IB(10) and constructed additional seven floors in building-B without any approval; against the same on a later date, the assessee paid compounding fees and even those floors were approved and completion certificate of the building-B was issued in 2012. The assessee is not entitled to claim any benefit of deduction u/s 80IB(10) in respect of said additional seven floors in building-B as the same were constructed without any approval. For the balance project, which was constructed as per approved building plan and within stipulated time provided under section 80IB(10) the claim of assessee cannot be denied. CIT(A) has categorically noted the fact that the assessee had applied for completion certificate vide its application dated 25.03.2011, which was submitted in the office of PMC on 30.03.2011 i.e. well within stipulated date. Though AO had pointed out that the said application was submitted on 01.04.2011, but necessary verification exercise was carried out by the CIT(A) and information was received from the Assistant Engineer, PMC, Pune and the copy of said application for occupancy certificate is scanned and of the appellate order. Hence, it is clearly proved that the application was filed within time in respect of 11 floors of building-A and 4 floors of building-B. Once the same have been completed within stipulated time, merely because the completion certificate has not been received, cannot result any denial of claim of deduction u/s 80IB(10) in respect of completed units. The assessee is entitled to the prorata deduction in this regard. The assessee is not entitled to claim any deduction under section 80IB(10) in respect of additional seven floors in building-B, which were constructed without any approval from PMC, the same were approved by paying compounding fees and any issue connected with the same is not before us and hence, we uphold the order of CIT(A) in allowing the claim of assessee in respect of proata deduction of the completed units. The grounds of appeal raised by Revenue are thus, dismissed. Issues:- Deduction under section 80IB(10) on pro-rata basis- Completion of project within stipulated time periodAnalysis:1. The Revenue filed three appeals against the CIT(A) order related to assessment years 2007-08, 2008-09, and 2010-11 concerning deduction under section 80IB(10) of the Income-tax Act, 1961.2. The issue in the first appeal (ITA No.2898/PUN/2016) was whether the deduction under section 80IB(10) could be allowed on a pro-rata basis and if the project completion time frame was met. The Revenue contended that the deduction should apply to the project as a whole and that the project completion was not within the stipulated time.3. The CIT(A) examined the case and found that the project was completed before the deadline, except for additional floors in building-B constructed without approval. The CIT(A) allowed a pro-rata deduction for the completed units but denied it for the unauthorized additional floors.4. The Tribunal upheld the CIT(A) decision, stating that the assessee could claim a pro-rata deduction for the completed units but not for the unauthorized additional floors. The completion certificate delay did not affect the deduction eligibility for the completed units within the stipulated time frame.5. The Tribunal dismissed all Revenue appeals, as the facts and issues in other appeals were identical to the first appeal, and the decision in the first appeal applied to them.This summary provides a detailed analysis of the judgment, addressing the issues of deduction under section 80IB(10) on a pro-rata basis and the completion of the project within the stipulated time period. The judgment clarifies the eligibility criteria for claiming deductions and the consequences of unauthorized construction within a project.