Court allows deduction under Section 80IB(10) despite plan deviations

The court ruled in favor of the assessee, finding them eligible for a deduction under Section 80IB(10) of the Income-Tax Act despite deviations from the sanctioned plan. The court held that the project complied with local authority approvals and conditions of the provision, including payment of compounding fees. The court dismissed the revenue's appeal, affirming that the completion certificate was not required under relevant local laws, and upheld the eligibility of the assessee for the deduction.

---

---

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income-Tax Act despite deviations from the sanctioned plan.
2. Construction deviations and compounding fee implications on Section 80IB(10) deduction.

Issue-wise Detailed Analysis:

Issue 1: Eligibility for deduction under Section 80IB(10) despite deviations from the sanctioned plan
The primary issue was whether the assessee firm was eligible for a deduction under Section 80IB(10) of the Income-Tax Act, 1961, despite having deviations from the sanctioned plan approved by the local authority. The Assessing Officer disallowed the deduction, citing that the built-up area exceeded the approved plan by 70.50%, thus violating the conditions of Section 80IB(10)(a). However, the Commissioner of Income Tax (Appeals) found that the modified building plan was approved by the Bruhat Bengaluru Mahanagara Palike (BBMP) and that the deviations were within permissible limits as per the revised master plan. The Tribunal upheld this view, noting that the project was approved by the local authority and that the assessee had paid the compounding fee for the deviations, thus fulfilling the conditions of Section 80IB(10). The court concluded that the project undertaken by the assessee complied with the conditions mentioned in Section 80IB(10)(a) and was therefore eligible for the deduction.

Issue 2: Construction deviations and compounding fee implications on Section 80IB(10) deduction
The second issue was whether the deviations in the construction and the subsequent payment of the compounding fee were sufficient to claim the deduction under Section 80IB(10). The revenue argued that the project was not completed as per the sanctioned plan and that the completion certificate was not obtained, thus disqualifying the project from the deduction. The assessee countered that the modified plan was approved, the compounding fee was paid, and the occupancy certificate was issued by BBMP. The court noted that the Bangalore Development Authority Act, Karnataka Municipal Corporation Act, and Karnataka Municipalities Act did not require a completion certificate. Therefore, the assessee was not obligated to obtain one. The court upheld the findings of the Commissioner of Income Tax (Appeals) and the Tribunal, affirming that the project complied with the local authority's approval and the conditions of Section 80IB(10).

Conclusion:
The court answered the substantial questions of law against the revenue and in favor of the assessee, dismissing the appeal. The assessee was found eligible for the deduction under Section 80IB(10) despite the deviations, as the project was approved by the local authority, and the necessary compounding fee was paid. The requirement for a completion certificate was deemed unnecessary in the context of the applicable local laws.

---