2022 (9) TMI 80 - AT - Income Tax

Tribunal overturns CIT(A)'s decision, denies deduction under section 80IB(10)

The Tribunal allowed the Revenue's appeal, overturning the CIT(A)'s decision and restoring the AO's order. The assessee's cross-objection was dismissed, ... Deduction u/s.80IB(10) - Denial of deduction as assessee failed to complete the project within the time stipulated as per the provisions of section 80IB(10) - Date of completion of the housing project - HELD THAT:- There is no reference to the alleged completion letter dated 7.3.2012 in such a Certificate. Further, the completion letter dated 24.9.2012 also does not refer to the alleged completion letter of 7.3.2012. Even otherwise, the letter dated 24.9.2012 also does not talk of the completion of construction in full. It says that: `Now, the entire project is virtually complete on the site’. When the project was not fully complete but only virtually complete on 24.9.2012, it obviously, could not have been completed more than six months before that on 7.3.2012. We, therefore, treat the alleged earlier letter of 7.3.2012 as farce, whose even furnishing to the competent authority is unproved. Even if the letter is assumed as genuine, it does not indicate the final completion of construction, which was even not fully complete by 24.9.2012. In such a situation, we find it difficult to accept the contention of the assessee that the construction was completed on 7.3.2012 so as to qualify as the date of completion certificate. The sequitur is that the construction was completed after 24.9.2012 but before 30.3.2013, when the construction got fully completed beyond the virtual completion. Date of approval of the housing project by the local authority - The housing project was approved on 30.03.2007 and a period of five years from the end of the financial year in which the housing project was approved by the local authority, came to an end on 31-03-2012. Since the actual completion of the project took place between 24-09-2012 (when the assessee intimated the factum of virtual completion of the project to the District Collector) and 30.3.2013 (when the completion certificate was issued by the competent authority), the condition of completing the construction within a period of five years from the end of the financial year in which the housing project was approved, got vitiated, making the assessee ineligible for deduction u/s.80IB(10) of the Act. We, therefore, overturn the impugned order and restore the order of the AO. Levy of tax u/s.115JC - assessee computed its income under the regular provisions and also the adjusted total income u/s.115JC - HELD THAT:- AR contended that though this section is applicable to the year under consideration, but it should not be applied because the housing project was approved in an earlier year, when this section was not in vogue. We do not find any logic in the interpretation of this provision as made by the AR. This section applies as one unit for a previous year, when the income under the regular provisions is less than the adjusted income under it. Neither section 115JC excludes its application in respect of housing projects approved prior to its insertion nor section 80IB(10) contains any such stipulation. As this section applies to a previous year, it cannot be construed to have applicability in part qua the other incomes and inapplicability in respect of income from the housing projects approved u/s 80IB(1) prior to its coming into force. If the contention of the ld. AR is taken to a logical conclusion, it would mean that the section shall apply in a truncated manner, so as not to apply in respect of income from the housing projects approved earlier but apply in respect of the projects approved after the cut-off date and also other items of income, which is patently fallacious having no legal sanction. The contention of the assessee does not hold water because the assessee is seeking non-application of section 115JC on the strength of a decision, which does not have such a point raised before it. In the hue of foregoing discussion, we are satisfied that there is no merit in the ground raised by the assessee in its cross objection. Issues Involved:1. Eligibility for deduction under section 80IB(10) of the Income-tax Act, 1961.2. Date of completion of the housing project.3. Date of approval of the housing project by the local authority.4. Levy of tax under section 115JC of the Income-tax Act.Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10):The primary issue raised by the Revenue was whether the assessee was eligible for a deduction of Rs.45,89,97,747/- under section 80IB(10) despite allegedly failing to complete the project within the stipulated time. The assessee, a Builder and Developer, had claimed this deduction for the housing project 'Teerth Towers.' The Assessing Officer (AO) rejected the claim, arguing the project was not completed within five years from the end of the financial year in which it was approved. The CIT(A) overturned this decision, but the Revenue appealed.2. Date of Completion of the Housing Project:The Tribunal examined whether the project was completed within the required five-year period. According to section 80IB(10), the construction must be completed within five years from the end of the financial year in which the project was approved. The completion date is defined as the date on which the completion certificate is issued by the local authority. The AO found the project was completed on 30-03-2013, more than six years after the approval date. The assessee argued that the project was actually completed on 07-03-2012, based on a letter to the District Collector. However, the Tribunal found discrepancies in the letter dated 07-03-2012 and concluded the project was not fully completed by 24-09-2012. Thus, the Tribunal determined the project was completed after 24-09-2012 but before 30-03-2013, failing to meet the five-year requirement.3. Date of Approval of the Housing Project by the Local Authority:The Tribunal addressed the timeline for the project's approval. The AO argued the approval date was 30-03-2007, while the assessee contended it should be 22-08-2007, when the demarcation certificate was issued. Section 80IB(10) requires the construction to be completed within five years from the end of the financial year in which the project is approved. The Tribunal held that the approval date was 30-03-2007, as the demarcation certificate was a procedural requirement and not the approval itself. Thus, the five-year period ended on 31-03-2012, and the project completion beyond this date disqualified the assessee from the deduction.4. Levy of Tax under Section 115JC:The assessee challenged the levy of tax under section 115JC, arguing it should not apply because the housing project commenced in an earlier year. Section 115JC mandates that if the regular income tax payable is less than the alternate minimum tax, the adjusted total income is deemed the total income for that year. The Tribunal found no merit in the assessee's argument, stating section 115JC applies to the previous year as a whole and does not exclude housing projects approved before its enactment. The Tribunal dismissed the assessee's challenge to the levy of tax under section 115JC.Conclusion:The Tribunal allowed the Revenue's appeal, overturning the CIT(A)'s decision and restoring the AO's order. The assessee's cross-objection was dismissed, affirming the ineligibility for deduction under section 80IB(10) and the applicability of section 115JC.