Court Allows Proportionate Deductions for Units Over 1000 Sq Ft u/s 80IB(10), Prioritizing Substantial Compliance.

The court addressed two main issues regarding deductions under Section 80IB(10). On the first issue, it allowed deductions on a proportionate basis for units exceeding 1000 square feet, emphasizing substantial compliance by the assessee, including project completion and application for a completion certificate. On the second issue, the court supported deductions despite the project not being completed by the specified date due to procedural delays by municipal authorities, stressing the importance of physical completion and architect-issued certificates over procedural delays. The court prioritized substantial compliance and physical completion in determining eligibility for deductions.

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Issues:
1. Whether deduction under Section 80IB(10) can be allowed on a proportionate basis for residential units exceeding 1000 square feetRs.
2. Whether deduction under Section 80IB(10) can be allowed if the project was not completed before the specified date despite objections from local authoritiesRs.

Analysis:
1. The first issue revolves around the correctness of directing the AO to allow deduction under Section 80IB(10) on a proportionate basis for residential units exceeding 1000 square feet. The judgment highlights the case where some units exceeded the specified area upon physical verification, leading to a violation of the Act. The court considered the substantial compliance by the assessee, emphasizing completion of the housing project before the deadline and application for a completion certificate. It referenced a similar case from the Gujarat High Court, emphasizing completion of construction, sale of units, and application for necessary permissions as factors supporting substantial compliance.

2. The second issue concerns the justification of allowing deduction under Section 80IB(10) when the project was not completed before the deadline, despite objections from the local Municipal Corporation regarding the absence of a No Objection Certificate (NOC) from the ULC Department. The judgment referred to a previous case where the court discussed the introduction of an Explanation to fix the completion date of a project. It highlighted the importance of physical completion and the role of a completion certificate issued by a supervising architect. The court critiqued the strictness introduced by the Explanation, emphasizing the significance of the architect's certificate in determining completion. It noted a case where the architect had issued a certificate before the deadline, and the delay in the municipal authority issuing the completion certificate was not attributed to the assessee.

In conclusion, the judgment analyzed the issues concerning deduction under Section 80IB(10) in detail, emphasizing substantial compliance, completion of construction, application for necessary permissions, and the significance of completion certificates issued by architects. It highlighted the importance of physical completion over procedural delays by municipal authorities in determining eligibility for deductions under the specified section.

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