2024 (11) TMI 1151 - AT - Income Tax

Retrospective Finance Act 2004 amendment restricting commercial space cannot apply to pre-2005 approved residential projects under Section 80IB

ITAT Indore allowed assessee's appeals for statistical purposes regarding Section 80IB deduction denial. The tribunal held that retrospective application ... Deduction u/s 80IB - Deduction denied as Non completion of project within the stipulated period provided u/s 80IB(10) i.e 31.03.2008 and commercial construction in the project exceeding the limit as provided in clause (d) of section 80IB (10) - thrust of the whole argument of the Ld. AR of the assessee is on the point that subsequent amendment vide Finance Act 2004 w.e.f 01.04.2005 in the provisions of section 80IB (10) cannot impose new condition for allowing deduction in respect of the project which was approved and commenced prior to 01.04.2005. HELD THAT:- The conditions for restrictions of commercial space in the residential project as inserted by clause (d) vide Finance Act 2004 w.e.f 01.04.2005 is in the nature of asking the assessee to comply with a conditions which is not possible if the project has already reached to advance stage as per the approved plan by the local authority but the condition of completion of project cannot be in the nature of impossible task because a reasonable period of more than three years is provided by the said amendment w.e.f 01.04.2005 as the project is required to be completed on or before 31.03.2008. In any case the time period of completion of the projects which are approved after 01.04.2005 is also only four years and therefore, the project which was approved in the year 2000 has already availed more than five years as on the date of amendment and further period of three years was allowed to complete such project for availing benefit of section 80IB(10) which is a proper and reasonable restriction placed by the legislature to protect the interest of the buyers who have booked their houses in ongoing project but would not get completed houses within a reasonable time. Even otherwise the assessment year under consideration are not prior to the amendment w.e.f. 01.04.2005 and therefore, the question of retrospective applicability of this amendment prescribing time limit for completion of the project does not arise. Since the issue of requirement of completion certificate issued by the local authority is sub-judice before the Hon’ble Supreme Court therefore, in the facts and circumstances of the case we remand this issue to the record of the AO for fresh adjudication as per provisions as existed as on the date of approval of the project and subject to the decision in case of Global Reality [2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT] as well as Global Estate [2019 (7) TMI 1474 - SC ORDER]. Denial of claim of deduction on the ground of commercial area exceeding the prescribed limit in clause(d) of section 80IB(10) - This issue is covered by the judgment of Sarkar Builders [2015 (5) TMI 555 - SUPREME COURT] cited and reproduced in forgoing part of this order. Therefore, the claim of deduction cannot be disallowed on the ground that commercial space in the project is more than the prescribed limit as per clause (d) section 80IB(10) if the said commercial part of the project is duly approved by the local authority. The AO has to verify from the sanction plan about commercial area in the project approved by the local authority and the construction is in the conformity of the local approved plan. Accordingly the matter is remanded to the record of the AO for fresh adjudication in the light of above observations. Appeals of the assessee are allowed for statistical purposes. Issues Involved:1. Denial of deduction under section 80IB(10) due to non-completion of the project within the stipulated period.2. Denial of deduction under section 80IB(10) due to commercial construction exceeding the prescribed limit.3. Applicability of amended provisions of section 80IB(10) to projects approved and commenced before the amendment.4. Requirement of obtaining a project completion certificate from the local authority.Issue-wise Detailed Analysis:1. Denial of Deduction Due to Non-Completion of Project:The core issue revolves around whether the amendment to section 80IB(10) by the Finance Act 2004, effective from 01.04.2005, which introduced a time limit for project completion, applies to projects approved before this amendment. The assessee argued that the original provisions at the time of project approval should apply, which did not impose such a completion deadline. The Tribunal noted that the original provisions required project completion by 31.03.2003, but the assessee's project was not completed by this date. The Tribunal highlighted that the subsequent amendment extended the completion deadline to 31.03.2008, and since the assessee availed the benefit of this extension, the condition of completion by the new deadline is applicable. The Tribunal remanded the issue to the Assessing Officer (AO) for fresh adjudication, considering the decision of the Supreme Court in the case of Global Reality, which is pending.2. Denial of Deduction Due to Excessive Commercial Construction:The Tribunal examined whether the restriction on commercial area introduced by the amendment to section 80IB(10) applies to projects approved before the amendment. The Tribunal relied on the Supreme Court's judgment in CIT vs. Sarkar Builders, which held that the amendment is prospective and does not apply to projects approved before 01.04.2005. Therefore, the Tribunal concluded that the deduction cannot be denied based on the commercial area exceeding the limit if it was approved by the local authority. The Tribunal remanded this issue to the AO to verify whether the commercial area was in conformity with the approved plan.3. Applicability of Amended Provisions:The Tribunal addressed the applicability of amended provisions of section 80IB(10) to projects approved and commenced before the amendment. The Tribunal emphasized that the conditions existing at the time of project approval should apply, as supported by various judgments, including those of the Supreme Court and High Courts. The Tribunal noted that the amendments are prospective and cannot impose new conditions on projects approved before 01.04.2005. However, since the assessee availed the benefit of the extended completion deadline, the Tribunal found that the completion condition as per the amended provisions is applicable.4. Requirement of Project Completion Certificate:The Tribunal considered whether obtaining a project completion certificate from the local authority is a mandatory condition for claiming deduction under section 80IB(10). The Tribunal noted that the requirement of a completion certificate was not part of the original provisions applicable to the assessee's project. However, the Tribunal acknowledged that the issue is sub-judice before the Supreme Court in the case of Global Reality. Therefore, the Tribunal remanded this issue to the AO for fresh adjudication, subject to the Supreme Court's decision.In conclusion, the Tribunal allowed the appeals for statistical purposes, remanding the issues to the AO for fresh adjudication in light of the observations and pending judicial decisions.