TaxTMI 
TaxTMI 
2012 (11) TMI 466
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....d the same was claimed as deduction u/s. 80IB(10) of the Act. Explaining such claim of the deduction, the assessee has submitted that it has taken up a venture at M.G. Road/ Secunderabad on development basis and constructed a residential complex on land of 5,500 sq. yards. The sanctioned plan for the project was obtained in September, 1999 and each flat was less than 1500 sq. ft. It was submitted that the construction was completed during FY 2005-06. It was further submitted that total 95 flats were constructed and as per development agreement 60% thereof i.e. 58 flats have come to the share of the builder. Stating that the flats were completed and handed over during 2004-05 and 2005-06, the assessee submitted that the exemption u/s. 80IB(10) was claimed in both the years. 4. The assessee further submitted that in respect of said venture, land owners are Sri Karan Singh and five other persons have sold the land to M/s. Labham Estates Pvt. Ltd. for a consideration and have given GPA without receiving entire sale consideration. Later, they have entered into development agreement with M/s. Labham Estates Pvt. Ltd., for construction of the complex. Since M/s. Labham Estates Pvt. Ltd. ....
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....e terms and conditions laid down by the Government / concerned local authority. She further noted that, in case any alteration / deviations are to be made as per demand of the customers or for business necessity, then assessee can approach the authority concerned with a revised plan. But, in this case, the assessee has not opted to go for a revised plan. According to her, as the assessee is claiming the entire profit from such complex, deduction u/s. 80-IB, the assessee has to ensure that the project is carried on as per the conditions laid down by MCH. Further, referring to the provisions of Explanation (ii) to clause (a) of Section 80IB(10), she noted that the assessee is required to furnish the completion certificate from the local authority for the purpose of claiming deduction u/s. 80IB(10) of the Act. However, in response to query raised by her in this regard, the assessee has submitted that it will not be possible to obtain a completion certificate from the local authority and the same is a very long drawn process. In view of certain differences generally existing in the actual construction of the project when compared to the approved plan. It was submitted that the above pr....
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....ct vide permit dated 7.9.1999, after that he has given a finding that the assessee is not entitled for deduction u/s. 80IB on the reason that the assessee has not produced completion certificate and constructed 95 flats as against 80 flats sanctioned by the Municipal Corporation of Hyderabad (MCH). He submitted that the findings of the CIT(A) are self contrary. According to the AR, the CIT(A) wrongly referred to Explanation (ii) below section 80IB(10) which stipulates that date of completion shall be taken to be the date on which completion certificate is issued by the local authority. 9. The AR submitted that the CIT(A) referred to Explanation (ii) below Sec. 80IB(10) which stipulates that date of completion shall be taken to be the date on which completion certificate is issued by the local authority. He held that obtaining such completion certificate is mandatory. The CIT(A) referred to the notices issued by the Municipal authority to the various flat owners in the residential complex and held that notices cannot be equated with completion certificate. The CIT(A) also held that the assessee has not even taken proper and appropriate steps for obtaining occupancy certificate incl....
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....ed attention of the Bench to Section 455 of the Hyderabad Municipal Corporation Act which stipulates that every person, after completion of erection of a building, should send to the Commissioner a notice in writing of such completion and accompanied by a certificate specified in the bye-laws and afford facilities for inspection of the building and apply for permission to occupy the building. The said rule stipulates that the building can be occupied either after the relevant permission is received or if within 21 days after receipt of the notice the Commissioner fails to intimate refusal of his permission. The assessee cannot be faulted for inaction on the part of the municipal authorities. 13. As regards the deviation from the municipal approval plan, the AR submitted that the parameters for issuance of occupancy certificate taken into account are (i) number of floors, (ii) extent of setbacks, (iii) parking space provision and (iv) abutting road width. Also the municipal admission and Urban development department has issued clarifications as per which, within the building, it is for the builder/architect who has the freedom to design the inside areas as per their choice. Copies ....
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....reas occupied like stair cases, corridors, lifts, gymnasium, swimming pool, tot-lot, water tanks, etc. The assessee submitted that the Assessing Officer should have obtained necessary information if she had any doubt about the veracity of the information submitted by the assessee. The rejection without any verification is arbitrary and unjustified. In this connection the assessee submitted that consequent upon a dispute raised by one of the purchasers, the State Consumer Redressal Forum , A.P, Hyderabad appointed an Advocate Commissioner who made actual measurement and furnished his report stating that in respect of Flat C-206, the actual plinth area is 1228.115 Sq. Ft and the common area relatable to the said flat was 655.67 sq. ft. This is evidence of the fact that the built up area has not been exceeded in respect of the flats built by the assessee. The assessee submitted before the CIT (Appeals) that Assessing Officer erred in holding that the assessee violated the norm of built-up area. The CIT (Appeals) noticed the submissions made by the assessee but did not give any specific finding thereon. The AR submitted that on the strength of the evidence submitted by the assessee, it....
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....land and M/s. Labham Estates Pvt. Ltd., for constructing the said residential complex. Since, it was not the developer of the said project, it is not entitled for deduction u/s. 80IB(10) of the Act. 18. The DR submitted that, without prejudice to the above, even if it is accepted, though not admitted, that the assessee has developed and built a housing project as per the sanctions obtained from MCH vide permit bearing number 1164/4/235/TP7/SDE/97 dated 07/09/1999, then also it cannot be allowed deduction u/s. 80IB(10) of the Act, since it has failed to furnish any completion certificate in respect of such project from the concerned local authority and further it has made construction of 95 flats, in utter violation of the said sanction obtained from the MCH for construction of only 80 number of flats. 19. The DR submitted that for the purpose of allowance of deduction u/s. 80IB(10), not only the project has to be approved by the local authority, but also the construction thereof has to be completed within 4 years from the end of the financial year, in which the project is approved by the local authority. In Clause (ii) below the Explanation to Sec. 80IB(10)(a), it is stipulated t....
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....oject. Therefore, the same should conform to the project plan approved by the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is constructed and not with reference to the demarcation of land done by the land development authority." 20. The DR submitted that from the above provisions, it may be seen that for allowance of deduction u/s. 80IB(10), the assessee has to obtain completion certificate in respect of such housing project from the concerned local authority. Further, drawing support from the provisions of para 25.2 of the above circular, the DR submitted that for allowance of deduction u/s. 80IB, construction of the project should conform to the project plan as approved by the local authority. Having regard to the provisions contained in Sec. 80IB( 10) and since in the instant case, the assessee has violated the project plan approved by MCH by constructing 95 flats and further has failed to obtain any completion certificate in respect of the said residential complex, it cannot be allowed deduction u/s. 80IB(10). 21. The DR submitted that in sup....
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....n should be completed within 4 years from the end of the financial year in which the housing project is approved by the Local Authority. (ii) The housing project is constructed on a plot of land which has a minimum area of 1 acre. (iii) The residential units constructed in the housing project have a maximum built up area of 1500 sq. ft. where such units are situated in places other than Delhi or Mumbai. (iv) The built-up area of shops and other commercial establishments included in the housing projects does not exceed 5% of the aggregate built-up area of the housing project or 2000 sq. ft., whichever is less. 25. The main contention of the DR is that the assessee is not a developer and only carried on the work of contractor and build the residential complex. But the question is that who is developing the project. Certain it is not the landlord. Admittedly, in this case, the landlord approached the assessee and jointly evolved a scheme for development and the assessee executed the work of development. There is an approved plan sanctioned vide permission dated 7.9.1999 for construction of 80 flats. Against the construction of 80 flats, the assessee h....
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....other objection of the Department is that the assessee has not produced the completion certificate. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absolute situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. No one can pass such a anomalous dictum while dealing with a legal problem. The Tribunal being final fact finding authority shall keep in mind an overall situation, factual as well as legal, so thereupon brings a dictum ought to be legally sustainable in the eyes of law. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on c....
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....come based on percentage completion method. It would only mean that the assessee has to obtain such certificate on completion of the housing project, least it would lose the deduction already granted u/s. 80IB(10) for the earlier years if it is not so produced. As held by the Hon'ble Supreme Court in the case of Bajaj Tempo v. CIT [1992] 196 ITR 188 a provision in the taxing statutes granting incentives for promoting growth and development of the nation should be construed liberally. When such liberal interpretation is to be given, the restriction placed in such provision granting the incentives also has to be considered so as to advance the objectives of the provisions and not to frustrate. Clause (a) of section 80IB(10) specifies that the development and construction of the project has to start before 1.4.2004 and the project has to be completed within four years from the end of the financial year in which approval for project was received from the local authority. Thus, a project can have a span of not more than 4 years from the end of the financial year it has received approval. Explanation under clause (a) only specified how to reckon the day of approval and date of completion....
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.... the light of the order of the Tribunal in the case of Namaha Estates [ITA Nos. 797 & 813/Hyd/06] dated 29.2.2008, wherein the Tribunal held as follows: "8. We heard the rival contentions. First let us address the main contention of the assessee that two residential units were combined into one single unit as per the requirement of the prospective buyer. We find from the assessment order that the assessee has combined all the possible two units into one residential unit and each of such flat has been sold to a single buyer only. So the claim of the assessee stated above does not appear to be correct. From the beginning, it appears that the intention of the assessee is to sell them as a single residential unit only. This intention is reinforced further with the numbering system adopted. As noticed by the Assessing Officer, the assessee instead of numbering the flats in a floor chronologically, he has numbered the two adjacent flats which are proposed to be combined, as for examine 1A and 1B, instead of being numbered as 1 and 2. Though the project plan was prepared to suit the requirement of conditions prescribed under section 80IB, one of the condition prescribing maximum area of ....