TaxTMI 
TaxTMI 
2011 (1) TMI 1215
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.... Corporation Act 1949 and has further erred in holding that the authority to issue the completion Certificate to the building vests with the PMC. The aforesaid finding being patently contrary to the statutory provisions, the same may please be vacated and it may please be held that an authority to issue the Completion Certificate does not vests with the PMC authorities and therefore the statutory requirement of obtaining Completion certificate from the local authority is an impossibility in respect of Housing Projects developed in Pune and consequently the Completion certificate issued by an architect be held to be the sufficient compliance of the Statutory provisions u/s 80IB[10] of the I.T. Act 1961 and consequently the deduction as claimed by the appellant u/s 80IB[10] of the I.T. Act 1961 be allowed to the appellant. 3. In the facts and circumstances of the case and law, it may please be held that on the principle of delegated authority, an architect is the proper authority as per the Development Control rules as applicable to Pune vide Rule 7.7 read with the provisions of The Bombay Provincial Municipal Corporation Act 1949 and therefore the Completion Certificate iss....
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....es, material available on record and the decisions relied upon by the parties. 3. The relevant facts are that the assessee a parternship firm carries on the business of promoters and builders. The assessee claimed deduction of Rs. 3,43,18,381/- in A.Y. 2004-05 and of Rs. 1,49,06,223/- in A.Y. 2005-06 u/s. 80 IB(10) of the Act in respect of the profits earned from the housing project namely 'Pinnac Dhavalgiri', Pune (hereinafter referred to as the project). In the assessment framed u/s. 143(3), wherein the claimed deductions were accepted. Later on, assessments were re-opened and in the assessments framed u/s. 147 r.w. Section 143(3) of the Act, the A.O. held that since the Pune Municipal Corporation (in short PMC) has not issued the completion certificate in respect of the project within the prescribed statutory time limit i.e. on or before 31st March 2008, the profits of the said project do not qualify for 100/ deduction u/s. 80IB of the I.T. Act, 1961. Consequently, the A.O. withdrew the deduction of Rs. 3,43,18,380/- in A.Y. 2004-05 and Rs.1,49,06,223/- in A.Y. 2005-06, allowed initially in the assessment framed u/s. 143(3) of the Act. The A.O. held that in respect of....
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....ircumstances, the occupancy certificate is deemed to have been granted to the assessee upon expiry of statutory period of 21 days i.e. on 28th November 2005. Thus, A.O is not correct in mentioning that the occupancy certificate in the said project has not been granted by the PMC till 31st March 2008. Without prejudice to the above submission, the Ld. A.R. submitted further that on principle of delegated authority, an architect is proper authority as per the D.C. Rules as applicable to Pune vide Rule 7.6 read with the provisions of Bombay Provincial Municipal Corporation Act 1949 and therefore, the completion certificate issued by an architect under Rule 7.6 of D.C. Rules acquires the status of completion certificate issued by local authority. He submitted that in Rule 6.4 of D.C. Rule read with Appendix 'C' thereof, qualification of an Architect/Engineer/Structural Engineer has been provided to whom PMC grants license. The Ld. A.R. submitted that the PMC never grants the completion certificate but grants the occupancy certificate. The completion certificate is issued by a licensed architect. In the circumstances, the issuance of completion certificate by a local authority a....
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....t in the present case was issued under the D.C. Rules applicable to PMC. In this regard, he drew our attention on page Nos. 1 to 7 of the Paper Book filed on 20.8.2010. These documents are on Explanation of term "Occupancy Certificate" by building Commission Victoria, copies of Rules 7.2.2. to 9.2.1 of Development Control Rules for Navin Mumbai Municipal Corporation, Sec. 65 [105] (Sn 22m) to (Sn 2221) of Service Tax, Service Tax (removal of difficulty), order 2010 dt. 22nd June 2010. At page No. 7 of this paper book has been made available the said order dated 22.6.2010 of the service tax (removal of difficulty) whereby in item No. 2 it has been made clear by the Ministry of Finance, that for the purpose of Sub Clause (zzq) and again Sub Clause (zzzh) of clause (105) of Section 65 of Finance Act, the expression "authority competent" includes, besides any government authority, (i) architect registered with the Council of Architecture constituted under the Architects Act, 1972 or (ii) Chartered Engineer registered with the Institution of Engineers (India) or (iii) Licensed Sureveyor of the respective local body of the city, or town or village or planning authority; who is authorised....
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....Executive by reasons of a delegated legislation, held the Hon'ble Supreme Court. 6.1. The Ld. A.R. submitted further that in the case of Church's Auxiliary For Social Action And Another v/s. Director General of Income Tax (Exemptions), New Delhi (supra), the Hon'ble Delhi High Court after long discussion has been pleased to hold that the question whether a particular provisions of a Statute, which can, on the face of it, appears mandatory in as much as it used the word "shall" or is merely directory, cannot be resolved by laying down any general rule, it depends upon the facts of each case particularly on a consideration of the purpose and object of the enactment in making the provisions. The Ld. A.R. further submitted that the Hon'ble Supreme Court of India in the case of Promoters and Builders Association of Pune v/s. Pune Municipal Corporation and Others (supra) has been pleased to hold that the language of Section have to be given there natural meaning. The Hon'ble Supreme Court has referred its earlier decision in the case of Union of India v/s. Hansolidevi (2002) 7 SCC 273 holding that it is a cardinal principle of construction of its Statute that when ....
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....ustify the orders of the authorities below. He submitted that for the purpose of issuance of Completion Certificate, one has to read Rule 7.6 of the DC Rules of PMC with Rule 7.7 thereof whereby it has been made clear that the completion plan shall be returned to the owner alongwith the issue of full Occupancy Certificate. He submitted that Occupancy Certificate is issued by the authority after inspection of work alongwith Completion plan. Thus if the first occasion when PMC inspects the site before issuance of completion plan alongwith Occupancy Certificate. The Ld. D.R. accordingly argued that such completion plan issued with Occupancy Certificate is actually the Completion Certificate issued by the local authority as desired in Explanation (ii) below S. 80IB(10)(a) of the Act. He pointed out that under PMC area there are thousands of unauthorised constructions and if the contention of the Ld. A.R. that the Completion Certificate issued by an architect can be treated as issued by local Authority is accepted it will multiply the sufferings of the poor occupants in unauthorised construction. The aim and object of incentive provisions in S. 80IB(10) to grant ultimate benefit to the ....
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....l" in respect of Completion Certificate because local authority is the Competent Authority to issue such Certificate and unless such Certificate issued, that too within the stipulated time, the developer will not be entitled to deduction. The issue of Completion Certificate by the local authority signifies that the builder/developer has complied with all the statutory requirements in connection with the project. Apart from the above, it has also social ramifications. The unauthorised construction not certified by the local authority will not be a social disaster. Therefore, the intention of legislature in the use of word "shall" is very clear and it is nothing, but mandatory. The Ld. D.R. submitted further that as per the position of law, the possession of flats, houses cannot be given to the purchasers unless the Completion Certificate is obtained by the builder/developer. In this regard, he referred Sec. 3(2)(i) of Maharashtra Ownership Flat Act. The provisions also put restrictions on the purchasers not to enter the premises unless the Completion Certificate is obtained. 7.1 Regarding the deemed approval mentioned in Rule 7.7 of D.C Rules of PMC, the Ld. D.R. submitted that t....
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....le Calcutta High Court in the said case on the said issue is not warranting relevance. 10. We have gone through the relevant provisions of the I.T. Act; Bombay Provincial Municipal Corporation Act, 1949; Development Control Rules for Pune Municipal Corporation, Pune, 1982; decisions cited and material available on the record in view of the arguments advanced by the parties. 11. There is no doubt to the submissions of the Ld. D.R. Shri Hareshwar Sharma, that ours is a welfare society, where legislators priority is to mitigate the miseries of weaker sections of the Society and to upgrade their livings by providing them with day to day necessities at affordable price for which the legislature adopt remedial measures in the Statute. The ultimate aim and object of all the incentives and subsidies provided in these statutes like Income Tax Act and Others are to facilitate the day to day needs like employment, accommodation etc., to the weaker section of the society at their affordable price. The Legislature has thus taken care of it by making several provisions, requirements, conditions and restrictions in the Statute itself to secure the benefit of such incentives to the said sect....
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....ions of the assessee merely on the basis that issuance of Completion Certificate by the local authority is mandatory to claim the deduction u/s. 80IB(10) of the Act. His further submission remained that the Court may assert the real intention of the legislature by carefully attending to the whole scope of the Statute. We have already discussed detailed submissions of the Ld. D.R. hereinabove in this regard. The crux of those argument advanced on behalf of the Revenue by the Ld. D.R. is that the issue of Completion Certificate by the local authority signifies that the builder and developer has complied with all the statutory requirement in connection with the project. The local authority has to ensure that the project has been carried out as per the approved plan without violation of local laws like green belt, reserved areas and also without violation of other laws like coastal regulation etc. His submission remained that since PMC has no occasion to inspect the site for issuance of Completion Certificate and on furnishing of Completion Certificate by the licenced architect of the assessee as per Rule 7.6 read with Rule 7.7 of the D.C. Rules for PMC, the authority visits the site a....
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.... of the sets, duly certified as Completion Plan is returned to the owner along with the issue of full Occupancy Certificate. Though there is no dispute and it has been also affirmed by the PMC in its reply dt. 4.10.2010 to the querries raised by the Department, in answering to the question in negative that as to whether Occupation Certificate and Completion is the same, but there is also no dispute that Occupation Certificate is issued or refused after inspection of the work by them. The very reading of Rule 7.6 of DC Rules, also suggests that after furnishing of notice to the authority regarding Completion of the work and Completion Certificate to the PMC in 4 sets in the prescribed form, one of the sets duly certified as Completion Plan is returned to the owner along with the issue of full Occupancy Certificate. Thus, Completion Plan and Full Occupancy Certificate in the case of PMC can be treated as completion certificate issued by the PMC to ensure that the project has been carried out as per the approved plan without violation of local laws and other laws. We are thus not inclined to accept the argument of the Ld. A.R that in case of PMC, the date of Completion Certificate iss....
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.... of Completion Certificate, after which period, it shall be deemed to have been approved by the authority for occupation. In this regard, he referred Rule 7.7 of DC Rule, reproduced hereinabove. He pointed out that in the case of the assessee the assessee had furnished Completion Certificate issue by licenced architect, to PMC on 29.10.2005 and there was no refusal or sanction of Occupancy Certificate or any objection thereto from PMC within 21 days from 29.10.2005, on expiry of such 21 days, it (construction) shall be deemed to have been approved by the authority for occupation. The Ld. A.R. pointed out that this contention is fortified by this fact that only on 23.12.2005, the PMC has issued letter pointing out certain objections/deficiency whereby the grant of Occupancy Certificate could not be considered as applied for by the applicant. The PMC authority have confirmed that the said letter was the first objection/refusal letter issued in respect of the application submitted by the assessee. The Ld. A.R. referred page No. 12 of the Paper Book No. I where the copy of the said letter dt. 23.12.2005 has been made available. The further contention of the Ld. A.R. remained that th....
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....m the provisions in the D.C. Rules of PMC. It is neverthless an admitted position that, local body like Municipal Corporation, generally takes inordinate time in issuing Completion/Occupancy Certificate.. 16. The submission of Ld. D.R. remained that in Rule 7.7 of D.C. Rules of PMC,, it has been stated that deeming clause will apply provided building has been constructed as per sanctioned plan. In the present case, from the perusal of objections raised by PMC, it is clearly seen that Occupation Certificate was not granted because failure of certain compliance was there. Pointing out about expiry of 21 days for acquiring the deeming occupancy, he said that it cannot be allowed without realising that the building has been constructed as per sanctioned plan. 17. Considering the above submissions, we find that the Development Control Rules for PMC are meant for application to building activity and development work in areas under the jurisdiction of Pune Municipal Corporation, Pune. Under Rule 1.3 of Rule 1 of D.C. Rules under the head "short title, extent and commencement", the following position about the Rules has been made clear in the Development Control Rules: "1.3 ....
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....he PMC would not issue occupancy certificate. But, where an assessee who feels that he has completed construction as per sanctioned/approved plan and furnishes Completion Certificate through its licenced architect, who supervised the construction, such assessee should not have waited for indefinite period for issuance of completion plan along with Occupancy Certificate to know one morning in some furture year about deviation if any, in the plan pointed out by the PMC. Certainly it may not be the intention of the Legislature. The constraint put in the provisions of Sec. 80IB(10) and in the Rules 7.6 and 7.7 of D.C. Rules of PMC by the Legislature, are certainly intended for the completion of the project within reasonable possible time, so that it may be available for the persons in need at earliest possible opportunity. The very purpose of incentive provided u/s. 80IB(10) is to encourage builder to make available accommodation to the persons in need on affordable price in time. So, PMC cannot be allowed to take advantage of its own lapses for detrimental of the interest of the assessee debarring him to claim deduction u/s. 80IB(10) in absence of Occupancy Certificate which was to be....
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....in 21 days from the date of receipt of Completion Certificate under Rule 7.6. (ii) PMC does not sanctions or refuse an Occupncy Certificate at all even after expiry of 21 days of deeming provision. (iii) PMC raises objections to the Completion Certificate for sanction of Occupancy Certificate after expiry of 21 days of deeming provision. Assessee's case falls under third situation as no response was there from PMC till the expiry of 21 days from the date of receipt of Completion Certificate (29.10.2005) filed by the assessee. Only after the expiry of 21 days of deeming provision, PMC issued objection on 23.12.2005, (copy made available at page no. 13 of the paper book no. I of the assessee). We will thus deal with situation (iii) herein. In the said letter dated 23.12.2005 issued at first instance after receipt of Completion Certificate, the specific objections shown are, (a) inside margin watchman shed is constructed, (b) unauthorised parking shed is constructed, (c) D.P. use certificate and final Fire 'NOC' not filed. Other remarks as "unauthorised use is observed", "there is difference in actual work on site and as shown in the Record Plans" are ....
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....n if any has been shown, we are of the view that it would be just and proper to treat the date after expiry of 21 days from receipt of Completion Certificate as date of completion for the purpose of meeting the requirement of Explanation (ii) below Sec. 80IB(10)(a) of the I.T.Act with this understanding that PMC will continue with its action against the assessee to set the stated objections if any, at right. 18. Since no dispute regarding applicability of amended Section 80IB(10) for the A.Ys. under consideration is there before us, we have confined ourselves only on the issue raised as to what would be the date of completion of the project to claim the deduction in the present case. 19. For a ready reference our above findings are summarised as under: 1. In the case of PMC, the completion certificate in prescribed form issued by the licensed architect etc. who has supervised the construction is furnished with four sets of completion plan under Rule 7.6 of the DC Rules of the PMC. Thereafter PMC is required to return one of the sets duly certified as Completion Plan to the owner along with the issue of full Occupancy Certificate after inspection of the work under Rul....