TaxTMI 
TaxTMI 
TaxTMI 
2014 (6) TMI 709
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....s claim of deduction u/s 80IB(10) of the IT Act. 3. Briefly, the facts are, the assessee a company is engaged in the business of housing project development. For the assessment year under dispute, assessee filed its return of income on 01/11/2005 declaring NIL income after claiming 100% deduction u/s 80IB(10) of the IT Act. Initially, the return was processed u/s 143(1) by accepting the income admitted. As it appears, subsequently, during the course of scrutiny assessment proceedings for A. Y. 2006-07 the Assessing Officer noticed that though the assessee has stated that the housing project was completed but it has not submitted completion certificate as required under Explanation - (ii) to clause (a) of section 80IB(10). The Assessing Officer therefore completed the assessment for the A. Y. 2006-07 by rejecting assessee's claim of deduction u/s 80IB(10). On the basis of the conclusion drawn in assessment year 2006-07, the Assessing Officer initiated action u/s 147 of the Act for the impugned assessment year by issuing a notice to the assessee u/s 148 of the Act. In course of the reassessment proceedings, the Assessing Officer called upon the assessee to explain why deduction clai....
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....f the honourable ITAT referred to supra. I find that the order of the honourable ITAT was passed on 21.09.2012 and it took into account all the facts of the case and clearly directed the assessing officer to allow the deduction in assessment year 2006-07. It was also held by the honourable ITAT that for assessees who were following the percentage completion method, subject to the satisfaction of other conditions, deduction u/s 80IB(10) cannot be denied and has to be allowed every year. If however, the assessee is not able to complete the project within the time stability of four years, then the cases shall be reopened and all the deductions so allowed shall be withdrawn. Following is the operative part of the order of the honourable ITAT:- " 26. Now the 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 o....
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....ssued by the local authority. To grant deduction u/s. 80IB(10) it is mandatory to furnish the completion certificate of the housing project but the persistent question here is whether for giving benef it of deduction u/s. 80IB(10), where an assessee is following the percentage completion method is it necessary to obtain such completion certificate for each year of assessee's claim or it is sufficient that certificate is obtained on the completion of the housing project as a whole. Stipulation for obtaining completion certificate should not be so interpreted to mean that an assessee can claim exemption u/s. 80IB(10) only in the year of completion of whole of the housing project, even where the project stretches over a number of years and assessee returns its income 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 8ajaj Tempo vs. CIT (196 ITR 188) (SC) a provision in the taxing statutes granting incentives for promoting....
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....a) The deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year. (b) In case it is late and it is found that the condition of completing the project within the specified time-limit of 4 years as stated in s. 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn. 4. The above instruction will override earlier clarification on this issue contained in Member (R.)'s O. O. Letter No. 58/Misc/2008/CIT (IT & CT), dt. 29th April, 2008 and Member (IT)'s 0.0. Letter No. 279/Misc/46/ 2008-IT] dt. 2nd May, 2008. " 28. In view of the foregoing discussion, we direct the Assessing Officer to allow deduction u/s. 80IB(10) of the Act in the light of the order of the Tribunal in ITA Nos. 797 & 813/Hyd/06 in the case of M/s. Namaha Estates dated 29.2.2008 wherein the Tribunal held as follows: 4.3 From above, it is amply clear that for the same project with similar facts, deduction u/s 8018(10) has been allowed by the honourable ITAT in assessment year 2006-07. Unless, the entire deduction for all the years is withdrawn, the deduction for the assessme....
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....o the AY 2006-07. While the Assessing Officer has disallowed the claim of deduction u/s 80IB(10) on the ground that in terms with Explanation - (ii) to clause (a) of section 80IB(10), the assessee has failed to furnish completion certificate from local authority, it is the specific contention of the assessee that the housing project having been approved prior to 01/04/2005, there is no need to furnish completion certificate as per the amended provision of law which was brought to the statute with effect from 01/04/2005. In the aforesaid factual backdrop, it is necessary to look into the provision contained u/s 80IB(10) of the Act prior to 01/04/2005 and after 01/04/2005. The relevant provisions are extracted for the sake of convenience: "Section 80IB(10) prior to the amendment of 01/04/2005: Sub s. by Finance (No.2) Act, 204 (23 of 2004), sec. 18(d), for sub-section (10) w.e.f. 01-04-2005. Earlier sub-section (10) was amended by the Finance Act, 2000 (10 of 2001), sec. 39(e)(i) and (w.e.f. 01/04/2001), by Finance Act, 2003 (32 of 2003), sec. (c)(i) and (ii) (w.e.f. 1.4.2002), sub-section (10), before substitution by Finance (No.2) Act, 2004, stood as under: (10)The amount of prof....
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....ect shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed 10[three] per cent of the aggregate built-up area of the housing project or 11[five thousand square feet, whichever is higher" 8. On comparative analysis of amended and unam....
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....ssessee will demolish the construction work which is already in progress and again comply with the direction of the law which was inserted on a later date which is prospective in nature. If the intention of the legislature would have been to make it effective from retrospective effect, nothing prevents the legislature to do so. 8.10 If the issue is analyzed in the light of case laws cited before us, we find that the Hon'ble Karnataka High Court vide judgment dated 29th February 2012 in the case of CIT v. Anriya Project Management Services (P.) Ltd. [2012] 209 Taxman 1/21 Taxmann.com 140, considered the decision like CIT v. G. R. Developers [2012] 209 Taxman 65 (Mag.)/22 taxmann.com 265 (Kar.) and held that definition of built up area was inserted by Finance (No.2) Act of 2004, which came into effect from 1-4-2005, is prospective in nature and has no application to the housing projects which were approved by local authority prior to that date, strongly supports the case of the assessee. It was held by the Hon'ble High Court that the assessee was entitled to hundred per cent benefit of sec. 80-lB(l0). 8.11 Another case cited was from Visakhapatnam Bench of the ITA T in the ....
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.... though the principle of res-judicata is not applicable to the income-tax proceedings, yet for the sake of consistency and for the purposes of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reopened unless some fresh facts are brought on record in subsequent assessment year. For A.Y. 2006-07, even the Id. CIT (A) decided the issue in favour of the assessee, which was confirmed by the Tribunal (supra), therefore, unless and until any new material facts are brought on record, the revenue is not permitted to take a "U turn", while denying the claimed deduction to the assessee, that too on same facts and circumstances. Our view is fortified by the decision of Hon'ble Jurisdictional High Court in the case of CIT v. A.R.J Security Printers [2003] 264 ITR 276 (Delhi) and the ratio laid down in CIT v. Neo Poly Pack (P.) Ltd. [2000] 245 ITR 492 Delhi; Berger Paints India Ltd. v. CIT [2004] 266 ITR 99 (SC); CIT Vs. Lagan Kala Upvan [2003] 259 ITR 489 (Delhi); and Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC). From this angle also the assessee is having a strong case in its favour. ....
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....in para 1.2 (page 5) of the impugned order, the Id. CIT (A) has examined the submissions of the assessee and the reason of denial of deduction to the assessee by the Id. Assessing Officer. The relevant portion from the impugned order is reproduced hereunder: It was further submitted that Addl. CIT wrongly tries to prove that sale with M/s. Rajasthan Global Securities Ltd. (RGSL) are not accounted for properly and undue profit has arisen on account of 80-IB whereas these are normal business transactions undertaken by assessee company with M/s. Rajasthan Global Securities Ltd. having no mutual relation whatsoever. The Assessing Officer has objected to the issue of preferential shares and its valuation. The assessee company has issued preferential shares to various persons as per SEBI guidelines and approval of Bombay Stock Exchange. The assessee company is a listed company and does not ah any discretion about the issue price and require to issue shares through preferential allotment only at the rate as per SEBI guidelines and approved by stock exchange. During the year the assessee company has calculated average market price as per general netting. certification by statutory auditor....
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....project and while approving such project when initially there was no such restriction in taxing statute and the permissible ratio for commercial user made 5% to the total built up area by way of amendment and reduction of which by further amendment to 3% of the total built up area, has to be necessarily construed on prospective basis. 22. As is very apparent from the record, there was no criteria for making commercial construction prior to the amended Section and the plans are approved as housing projects by the local authority for both the projects of the appellant. Permission for construction of shops has been allowed by the local authority in accordance with rules and regulations, keeping in mind presumably the requirement of large townships. However, the projects essentially remained residential housing projects and that is also quite apparent from the certificates issued by the local authority and, therefore neither on the ground of absence of such provision of commercial shops nor on account of such commercial construction having exceeded the area contemplated in the prospective amendment can be made applicable to the appellant assessee whose plans are sanctioned as per the ....
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....ndment provision would have no application to housing projects, which were approved by the local authority prior to 1.4.2005 in calculating 1500 sq. feet of residential unit and it further held that once such housing project of assessee is approved by local authority prior to 1.4.2005, it would be entitled to 100% benefit of Section 80IB(I 0). While so holding, it relied on the judgment of the Karnataka High Court in the case of CIT v. G.R. Developers [2012] 209 Taxman 65 (Mag.)/ 22 taxmann.com 265. 25. Corollary to this is one more aspect that requires reference here. The Government of India Ministry of Finance, Department of Revenue to all Chief Commissioners of Income-Tax and all Director Generals of Income-Tax issued Instruction No.4 of 200 dated 30.6.2009 in respect of Section 80lB (10) of the Act would be available on year to year basis where the assessee is showing profit on partial completion or the same would be available on the year of completion of the project, which is clarified as under:- "3. The above issue has been considered by the Board and it is clarified as under:- (a) The deduction can be claimed on a year to year basis where the assessee is showing profit fr....
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.... the opinion that the reasoning and conclusions of the Karnataka High Court and the Gujarat High Court are fully applicable to the facts of this case. The Tribunal was not, therefore, in error of law while holding in favour of the assessee." 9. On a careful reading of the aforesaid judgment of the Hon'ble Delhi High Court and more specifically the observation made in Para 10 of the judgment, the proposition of law which can be culled out is, for a housing project which is approved by the competent authority prior to 01/04/2005 there is no requirement under the unamended provision u/s 80IB(10) to furnish a completion certificate from the local authority because law requiring furnishing of such completion certificate was brought into the statute only with effect from 01/04/2005, hence, would apply prospectively. However, it needs to be mentioned here that in assessee's own case for the AY 2006-07 the coordinate bench of this Tribunal in paragraph 27 did observe that since the assessee is following percentage of completion method the assessee cannot be expected to furnish a completion certificate in each year of continuation of the project, but, only on completion of the project. Sim....