TaxTMI 
TaxTMI 
2017 (1) TMI 1403
X X X X Extracts X X X X
X X X X Extracts X X X X
..../- u/s 80IB(10) of the Act." Ground of assessee's C.O. No. 39/JP/2015. "(1) The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the validity of assessment framed u/s 147." Grounds of revenue's appeal in ITA No. 418/JP/2015. "1. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of Rs. 91,68,150/- made on a/c of disallowance of deduction claimed u/s 80IB(10) of the Act." 2. The facts relevant for issue under consideration are that the assessee company is engaged in the construction and development of housing project. It had undertaken construction and development of a housing project "Guru Shikhar" at village- Nanakpura Alis Hema Ki Nagal and Ajayrajpura, Tehsil Sanganer, Tonk Road, Jaipur. The housing project comprises of different blocks. In khasara no. 1 to 8 and 11 to 17, block A to G is constructed and at khasara no. 9, 10 & 18, block H & I is constructed. The assessee submitted the application for approval of MAP's of the two khasara no. comprising of different blocks as stated above on 25-03-2007 to Gram Panchayat and on 26-03-2014....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reference to application dated 23-03-2012 placed in 122nd meeting dated 28-08-2012 in respect of block no. A to E 21-03-2013 3. During AY 2010-11, the assessee company filed its return of income declaring an income of Rs. 16,43,530/- after claiming deduction u/s 80-IB at Rs. 91,68,155/-. This deduction was revised in assessment proceeding to Rs. 1,41,53,488/- but restricted to Rs. 1,08,11,680/- i.e. to the extent of available profit. 4. The AO disallowed the claim of deduction for the reason that assessee has not fulfilled the following conditions prescribed u/s 80-IB(10):- (i) As per section 80-IB(10)(a), the project must be completed within five years from the end of the financial year in which it is approved by the Local Authority. The period of five years expired on 31-03-2012. As per explanation (ii) to this section, date of completion of construction of the housing project is to be taken to be the date on which the completion certificate is issued by the Local Authority. Such certificate is issued by JDA after 31-03-2012 and therefore this condition is violated. For drawing this inference, AO made following observations:- (a) The assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated this condition where more than one residential unit is allotted to individual and in one case this condition is violated where it is allotted to person other than individual. 5. Based on the findings given in AY 2010-11, the AO issued notice u/s 148 for AY 2009-10 on 07.08.2013 and disallowed claim of deduction u/s 80-IB of Rs. 1,16,92,294/-. 6. The Ld. CIT(A) allowed the claim of deduction u/s 80-IB to the assessee in AY 2010-11 and following the same, it was allowed for AY 2009-10 also which has now being contested before us. 7. The relevant provisions of section 80-IB(10) which are under consideration are as under: "The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, - (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction, - (i) in a case where a housing project has been approved by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] 8. There is no dispute as to the fact that assessee has complied with the conditions stated in sub clause (b), (c) & (d). The dispute remains only with reference to the conditions stated is sub clause (a), (e) & (f). In present case, to decide the fulfillment of condition referred in clause (a), (e) & (f), following issues needs to be considered:- (i) Who is the Local Authority to approve the housing project and to issue the completion certificate of the housing project? (ii) When the application for issue of the completion certificate is made within the prescribed time, any delay in issue of the completion certificate would relate back to the date of making of ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is held that local authority has not been defined in sec. 80-IB(10). However, sec. 10(20) explanation provides that local authority will definitely include a Municipal Committee, Panchayat and Cantonment Board. Thus local authority will include Corporation of Chennai. Chennai Corporation was issuing building permits to all the buildings including CMDA's special buildings, after the planning permits were issued by CMDA. Hence, deduction u/s 80-IB(10) is allowed to the assessee as Corporation of Chennai has given completion certificate. (e) From the above it can be noted that the Gram Panchayat is the competent authority for approval of the Housing Project and for issue of the completion certificate in respect of the housing project. (f) In the present case, approval of the Housing project from Gram Panchayat was obtained on 10-04-2007. Thus, the period of five year from the end of the financial year in which the project is approved ends on 31-03-2013. The housing project was completed in Feb. 2012. Therefore, assessee moved an application for issue of the completion certificate to Gram Panchayat on 01-03-2012. The Sarpanch of the Gram Panchayat has issued the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A communicated the approval of maps to the assessee in the month of August 2008 and Oct 2008 and therefore the period of five years from the end of the financial year from the communication of the approval ends on 31-03-2014. However, as the project was completed in the month of Feb 2012, the assessee also moved an application to JDA for issue of completion certificate on 23-03-2012. The JDA after completing its formalities issued the completion certificate on 01-08-2012/23-03-2013 but all these certificate would relate back to the date of the application dated 23-03-2012 as discussed below. From the above discussion it is evident that assessee has completed the housing project prior to 31-03-2012 and also obtained the completion certificate from Local Authority and therefore, the condition specified in clause (a)(iii) to section 80-IB(10) is fully satisfied. Therefore, the Ld. CIT(A) considering all these evidence has rightly held that the project was completed prior to 31.03.2012. 9.3 We have heard the rival contentions and pursued the material available on record. The term "local authority" has not been defined u/s 80IB(10) of the Act. Therefore, the expression "local auth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sthan Municipalities Act, 1959 in Jaipur Region. The term "Panchayat" has been defined under Section 2(14) to mean a Panchayat established under the Rajasthan Panchayat Act, 1953 (Rajasthan Act 21 of 1953) in Jaipur Region; or a Panchayat Samiti or Zila Parishad constituted under the Rajasthan Panchayat Samitis and Zila Parishads Act, 1959 (Rajasthan Act 37 of 1959) in Jaipur Region. Section 3(1) talks about establishment of an authority to be called Jaipur Development Authority for the purposes of this Act as notified by the State Government. Section 3(3) states that the authority shall be deemed to be a local authority within the meaning of the term "Local Authority" as defined in the Rajasthan General Clauses Act, 1955. Section 4 talks about composition of the Jaipur Development Authority which shall consist of the following members:- (i) a Chairman, who shall be the Minister-in-charge of Urban Development of the State of Rajasthan or a nominee of the Governor during President's Rule; (ii) a Vice-Chairman, who shall be State Minister of Urban Development of the State of Rajasthan, or a nominee of the Governor during President's Rules; (iii) Secretary t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) execution of projects and schemes on the directions of the State Government; (j) undertaking housing activity in Jaipur Region, provided that the delineation of responsibility for housing between Rajasthan Housing Board and the Authority will be made by State Government effective from the date to be fixed by it; (k) to acquire, hold, manage and dispose of property, movable or immovable, as it may deem necessary; (l) to enter into contracts, agreements or arrangements with any person or organization as the Authority may deem necessary for performing its functions; (m) to prepare Master Plan for traffic control and management, devise policy and programme of action for smooth flow of traffic and matters connected therewith; (n) to perform functions designated by the State Government in the areas of urban renewal, environment and ecology, transport and communication, water energy resource management directly or through its Functional Boards or other departments/agencies as the State Government may specify; (o) regulating the posting of bills, advertisement hoardings, signpost, and name boards in Jaipur Region or in any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....neglect in granting or refusing permission, and if such omission or neglect in granting or refusing permission, and if such omission or neglect continues for a further period of thirty days from the receipt of such communication, the Authority shall be deemed to have permitted the proposed development and such development may be proceeded within the manner specified in the application: Provided that nothing herein contained shall be construed to authorize any person to act in contravention of any provision of this Act or the rules, regulations or order made thereunder, relating to any matters other than the requirement of obtaining permission of the Authority before undertaking or carrying out any improvement under this Act. (4) Any authority or person aggrieved by the decision of the Authority under sub-section (3), may, within thirty days, appeal against such decision to the State Government whose decision shall be final: Provided that, where the aggrieved authority submitting such appeal is under the administrative control of the Central Government, the appeal shall be decided by the State Government after consultation with the Central Government. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered view that housing project falls with the Jaipur region and the JDA is the approving authority for development and construction of the housing projects and it shall be the local authority for the purposes of claim of deduction under Section 80IB(10) of the Act. 10. Where the housing project is completed and the application for issue of the completion certificate is made within the prescribed time, whether any delay in issue of the completion certificate would relate back to the date of making of application or not? 10.1 In this regard, the ld AR has submitted as under: (a) In case JDA is considered to be local authority for approval in issue of completion certificate, it can be noted that the assessee has also moved an application for approval of the map of the housing project to JDA on 26.03.2007 (PB 2 & 15) but the approval was conveyed on 26.08.2008 (17 months delay) for Block A to G (PB 2-3) and on 01.10.2008 (18 months delay) for Block H & I (PB 15-16). From the date of conveying the approval, the period of 5 years ends on 31.03.2014. However, as the project was completed in February, 2012, assessee moved application on 23-03-2012 to JDA for issuing the comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by order dated March 19, 2009. Several residential units were occupied without necessary permission. The assessee paid a penalty and got such occupation regularised. On appeal the Court held that under sub-clause (i) of clause (a) of section 80-IB(10), since the assessee had got approval for the housing project from the local authority before April 1, 2004, it was required to complete the construction latest by March 31, 2008. The assessee had not only completed the construction two years before the final date but had applied for the building use permission. Such permission was not rejected on the ground that construction was not completed but on some other technical ground. Thus, granting the benefit of deduction could not be held to be illegal. CIT v. Radomir Dzelatovic 206 ITR 320 (Bom.): The assessee, a foreign technician, filed an application before the Central Government claiming exemption from payment of tax under section 10(6)(viia)(I)(B) of the Income-tax Act, 1961. The Central Government granted the approval on May 26, 1972, for a period of two years. On March 25, 1974, the assessee applied for extension of the exemption which was granted on Oc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Hindustan Samuh Awas Ltd. (2015) 377 ITR 150 (Bom.) In this case where application for issue of completion certificate was made prior to 31.03.2008 but the same was issued by the municipal corporation on 10.10.2008, the deduction u/s 80-IB(10) was held allowable by giving following findings in para 11 & 12 of the order:- "11. The question we raise here is whether the explanation introduced an element of harshness to such an extent that it rendered the main provision nugatory? In our view, the explanation is introduced recently to put an end to a controversy, which might arise before the Assessing Officer about the date of completion. The intention of the legislature in providing explanation to fix the date of completion of a project is quite helpful when this provision is utilized in practice. In our view the explanation has introduced an unnecessarily strictness in the provision which is in the nature of exemption and not in the nature of charging. Sub-section (10) mentions that a housing project should be complete before 31.03.2008 so as to get the exemption. Completion of housing project is a physical act. It can be demonstrated on the spot and also through a c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e ground that the PMC has not issued the completion certificate before the stipulated date. Sanghvi & Doshi Enterprise Vs. ITO (2011) 60 DTR 306/131 ITD 151(Chennai) (Trib.) (TM) Assessee can make an application for completion certificate only when the project is completed. Thus, grant of a completion certificate after verification by the competent authority on a subsequent date would relate back to the date on which the application is made. Thus, there cannot be two views that construction of Block H & I was completed before 31-03-2012. (d) In respect of Block A to G, the letter dated 8-05-2012 (PB 10) written by JDA to the assessee mentions that the work of block A to D is almost complete and the civil work of block E, to G is in progress. The letter does not specify the nature of civil work which is in progress. This letter was never received by the assessee. As against this, the Chief Fire Brigade Officer vide its letter dated 2305-2012 (PB 8-9) have stated that block A to G has been constructed for which no objection certificate is issued. How the fire fighting department could have issued no objection certificate on 23-05-2012 if the constr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cause there is delay in getting the environment clearance certificate, the completion certificate in respect of these blocks were not issued by JDA. This would not mean that the construction of block F & G was not complete before 31-03-2012. In view of the above, it is proved beyond doubt that the construction of all the blocks of the housing project was complete before 31-03-2012. If there is delay on part of the JDA for issuing completion certificate or because of some technical reason such certificate is not issued by JDA but issued by Gram Panchayat, the condition of issue of completion certificate by Local Authority stands satisfied and therefore even if JDA is considered to be Local Authority u/s 80-IB(10), the condition referred in clause (a)(iii) of section 8IB(10) stands satisfied. In these facts and circumstances, the Ld. CIT(A) has rightly held that condition referred to in section 80-IB(10)(a)(iii) is fulfilled. 10.2 We have heard the rival contention and perused the material available on record. In this regard what is relevant to examine is firstly, when the housing project was approved by the JDA and secondly when the housing project was completed and comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....08 and the second approval has been issued on 01.10.2008. On perusal of both these approvals and other material available on record, there is nothing to suggest what caused the undue delay on the part of JDA to convey the approval to the assessee after a gap of so many months. In any case, given that the building maps have been approved on 29.03.2007 even though the same has been conveyed at a later point in time to the assessee, it is clear that the building plans have been approved before the 31st day of March, 2008. Therefore, the first condition, requiring developing and building housing projects approved before 31.03.2008 by a local authority, is satisfied in the instant case. 10.5 Now coming to the issue of completion certificate issued by JDA, the ld. AR has submitted that the assessee has moved an application for approval of the map of the housing project to JDA on 26.03.2007 in respect of blocks A to G and Block H& I respectively. The JDA conveyed the approval on 26.08.2008 for the blocks A to G and on 01.10.2008 for the block H &I and from such date of conveying the approval, the period of 5 years for completion of the housing project ends on 31.03.2014. However, as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... certificate and thereafter, on 1.08.2012, a letter was issued to the assessee conveying the decision taken in the meeting held on 11.07.2012. There is nothing on record to suggest that the blocks H & I were either not complete or there were certain deficiencies on the part of the assessee between the date of filing of the application and its approval thereof in the meeting held on 11.07.2012. The blocks H & I are therefore held to be complete as on the date of moving the application on 23.03.2012 even though the approval has been granted on 11.07.2012 and completion certificate issued on 1.08.2012. 10.8 In respect of khasra no. 1 to 8 and 11 to 17 (Blocks A to G), the JDA vide its letter dated 05.10.2012 has stated that the matter relating to the application filed by the assessee was taken up in the 122nd meeting of building plan committee held on 28.08.2012 wherein the assessee was asked to take certain actions steps. Firstly, it was stated that solar energy equipments have been installed in four towers, however, in respect of remaining 3 towers, solar energy equipment needs to be installed before the completion certificate is issued by JDA. Secondly, it was stated that the bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e architect report as well as issuance of the no objection certificate by the Chief Fire Brigade Officer, Nagar Nigam, Jaipur all blocks were completed in March, 2012 itself. However, the JDA has issued a letter dated 08.05.2012 wherein it is stated that on physical inspection, work in respect of block A to D is almost complete except some fitting/finishing and in respect of block E, F and G, the civil construction work is in progress. The assessee has challenged this letter of JDA dated 08.05.2012 stating that it doesn't specify the nature of civil work which is in progress and secondly, this letter was never received by the assessee. In our view, there are not enough material on record for us to take a view in the matter. In the interest of justice and fair play, the matter require to be set-aside to the file of AO for fresh examination so that all relevant facts and documents are brought on record to determine the actual date of completion of blocks A to G. 10.10 In light of above, it is clear that in respect of bock H & I, the construction has been completed as on 31.03.2012 even though the approval has been granted on 11.07.2012 and completion certificate issued by JDA on 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area. In this case the assessee completed four housing projects in the city of Madurai. Out of these, in two of the projects, the assessee constructed flats exceeding 1500 sq. ft. and also flats of less than 1500 sq.ft in area. The assessee claimed deduction under section 80-IB(10) of the Income-tax Act, 1961, in respect of flats which had area measuring less than 1500 sq. ft. The Assessing Officer denied the deduction because the housing project comprised residential units exceeding 1500 sq. ft. The Commissioner (Appeals) allowed the deductions under section 80-IB(10) in respect of the residential units with an area of less than 1500 sq. ft. On appeal by the Department, the Tribunal allowed the appeal by holding that the eligibility conditions under section 80-IB are that the built-up area should not exceed 1500 sq. ft. in the context of cities other than Delhi and Mumbai and the profits must be derived in the previous year from the housing project. This restriction is applicable for the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te issued in respect of some of the blocks. As we have noted above, the construction has been completed and completion certificate has been issued by JDA in respect of Block H & I. Accordingly, the assessee shall be eligible to claim proportionate deduction u/s 80-IB(10) in respect of Block H & I. 12. Whether where some of the flats in a block are not fulfilling the condition of allotment of the flat, entire deduction is to be disallowed or the claim is to be restricted proportionately? 12.1 In this regard, the ld AR has submitted that: (a) The AO has observed that assessee has allotted more than one flat to the persons covered under provisions of sec. 80-IB(10)(e) & (f). In the show cause notice, he has given reference to six instances. The assessee explained that out of these six cases except in case of M/s Rajasthan Patrika Pvt. Ltd., allotments were made prior to insertion of clause (e) & (f). It was further stated that even in these five cases, ultimately not more than one flat is allotted or two units were combined to make one unit, area of which does not exceeds 1500 sq. ft. The AO however, has not accepted the explanation given by the assessee. The AO further....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that two flats should not be allotted to the same individual or to the spouse or minor children of such individual. Therefore, even if the booking amount is received from such person in respect of two or more flats but ultimately not more than one flat is allotted to such person, the condition of clause (f) would not be violated. Further, this clause inserted from 01.04.2010 has prospective effect. Therefore, where the flats are allotted in respect of booking which is made prior to 01.04.2009, clause (f) would not apply. Gujarat High Court in case of Mannan Corporation Vs. ACIT (2013) 214 Taxman 373 and Bombay High Court in case of CIT Vs. Jogani Constructions Ltd. 217 Taxman 95 (Mag.) with reference to amendment made to section 80-IB(10)(d) w.e.f. 01.04.2005 held the same to be prospective in nature for the purpose of claim of deduction by assessee u/s 80-IB(10). On the same analogy, insertion of clause (e) and (f) w.e.f. 01.04.2010 are prospective in nature and therefore if more than one flat is booked in the name of same individual or in the name of spouse or minor children prior to 01.04.2009, the condition of clause(e)/(f) cannot be applied on the same. (d) Otherwis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained approval from Dy. Director town planning for construction is the approval of local authority. Further, assessee is entitled for deduction u/s 80-IB(10) pro rata for housing units having built up area less than 1500 sq. ft. Sanghvi and Doshi Enterprise v. Income-tax Officer Sri Mahalakshmi Housing v. Income-tax Officer Sri Mahalakshmi Builders v. ITO 18 ITR 608 (Trib.)(Chennai) In these cases, by following the decision of Calcutta High Court in case of CIT Vs. Bengal Ambuja Housing Development Limited in I.T.A.No.458 of 2006 dated 5 January 2007, it was held that a pro rata deduction is permissible u/s 80-IB where some residential units exceeds 1500 sq. ft. Sreevatsa Real Estate P. Limited 41 DTR 497 (Chennai)(Trib.) In this case it was held that where the built up area of some of the housing units are more than 1500 sq. ft., assessee is entitled for deduction u/s 80-IB(10) on pro rata for housing units having built up area less than 1500 sq. ft. (e) The Ld. CIT(A) after considering these evidences at Pg 34 of the order has rightly held that assessee has not violated requirement of sec. 80-IB(10)(f). 12.2 We hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....karta. This amendment will take effect from the 1st day of April, 2010 and shall accordingly, apply in relation to assessment year 2010-11 and subsequent years." 12.4 In light of above, clauses (e) and (f) are additional and new conditions which have been brought on the statue by the Finance Act, 2009 to aid and supplement the existing condition of limiting the size of the residential unit (less than 1500 sq. Ft) with an ultimate objective of ensuring tax benefit for housing projects for low and middle income households. Here we refer to the decision of the Hon'ble Gujarat High Court in case of Manan Corpn. vs. Assistant Commissioner of Incometax, Circle-5 [2013] 29 taxmann.com 15 (Guj.) where in the context of amendment by way of insertion of clause (d) to section 80IB(10), the Hon'ble High Court has held that the criteria to hold the amendment in question retrospective are absent as there is no explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication, the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the allotment has either not being made or booking of flats has happened prior to insertion of clause (f) of section 80IB(10) of the Act in these limited cases. In our view, the legislature has used the expression "allotment" and not the expression "booking" of the residential unit which precede the allotment of residential unit as generally understood in the housing sector. Unless, in a given case, where the booking and allotment are same as demonstrated through the contractual understanding between the builder and the allottee of the residential unit, it would not be correct to use these terms inter-changeably. In light of above directions, we accordingly set-aside the matter to the file of the AO to examine the allotment of flats made by the assessee in entirety and examine the satisfaction of conditions under clause (e) and clause (f) of section 80IB(10) of the Act. 12.7 In light of above discussions and taking into consideration the entirety of facts and circumstances of the cases including the arguments and legal authorities quoted before us, the Revenue's appeal for both the years is partly allowed with above directions for statistical purposes. Assessee's C.O. N....