TaxTMI 
TaxTMI 
2017 (1) TMI 1403
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....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 to Jaipur Development Authority. The various dates relating to the filing of the appl....
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.... 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 filed the copy of the completion certificate dated 01-08-2012 issued by the JDA in respect of Khasara No. 9, 10 & 18. No completion certificate was filed in respect of khasara no. 1to 8 & 11 to 17. Hence, date of completion of the portion of the pro....
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.... 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 local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 [but not later than the 31st day of March, 2005], within four years from the end of the f....
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....hildren 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 application or not? (iii) Whether each block of housing complex in the project is to be considered separately or all block of the housing complex in the project is to be considered together for ascertaining the date of completion of the construction of the housing project? (iv) 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....
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....e 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 completion certificate on 27-03-2012. The AO has recorded the statement of the Sarpanch on 21-03-2013 where she stated that the certificate was issued in good faith without site verification. However, the statement of the Sarpanch was not confronted to the assessee. Therefore, such statement recorded at the back of the assessee has no evidentiary value. It is a settled law that a statement recorded at back of the assessee and not confronted to him can't be used against the assessee as....
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....te 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 authority" has to be examined in the context of section 80IB(10) of the Act where it has been used. This section requires that the deduction shall be available to an undertaking developing and building the housing project which has been approved by the local authority and completes such construction within a period of five years from the end of the financial year in which the housing project is approved by the local authority. In this context, the local authority should be such an authority which has been authorized and empow....
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....he 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 to the Government, Urban Development and Housing Department; (iv) Jaipur Development Commissioner (appointed under this Act); (v) Chairman, Rajasthan Housing Board; (vi) Chief Engineer, Public Health Engineering Department; (vii) Chief Engineer, Public Works Department; (viii) District Collector, Jaipur; (ix) Chief Engineer, Rajasthan State Electricity Board; (x) Chairman/Administrator, Municipal Council, Jaipur; (xi) Zila Pramukh of Zila Parishad, Jaipur District; (xii) Chief Town Planner Rajasthan; and (xiii) Non-official m....
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....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 part thereof as specified by the Authority; (p) regulating the erection or re-erection of buildings and projections, making material alterations therein and providing for open spaces in Jaipur Region or in any part thereof as specified by the Authority; (q) removing obstructions and encroachments upon public streets, open spaces and properties vesting in the Government or the Authority; (r) to do all such other acts and things which may be necessary for or incidental or conducive to, any matters which arise on account of its activity and which are necessary for furtherance of the objects for which the Authority is established: and (s) to perform any other functions that the State Government may designate in furtheran....
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.... 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. (5) In case any person or authority does anything contrary to the decision given under this section, the Authority shall have power to pull down, demolish or remove any development undertaken contrary to such decision and recover the cost of such pulling down, demolition or removal from the person or authority concerned." 9.7 In light of above, it is clear that the authority which has been authorized and mandated to approve the development and construction of housing projects in the Jaipur region is the Jaipur Development Authority. Further, in terms of Section 3(1) read with section 3(3) of the JDA Act, the Jaipur Development Authority is deemed to be a local authority for the purposes of this Act which includes the development and construction of housing projects in the Jaipur region. The other local ....
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.... & 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 completion certificate. The completion certificate is issued by JDA for Block H & I on 01-08-2012 (PB 21), for Block A to E on 21-03-2013 (PB 13) but the completion certificate for Block F & G was not issued for want of environment clearance certificate. However, the fact remains is that the flats in these blocks are occupied and used for residence by its owners. (b) The AO at Pg 7 of the order has stated that he has inspected the file of the assessee with JDA on 15-03-2013 and found that on 0805-2012 (PB 10), JDA wrote a letter to the assessee in response to its application dated 23-03-2012 for issue of completion certificate and in that matter it is stated that out of seven blocks, work of block A, B, C & D is almost complete but the civil construction at Block E, F & G is in progress. The AO has further observed that ass....
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....ation 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 October 4, 1975, i.e., beyond October 1, 1975, resulting in a delay of three days on the part of the Central Government. The Tribunal held that the assessee could not be denied the benefit of exemption for the assessment year 1975-76 for the delay on the part of the Central Government, that the approval, once accorded, related back to the date of the application and that hence the assessee was entitled to the exemption for the assessment year 1975-76. On a reference the court affirming the order of the Tribunal, held that the assessee was entitled to exemption under section 10(6)(viia)(1)(B) of the Income-tax Act, 1961, for the assessment year 1975-76. CIT Vs Akshay Eminence Developers (P.) Ltd. 206 Taxman 99 (Kar.) In this case assessee company under took a project with regard to construction of a residential flats in Bangalore. It applied for approval of the said pr....
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....re 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 certificate issued by an architect who is appointed for supervising the construction work. He is a professional who would declare that the project is complete. Unfortunately, Sub-section (10) and the explanation do not give any importance to the issuance of such Completion Certificate by the concerned architect. It gives importance only to the certificate of Municipal authority. It is common knowledge that an application for Completion Certificate submitted to the Municipal Authorities is accompanied by a Completion Certificate issued by the concerned architect. No doubt, the Municipal authorities then cause inspection of the site and verify the claim. Thereafter, they issue Completion Certificate. But, if a project is really complete before 31.03.2008 and an application is moved quite in time, for seeking Completion Certificate from the Municipal authorities, and if they do not take steps urgently and delay the issuan....
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.... 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 construction of block A to G were incomplete on 8-05-2012. This shows that the letter dated 08-05-2012 of JDA is vague and can't be relied upon. (e) The JDA vide letter dated 05-10-2012 (PB 11) has communicated that the issue of the completion certificate was put in the Building Map Committee on 08-08-2012 where it is stated that assessee has constructed more than 20,000 sq. mt. than the approved construction for which environment clearance is to be produced and it is to give an undertaking that the space below the water tank would not be used for residential or any other use. If the civil construction was in progress on 08-05-2012, in respect of block E to G, how in the meeting dated 08-08-2012, the maps already submitted on 23-03-2012 is put for approval. Again vide letter dated 07-01-2013 (PB 12), it is intimated to produce environment clearance certificate so that further action can be taken for issue of completion certificate. However, because of certain issues wit....
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....he 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 completion certificate issued by the JDA. 10.3 Here it would be relevant to look at the provisions of section 80IB(10)(a)(iii) which provides that the amount of deduction in the case of an undertaking developing and building housing projects approved before 31.03.2008 by a local authority shall be 100% of the profits derived in the previous year relevant to any assessment year from such housing project where such undertaking commences development and construction of housing project on or after the 1st day of October, 1998 and completes such construction within 5 years from the end of the financial year in which the housing project is approved by the local authority. Further, explanation (i) to clause (iii) provides that in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. And explanation (ii) ....
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....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 the project was completed in February, 2012, the assessee moved application on 23.03.2012 to JDA for issuing the completion certificate in respect of blocks A to G as well as blocks H & I. Thereafter the completion certificate for blocks A to G was issued on 21.03.2013 and for blocks H & I on 01.08.2012. In respect of blocks F & G the completion certificate was not issued by JDA for want of environmental clearance certificate however, the facts remains that the flats in these blocks were occupied and used for residence by owners. 10.6 In this regard, firstly, as we have stated above, the housing project was approved on 29.03.2007, therefore the period of five years from the end of the financial year in which the housing project is approved by the local authority ends on 31.03.2012. Here, we are unable to accede to the contention of the ld AR that the period of five years should be counted from the date of issuance and communication of approval (26.08.2008/1.10.2008). Infact, this is the ratio de....
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....r 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 built up area is more than 20,000 sq. meters and therefore, environmental clearance from the environmental department needs to be produced. Thirdly, it was stated that in all the blocks, 2.90 ft. columns have been build on the terrace for water tank which were not approved earlier. In this regard, an undertaking was sought from the assessee that the area under the said columns on the terrace will not be used for housing or any other purposes. Thereafter, another letter was issued by JDA on 07.01.2013 wherein the assessee was again reminded about obtaining the environmental clearance which was still not been obtained and submitted to JDA and thereafter, finally on 21.03.2013, the JDA issued a letter stating that pursuant to decision taken in the 122nd meeting held on 28.08.2012, the amended building plan and completion certificate for block A to E is being issued. On perusal of these documents what is emerging that in the meeting held on 28.8.2012, the matter relating to assessee's application dated 23.....
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.... 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 1.08.2012. The delay in issuance of completion certificate cannot be attributed to the assessee and the assessee cannot be penalized by way of denial of tax deduction which it is otherwise eligible to and solely on the ground of delay in issuance of completion certificate. As held by Hon'ble Bombay High Court in case of Hindustan Samuh Awas ltd (supra), the explanation has introduced an element of unnecessary strictness in the provision which is in the nature of exemption and not in the nature of charging and the completion of the housing project is a physical act which can be demonstrated on the spot. We are accordingly of the view that in respect of Block H & I, the assessee satisfies the condition of completion of construction before 31.03.2012. 11. Whether each block of housing complex in the project is to be considered separately or all block of the housing complex in the project is to be considered together for ascertaining the date of completion of the construction of the housing project? 11.1 In....
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....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 entire project. If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit could not be extended to the project. On further appeal, Hon'ble Court held that within a composite housing project where there are eligible and ineligible units, the assessee can 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. Further, Gujarat High Court in case of ITO Vs. Saket Corporation (2015) 234 Taxman 435 where assessee claimed deduction u/s 80-IB with respect to housing project consisting of 43 units which was disallowed on ground that Building Use (BU) permission and completion certificate was granted only with respect to 20 units within a period of four years from date of approval of project by local authority and not with respect to entire housing project consisting of 43 units, it was held that since assessee had completed const....
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....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 observed that certain flats were allotted to husband and wife and therefore condition of section 80-IB(10)(f) is violated. He therefore held that deduction of sec. 80-IB(10) is not available and therefore denied the claim of deduction. (b) It may be noted that in all, AO has referred to 8 instances which according to him violates the condition of section 80-IB(10)(f). The explanation of the assessee in respect of these 8 instances is as under:- S.N . Flat No. Name of the customer Explanation 1 C-801 C-802 R. P. Saini The flat was blocked tentatively for his prospective customer, which was cancelled. No flat has been allotted to this party. 2 F-902 F-903 Lata Sharma The flat no. 902 was blocked by Lata Sharma but later on cancelled. Thus, only one flat was allotted to her. 3 B-801 C-403 B-805 B-808 Prakash Devi The flat was blocked tentatively for his prospective customer, which was cancelled. No flat has been allotted to this party. Further these flats were booked prior to insertion of the clause (f) of....
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....ndition of clause(e)/(f) cannot be applied on the same. (d) Otherwise also, if there is any violation of the conditions specified in clause (e) & (f) of section 80-IB(10), the deduction can't be disallowed in entirety but should be restricted only with reference to those flats where there is a violation of the condition. For this, reliance is placed on the following cases:- SJR Builders Vs. Ass. CIT 3 ITR 569 (Trib.) (Bang.) In this case the assessee was engaged in real estate and construction business. For the assessment year 2005-06, it claimed deduction under section 80-IB(10) amounting to Rs. 2,02,08,690 being 100 percent of the profit in respect of a project. The deduction was claimed by the assessee on the ground that each dwelling unit/flat constructed in the project was less than 1500 sq. ft. per unit. There was a survey action under section 133A on February 8, 2007 which covered the project sites as well. It was found that some of the residential units measured more than 1500 sq. ft. The Assessing Officer held that the assessee was not entitled to deduction under section 80-IB(10). This was confirmed by the Commissioner (Appeals). On appeal to the Tribunal it was hel....
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....l contentions and pursued the material available on record. Firstly, regarding the contention of the ld AR that the clauses (e) and (f) inserted by the Finance Act, 2009 w.e.f 1.04.2010 is prospective in nature, we refer to notes to clauses and Memorandum explaining the Finance Bill, 2009. The notes to clauses provides that "The proposed amendment seeks to insert two new conditions by way of two new clauses namely clause (e) which proposes to provide that not more than one residential unit is allotted to any person not being an individual and clause (f) which proposes to provide that in a case where a residential unit in the 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 :- (i) the spouse or 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. This amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessme....
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.... already been done prior to 1.04.2009, it would be unreasonable to expect the builder to cancel such allotment and refund the amount or forfeit the tax benefit for the non-fulfillment of such conditions which either of the parties were not aware at the time of allotment of the flats. Though the objective of these conditions are to aid and supplement the existing conditions, at the same time, the same cannot be read to apply retrospectively in absence of any explicit and specific wording expressing retrospectivity and also on ground of reasonableness. Therefore, the clauses (e) and (f) shall apply in respect of allotment made on or after 1.04.2009. 12.5 Regarding the second contention of the ld AR that where there is still any violation of the conditions specified in clause (e) & (f) of section 80-IB(10), the deduction can't be disallowed in entirety but should be restricted only with reference to those flats where there is a violation of the condition. The decision of Hon'ble Madras High Court in case of Vishwas Promoters Private Limited and various other decisions of the Coordinate Benches referred supra support the contentions of the ld AR. We agree with the contentions of the l....