Saket Corporation, Baroda vs Assessee

ITA No.3043/Ahd/2011 2 Asst. Year 2008-09

This is an appeal filed by the assessee against the order of CIT(A) dated 01/09/2011 for AY 2008-09 on the following grounds:-

1. Ld. CIT(A) erred in law and on facts in confirming disallowance of deduction u/s 80IB(10) of the Act holding the appellant ineligible to claim deduction in absence of project completion certificate from VMSS in totality. The order of ld. CIT(A) is bad in law that deserves to be quashed.

2. Ld. CIT(A) erred in law and on facts in holding that the project was not completed in time prescribed under law when as a matter of fact the appellant not only submitted the project completion report but also paid drainage and water line connections to local authority before the time limit prescribed under the law. Ld. CIT(A) ought to have appreciated the submissions of the appellant by deleting the disallowance made by AO.

3. Ld. CIT(A) further erred in not appreciating the fact that the application for issuance of project completion certificate was already made to the competent authority and in absence of failure on the part of the authority to issue the same denial of legitimate deduction amounts to denial of justice.

4. Alternatively and without prejudice ld. CIT(A) ought to have taken into consideration the fact that the appellant was entitled to proportionate deduction u/s 80IB(10) of the Act for the units in respect of which completion certificate was issued by the competent authority.

5. Both the lower authorities failed to appreciating the facts, various submissions, explanations and information submitted ITA No.3043/Ahd/2011 3 Asst. Year 2008-09

by the appellant from time to time which ought to have been considered before passing the impugned order.

6. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is not justified.

7. Initiation of penalty u/s 271 (1)(c) of the Act is not justified.

2. The assessee in its return of income has claimed deduction under section 80IB(10) which was disallowed by the Assessing Officer on the ground that the assessee was not the owner of the property and the permission was not granted in the assessee's name. The approval by the Vadodara Municipal Corporation was in the name of the original land owners and not in the name of assessee developer and as per the Assessing Officer the original land owner had merely obtained the services of assessee firm for development and construction of the project. The Assessing Officer observed that the assessee had utilized FSI of 7293 sq.mtrs. and left unutilized FSI of 4037 sq.mtrs and as the unutilized land was disposed by the assessee along with the tenements to prospective buyers, the profit booked from sale of 4037 sq.mtr. was stated to be outside the ambit of provisions of section 80IB(10) as it is not the profit derived from activities of development and construction. In essence deduction u/s 80IB(1) was denied on account of ownership not being in the name of the assessee and in the alternate the deduction was limited to sale of ITA No.3043/Ahd/2011 4 Asst. Year 2008-09

utilized FSI of 7293 sq.mtrs. The claim of deduction was also denied as the assessee had not acquired completion certificate for the project within the stipulated time. The completion certificate was received only for 20 out of the 43 units in the project. Thus the claim of assessee was not allowed.

3. The assessee went in appeal before the CIT(A). The CIT(A) by following appellate order for AY 2007-08 at page 9-10s has observed as under :-

''In the appellant order for Assessment Year 2007-08, the CIT(A)-II, Baroda has observed that :-

My attention is drawn to para -116 of the order wherein an exception has been made. This para reads as follows :-

''An exception, however, will have to be made out in a case where commercial use of built up area is more than 10 per cent of the total area, and yet, in terms of our observations in paragraph 115 above the assessee is eligible for deduction in respect of profits of the residential units segment of the project. In such a situation, since residential unit segment is being treated on a standalone basis for eligibility to deduction under section 80IB(10), the eligibility for such deduction can only be for the profits which are in respect of residential unit segment of the overall project, because, in the light of the discussions, only that part of the overall project can be said to be housing project. Accordingly, eligibility for deduction under section 80IB(10) must remain confined to the same."

There cannot be any quarrel with this finding. If the completed portion, on stand alone basis, fulfils all the criteria of a housing project, it would get the benefit i.e. the completed area should be completely delinked conceptually from the unfinished portion of the project for availing the benefit. Even in the case of Bengal Ambuja Housing Development Ltd. (supra) as followed in AIR Developer (supra), relied upon by the Assessing Officer the deduction in respect of smaller units were allowed, because they fulfilled all the conditions laid down in section 80IB on stand alone basis. In the case of the appellant, certified completed portion fails the test to be considered as stand alone project on several counts, the first and foremost being area of 20 completed unit being less than one acre. The 20 completed units are not on one acre of land to be considered a ITA No.3043/Ahd/2011 5 Asst. Year 2008-09 stand alone housing project. Here it is also worth mentioning that the electricity Bill of the units for unit No.21 onwards shows that meters in respect of all these units were installed after April, 2007 that is not pertaining to instant assessment year. Similarly, it is also to be noted that sewage connection is apparently for the whole plot is not in respect of only un-computed units and it is of no consequence for issue under consideration.

In view of all the above, the deduction u/s 80IB(10) claimed by the assessee cannot be allowed in view of the assessee not fulfilling this essential condition for the grant. There is no question of proportional allowance. Hence the action of the Assessing Officer in denying deduction for the entire project is upheld and ground no.2 fails."

and thus confirmed the action of AO. The assessee is now in appeal before us.

4. Before us the ld. counsel for the assessee at the outset submitted that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case in ITA No.3377/Ahd/2010 for AY 2007-08. He submitted a copy of the order of the Tribunal dated 14/08/2014 which is placed on record. He also submitted that the view taken by the Tribunal has been upheld in favour of the assessee by the Ho'ble Gujarat High Court vide its order in Tax Appeal No.107 of 2015, dated 05/05/2015. A copy of the order of Hon'ble High Court has also been placed on record. Therefore, he submitted that the present issue be decided accordingly in view of the above decisions. The ld. DR on the other hand supported the orders of lower authorities.

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5. After considering the rival submissions and going through the record, we find that the Tribunal vide its order dated 14/08/2014 has allowed the claim of assessee. The view taken by the Tribunal has been upheld by the Hon'ble Gujarat High Court vide its order in Tax Appeal No.107 of 2015, dated 5/5/2015 with the following observations :-

"2.06. At the outset, it is required to be noted that the Housing Project for 43 units came to be approved by the local authority and the assessee claimed deduction under section 80IB(10) of the Act, however, the assessee has not obtained completion certificate within a period of four years from the date of approval by the competent authority with respect to all 43 units though entire housing project consisting of 43 units was completed and the assessee could obtain Completion Certificate in respect of remaining 23 units though the construction of the same were completed and though the assessee applied for completion certificate within a period of four years from the date of approval by the competent authority. Completion certificate was not issued for the reasons best known to the authority. Therefore, both, the AO as well as the learned CIT(A) disallowed the deduction claimed under section 80IB(10) of the Act. However, the learned ITAT deleted the disallowance made by the A.O. and held that the assessee shall be entitled to the deduction claimed under section 80IB(10) of the Act and while holding so in para 6, the learned tribunal has observed and held as under :-

''6. We find that in the instant case, the housing project was approved on 10.03.2004 by the competent authority. The above fact is not in dispute. On the above fact, as per the ITA No.3043/Ahd/2011 7 Asst. Year 2008-09

decision of the Hon'ble Delhi High Court in the case of CIT vs. CHD Developers (supra), the condition for obtaining completion certificate within four years of the date of approval for being eligible for deduction u/s 80IB(10) is not applicable. The Departmental Representative could not point out any good reason as to why the aforesaid decision of the Hon'ble Delhi High Court should not be followed in the instant case.''

2.07 In the case of CIT vs. Tarnetar Corporation, reported in (2014) 363 ITR 174 (Gujarat), the Division Bench of this Court has allowed deduction under section 80IB(10) of the Act by holding that if the assessee has completed construction within the prescribed time limit and applied for B.U. permission, however, for some technical ground, B.U. permission was not granted and the B.U. permission was not received on the ground that construction was not completed, the assessee shall be entitled to claim deduction under section 80IB(10) of the Act.

2.08 Considering the aforesaid decision of the Division Bench of this Court and the facts of the case on hand, as the assessee completed project/construction of all 43 units within 4 years from the date of approval by the competent authority and also applied for B.U. permission within a period of four years with respect to all 43 units, however, could obtain B.U. permission with respect to 20 units only and for whatever reasons, with respect to remaining 23 units, B.U. permission was not issued by the authority and as observed hereinabove, construction of all 43 units was completed, the assessee is entitled to deduction under section 80IB(10) of the Act, no error has been committed by the learned tribunal in holding that the assessee shall be entitled to deduction claimed under section 80IB(10) of the Act.

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3.00 No substantial question of law arise in the present Tax Appeal, as proposed and suggested by the appellant-revenue. Hence, present Tax Appeal deserves to be dismissed and is accordingly dismissed."

6. The facts are similar in the present case. So, we agree with the submissions of ld. counsel for the assessee that the assessee is eligible for deduction under section 80IB(10) in absence of project completion certificate from VMSS in totality because the project was completed within four years, the time prescribed. The CIT(A) was not justified in upholding the action of A.O. when the assessee not only submitted the project completion report but also paid drainage and water line connections to the local authority within the time limit prescribed under the Act. Following the decision of the Tribunal in assessee's own case for AY 2007-08 which has been upheld by Hon'ble Gujarat High Court vide order dated 05/05/2015 (supra), we set aside the orders of lower authorities and allow the claim of assessee on this issue.

7. The ground relating to levy of interest u/s 234A, 234B, 234C & 234D of the Act is consequential. This ground stands disposed of accordingly.

8. The ground relating to initiation of penalty u/s 271(1)(c) is premature and hence dismissed.

ITA No.3043/Ahd/2011 9 Asst. Year 2008-09

9. In the result, the appeal of assessee is partly allowed as stated above.

Pronounced in the open Court on this the 24th day of June, 2015 Sd/- Sd/-

(Anil Chaturvedi) (Shailendra Kumar Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated :24/06/2015

Mahata/-

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy.Registrar,ITAT, Ahmedabad ITA No.3043/Ahd/2011 10 Asst. Year 2008-09

1. Date of dictation: 8/6/2015

2. Date on which the typed draft is placed before the Dictating Member: 9/6/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk: 24/6/2015

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: