Income Tax Appellate Tribunal - Mumbai
Ito Wd 2(3), Thane vs D.V. Realtors, Thane on 11 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA No.3992/M/2016
Assessment Year: 2012-13
Income Tax Officer, M/s. D.V. Realtors,
Ward 2(3), Shree Shashwat,
Thane Opp. Sai Mansarovar
6th Floor, AsharIT Park, Vs. Complex,
Wagle Industrial Estate, Near Pleasant Park,
Thane (W), 400 604 Mira Road (E),
Thane - 401 107
PAN: AAFFD1308P
(Appellant) (Respondent)
Present for:
Assessee by : Shri Anuj Kisnadwala, A.R.
Revenue by : Shri Ajay Kumar, D.R.
Date of Hearing : 13.11.2018
Date of Pronouncement : 11.12.2018
ORDER
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the Revenue against the order dated 31.03.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
2. The grounds raised by the Revenue are as under:
"1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made under 80IB(10) without getting the built up area of the flat measured.
1.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in adopting the loading factor at the rate of 1.2 times on the carpet area as per stamp duty valuation ready recknor instead of the getting the built area measured as per his own definition. (Para 48 of CIT(A)'s order).ITA No.3992/M/2016
2 M/s. D.V. Realtors
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the disallowance made under 80IB(10) on pro- rata basis in the gross violation of section as the basic condition as laid by section 80IB(10)(f) of not allotting more than one unit to any individual or family members is not fulfilled.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT{A} erred in deleting the disallowance made under 80IB(10) without bringing the fact on record whether the competent authority i.e. MBMC raised any objection on the completion of the project during the period between date of filing of application for Occupation Certificate and date of issue of occupation certificate by the MBMC.
4. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored.
5. The appellant craves leave to add, amend, alter or delete any ground of appeal."
3. The only common issue raised by the Revenue in various grounds of appeal is that the Ld. CIT(A) has wrongly directed the AO to allow deduction under section 80IB(10) of the Act without the various conditions being satisfied and therefore the order of AO should be restored.
4. The facts in brief are that the assessee is a developer and builder and carried out construction of housing projects namely Shree Shashwat Building No.16, 17 & 18 at Mira Road, (E) and filed the return of income on 27.09.2012 declaring income of Rs.8,240/- after claiming deduction under section 80(IB)(10) to the tune of Rs.32,54,33,497/- which was processed under section 143(3) of the Act. The said return was revised subsequently on 30.09.2013 declaring nil income after claiming deduction under section 80(IB)(10) at Rs.31,97,34,226/-. The case of the assessee was selected for scrutiny and notices under section 143(2) and 142(1) were duly served on the assessee. The AO issued detailed questionnaire to the assessee calling upon the assessee to furnish ITA No.3992/M/2016 3 M/s. D.V. Realtors various information which has mentioned in para 3 of the assessment order by the AO. Since the assessee did not reply and file the said information/details, the AO again issued show cause notice on 04.03.2015 calling upon the assessee to file various information/details as stated at page No.2 of the assessment order. The housing project was first approved on 22.07.2006 and work commencing certificate for building No.16, 17 & 18 of Shree Shashwat project was issued by the local authority on 29.03.2007 and therefore the due date for completion of the project was on or before 31.03.2012 in order to claim deduction under section 80(IB)(10) of the Act. According to the AO, as per the occupation certificate issued by Commissioner of Municipal Corporation dated 28.08.2013 for building No.16, 17 & 18, it was observed that project was not completed on or before 31.03.2012 as the OC was issued on 28.08.2013. Similarly, the plumbing contractors M/S Star Plumbers issued plumbing work completion certificate on 26.04.2013 and final NOC issued by fire department was dated 24.03.2013. On this basis, the AO formed an opinion that building No.16, 17 & 18 were not completed within the specified time as prescribed under section 80(IB)(10) of the Act. The AO further observed from the submissions filed by the assessee that Shri Raisuddin has purchased three flats i.e. No.701, 704 & 705 on 7th floor in Building No.18. Out of the above said two flats 704 & 705 were allotted to Shri Raisuddin & Smt. Irfana Qamar and the third flat was allotted in the joint name of Shri Raisuddin & Master Rahil Raisuddin and therefore concluded that the flats in the housing project were not allotted as per the conditions prescribed under the provisions of section 80IB(10)(f) of the Act. The AO also noted on the basis of ITA No.3992/M/2016 4 M/s. D.V. Realtors information furnished by assessee that carpet area of the flat shown against the flats as stated in para 5.3 of the assessment order are likely to exceed 1,000 sq. ft. which is worked out after loading the area 30% to the built up area thereby observing that the project being within the 25Kms of the boundary of Bruhan Mumbai Municipal Corporation, Mumbai, hence the built up area of flats of the housing project have exceed the prescribed limit as provided by the provisions of section 80IB(10)(c) of the Act. Finally, the AO observed that assessee has not fulfilled the various conditions as envisaged by the provisions of section 80IB(10) of the Act and disallowed the deduction claimed under section 80IB(10) of the Act to the tune of Rs.31,97,34,226/- by framing assessment under section 143(3) of the Act vide order dated 31.03.2012.
5. In the appellate proceedings, the Ld. CIT(A) after considering the detailed submission of the assessee partly allowed the appeal of the assessee by observing and holding as under:
"17. I have carefully considered the appellant's submissions, observations of the AO in the assessment order and remand report and the facts of the case. The appellant during the year under consideration had carried out construction of a housing project Shree Shashwat Building No. 16, 17 & 18, Mira Road (E), Bhayander. The appellant had claimed deduction u/s. 80IB(10) of the I.T. Act in respect of this housing project amounting to Rs.31,97,34,2267-. This deduction was disallowed by the AO inter-alia for the reason that the housing project was not completed within the specified time limit prescribed under section 80IB(10)(a) of the Act. The relevant provision of section 80IB(10)(a) is reproduced as under -
(10) 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 -
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ITA No.3992/M/20165 M/s. D.V. Realtors
(iii) in a case where housing project has been approved by the local authority on or after the 1st day of April 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.
Explanation - For the purposes of this clause -
(i) ---
(ii) The date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority.
18. The appellant's housing project was first approved on 22.07.2006 and the Work Commencement Certificate for the Building No. 16, 17 & 18 of Shree Shashwat, was issued by the Local Authority i.e. Mira Bhayander Municipal Corporation on 29.03.2007. Therefore, for claiming the deduction u/s 80IB(10), the housing project should have been completed on or before 31.03.2012 as per above reproduced provisions of the section. The appellant has submitted that it had completed the construction of housing project and had applied for occupation certificate on 22.03.2012 i.e. before 31.03.2012, which was however issued by the Commissioner, MBMC on 28.08.2013. The appellant filed the following documentary evidence in support of its contention that the construction of the building was completed before 31.03.2012 -
i. Copy of completion certificate issued by the architect of project i.e. M/s. I Nakasha Architect dated 19.03.2012.
ii. Copy of certificate of independent architect M/s. P.R. Consultants dated 14.03.2012 certifying the completion of construction of building work. iii. Sample copy of possession letter dated 15.01.2012 in respect of flat handed over to the buyer for carrying out furniture work.
iv. Copy of certificate dt. 10.03.2012 issued by M/s. Fire Ext Engineering for compliance of fire prevention & life safety measures. v. Copy of stability certificate dated 12.03.2012.
vi. Copy of letter for transfer of electric meter in the purchaser's name.
19. The AO after going through the documentary evidence filed by the appellant disallowed the deduction for the following reasons -
(a) The Occupation Certificate issued by the Commissioner, Mira Bhayander Municipal Corporation was dated 28.08.2013 i.e. beyond the stipulated date of31.03.2012.
(b) M/s. Star Plumbers has issued the plumping work completion certificate only on 26.04.2013.
(c) Final No Objection Certificate issued by the Fire Brigade Department Vide letter No. MNC/Fire/1570/2012-13 dated 24.03.2013
20. The AO while disallowing the deduction observed that as per provisions of section 80IB(10)(a) the date of completion of the housing project is to be taken as the date on which the completion certificate in respect of the said housing project is issued by ITA No.3992/M/2016 6 M/s. D.V. Realtors the Local authority. In the appellant's case as the Occupancy certificate was issued by the local authority on 28.08.2013 i.e. beyond 31.03.2012, he disallowed the deduction u/s. 80IB(10) of the I.T. Act on the ground that the project had not been completed by 31.03.2012. The AO also referred to letters dated 26.04.2013 of M/s. Star Plumbers and final NOC issued by the Fire brigade department dated 24.03.2013 which were referred to in the OC certificate for holding that the construction of the housing project had not been completed before 31.03.2012.
21. As far as letter dated 26.04.2013 of M/s. Star Plumbers is concerned, as already discussed above a copy of the same was obtained by the AO from the MBMC and forwarded to the undersigned vide his letter dated 28.03.2016. The appellant with regard to this letter has submitted that this letter had been issued to MBMC by the Licensed Plumber Mr. V.P. Shukla. He had only confirmed in this letter about the work that had been carried out under his supervision and has not referred to any date of completion of the work. The completion certificate of plumbing and drainage work had already been given by M/s. Star Plumbers vide their letter dated 19.03.2012. The letter dated 26.04.2013 of M/s. Star Plumbers as obtained by the AO from the MBMC is reproduced as under for ready reference -
Dt: 26/04/2013 PLUMBING & DRAINAGE COMPLETION CERTIFICATE To The Commissioner Mira Bhayandar Municipal Council, Bhayandar (W), Dist. Thane Dear Sir, This is to certify that The Plumbing and Drainage Work of the Building known as "Shree Shashwat Bldg No. 16, 17 & 18 on property bearing :
Old Survey /Hissas No, -177/4, 179/2, 181/7 PT.
New Survey / Hissa No. - 45/4, 47/2, 50/7C of Village Mira Road, Dist. Thane for "D. V, Realtors " has been completed to my satisfaction. The workmanship and the whole of the materials used are good and no provision of the Developers Control Regulation or Building Bye-Laws and Registration made or condition prescribed or Building Bye-laws and Registration made or condition prescribed or Building Reunder has been transgressed in the course of the work.
Thanking you, Yours faithfully Sd/-
V.P. SHUKLA 2787 LICENCED PLUMBER ITA No.3992/M/2016 7 M/s. D.V. Realtors
22. After going through the above reproduced contents of the letter dated 26.04.2013 the contention of the appellant that this letter has been issued by Mr. V.P. Shukla, the Licensed Plumber, has been found to be correct though the same has been issued on the letter head of M/s. Star Plumbers, whose proprietor is Shri Mohammed Shaikh. A perusal of the contents of the letter as reproduced above reveals that Mr. V.P. Shukla, the Licensed Plumber has certified that the plumbing and drainage work of the three buildings had been carried out to his satisfaction. In this letter nowhere it is suggested that the plumbing and drainage work had not been completed by 31.03.2012, a certificate to which effect had already been given by Shri Mohammed Shaikh, Proprietor of M/s. Star Plunber dated 19.03.2012. Therefore, no adverse inference regarding completion of construction of the project Shree Shashwat Building No. 16, 17 & 18 can be drawn on the basis of letter dated 26.04.2013 issued by Mr. V.P. Shukla, the Licensed Plumber on the letter head of M/s. Star Plumber.
23. With regard to letter dated 24.03.2013 issued by the Fire Brigade department giving NOC, a copy of the same was obtained by the AO from the MBMC and forwarded to this office vide his letter dated 28.03.2016. The contents of this letter are reproduced as under -
"Please refer to C. C. issued by Town Planning Dept. MBMC/NR/581/2011-12, Dated 30/05/2011. The party has constructed "Residential Building No. 16, 17 &18" Stilt + 14 Floors " as per sanction Plan.
With reference to above on 08/01/2013 representative of this office visited the building situated on the above mentioned address for inspection from the point of view of fire prevention & protection provided by "M/s. D.V. Realtors"
Following Fire Fighting arrangements provided were found in satisfactory working condition.
A) Wet Riser System (3 Nos.)
a) On every floor hose reel hose & landing valve I Hydrant Valve, Manual Call Points.
b) Booster pump on terrace for Each wing
c) Fire Brigade Intel at ground floor.
d). Main Pump-45 HP (2 Nos.)
e) Jockey Pump-6.5 HP
B) 1 Fire Extinguisher provided at meter box, at Lift machine room
& on each floor.
C) Court Yard Hydrant
D) D.G.Set
E) Refuge area on 8th floor.
Considering the same this Office is issuing a final No Objection certificate for the above mentioned building. This certificate shall be treated valid upto 31/12/2013. It is the responsibility of the owner / Architect / occupier to get :. the same renewed on 1st January of every year and submit Testing Certificate from the License Agency appointed by Mira-Bhaindar Municipal Corporation or from Government of Maharashtra on 1st July of every year. After paying inspection fees Fire Brigade Department will renew the Final No Objection ITA No.3992/M/2016 8 M/s. D.V. Realtors Certificate. It is the duty of the Developer / Architect to inform the Occupier / Residence. In failure of fulfilling the requirement of Fire Department, the owner /Architect / occupier will be personally responsible.
The Chief Fire Officer Reserves right to amend any additional recommendations deemed fit during the stage wise inspection due to statutory provision amended from time to time and in the interest of the protection of the building / People.
The Party has already paid the capitation fees of Rs. 1L28.782/- as per mentioned in the provisional N.O.C. (Ref. No. 2) for the total gross built up area 11287.82 sq. Mtr. As per mentioned in the letter given by the Architect dated 20/01/2012.
Town Planning Dept. is requested to verify the gross built-up area and inform this department if it is more for the purpose of levying additional capitation fee, if necessary."
24. While giving the NOC the authorized Officer of the Fire Brigade Deptt has referred to various letters, amongst which at SI. No. 5 is the Fire prevention equipment installation certificate issued by Fire Ext Engineering dated 10.03.2012 and at SI. No. 6 is a Building completion certificate by M/s. Nakasha Architect dated 19.03.2012. On the basis of these letters it is seen that the NOC issued by the Fire Brigade department had duly taken into account the fire prevention and life safety measures installation by Fire Ext Engineering, who had already filed a certificate that the installation of such equipment had been carried out by them by 10.03.2012. In the NOC issued by the Fire Brigade department no shortcomings have been pointed out in the installation certificate of Fire Ext Engineering dated 10.03.2012 and thus there is nothing in this certificate to suggest that the installation of the fire prevention and life safety measures equipment had not been completed before 10.03.2012. Therefore, no adverse inference can be drawn on the basis of letter dated 24.03.2013 issued by the Fire Brigade Department granting final NOC in respect of the housing project Shree Shashwat Building No. 16, 17 & 18.
25. Lastly, with regard to issue of Occupancy certificate from the MBMC dated 28.08.2013 it is seen that in various decisions of the higher judicial authorities including the Hon'ble jurisdictional Bombay High Court it has been held where assessee builder undertook a housing project which was completed on time and an application was moved in time for seeking completion certificate from Municipal Authority but same was issued to assessee with delay, that delay could not be attributed to assessee and assessee was entitled to exemption under section 80- IB(10)."
The Hon'ble jurisdictional Bombay High Court it has been held where assessee builder undertook a housing project which was completed on time and an application was moved in time for seeking completion certificate from Municipal Authority but same was issued to assessee with delay, that delay could not be attributed to assessee and assessee was under section 80.IB(10).
26. The Hon'ble Bombay High court in the case of CIT vs Hindustan Samuh Awas Ltd (2015) 62 Taxmnann.com 175 (Bombay) held as under -
ITA No.3992/M/20169 M/s. D.V. Realtors
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 con1rovers which might arise before the Assessing Officer about the date of completion. The intention oft/re 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 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 he 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 issuance of Completion Certificate from their side, can it be said that such certificate would alone decide the date of completion of the project? The answer is in negative.
12. In the facts of this case, adnitted1y. the Architect of the project had given a certificate prior to 31.03.2008. The respondent submitted application to the Municipal authority along with such certificate well in time on 25.3.2008. It seems that the Municipal authorities directed the respondent to deposit certain amount for issuance of Completion Certificate on 27. 03. 2008 and the amount was accordingly deposited on 31.03.2008. Thereafter, the cert1cate was issued in October, 2008. This delay cannot be attributed to the respondent assessee
27. The other decisions relied up by the appellant in this regard are discussed as under. Gujrat High Court in the case of CIT vs Tarnetar Corporation, (2012) 26 Taxmann.com 180 (Gujarat) held as under-2-012)- Y axma1com 180 (Gujrat) held as under-
4. CIT (Appeals) as well as the Tribunal after detailed discussion came to the conclusion that such requirement was not mandatory in nature. In the present case, the assessee had completed the construction well before the last date, namely, 31st March, 2008 and had also sold several units which was completed and actually occupied and-it also applied for BU permission to the local authority. The local authority, however, for technical reasons, at one stage rejected such application in the year 2006 and thereafter upon revised efforts from the assessee granted the same by order dated 19th March, 2009.
ITA No.3992/M/201610 M/s. D.V. Realtors
5. We have perused the detailed discussion of the CIT (Appeals) as well as the Tribunal on the issue+ In particular, the Tribunal noted that the construction was completed in 2006. Application for BU permission to the Municipal authorities wasfiled on 15.2.2006 which was rejected on 1.7,06. Several residential units were occupied since the same was done without necessary permission. The assessee had also paid penalty and got such occupation regularized. Several tenements were sold long before the last date.
6. In the present case, therefore, the fact that the assessee had completed the constitution well before 31st March, 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause (a) to section 80-IB(10) links the completion of the construction to the BU permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available
7. In the present case, the facts are peculiar. The assessee had not only completed the construction two years before the final date and had applied for BU permission. Such BU permission was not rejected on the ground that construction was not completed, but the some other technical ground. In that view of the matter, granting benefit of deduction cannot be held to be illegal.
28. "A" bench of Hon'ble Pune ITAT in the case of Gera Developments Pvt Ltd vs JCIT in ITA No. 598/PN,2013 on the same issue following the decision of the Hon'ble Gujarat HC in the case of Tarnetar Coporation (supra) has held under:-
18. We have carefully considered the rival submissions. Quite clearly, the entire case of the Assessing Officer rests on Explanation (ii) to section 80IB(10)(a) of the Act which prescribes that the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority.In the present case, the local authority, i.e. Pune Municipal Corporation has not issued the requisite completion certificate (to be understood as occupancy certificate in the context of the PMC) before the stipulated date. However, the assessee has counted the aforesaid objection by pointing out that in-fact it has completed the construction of the project on 04-12-2007 i.e. much before the stipulated date of completion contained in section 80IB(10)(a) of the Act, it had applied to the PMC for obtaining of the occupancy certificate based on the certificate of the architect and the other NOCs required for the said purpose.The CIT(A) has also called for information u/s.133(6) of the Act from the PMC and its response did not reveal any objection on the part of the PMC that the construction was not complete with respect to the sanctioned plans. Therefore, factually speaking there is no controversion to the assertions of the assessee that it's project was otherwise complete as per the sanctioned plans within the stipulated date. In this background, in our view, the CIT(A) made no mistake in allowing the claim of ITA No.3992/M/2016 11 M/s. D.V. Realtors the assessee and her approach is not only consistent with the decision of the Pune Bench of the Tribunal in the case of Satish Bora and Associates (supra) but it is also in line with the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Tarnetar Corporation, (2014) 362 ITR 174 (Guj).
29. A" bench of Hon'ble Pune ITAT in the case of Siddhivinayak Venture vs Addl CIT, in ITA no. 1112/PN/2011 on the same issue following the decision of the same Tribunal in the case of Hindustan Samuh Awas Ltd vs ITO has held under -
33. In conclusion, we hold that 'SWRH' project is to be considered as an independent 'housing project' for evaluating assessee's claim for deduction u/s. 80- IB(10) of the Act. The only aspect now to be examined is as to whether assessee has completed construction of the said project before 31.03.2008, as required by section 80-IB(10)(a)(i) of the Act.
34. On the above aspect, the claim of the Revenue is that prior to 31.03.2008, assessee has obtained conviction certificate only in respect of 293 out of 295 total row houses and thus, it has to be inferred that assessee has not fulfilled the condition prescribed in section 80-IB(10) (a)(i) of the Act. As noted earlier out of 295 row houses the completion certificate in respect of 293 row houses was obtained prior to 31.03.2008 but even with regard to the remaining two raw houses the application for obtaining completion certificate was made to the 'local authority' on 26.03,2008. The assessee claimed before the lower authorities that construction of the remaining two row houses was also complete before 31.03.2008, a plea which has not been accepted Before us, learned counsel for the assessee pointed out that subsequent to the impugned order of the CIT(A), on 28.06.2012 in pursuance to the application of the assessee submitted on 26.03.2008, the completion certificate has been issued by PCMC for the remaining two row houses also, a copy of the said certificate is placed at page 293 of the Paper Book. On this aforesaid certificate provides that it is being issued w.e.f. 26.03.2008. On this basis, it has been vehemently argued that the construction was complete even A.Y. 2006-07 & 2007-08 at the time of submission of application to PCMC on 26.03.2008, and the delay in issuance of completion certificate by PCMC could not be attributed to the assessee inasmuch as no objections were confronted to the assessee at any stage. Be that as it may, we find that the said certificate dated 28.06.2012 was not before the lower authorities and is an additional piece of evidence now sought to he relied by the assessee. We deem it fit and proper to admit such evidence because the certificate is issued by a local authority' duly constituted in law and it is relevant to decide the issue on hand. Moreover, it does not enable the assessee to make out a new case inasmuch as the same has been obtained from PCMC in response to an application made of an earlier dale, which is in the knowledge of the authorities below, and is merely in support of assessee's assertions made consistently before the lower authorities that the construction of the two row houses was complete in all respects before 31.03.2008 and that it had applied for obtaining the completion certificate in time i.e. on 26.03.2008 Thus, we find that tile delay in issuing completion certificate cannot be attributed to assessee so as to deny the deduction claimed u/s 80IB(10) of the Act on the basis that the construction was not complete ITA No.3992/M/2016 12 M/s. D.V. Realtors before 31.03.2008, especially when there is no objection raised by PCMC regarding non-completion of construction.
30. The Hon'ble "C" bench of ITAT Delhi in the case of ACTT vs Girija Colonisers, ITA no.2417/Del/2011 on the same, issue following the decision of the Pune (TAT in the case of Hindustan Samuh Awas Ltd vs ITO has held under.
9.In the present case, the assessee vide application dated 26.11.2007 has requested the Municipal Corporation for issuance of completion certificate in respect of housing projects named as "Surendra Enclave" "Surendra Vihar Phase-f' and "Surendra Garden" completed by the assessee. The Municipal Corporation had issued the completion certificate on 18.06.2010, 23.06.2010 and 24.06.2010 in respect of Permission No. 3737/27.03.2001, 299/04.09.1999 and 580/02.11.1999 respectively. The A0 in his remand report dated 08.02.2011 has stated that an enquiry was made from the City Planner, Bhopal Municipal Corporation, who has reported that the assessee submitted application for completion certificate in respect of its housing projects on 26.11.2007, the assessee M/s Girija Colonisers had complied with all the formalities and the Municipal Corporation has to carry out inspection of all the constructed units before issuing completion certificate. and Ms Girija Colonisers had given possession of most of the units before submitting the application for completion certificate, as a result of which it took time for inspection. In the light of the facts narrated in AO's remand report and facts,available on record, the Ld. CIT(A) has taken a view that the assessee has completed the construction much prior to 31.03.2008 and had fulfilled all requirements/formalities of the completion certificate as notified by the corporation at the time of filling application for issuance of completion certificate on 26.11.2007. The Ld. CIT(A) has also recorded a finding that sales of all residential units in respect of three projects were materialized on or before 31.03.2008. The Municipal authority has not pointed out any defect and irregularity in the assessee's application dated 26.11.2007 submitted for issuance of completion certificate of all the said projects. Therefore, in the light of facts found by the Ld. CIT(A) and reasons given by him, ad respectfully following the aforesaid decision of ITAT, Pune Bench "B", Pune in the case of Hindustan Samuha Awas Ltd. (supra), we do not find any reason to take a view other than the view taken by the learned CIT(A)in the present case. We, therefore, uphold the order of the learned CIT(A) and dismiss all these appeals filed by the revenue.
31. In the appellant's ease it is an 'undisputed fact that the appellant's Architect M/s Nakasha Architects had filed a certificate dated 19.03.2012 to the Commissioner, MBMC, Bhayander requesting for issuing Occupancy Certificate in which they had certified that the full development work had been completed in respect of Building No. 16, 17 & 18 according to the Commencement certificate. They further certified that all theconstruction work was supervised by them and was completed in all respects. This certificate of the architect has also been referred to in the OC certificate issued by the Commissioner MBMC dated 28.08.2013. Further, the property has been assessed to property tax by the MBMC in the name of the individual flat owners as can be seen from the letter dated 15.03.2016 flied, by the appellant, during the course of present ITA No.3992/M/2016 13 M/s. D.V. Realtors proceedings. The authenticity of this letter was independently verified by the AO from the MBMC and the AO's observations in this regard have already been reproduced in the preceding paragraphs. Therefore, keeping in view the documentary evidence in the form of Architect's certificate duly filed before the Commissioner and MBMC dated 19.03.2012 (received in their office on 22.01.2012) and the fact that the house property was assessed to property tax in the name of individual fiat owners w.e.f. 1.04.2012 and relying on the various decisions discussed above including the Hon'ble jurisdictional Bombay High Court's decision in the case of Hindustan Samuh Awas Ltd. (supra), it is held that there is 'nothing on record to suggest that the appellant had not completed the construction of the housing project building no 16,17 & 18 of Shree Shashwat project before 31.03.2012, the prescribed date as per section SOIB(10)(a) of the I.T. Act. The delay in issuance of Completion certificate by the MBMC beyond 31.03.2012 cannot be attributed to the appellant as the appellant had duly filed the Completion certificate from the Architect in the office of the MBMC, received in their office on 22,03.20 121. Therefore, deduction u/s. 80 IB(10) of the IT. Act cannot be denied to the appellant on the ground that the project was not completed before the stipulated date i.e. 31.03.2012 The AO is directed accordingly.
Ground No. 2B- Violation of conditions prescribed u/s. 80IB(10)(f)--
32. On verification of the list of flat owners in the housing project under consideration the AO noticed that Shri Raisuddin jointly with his wife and minor son had purchased. three flats i.e. Flat No. 701, 704 & 705 on the same floor i.e. Floor No. 7 of Building No. 18. He further observed that flat No. 704 & 705 are allotted in the joint name of Shri Raisuddin & Smt. Irfana Qamar and other flat No. 701 was allotted in the name of Shri Raisuddin & Master Rahil Raisuddin. As per the provision of section 80IB(1(f) in a case where a residential unit is allotted to a person being an individual no other residential unitin such project is to be allotted to such individual or his spouse or his minor child. Therefore, the AO observed that the appellant. by allotting these three flats in the name of one individual jointly with his wife and minor child had violated the conditions prescribed u/s.80IB(10)(f) and therefore deduction u/s. 80E13(10) of the LT. Act was disallowed on this ground also.
33. The appellant in response to this disallowance submitted that out of the three flats flat No. 705 was surrendered and sold to some other party vide agreement dated 01.08.2012. It was further submitted that initial payment for all the three flats was received on 09.08.2009 and the allotment letters were also issued on the same date. Clause (f) was inserted by the Finance Act No. 2 of 2009 and is applicable from 01.04.2010 and will apply to A.Y. 2010-11 and subsequent assessment years. It was therefore submitted that the provisions of clause (1) was not applicable in respect of flats which had already been allotted before 19.08.2009 on which date the Finance Act No. 2 of 2009 became law, in this regard the appellant relied on the decision of Hon'ble ITAT, Ahmedabad in the case of Patel Jashwantlal A. & Patel Punamchand N. vs. ITO 43 CCH 0004, wherein it washeld that as per agreement to sale and sale-deed the payments were made even before aforesaid provision came into force. Therefore, lower ITA No.3992/M/2016 14 M/s. D.V. Realtors authorities were not justified in rejecting the claim of deduction on the basis of a condition created by a provision which came into force subsequent to allotment of residential unit.
34. Without prejudice it was submitted that even if there was violation of condition u/s.80IB(10(f) in respect of the said residential units may be disallowed.The appellant in this regard relied on the following decisions.
1) ITO vs. Mis. Paras Builders ITA No, 583/PN/2013 dated 31.03.2015.
2) G.V. Corporation v. ITO (2010) 38 SOT 174 (Mum)
3) Sanghvi & Doshi Enterprises v. ITO (2011) 12 taxmann.com 240(Cheanni)
4) SJR Builders v. ACIT (2010) 3 ITR (Trib). 569 (Bang.)
35. I have carefully considered the appellant's submissions. The appellant had allotted three flats bearing Flat No. 704 & 705 in the joint name of Slid. Raisuddin & his wife Smt. Irfana Qamar and flat No. 701 in the name joint name of Shri Raisuddin & his minor son Master Rahil Raisuddin,thereby violating the provision of section 80IB(10(f), which isreproduced as under for ready reference -
(f) In a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unti 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.
36. As there was violation of provisions of section 80IB(10(f) the AO disallowed deduction u/s. 801113(10) on this ground also. The submissions of the appellant have already been reproduced above. As far as the appellant's submission that Flat No. 705 had been surrendered and sold to some other party vide agreement dated 01.08.2012 is concerned, it is seen that the appellant has not placed on record any supporting documentary evidence. Thus, the appellant had allotted three flats in the joint name ofShri Raisuddin and his wife I minor child thereby violating the provisions of section 80IB(10)(f). The question that needs to be decided here is whether the deduction u/s. 80IB(10) in respect of 224 flats can be disallowed merely for the fact that the appellant had violated the provisions of section 80IB(10)(f) in respect of three fiats. Various Benches of the ITAT in this regard have held that in such a situation what can be disallowed is the proportionate profit earned by the appellant in respect of residential units which do not fulfill the conditions prescribed by the section. Various decisions reliedupon by the appellant in this regard are discussed as under --
37. In the case of ITO vs Paras Builders, ITA no. 5831PN/2013, the grounds of appealraised in this appeal were as under -
1. In facts and circumstances of the case, and in law, the Hon'ble CIT(A) is not justified in accepting the assessee's claim of "pro-rata" deduction u/s 80IB of the Act when there is no provision for allowing such partial deduction in terms of provisions of section 80IB(10) of the Act.
ITA No.3992/M/201615 M/s. D.V. Realtors
2. On the facts and in the circumstances of the case, and in law, the CIT (A) is not justified in accepting the assessee's claim to allow piece-meal deduction, when the provisions of section 80IB (10) of the Act, categorically speaks of lump-sum deduction for entire profits derived from such Housing projects, subject to fulfillment of all the conditions prescribed u/s 80IB (10)(a) to 80IB(10)(f) of the Act.
3. On the facts and in the circumstances of the case, and in law, the CIT-(A), is not justified in accepting the assessee's claim, when provisions of section 80IB(10(c) clearly lays down upper limit of each residential unit, and no such exclusion is contemplated.
38. The Hon'ble B bench of ITAT Pune on the issue of proportionate allowance ofdeduction u/s 80IB(10), relying on the decision of the same bench of the ITAT in the case of Pharande Developers vs ITO in ITA No. 715/PN/2011 (which in turn had relied on the decision of the ITAT Pune in the case of D.S. Kulkarni Developers Ltd vs ACIT in ITA No. 1428 and 1429/PN/2008 and subsequent judgment of Hon'ble Madras High Court in the case of Viswas Promoters (P) Ltd (2013) 29 Taxmann.com 19 (Madras) has held as under-
11. Following the aforesaid ratio laid down by the Pune Bench of the Tribunal (supra) we hold that merely because the assessee had violated the provisions of section 80IB(10)(c) of the Act in respect of two units i.e. row houses D-3 and D- 4, the deduction under section 80IB(10)© of the Act in respect of two units i.e. row houses D-3 and D-4,the deduction under section 801B(]0) could not be denied in entirety. The assessee is entitled to the said deduction under section 80IB(10) of the Act in respect of balance units which have been constructed as per the conditions laid down in section 80IB(10)© of the Act. Only in respect of two units i.e. D-3 and D-4, deduction under section 80IB(10)of the Act would be denied to the assessee. Accordingly we uphold the order of CIT(A) in directing the Assessing Officer to re-compute the deduction wider section 80IB(10)of the Act in relation to the said project by limiting the denial only in respect of row houses D-3 and D- 4 and for the balance units the assessee would be entitled to the said deduction under section80IB(10)of the Act. Thus, the grounds of appeal raised by the Revenue aredismissed.
39. On the same issue of proportionate allowance of deduction u/s. 80IB(10), Hon'ble G Bench of the Mumbai ITAT in the case of G.V,.Corporation vs ITO in ITA No.4512/Murn12007 has held as under -
13. Even assuming for the sake of argument that there was a violation of the condition(c) prescribed by section 80IB(10), the result thereof would not be denial of the claim for deduction as has been held by the Special bench (Pune) in the case of Brahma Associates Vs. JCIT. OSD) Circle-4, Pune, (2009) 119 ITD 255 (SB). In this case it was found that a small part of the building was built for commercialuse. The condition that the entire building should have been built for residential use was thus not satisfied However the portion used for commercial purposes was minimal and less than 10% of the total built up area. In such circumstances, the Tribunal held that the deduction under section 80IB ITA No.3992/M/2016 16 M/s. D.V. Realtors (10) cannot be totally denied and if it is found that even if the commercial use exceeds 10%, but the residential segment of the project satisfies all the requirements of sub-section (10) on standalone basis and the income from the construction of the residential units can be ascertained on a standalone basis, the deduction would be -available in respect of the residential segment of the project Applying, with respect, the the violation, if any, of condition (c) ofsub- section (10) is much less than 10% say around 6.5% to 7% only, and therefore the deduction for the profits arising from the housing project cannot be denied The extent of violation, if at all there is a violation, is so less that it would be inappropriate to deny the deduction totally. The Special Bench has held that even if the commercial user of the built up area of the building exceeds 10% the assessee would still get the proportionate deduction, i.e. the deduction would be confined only to the profits of the residential segment of the overall profit. Therefore, even if the assessee cannot be given the entire deduction under section 80IB. it should be eligible for the roport1onate deduction as envisaged by the Special Bench It has been brought to our notice by the assessee that the Chennai Bench of the Tribunal in the case of Arun Excello Foundations (P) Ltd. Vs. ACIT., (2007) 108 TTJ 71 and the Bangalore Bench of the Tribunal in DCIT Vs. Brigade Enterprises (P) Ltd., (2008) 119 TTJ 269 have held that even where the violation exceeds the limit of 10% the entire deduction cannot be denied but the same shoul4 he allowed proportionately. In this view of the matter also the grant of deduction by the Assessing Officer in the present case cannot be said to be erroneous and prejudicial to the interest of the revenue.
40. Similarly on the issue of proportionate allowance of deduction u/s 80IB(10), A Bench (Third Member) of Hon'ble Chennai ITAT, in the case of Sanghvi & Doshi Enterprise vs ITO (2011) 12 Taxmann.com 240 (Chennai) has held as under-
Section 80-IB of the Income-tax Act, 1961-Deductions -Profits and gains from industrial undertakings other than infrastructure development undertakings-Assessment Years 2005-06 and 2006-07-Assessee-firm, engaged in construction of residential buildings, claimed deduction under section 80- IB(10)- It was noted from records that in respect of some of flats built up area exceeded 1500 square feet-Whether in view of order passed by Calcutta High Court in CIT v. Bengal Ambuja Housing Development Ltd. In [IT Appeal NO. 458 of 2006, dated 5-1-2007], assessee was entitled for deduction under section 80- IB(10) in respect of flats having built up area not exceeding 1500 square feet and not entitled for deduction in respect of those flats having their built up area exceeding 1500 square feet-Held, yes.
41. Similarly on the issue of proportionate allowance of deduction u/s 80IB(10), A Bench of Hon'ble Bangalore ITAT, in the case of SJR Builder vs ACIT (2010) 3 ITR (T) 569 (Bang) held as under-
16. Considering the rival submissions, we are of the view that the appeal by the assessee is to be allowed to the extent of the fiats the built-up area of the flat is not more than 1500 sq.ft. We agree with the submission of the learned representative for the assessee that while considering the built-up area of 1500 sq.ft for the purpose of exemption under section 80-IB(10), the mezzanine floor ITA No.3992/M/2016 17 M/s. D.V. Realtors and common areas are to be excluded. The Assessing Officer is directed accordingly. We hold that in respect of the penthouses the built-up area of which is more than 1500 sq.ft, they may be excluded for exemption. However, in the light of the decision of the Special Bench in the case of Brahma Associates v. Joint CIT [2009] 315 ITR (AT) 268 (Pune), merely because some flats are larger than 1500 sq. ft, the assessee will not lose the benefit in its entirety. Only with reference to the flats which have more than the prescribed area, the assessee will lose the benefit.
42. Based on various decisions of the ITAT, as discussed above, it is held that even though the appellant had violated the conditions of section 80IB(10)(f) in respect of three flats, the deduction u/s. 801B(10) cannot be disallowed to the appellant in its entirety on this ground. The AO is therefore directed to limit the disallowance of deduction u/s 80IB(10) to tin profits on proportionate basis with respect to three flats No. 701, 704 & 705.
Ground No. 2C -- Violation of provisions of section 801B(10)(c)-
43. The deduction u/s. 801B(10) was disallowed also on the ground that 18 flats in the appellant's housing project were likely to exceed built up area of 1000 sq. ft, each thereby violating the provisions of section 80IB(10)(c).The observations of the AO in theassessment order are reproduced as under -
"5.3 It is not the out of place to mention that, as per the details of flat produced by the assessee, the carpet area of the flats shown against the following flats were likely to exceed built-up area of 1000 sq.ft.
Sr.No. Flat NO. Name of the Carpet Area Loading Built up
owner (Sq.ft) Area @30% Area (Sq.ft)
of built up
area (Sq.ft)
(1) (2) (3) (4) (5) (6)
1 306/16 Ms. Farzana 791 339 1130
2 506/16 Shri Divakar 791 339 1130
Shetty
3 706/16 NavinSuvarna 791 339 1130
4 806/16 S.P. Singh 791 339 1130
5 906/16 Vijay Khambalkar 791 339 1130
6 106/16 Dipak Kumar 791 339 1130
7 1006/16 Kamlesh Chauhan 791 339 1130
8 1306/16 Ashok Patil 791 339 1130
9 201/18 Sandeep Kaul 791 339 1130
10 301/18 YogirajMaxumdar 791 339 1130
11 401/18 Parmindar 791 339 1130
Sandhal
12 501/18 Balbir Gupta 791 339 1130
13 601/18 Karmbir Singh 791 339 1130
14 701/18 Raisuddin 791 339 1130
15 801/18 Amit Dubey 791 339 1130
16 901/18 Jognarayan 791 339 1130
17 1001/18 Mohd. Hanish 791 339 1130
ITA No.3992/M/2016
18 M/s. D.V. Realtors
Patel
18 1101/18 Vinod Kothari 791 339 1130
In general, the loading area is 30% of the built up area. On perusal of thesubmissions of the assessee, the carpet area the above fiat numbers mentionedcolumn No. 2 are measured at 791 sq. ft. Hence after computation of loading area of 30%, the built iv area calculated at 1130 sq. ft as mentioned in column No. 6above.
As per the conditions prescribed under clause (c) of section 80IB(10),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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place".
The location of the project comes within 25 kilometers of the boundary ofBruhan Mumbai Municipal Corporation, Mumbai. Hence, in view of the above, the built up area of the flats of the housing project viz. Shree Shashwat Building No. 16,17 & 18 have been exceeded the prescribed limit awarded by the provisions of section 80IB(10)(c) of the income-tax Act, 1961,"
44. The appellant in response to this disallowance submitted that the AO had calculatedthe built up area by applying loading factor @ 30% of the built up area i.e. 43% of the carpet area. It was submitted that nowhere in the assessment order it has been stated by the AO on what basis he had applied such high loading factor. It was therefore submitted that loading factor had been applied by the AO on assumptions and surmises. It was alsosubmitted that as per Stamp duty ready reckoner the loading factor is 1.2 times of the carpet arm The appellant with regard to the meaning of built up area referred to section 80IB(14)(a), which was reproduced as under -
"(a) "built up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared' with other residential units."
45. It was further pointed out that 791 sq.ft. carpet area for the flats mentioned by theAO as above was arrived at after including the area of flower bed and dry balcony, both of which were below floor level and was required to be reduced from 791 sq. ft. to arrive at correct built up area as per definition provided u/s. 80IB(14)(a). It was pointed out that the area of flower bed and dry balcony can easily be arrived at from the approved plan. The appellant further pointed out that during the course of assessment proceedings for the succeeding assessment year the AO had got inquiries made through the ITA No.3992/M/2016 19 M/s. D.V. Realtors Inspector of the Ward for carrying out actual physical verification of the built up area of the flats.
46. I have carefully considered the appellant's submissions, observations of the AO in the assessment order and the facts of the case. The disallowance of deduction u/s. 80IB(10) of the I.T.Act was made by the AO also on the ground that the built up area of 18 flats in the housing project was likely to exceed 1000 sq.ft. each thereby violating the conditions prescribed u/s 80IB(10)©, which is reproduced as under for ready reference-
(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 kilometers.
47. The calculation of the AO for working out the built up area has already been reproduced in the preceding paragraphs. The above working by the AO by applying loading factor @30% of the built up area i.e. 43% of the carpet area is based on an estimate for which no basis has been mentioned by the AO in the assessment order. Till the time of passing of the assessment order no physical verification of the actual built up area of had carried out. As the appellant had pointed out during the course of present proceedingsthat the AOduringthe course of assessment proceedings of the subsequent assessment year had deputed his inspector for carrying out actual physical verification of the built up area ofthe flats, the AO vide this office letter dated 16.03.2016 was requested to communicate the results of the physical verification of the built up area of flats had been carried out by the Inspector during the course of assessment proceedings for A.Y. 2013-14. Therefore, assessment records of A.Y.. 2013-2014 were called for and it was noticed that the inspector of the Ward had conducted inquiries and had submitted a report to the AO which is available on record of A.Y. 2013-14 and is reproduced as under-
INSPECTOR REPORT Sir, As directed I went to the site of the project in respect of M/s. D.V. Realtors at Shree Shashwat, Opp. Sai Mansarovar Complex, Near Pleasant Park; Mira Road(E), Thane --401107, on 19 Jan 2016 to inspect thee the 801B(10) for the A. Y 2013-14. There are, in total, three residential lowers in the project in question, namely - Building No. 16, 17 & 18, each building comprising of ground (parking) plus 14 floors.
1. I measured the total area of the plot which is more than one acre.
2. I measure one flat No. 401/18, owned by Shri Parminder Sandhal, which was one of the largest flats and its internal measurement (carpet area) is approximately 750 sq. ft.
3, There is no commercial space or shop in the project. Neither any business activity is being carried out from the premises.
3. I check the names plates of all the three buildings for allotment of two or more flats to one-person r one family. No person or family was found to have been allotted more than one residential unit.
ITA No.3992/M/201620 M/s. D.V. Realtors
5. I checked all of the flats of three building for joining to flat to make one. There are no two flats, which have been combined to make one. Every flat is independent in itself.
Submitted please Sd/-
(Satypal Singh Dahiya) Inspector Date: 21 Jan 2016 V,/
48. After going through the Inspectors report as above, it is seen that on physical measurement the carpet area of one of the largest flats i.e. Flat No. 401/ 18 was found to be approximately 750 sq.ft. As per definition of built up area provided in section 80IB(14)(a), built up area means the carpet area at the floor level including projection and balconies, as increased by the thickness of walls but does not include the common areas shared with other residential units. Therefore to the carpet area of 750 sq.ft. which was physically measured by the inspector, what is required to be added is the thickness of walls and not the common areas shared with other residential units. Therefore, the built up area of the flats could not have exceeded 1000 sq.ft after adding the thickness of walls to the carpet area. Otherwise also if the loading factor of 1.2 times as per stamp duty ready reckon was applied to the carpet area measured by the inspector, the built up area will be 900 sq.ft. only. Therefore, the built up area of the flats listed by the AO in the assessment order did not exceed the prescribed limit of 1000 sq.ft. each and there was no violation of the condition prescribed u/s. 80IB(10)(c) of the I.T.Act. Therefore, the AO was not justified in disallowing deduction u/s. 80IB(10)(c) on the ground of violation of condition prescribed u/s. 80IB(10)(c) of the I.T.Act. The AO is directed accordingly.
49. In result, the appeal of the appellant is partly allowed.
6. The Ld. D.R. vehemently submitted before us that the order passed by the Ld. CIT(A) is not correct in so far as the same has been passed by disregarding the mandatory provisions as prescribed by section 80IB(10) of the act. The Ld. A.R. submitted that the project was not completed on or before 31.03.2012 which was a precondition for allowing deduction under section 80IB(10). The said fact is clear from the occupancy certificate dated 28.08.2013, plumbing completion certificate issued by Star Plumbers dated 26.04.2013 and final NOC certificate issued by ITA No.3992/M/2016 21 M/s. D.V. Realtors the fire brigade department dated 24.03.2013. The Ld. D.R. also submitted that the area of the flat was likely to exceed the prescribed area of 1000 sq. ft. which is another violation of the condition for allowing deduction under section 80IB(10). The Ld. D.R. also pointed out that the assessee has sold three flats to one person and his family which is another violation of the provisions of section 80IB(10) and therefore the AO has rightly dealt with all these issues and disallowed the deduction claimed by the assessee under section 80IB(10). The Ld. D.R. in defence of his argument relied on three decisions namely CIT vs. Global Reality (2015) 62 taxmann.com 204 (Madhya Pradesh), ITO vs. Everest Home Construction (India) (P) Ltd. (2012) 26 taxmann.com 246 (Mumbai-Trib) and Fortuna Foundation Engineer & Consultants (P.) Ltd. vs. ACIT (2012) 25 taxmann.com 471 (Lucknow). The Ld. D.R. argued before the Bench that in the case of CIT vs. Global Reality (supra) the Hon'ble High Court has held that in case of completion certificate of the project issued by the local authority after the cutoff date does not fulfill the condition as provided under section 80IB(10). It was also held by the Hon'ble High Court that a completion certificate issued after the specified date mentioning that project was complete before the cut-off date does not fulfill the condition specified in clause (a) of section 80(IB)(10) Explanation(ii) of the Act. Finally, the Ld. D.R. submitted that in view of the ratio laid down by the Hon'ble Madhya Pradesh High Court, the assessee has not fulfilled the necessary conditions for allowing the deduction under section 80(IB)(10) and therefore order of Ld. CIT(A) should be set aside and that of the AO should be restored.
ITA No.3992/M/201622 M/s. D.V. Realtors
7. The Ld. A.R., on the other hand, submitted that the deduction under section 80(IB)(10) has been claimed after the assessee fulfilled all the conditions as envisaged in the said section which has been dealt with and discussed by the Ld. CIT(A) in a comprehensive manner in the appellate order and only thereafter, after passing a speaking and well reasoned order, reversed the order of AO and directed him to allow the deduction under section 80(IB)(10). The Ld. A.R. argued that the housing project was completed prior to March 2012 and assessee also applied for issuance of occupation certificate on 22.03.2012 which was issued by the Commissioner of MBMC on 28.08.2013. The Ld. Counsel further submitted that the architect of the project M/s. Nakasha Architect issued completion certificate on 19.03.2012. Similarly, independent architect M/s. P.R. Consultants issued completion certificate certifying the completion of construction of building work on 14.03.2012. The Ld. A.R. also drew our attention to sample possession letter dated 15.01.2012 in respect of flat handed over to the buyer for carrying out furniture work. The Ld. A.R. also referred to the NOC issued by M/s. Fire Ext. Engineering for compliance of fire prevention and life safety measures dated 10.03.2012 and stability certificate dated 12.03.2012 and finally the letter for transfer of electric meter in the purchaser name. The Ld. A.R. while relying on the decision in the case of CIT vs. Hindustan Samuh Awas Ltd. (2015) 377 ITR 150 (Bom.) submitted that the Hon'ble jurisdictional Bombay High Court clearly held that the condition for allowing the deduction under section 80(IB)(10) would be satisfied if the architect has certified the completion of the project, application to Municipal Corporation for issuance of completion certificate is ITA No.3992/M/2016 23 M/s. D.V. Realtors made before the cutoff date or within the stipulated time and due payment of fee was made, then it is immaterial that completion certificate was issued by the municipal authorities after the specified date. The Ld. A.R. submitted that in view of this binding decision of the Jurisdictional High Court the Ld. CIT(A) allowed the appeal of the assessee and the same deserved to be upheld on this basis only. Referring to the objection of the AO that the same party has bought three flats jointly with the name of the family members, the Ld. A.R. submitted that Ld. CIT(A) has rightly disallowed the deduction only in respect of that specific assessee for three flats allotted to one family and rightly held that the disallowance cannot be extended to the entire project. The Ld. A.R. relied on the decision of co-ordinate bench of the Tribunal in the case of Om Swami Smaran Developers (P.) Ltd. vs. ITO (2018) 90 taxmann.com 267 (Mumbai - Trib.) wherein the co-ordinate bench of the Tribunal has held that for violation of condition of clause (f) of section 80(IB)(10) of the Act in respect of two flats would not construed as violation of conditions for the entire housing project i.e. in respect of other flats which otherwise are complying with the condition of section 80(IB)(10) and can not be disallowed. The Ld. A.R. finally submitted that since the Ld. CIT(A) has passed a very speaking order after following various decisions by the various judicial authorities including the Hon'ble Bombay High Court and Tribunal's, the order of Ld. CIT(A) should be affirmed by dismissing the appeal of the Revenue.
8. We have heard the rival submissions of both the parties and perused the material on record including the impugned order and the decisions cited by both the parties. The undisputed facts are that assessee has applied for issue of completion certificate to the ITA No.3992/M/2016 24 M/s. D.V. Realtors municipality on 22.03.2012 which was within the cut-off date of 31.03.2012 in terms of the provisions of section 80(IB)(10) of the Act and the said certificate was issued by Commissioner of MBMC on 28.08.2013. Besides, we observe from the records before us and order of the Ld. CIT(A) that architect of the assessee i.e. M/s. Nakasha Architect, independent architect M/s. P.R. Consultants issued completion certificates certifying the completion of construction of building in the month of March. Similarly, we have examined other various evidences such as sample copy of possession letter dated 15.01.2012, copy of certificate dated 10.03.2012 issued by M/s. Fire Ext. Engineering for compliance of fire prevention and life safety measures dated 12.02.2012 and application for transfer of electric meters in the name of the purchasers. We are of the opinion that all these evidences corroborate that assessee has completed the project within the specified time as prescribed under section 80(IB)(10) of the Act. The observations of the AO as regards non completion of the project on or before 31.03.2012, purchase of three flats by one family and area of each flat exceeding 1000 sq. ft. are based upon wrong appreciation of facts and based upon conjectures and surmises of the AO which are rightly negated by the Ld. CIT(A) by passing a very reasoned and speaking order discussing the satisfaction of each and every conditionality as provided in section 80(IB)(10) of the Act. Moreover, the case of the assessee is squarely covered by the decision of the jurisdictional High Court in the case of CIT vs. Hindustan Samuh Awas Ltd. (supra) which has been considered by the Ld. CIT(A) and also reproduced the operative para thereof in the appellate order in which it has been held that it would be suffice if the assessee has applied for the ITA No.3992/M/2016 25 M/s. D.V. Realtors issuance of completion certificate before the cutoff date or specified date under the provisions of section 80(IB)(10) of the Act and architect has specified the completion of the project. The Hon'ble High Court has held that the actual issuance of completion certificate by the municipal authorities is not relevant for the purpose of claiming deduction under section 80(IB)(10) of the Act. Similarly, in the case of Om Swami Smaran Developers (P.) Ltd. (supra) the co-ordinate bench of the Tribunal has held that where the conditions of clause (f) of section 80(IB)(10) of the Act is violated in respect of two flats then the disallowance has to be restricted only for the two flats and not qua the remaining flats which complied with the condition as envisaged under clause (f) of the Act. Under these facts and circumstances we find no reasons to deviate from the finding of the first appellate authority. We, therefore, respectfully following the decision of the Hon'ble Bombay High Court uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue.
Order pronounced in the open court on 11.12.2018.
Sd/- Sd/-
(Mahavir Singh) (Rajesh Kumar)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 11.12.2018.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
[
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.