Income Tax Appellate Tribunal - Indore
Shri Rajesh Pardasani Prop. M/S. Ambika ... vs The Ito 1(2), Bhopal on 22 March, 2017
Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A. No. 8/Ind/2015 नधा रण वष /Assessment Year: 2010-11 Shri Rajesh Pardasani Prop. Ambika Paints (Crystal Construction) Bhopal PAN - AGIPP 9550E :: अपीलाथ /Appellant Vs Income Tax Officer 1(2) Bhopal :: यथ /Respondent आ.अ.सं./I.T.A. No. 399/Ind/2014 नधा रण वष /Assessment Year: 2009-10 M/s J.C. Shjarma &n Sons Bhopal PAN - AAEFJ6447L :: अपीलाथ /Appellant Vs. Asstt.Commr. of Income Tax 3(1), Bhopal :: यथ /Respondent 1 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 आ.अ.सं./I.T.A. No. 732/Ind/2014 नधा रण वष /Assessment Year: 2009-10 M/s Surbhi Homes Pvt. Ltd.
Bhopal
PAN - AAJCS7211C :: अपीलाथ /Appellant
Vs.
Asstt.Commr. of Income Tax
3(1), Bhopal :: !यथ /Respondent
नधा "रती क$ ओर से/Assessees by Shri Ashish Goyal and Shri N.D.
Patwa
राज(व क$ ओर से/Revenue by Shri Mohd. Javed - DR
सन
ु वाई क$ तार ख 21.3.2017
Date of hearing
उ-घोषणा क$ तार ख 22.3.2017
Date of pronouncement
आदे श /O R D E R
PER BENCH
These appeals have been filed by above-named assessees against different orders of the learned CIT(A), Bhopal, for the assessment years mentioned above.
2. The sum and substance of the grounds of appeals taken by the assessees is that the learned CIT(A) was not justified in confirming the action of the Assessing Officer in disallowing the claim of deduction made by the assessee u/s 80IB(10) of the Act. 2 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014
3. We carefully considered the arguments of both the sides. So far as the deduction u/s 80IB(10) of the Act is concerned, we find that in a recent judgment the Hon'ble jurisdictional High Court of Madhya Pradesh in the case of CIT vs. M/s Global Reality; ITA No. 40/2012 and others has decided the issue against the assessee by holding as under :-
19. The provision such as clause (a) as amended, sensu stricto, cannot be considered as a new condition and that too incapable of compliance. Inasmuch as, clause (a) deals with the time frame within which the housing project was expected to be completed, to get the benefit of the prescribed deduction. Notably, the amended Section 80IB (10) (a) extends the benefit even to the housing projects approved by the Local Authority before 31.03.2007, instead of 31.03.2005 - as was provided in the unamended provision.
Therefore, necessity was felt to make distinction between the two classes of housing projects for specifying the time frame for completion. The one approved by the Local Authority before 1st day of April, 2004; and the other class of housing project approved by the Local Authority on or 3 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 after 1st April 2004 till 31.03.2007. In either case, the time frame for completion of project has been prescribed as four years. In that, the project approved before 1st April, 2004 has been given time to complete before 31.03.2008; and in the latter category I.T.A.Nos.40/2012, 36/2012 & 35/2012 within four years from the end of the financial year in which the housing project was approved by the Local Authority.
20. Thus understood, similar time frame for completion of housing project has been given to both class of housing projects. Moreover, the explanation below clause (a), in particular (ii), applies to both class of housing projects uniformly. It postulates that "the date of completion of construction of housing project" shall be taken to be "the date on which completion certificate" in respect of such housing project "is issued by the Local Authority". If Explanation (ii) is superimposed on the expression "completes such construction" in Clause (a) of Section 80IB(10), it would mean that the housing projects commenced on or after 01.10.1998 must possess completion certificate issued by 4 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 the Local Authority on or before the cut off date, as may be applicable - to become eligible for tax deduction. As per Explanation (ii), therefore, the synonym of "completes such construction" would be the date on which completion certificate is issued by the Local Authority. No more and no less. Thus, enough indication and also sufficient time has I.T.A.Nos.40/2012, 36/2012 & 35/2012 been given to both the class of housing projects to fulfill that condition. The provision is in the nature of limiting the benefit of deduction to the specified housing projects, and not to those who fail to fulfill the requirement of completion of construction in time frame specified for the respective category of housing projects. This has been done in larger public interest - to ensure that the benefit is given only to such projects who would further the goal of providing low cost economic houses to the deserving persons in reasonable time.
21. Concededly, it is within the domain of Parliament to extend benefit or privilege to certain class of persons and also to withdraw the same for just reasons. That cannot be questioned, unless shown to be unconstitutional in form or 5 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 its substance. It was thus open to the Parliament, to provide for a cut off date for completion of the housing projects, as a condition precedent to avail benefit of deduction. In the past, such stipulation was in place, but, later on, it was done away with. However, by amendment which came into effect from 1st April, 2005, the condition for completion of project within specified time has I.T.A.Nos.40/2012, 36/2012 & 35/2012 been reintroduced, while giving sufficient time (four years) to the assessee to comply for being entitled to get deduction.
22. A priori, it is not a case of imposing new condition, much less, with retrospective effect as has been argued before us; unlike introduction of new condition in the shape of clause
(d) - which obviously could be applied only prospectively, as held by the Supreme Court in the aforesaid decisions. Clause (a) stands on a completely different pedestal. It cannot be treated as a new condition linked to the approval and construction or having retrospective effect as such. For, it gives at least four years' time frame to both class of housing projects; to wit, housing projects approved prior to 6 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 1st April, 2004 or after 1st April, 2004. The four years period obviously has prospective effect, albeit limiting the period for completion of the project, to avail of the benefit. Four years' time frame for completion of the project, by no standards, can be said to be unreasonable, harsh, absurd or incapable of compliance. It is also not a case of withdrawal of vested right of the developer, as such. No developer can claim vested right to complete the housing project I.T.A.Nos.40/2012, 36/2012 & 35/2012 in indefinite period. The right arising from Section 80IB, is coupled with the obligation or duty to complete the project in specified time frame. If the developer does not complete the housing project within specified time, will not receive that benefit. There is no compulsion on him to complete the project in four years. Notably, even the approvals to the construction of housing project granted by the Local Authority specify the date within which the construction must be completed, as per the time frame specified in the permission. If the project is not completed within the stipulated time, the developer is free to get that period renewed or extended from the Local Authority 7 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 as per the applicable Rules and Regulations. The provision for claiming tax deduction from profits, can certainly prescribe for reasonable conditions and more so time frame for completion of the project, in larger public interest.
23. Suffice it to observe that, no comparison can be drawn between the new condition prescribed in terms of clause (d) and that of clause (a). Condition in Clause (a), neither operates retrospectively nor can be said to be absurd, unjust or expecting I.T.A.Nos.40/2012, 36/2012 & 35/2012 the assessee to comply with something which is impossible to achieve.
24. The next question that needs to be answered, is, whether the stipulation in Section 80IB(10)(a) can be said to be directory. Considering the prodigious benefit offered in terms of Section 80IB to the assessee (hundred per cent of the profits derived in any previous year relevant to any assessment year); and the purpose underlying the same - which is inter alia burden on the public exchequer due to waiver of commensurate revenue - the stipulation for 8 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 obtaining completion certificate from the Local Authority before the cut off date, must be construed as mandatory. The fact that compliance of that condition is dependent on the manner in which the proposal is processed by the Local Authority, the provision cannot be construed as a directory requirement. It is a substantive provision mandating issuance or grant of completion certificate by the Local Authority before the cut off date or specified time, as a precondition to get the benefit of tax deduction. Else, it will then be open to the assessee to rely on other circumstances or I.T.A. Nos. 40/2012, 36/2012 & 35/ 2012 evidence to plead that the housing project is complete - requiring enquiry into those matters by the Tax Authorities - sans a completion certificate issued by the Local Authority in that behalf. A priori, the argument of substantial compliance is sufficient, would lead to uncertainty about the date of completion of the project which is the hallmark for availing of the benefit of tax deduction. Only with this intent the legislature in its wisdom has predicated that, "the completion of construction" of the housing project is taken to be "the date on which" the 9 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 completion certificate "is issued" by the Local Authority. To interpret it to include an ex post facto certificate or such certificate issued by the Local Authority after the cut off date, would not only result in rewriting of the express provision and run contrary to the unambiguous position pronounced in the Section, but also doing violence to the legislative intent. For, Explanation (ii) will then have to be read as "date of completion of construction of the housing project shall be taken to be the date as certified by the Local Authority in that behalf", irrespective of the date of issuance of such certificate by the I.T.A.Nos.40/2012, 36/2012 & 35/2012 Local Authority. Indeed, in a given case if the assessee is able to substantiate that the completion certificate "was in fact issued" by the Local Authority before the cut off date, but could not be produced by him within time due to reasons beyond his control, the argument of substantial compliance of the provision can be tested. Any other interpretation would result not only in uncertainty (in finalization of assessment proceedings due to non-issuance or delayed issuance of such certificate by the Local Authority 10 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 and prone to manipulations at the end of the Local Authority); but also have to yield to the subjective satisfaction of the Assessing Authority and of investing wide discretion in that Authority, which, eventually, may only end up in getting embroiled in litigation. If the assessee has failed to comply with the condition of obtaining completion certificate from the Local Authority before the cut off date, he must take the consequence therefor and of denial of the benefit of tax deduction offered to him on that count.
25. We cannot be oblivious of the fact that the Municipal Laws of different States are not uniform in respect of procedure for I.T.A.Nos.40/2012, 36/2012 & 35/2012 issuance of completion certificate. To wit, in some States, the dispensation provided is to issue partial or full occupation certificate; and thereafter issue completion certificate after removal of all the deficiencies pointed out by the Local Authority. In some States, the Municipal Law may provide for issuing partial or full completion certificate. The 11 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 requirement of completion certificate issued by the Local Authority, as envisaged in Section 80IB(10)(a) of the Income Tax Act, which is a Central enactment dealing with the special subject of taxation, however, is, of only one certificate - which is full completion certificate issued by the Local Authority before the cut off date. That is to lend credence to the factum of completion of the entire housing project in all respects as per the approval granted by the Local Authority. It can be safely assumed that the legislature was conscious of this position, for which, express provision has been made as to the meaning of the date of completion of the housing project linked to the "date on which"
completion certificate "is issued" by the "Local Authority", as predicated in Explanation (ii) thereunder.
"26. We accordingly hold that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date does not fulfill the condition specified in clause (a) of 12 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 Section 80IB (10) read with Explanation (ii) thereunder. We reject the argument of the assessee that the effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005 ,has retrospective effect or that it is unjust in any manner or incapable of compliance at all. Similarly, the requirement of securing completion certificate issued by the Local Authority before the cut off date is not directory, in view of the express provision in Section 80IB(10)(a) and the Explanation (ii) thereunder. The completion certificate granted by the Local Authority must bear the date of having been issued before the cut off date.
27. That takes us to the argument of the assessee that the stipulation in Section 80IB(10)(a) of completion certificate issued by the Local Authority before the cut off date, cannot be applied in the case of assessee following the work in progress accounting method. In our opinion, the provision in the form of Section 80IB (10)(a), applies uniformly to all the assessees - be it following work in 13 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 progress accounting method or otherwise. The benefit of deduction under this provision can be availed by the assessee following the work in progress accounting method, provided he has complied with the stipulation of having produced completion certificate issued by the Local Authority before the cut off date, as may be applicable in his case. In other words, if the housing project was approved by the Local Authority before 1st April, 2004, he must submit completion certificate issued by the Authority having been issued before the 31st March, 2008. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. If this condition is not fulfilled, the assessee who maintains work in progress accounting method and has claimed deduction under Section 14 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 80IB(10)(a) must suffer the consequence of disallowance or withdrawal of the benefit claimed by him on that count.
28. Accordingly, these appeals succeed. The impugned judgment of the Tribunal is set aside; and in the facts of the present case, the decision of the Assessing Officer to disallow deduction under Section 80IB(10)(a) of the Income Tax Act is upheld. No order as to costs."
4. The Hon'ble jurisdictional High Court has considered the sweep of amended clause (a) of the provision under sub-section (10) of section 80IB of the Act and held that the provisions of clause (a), as amended, sen sustricto cannot be considered as new condition and that too incapable of compliance. The clause deals with the time frame within which the housing project was expected to be completed to get the benefit of prescribed deduction. The Hon'ble High Court has held that issuance of completion certificate after the cut off date by the local authority but mentioning in the date of the completion of project before cut off date, does not fulfil the condition specified in clause (a) of section 80IB(10) read with 15 Rajesh Pardasani, etc. ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014 Explanation 2 thereunder. In view of this finding of the Hon'ble jurisdictional High Court, we find no merit in these appeals of the assessees and dismiss the same.
5. In the result, all the appeals of the assessees stand dismissed.
Pronounced in open Court on 22nd March, 2016 Sd/- sd/-
लेखा सद(य या यक सद(य
(O.P.Meena) (C.M. Garg)
Accountant Member Judicial Member
March 22nd 2017.
Dn/
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Rajesh Pardasani, etc.
ITA Nos.8/Ind/2015,399/Ind/2014 &732/Ind2014
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