Income Tax Appellate Tribunal - Hyderabad
Sigma Constructions,, Hyderabad vs Department Of Income Tax on 16 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD "A" BENCH, HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 921/HYD/2013
Assessment Year : 2009-10
Income Tax Officer, Ward - 6(3), ... Appellant
Hyderabad.
Vs.
Sigma Constructions, Hyderabad ... Respondent
(PAN - AATES 4213 Q)
Appellant by: Shri R. Laxman
Respondent by: None
Date of hearing: 16/09/2013
Date of pronouncement: 16/09/2013
ORDER
PER CHANDRA POOJARI, A.M.:
This appeal filed by the Revenue is directed against the order passed by the CIT(A)-IV, Hyderabad on 25/03/2013, for the assessment year 2009-10, wherein the revenue has raised the following grounds of appeal:
"1. The learned CIT(A) erred both in law and on facts of the case.
2. The learned CIT(A) ought to have noticed the basic condition for 80IB deduction as per 80IB (10)(b) is that the project must be on the size of plot of land which has a minimum area of once acre."
2. Briefly the facts of the case are that the assessee filed its return of income on 30/09/2009 declaring total 2 ITA NO. 921/H/13 Sigma Constructions ================================= income at Rs. 90,796/- after claiming a deduction of Rs. 24,98,121/- u/s 80IB(10) of the Act. The Assessing Officer following the reasons given in the assessment order for AY 2008-09 in assessee's own case (that the
i) total area of the plot was less than 1 acre and ii) the assessee had not furnished a completion certificate) held that the assessee was not eligible for deduction u/s 80IB(10) and assessed the total income at Rs. 25,88,920/-.
3. On appeal, the CIT(A) following the decision of the ITAT in assessee's case for the AY 2008-09 in ITA No. 364/Hyd/2012 dated 07/03/2013 allowed the assessee's claim of deduction u/s 80IB(10). The Tribunal in AY 2008-09 rejected the Assessing Officer's view on both the aforementioned aspects and allowed the assessee's appeal with regard to denial of deduction u/s 80IB(10) of the Act.
4. Aggrieved by the order of the CIT(A), the revenue is in appeal before us.
5. None appeared on behalf of the respondent- assessee at the time of hearing before us. However, we proceed to decide the appeal after hearing the learned DR as the issue in dispute is covered by the decision of the Tribunal in assessee's own case for AY 2008-09.
6. The learned DR has not disputed the facts on record nor brought any contrary decision in this regard.
3ITA NO. 921/H/13 Sigma Constructions =================================
7. We find that the issue in dispute is squarely covered by the decision of the ITAT in assessee's own case for AY 2008-09 (supra) wherein the Tribunal held as follows:
"12. We have heard both the parties and perused the material on record. In this case deduction u/s. 80IB(10) was denied on the reason that the project was executed in a plot area admeasuring less than one acre and there was no completion certificate obtained from MCH. The assessee pleaded before us that the project was executed on an area exceeding one acre and in the course of completion of the project 1373 sq. yards of land has been earmarked for acquisition of MCH for the purpose of making roads and this was not acquired by MCH and still in the possession of the assessee. Regarding completion certificate it was submitted that the assessee duly applied for completion certificate vide application dated 30.9.2008 and duly acknowledged by MCH vide acknowledgement dated 17.10.2008 and also flats are fully completed in all respects which are duly connected by electricity and water supply and individual Distinct Number was allotted by MCH and they are assessed to municipal tax. According to the AR the area of plot is exceeding one acre and the area earmarked for roads cannot be excluded from the area of plot as decided by the Tribunal in the case of Vidhi Builders, Mumbai vs. ITO in ITA No. 1212/Mum/2009 for A.Y. 2005-06 dated 8 th April, 2011 wherein the Tribunal held that the area earmarked for road setback, recreation open space and internal road setback cannot be excluded for the purpose of calculating the total plot area. While deciding the issue, the Tribunal placed reliance on the earlier order of the Mumbai Bench in the case of Umiya Enterprises vs. ITO in ITA No. 2750/Mum/2009 for A.Y. 2004-05. In view of this, we are inclined to hold that as per provisions of section 80IB(10) of the Act, the housing project should be on the size of a plot of minimum one acre. If the building project was sanctioned by the Municipal Corporation for developing the project in the area of one acre land or more, the assessee is entitled for deduction u/s. 80IB(10) of the Act.
13. We have carefully gone through the approved building plan as per which total area of the project is 4310.89 sq. metres, East side road widening area is 1089.21 sq. metres, West side road widening area is 8439 sq. metres and the net plot area is 3127 sq. metres. The learned AR submitted before us that the total plot area is 5130 sq. yards which more than one acre. It is also pleaded before us that the assessee's plot is more than one acre and, beyond his control, a potion of the plot was earmarked for roads. Being so, liberal interpretation of section 80IB is to be considered. In our opinion, if a portion of the plot area is earmarked for roads after the assessee 4 ITA NO. 921/H/13 Sigma Constructions ================================= entered into development agreement and the plan was duly sanctioned by the competent authority, we cannot find fault with the assessee to deny the deduction u/s. 80IB(10) of the Act. Accordingly, we are of the opinion that the area of the plot available to the assessee for housing project is more than 1 acre. Accordingly, the claim of the assessee cannot be denied on this ground if it is available at the time of entering into development agreement and deduction u/s. 80IB(10) is to be given to the assessee.
14. Regarding non-production of completion certificate, the learned AR submitted that the circumstances brought on record show that the project is completed. He relied on judgement of Gujarat High Court in the case of Manan Corporation vs. ACIT in TA No. 1053 of 2011 dated 3.9.2012 wherein held that there is no necessity of strict interpretation of section 80IB(10) of the Act as it is a beneficial provision and the facts brought on record show the completion of the project and deduction has to be given. He also relied on the order of the Tribunal in the case of Keerthi Estates Pvt. Ltd. in ITA No. 478/Hyd/2011 dated 21 st September, 2012 (paras 14 and 15, as given below), wherein held as follows:
"14. Now the objection of the Department is that the assessee has not produced the completion certificate. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. No one can pass such a anomalous dictum while dealing with a legal problem. The Tribunal being final fact finding authority shall keep in mind an overall situation, factual as well as legal, so thereupon brings a dictum ought to be legally sustainable in the eyes of law. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on completion of the project. If the stand of the Revenue is accepted then only on completion of project an assessee would be 5 ITA NO. 921/H/13 Sigma Constructions ================================= entitled for deduction u/s. 80IB(10), then undisputedly an anomaly shall arise as to how and when the tax should be charged. This is not the scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department. The accepted principle is that the year of the assessment of income and connected deduction shall fall in the same assessment year. If the Revenue is taxing the profit in the year under consideration on the ground that the assessee is adopting "Percentage Completion Method" then the natural corollary should be that the connected deduction ought to be granted simultaneously in this year or the other method of computation is that the Revenue must not tax the profit of the project yearly on the basis of "Percentage Completion Method" but tax the entire profit on completion of the project by applying "Project Completion Method.
15. In view of the foregoing discussion, we direct the Assessing Officer to allow deduction u/s. 80IB(10) of the Act in the light of the order of the Tribunal in Hiranandani Akruti JV v. DCIT (39 SOT 498)."
15. Coming to the facts of the present case, the project was approved by the Municipal Corporation of Hyderabad vide their permit No. 48/49 f. No. 0069/CSC/TP-5/04 dated 3.11.2004. As per certificate of assessee's architect dated 3.9.2008, the project was completed on 1.10.2007. The learned AR submitted before us that the assessee has completed the project by this date and the assessee is following contract completion method. The claim for deduction u/s. 80IB(10) was made by the assessee for the first time which was denied by the authorities on the reason that there is no completion certificate.
16. The meaning of "date of completion" has been given in Explanation (ii) to clause (a) to section 80IB(10). Date of completion of construction would mean date on which completion certificate in respect of housing project was issued by the local authority. To grant deduction u/s. 80IB(10) it is mandatory to furnish the completion certificate of the housing project but the persistent question here is whether for giving benefit of deduction u/s. 80IB(10), where an assessee is following the percentage completion method is it necessary to obtain such completion certificate for each year of 6 ITA NO. 921/H/13 Sigma Constructions ================================= assessee's claim or it is sufficient that certificate is obtained on the completion of the housing project as a whole. Stipulation for obtaining completion certificate should not be so interpreted to mean that an assessee can claim exemption u/s. 80IB(10) only in the year of completion of whole of the housing project, even where the project stretches over a number of years and assessee returns its income based on percentage completion method. It would only mean that the assessee has to obtain such certificate on completion of the housing project, least it would lose the deduction already granted u/s. 80IB(10) for the earlier years if it is not so produced. As held by the Hon'ble Supreme Court in the case of Bajaj Tempo (196 ITR 188) a provision in the taxing statutes granting incentives for promoting growth and development of the nation should be construed liberally. When such liberal interpretation is to be given, the restriction placed in such provision granting the incentives also has to be considered so as to advance the objectives of the provisions and not to frustrate. Clause
(a) of section 80IB(10) species that such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 [but not later than the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority;
17. Thus, a project can have a span of not more than 4 years from the end of the financial year it has received approval. Explanation under clause (a) only specified how to reckon the day of approval and date of completion. It would not mean that the assessee can have the benefit of section 80IB(10) only in the year of completion of the project, especially so, for an assessee not following project completion method for accounting its income. If otherwise interpreted, it would be equivalent to forcing an assessee to follow a particular method of accounting, which would never have been the intention of legislation. Intention would only have been that for the project as a whole, there should be certification from the relevant authority proving the commencement and completion, and not that a completion certificate should be there in every year of the project span. The certifications are for ensuring that the project span does not exceed the prescribed period and nothing more. Of course if such period exceeded the prescribed limit, Revenue would be well within its rights to withdraw the claims already allowed, following the procedure prescribed under the Act. Thus, the Assessing Officer cannot insist on the completion certificate in the impugned year. This view has also been taken by CBDT in its Instruction No. 4 of 2009 dt. 30.6.2009, paras 2 to 4 of which are reproduced hereunder:
7ITA NO. 921/H/13 Sigma Constructions ================================= "2. Clarifications have been sought by various Chief CITs on the issue whether the deduction under s. 80IB(10) would be available on a year-to-
year basis where an assessee is showing profit on partial completion or if it would be available only in the year of completion of the project under s. 80- IB(10).
3. The above issue has been considered by the Board and it is clarified as under :
(a) The deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year.
(b) In case it is late and it is found that the condition of completing the project within the specified time-limit of
4 years as stated in s. 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn.
4. The above instruction will override earlier clarification on this issue contained in Member (R.)'s D.O. Letter No. 58/Misc/2008/CIT (IT & CT), dt. 29th April, 2008 and Member (IT)'s D.O. Letter No. 279/Misc/46/ 2008-ITJ dt. 2nd May, 2008."
18. Now the objection of the Department is that the assessee has not produced the completion certificate. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. No one can pass such a anomalous dictum while dealing with a legal problem. The Tribunal being final fact finding authority shall keep in mind an overall situation, factual as well as legal, so thereupon brings a dictum ought to be legally sustainable in the eyes of law. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on completion of the 8 ITA NO. 921/H/13 Sigma Constructions ================================= project. If the stand of the Revenue is accepted then only on completion of project an assessee would be entitled for deduction u/s. 80IB(10), then undisputedly an anomaly shall arise as to how and when the tax should be charged. This is not the scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department. The accepted principle is that the year of the assessment of income and connected deduction shall fall in the same assessment year. If the Revenue is taxing the profit in the year under consideration on the ground that the assessee is adopting "Percentage Completion Method" then the natural corollary should be that the connected deduction ought to be granted simultaneously in this year or the other method of computation is that the Revenue must not tax the profit of the project yearly on the basis of "Percentage Completion Method" but tax the entire profit on completion of the project by applying "Project Completion Method".
19. In view of the above discussion, the Assessing Officer is directed to consider the claim of the assessee in the light of the above observations."
8. As the issue in dispute is materially identical to that of the case decided by the Tribunal in assessee's own case for AY 2008-09, respectfully following the same, we uphold the order of the CIT(A) in allowing the assessee's claim of deduction u/s 80IB(10) of the Act and dismiss the grounds raised by the revenue in this regard.
9. In the result, appeal of the revenue is dismissed.
Order pronounced in the open Court on
16 th September, 2013
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 16 th September, 2013
kv
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ITA NO. 921/H/13
Sigma Constructions
=================================
Copy to:-
1. ITO, Ward - 6(3), 6 th Floor, 'C' Block, Income Tax Towers, AC Guards, Hyderabad.
2. M/s Sigma Constructions, 302, Emerald Apartments, Amrutha Hills, Panjagutta, Hyderabad.
3. The CIT (A)-IV, Hyderabad
4. The CIT-III, Hyderabad
5. The Departmental Representative, I.T.A.T., Hyderabad.