Assessee is a firm engaged in business of builder and promoter. The
issue before us is regarding allowability of deduction u/s.80IB(10) of
the Act on partially complete project. The Assessing Officer has denied
the deduction on the ground that project was not complete within the
stipulated time. There is no dispute with regard to other conditions
laid u/s.80IB(10) of the Act, i.e., commencement of project, area of
land of project, etc. Assessee's housing project was approved vide
commencement certificate No.3837/04 dated 13.01.2005 out of which
completion certificate was obtained and furnished before the Assessing
Officer for 173 out of 205 flats. Same was rejected by the Assessing
Officer and confirmed by the CIT(A). The request for granting whole
deduction in respect of whole project has rightly been rejected because
deduction
u/s.80IB(10) could not be granted to assessee on incomplete
construction at relevant point of time. Regarding proportionate
deduction in respect of 173 of 205 flats of project completed as
recognized by local authority, i.e., PMC in its completion certificate
No.BCO/03/01333 dated 31.03.2008, the Ld. Authorised Representative
heavily relied on decision of Bengal Ambuja Housing Development Ltd.
(supra), Brigade Enterprises P. Ltd. (supra), AIR Developer (supra),
Sheth Developers (supra) and also G.V.Corporation (supra), wherein
deduction u/s.80IB(10) was denied as size of some of the residential
units exceeded prescribed limit as laid down u/s.80IB(10) of the Act.
Above mentioned decisions are applicable in their own sphere, i.e. on
point of excess area of some of the flats which hold good in its own
sphere. However, in case before us, deduction u/s.80IB(10) of the Act
has been rejected on the ground that condition of completion of project
before the due date i.e., 31.03.2008 as laid down u/s.80IB(10)(c) of the
Act, has not been complied by assessee which is basic condition for
allowability of deduction u/s.80IB(10) of the Act. We find that in case
of Johar Hassan Zojwalla (supra), wherein condition of completion as
laid down in section 80IB(10)(a) could not be complied with because of a
stay being granted by MRTP Court. Thus fault of incompletion of
construction was not attributable to assessee. In case such a
contingency emerges which makes the compliance with provision
impossible, then benefit bestowed on an assessee cannot be completely
denied. Such liberal interpretation should be used in favour of assessee
when he is incapacitated in completing project in time for the reasons
beyond his control. In case before us, as stated on behalf of assessee,
that assessee submitted certain modifications/rectifications for top
floors of building. The said modification/rectification could not be
completed as local authority could not approve the modification as their
files have been taken over by concern intelligence department for
investigation of violation of urban land ceiling Act applicable to land
in question at relevant point of time. This fact has not been disputed
on behalf of revenue. Thus, assessee was prevented by sufficient
reasonable cause which compelled the impossibility on part of the
assessee to have completion certificate in time. It is settled legal
position that the law always give remedy and the law does wrong to no
one. We agree to proposition put forward by Ld. Departmental
Representative that plain reading of section 80IB(10) of the Act
suggests about only completion of construction and no adjective should
be used alongwith the word completion. This strict interpretation should
be given in normal circumstances. However, in case before us, assessee
was prevented by reasonable cause to complete construction in time due
to intervention of CID action on account of violation of provisions of
Urban Land Ceiling Act applicable to land in question. Assessee was
incapacitated to complete the same in time due to reasons beyond his
control. Assessee should not suffer for same. The revision of plan is
vested right of assessee which cannot be taken away by strict provisions
of statute. The taxing statute granting incentives for promotion of
growth and development should be construed liberally and that provision
for promoting economic growth has to be interpreted liberally. At the
same time, restriction thereon too has to be construed strictly so as to
advance the object of provision and not to frustrate the same. The
provisions of taxing statute should be construed harmoniously with the
object of statue to effectuate the legislative intention. In view of
above facts and circumstances, we hold that assessee is entitled for
benefit u/s.80IB(10) of the Act in respect of 173 flats completed before
prescribed limit. The Assessing Officer is directed accordingly.
INCOME TAX APPELLATE TRIBUNAL , PUNE
I.T.A. No. 84/PN/2011 : A.Y. 2007-08
M/s. Ramsukh Properties Vs. Dy CIT
Date of pronouncement: 25-07-2012
ORDER
PER SHRI SHAILENDRA KUMAR YADAV, JM
This
appeal by the assessee is directed against order of the CIT(A)-II Pune
dated 19-11-2010 for A.Y. 2007-08 on the following grounds:
"1.
The Hon'ble CIT(A) erred in confirming the AO's order not allowing the
appellant's claim for deduction of Rs. 7,87,49,450/- u/s 80-IB(10) on
grounds that all 205 flats planned in the project were not completed
within the time stipulated under the section. The appellant pleads that
its claim is legitimate and that the AO be directed to allow the claim.
2.
The Hon'ble CIT(A) erred in confirming the AO's order denying
proportionate deduction u/s 80-IB(10) in respect of 173 flats which were
completed within the stipulated time and certified as such by the local
authority. "
2. The assessee is a firm engaged in the business
of builders and promoters. The issue before us is regarding deduction
u/s 80-IB(10) of the Act amounting to Rs. 7,87,49,450/-. The Assessing
Officer denied the deduction u/s 80-IB(10) of the Act on the ground that
the project was not complete within the stipulated period of time. The
assessee's project at Vishrantwadi, consisted of six buildings C, D and
E1 to E4 having 205 flats. The housing project was approved vide
commencement certificate no. 3837/04 dated 13-1-2005 out of which
completion certificate was obtained and furnished before the Assessing
Officer for 173 flats only. The stand of the assessee before the
Assessing Officer was that other conditions given u/s 80-IB(10) (b), (c)
and (d) were fulfilled and so far as condition given in clause (a) of
section 80-IB(10) is concerned, which relates to completion of the
project within the stipulated time period, it was stated that 85% of the
housing project was completed. However, the Assessing Officer rejected
the claim of the assessee on main as well as alternate claim with
regards to the proportionate deduction. The matter was carried in appeal
before the first appellate authority who confirmed the order of the
Assessing Officer on main ground as well as alternate ground.
3.
Before us, the learned Authorised Representative submitted that the
assessee being a builder and developer had claimed the deduction u/s
80-IB(10) on the basis of occupation/completion certificate issued by
the local authority i.e. Pune Municipal Corporation dated 31-03-2008.
The assessment year being 2007-08 as approximately 85% of the project
was completed and fully recognizable revenue was booked in accordance
with project completion method of accounting. The stand of the assessee
before the Assessing Officer has been that the project has been
substantially completed and as such the completion certificate was
obtained, the deduction u/s 80-IB(10) of the Act be granted. The
Assessing Officer rejected the claim of the assessee as stated above and
confirmed by CIT(A).
3.1. Regarding proportional deduction stand
of assessee has been that completion certificate issued by the local
authority has been issued in respect of 173 residential units vide its
certificate No. BCO/03/01333 dated 31-3-2008. According to Ld.
Authorised Representative for assessee, section 80- IB(10) stipulates
that 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. The legislature
did not add any adjective to the word completion such as full completion
or part completion or substantial completion. Hence phrase "completion"
is a relative, and not absolute term. Accordingly even part completion
must be construed to completion as the local authority being recognized
as authority for approval and completion of housing project u/s
80-IB(10), completion certificate issued by local authority should not
be doubted.
3.2. The Ld. AR submitted that the Tribunal in the
case of Bengal Ambuja Housing Development Ltd. In ITA No. 1595/Kol/2005
for A.Y. 2002-03 dated 24-3-2006 has held as under:
We,
therefore, keeping in view the above facts and circumstances and in the
light of above discussion, are of the opinion that the ld. CIT(A) while
allowing the claim of the assessee on account of deduction of profit u/s
80-IB(10) on 150 units has passed a well reasoned and speaking order
which does not need any interference at our end. We therefore, uphold
the same and reject the ground raised by the Revenue."
This decision of Calcutta Bench has been approved by Hon'ble Calcutta High Court.
3.3.
The learned AR for the assessee drew our attention to the decision of
Bombay Bench J of the Tribunal in the case of Mr. Johar Hassan Zojwalla
in ITA No. 5404/MUM/2008 for A.Y. 2005-06 dated 12-1-2011 wherein it has
been held as under:
6.1. In the case of Bengal Ambuja Housing
Development Ltd. (supra), the facts were that the housing project
consisted of 261 residential units and the individual flat size varied
between 800 sq.ft. to 3000 sq.ft. and the total built up area of this
housing project was 346599 sq. ft. This project contained 150
residential units with a built up area of individual unit of less than
1500 sq.ft. aggregating to 169500 sq.ft. The remaining built up area of
187593 sq. ft. was consumed by other residential units wherein the size
of individual unit exceeded 1500 sq. ft. of built up area. Under these
circumstances, the assessee had claimed deduction u/s.80IB(10) with
reference to the profit attributable to the built up area which was
occupied by residential units having individual flat size of less than
1500 sq.ft. The A.O. rejected the claim of the assessee u/s.80IB(10),
inter alia, observing that as per the terms of sec.80IB(10), all the
units comprised in the housing project should have had individual flat
size of less than 1500 sq.ft. In the backdrop of these facts, the
Tribunal observed that the provisions laid down in sec.80IB(10) do not
speak regarding such denial of deduction in case of profit from a
housing complex containing both the smaller and large residential units
and since the assessee had claimed only deduction on account of smaller
qualifying units by fulfilling all the conditions as laid down
u/s.80IB(10), the denial of claim by the A.O. was not justified.
6.2
In the case of Brigade Enterprises (P) Ltd. (supra), the facts were
that the assessee formed a single project by name `Brigade Millennium'
comprising a total area of 22 acres and 19 guntas in Survey Nos.44, 45
and 51/1 of Bangalore South Taluk. This macro project comprised certain
housing blocks, community hall etc. as its micro components. It
comprised, among other things, 5 residential blocks by name Mayflower,
Cassia, Magnolia, Jacaranda and Laburnum. Approval had been obtained
from BDA on 24-5-2002. The assessee took two blocks separately, viz.,
Mayflower and Cassia, and claimed the benefit of deduction u/s.80IB of
the Act in respect of the said two blocks, claiming them to be separate
projects, as only the said two blocks could fulfill the requirements
prescribed u/s.80IB of the Act. The AO, however, denied the claim of
deduction u/s.80IB treating Brigade Millennium as only one project. The
Tribunal, after considering the facts, observed that the use of the
words "residential units" means that deduction should be computed
unit-wise. Therefore, if a particular unit satisfies the conditions of
sec.80IB, the assessee is entitled for deduction. Therefore, the
Tribunal upheld the order of Id. CIT(A) in allowing deduction
u/s.80IB(10) in respect of two blocks as claimed by the assessee.
6.3
In the case of ITO vs. AIR Developers (supra) also, inter alia, the
dispute was that since the built up area of some of the residential
units was more than 1500 sq. ft., deduction u/s.80IB(10) was not
allowed. The Tribunal, following the decision in Bengal Ambuja Housing
Development Ltd. (supra) also, held that proportionate deduction is to
be allowed.
6.4 In the case of Sheth Developers (supra) also,
similar view was taken and it was held that even where some of the units
in a housing complex exceed the area limit, relief has to be given on a
pro rata basis.
6.5 In the case of' G.V. Corporation vs. ITO
(supra), the assessee, at the request of purchasers, joined some of its
flat/residential units, as a result of which built up area of those
flats exceeded 1,000 sq. ft. Deduction was denied u/s.80IB(10) on the
ground that the aforesaid act of the assessee resulted in violation of
the provisions of sec.80IB(10). The Tribunal, following the Special
Bench decision of the Tribunal in the case of Brahma Associates vs. Jt.
CIT (2009) 119 ITD 255, held that deduction could not be totally denied
and it would be eligible for proportionate deduction.
7. In all
the above decisions, deduction u/s.80IB was denied as some of the
residential units exceeded the limit of 1500 sq. ft. as laid down
u/s.80IB(10(c). However, in the present case, the deduction has been
denied, inter alia, on the ground that the project could not be
completed before 31-3-2008. It is not disputed that this condition has
not been fulfilled. Now, in the light of the aforesaid decisions, we
have to consider what would be the consequences of the project being not
completed by 31-3-2008. This is the basic condition for allowability of
deduction u/s.80IB. We find considerable force in the submission of Ld.
DR. However, since the condition could not be complied with because of
stay being granted by MRTP Court, fault cannot be found with the
assessee. If such a contingency emerges, which makes the compliance with
the provisions impossible, then the benefit bestowed on an assessee can
not be completely denied. We may clarify that it is only in such
exceptional circumstances that the deduction cannot completely be denied
but this cannot be extended to such situations where the project is not
completed on account of reasons within the control of assessee. In the
case of Brigade Enterprises (P) Ltd. (supra), the Tribunal observed that
the use of words "residential units" means that deduction should be
computed unit-wise. Therefore, if a particular unit fulfils the
conditions of section 80IB, the assessee is entitled for deduction
subject to fulfillment of other statutory requirement. In the present
case we find that there is no dispute that Buildings A & B have
complied with the conditions contemplated u/s.80IB but the project as
such could not be treated as completed within the stipulated period.
Therefore, in view of the principles laid down in the aforesaid
decisions, we are of the opinion that on account of assessee being
incapacitated in completing the project within the stipulated period,
proportionate deduction u/s.80IB should be allowed in the ratio of area
completed to sanctioned area. We may clarify that for the purpose of
sanctioned area, the size of plot is to be taken at 5100 sq.ft. In the
result, this ground is partly allowed.
8. In the result, the appeal is partly allowed."
3.4.
The learned AR submitted that in the case of Bajaj Tempo Ltd. Vs. CIT
(1992) 196 ITR 188 (SC), the Hon'ble Supreme Court held that a provision
in a taxing statute granting incentives for promotion of growth and
development should be construed liberally, and that since provision for
promoting economic growth has to be interpreted liberally, while
restriction on it too has to be construed strictly so as to advance the
object of provision and not to frustrate the same. In the case of CIT
Vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 the
Apex Court held that the provisions of taxing statute should be
construed harmoniously with the object of the statute to effectuate the
legislative intention. In the case of CIT Vs. Strawboard Mfg. Co. Ltd.
(177 ITR 431) (SC) Hon'ble Supreme Court had emphasized the above
principles. In this background, an alternate ground of the assessee was
that even if it is presumed that the project is not fully completed then
the proportionate deduction should have been granted on the basis of
Principles of Proportionality or pro rata basis. According to Ld.AR, the
Tribunal Benches have granted proportionate deduction in respect of
deduction u/s 80-IB(10) of the Act in following cases:
1) Johar Hassan Zojwalla (supra)
2) G.V. Corporation Vs. ITO (2010) 30 SOT 174 (Mum)
3) Arun Excello Foundations (P) Ltd. Vs. ACIT (2007) 108 TTJ (Chennai) 71
4) Dy. CIT Vs. Brigade Enterprises (P) Ltd. (2008) 119 TTJ (Bang) 269
5) Bengal Ambuja Housing Development Ltd (supra)
6) ITO Vs. AIR Developers (2010) 122 ITD 125 (Nag)
7) ACIT Vs. Sheth Developers (P) Ltd. 33 SOT 277 (Bom).
Accordingly Ld. Authorised Representative submitted that assessee should be granted relief on proportionate basis.
On
the point of late completion due to incapacitation the stand of the
assessee is that because the assessee submitted certain
modifications/rectifications for the top floors of the buildings. The
said revision could not be completed as the Pune Municipal Corporation
could not approve the modification as their files have been taken over
by the CID for investigation of ULC Act by the Government of Maharashtra
and the same was received back from the CID only on 16-11-2007 and
further approval was received and the assessee could complete the total
project on 6-3-2010. These facts have not been disputed by revenue.
Accordingly, Ld. Authorised Representative submitted that the assessee
was prevented by sufficient cause and the law cannot compel the
impossible i.e. lex non cogit ad impossibilia. Lex simper dabit
remedium, the meaning "the law always gives the remedy". "Lex nemini
facit injuriam" the meaning "The law does wrong to no one" as held in
the case of Smt. V.A. Tharabai Vs Dy CIRT (2012) 14 DTR (Trib) 15
(Chennai), wherein Tribunal has recognized benefit of deduction under
section 80IB of part completion due to genuine hardship to complete in
time.
4. On the other hand, Ld. Departmental Representative
submitted that a plain reading of section 80IB(10)(a) suggests that it
speaks about only completion of construction and no adjectives can be
used along with the word `completion'. The use of words like "such" and
"the" before the "Housing project" and "completion" clearly and plainly
suggest that the same is very specific and no two meanings can be
assigned to the same. Even, plain and ordinary reading of the word
"completion" suggests that if a particular project is not complete then
in no way and in no sense, anybody can say that the project is
completed. Deduction u/s 80IB(10) has to be given on completion of the
project by the specified date. As the appellant has not completed the
project by the due date specified as per the Statute, hence no deduction
is available to the appellant.
5. If the Legislature can use and
clearly specify about the `approval' which is relevant for the purpose
of Explanation (i) to section 801B(10) of the Act then the Legislature
had all the powers to legislate and specify about completion or `part'
completion of project by specified dates in view of which the assesses
can avail off the benefit of deduction u/s 80IB(10) of the Act. By
choosing not to do the same means that this was never the intention of
the Legislature. The Legislature, having realized the lacunae about the
date of completion of the project, an amendment had been brought to
section 80IB(10)(a) whereby the outer limit for completion of the
project was specified. In the absence of this provision earlier, the
object of providing residential accommodation to public at large within a
limited time frame was getting frustrated and therefore, in order to
give priority to the availability of residential accommodation, the
amendment has been brought. Otherwise too, the use of the word "the"
before "housing project" in Explanation (ii) clearly shows that the
Legislature only intended for full completion of Housing Project and
there is no scope for any other meaning etc. to be attributable to the
same in view of the plain and simple language used by the Legislature.
Decision in case of Johar Hassan Zojwalla in ITA No. 5404/Mum/2008 for
A.Y 2005-06 does not help the assessee. He accordingly submitted that
the order of the CIT(A) being just and proper should be upheld.
6.
After going through rival submissions and material on record, we find
that the assessee is a firm engaged in business of builder and promoter.
The issue before us is regarding allowability of deduction u/s.80IB(10)
of the Act on partially complete project. The Assessing Officer has
denied the deduction on the ground that project was not complete within
the stipulated time. There is no dispute with regard to other conditions
laid u/s.80IB(10) of the Act, i.e., commencement of project, area of
land of project, etc. Assessee's housing project was approved vide
commencement certificate No.3837/04 dated 13.01.2005 out of which
completion certificate was obtained and furnished before the Assessing
Officer for 173 out of 205 flats. Same was rejected by the Assessing
Officer and confirmed by the CIT(A). The request for granting whole
deduction in respect of whole project has rightly been rejected because
deduction u/s.80IB(10) could not be granted to assessee on incomplete
construction at relevant point of time. Regarding proportionate
deduction in respect of 173 of 205 flats of project completed as
recognized by local authority, i.e., PMC in its completion certificate
No.BCO/03/01333 dated 31.03.2008, the Ld. Authorised Representative
heavily relied on decision of Bengal Ambuja Housing Development Ltd.
(supra), Brigade Enterprises P. Ltd. (supra), AIR Developer (supra),
Sheth Developers (supra) and also G.V.Corporation (supra), wherein
deduction u/s.80IB(10) was denied as size of some of the residential
units exceeded prescribed limit as laid down u/s.80IB(10) of the Act.
Above mentioned decisions are applicable in their own sphere, i.e. on
point of excess area of some of the flats which hold good in its own
sphere. However, in case before us, deduction u/s.80IB(10) of the Act
has been rejected on the ground that condition of completion of project
before the due date i.e., 31.03.2008 as laid down u/s.80IB(10)(c) of the
Act, has not been complied by assessee which is basic condition for
allowability of deduction u/s.80IB(10) of the Act. We find that in case
of Johar Hassan Zojwalla (supra), wherein condition of completion as
laid down in section 80IB(10)(a) could not be complied with because of a
stay being granted by MRTP Court. Thus fault of incompletion of
construction was not attributable to assessee. In case such a
contingency emerges which makes the compliance with provision
impossible, then benefit bestowed on an assessee cannot be completely
denied. Such liberal interpretation should be used in favour of assessee
when he is incapacitated in completing project in time for the reasons
beyond his control. In case before us, as stated on behalf of assessee,
that assessee submitted certain modifications/rectifications for top
floors of building. The said modification/rectification could not be
completed as local authority could not approve the modification as their
files have been taken over by concern intelligence department for
investigation of violation of urban land ceiling Act applicable to land
in question at relevant point of time. This fact has not been disputed
on behalf of revenue. Thus, assessee was prevented by sufficient
reasonable cause which compelled the impossibility on part of the
assessee to have completion certificate in time. It is settled legal
position that the law always give remedy and the law does wrong to no
one. We agree to proposition put forward by Ld. Departmental
Representative that plain reading of section 80IB(10) of the Act
suggests about only completion of construction and no adjective should
be used alongwith the word completion. This strict interpretation should
be given in normal circumstances. However, in case before us, assessee
was prevented by reasonable cause to complete construction in time due
to intervention of CID action on account of violation of provisions of
Urban Land Ceiling Act applicable to land in question. Assessee was
incapacitated to complete the same in time due to reasons beyond his
control. Assessee should not suffer for same. The revision of plan is
vested right of assessee which cannot be taken away by strict provisions
of statute. The taxing statute granting incentives for promotion of
growth and development should be construed liberally and that provision
for promoting economic growth has to be interpreted liberally. At the
same time, restriction thereon too has to be construed strictly so as to
advance the object of provision and not to frustrate the same. The
provisions of taxing statute should be construed harmoniously with the
object of statue to effectuate the legislative intention. In view of
above facts and circumstances, we hold that assessee is entitled for
benefit u/s.80IB(10) of the Act in respect of 173 flats completed before
prescribed limit. The Assessing Officer is directed accordingly.
7. As a result, the appeal of the assessee is disposed off as indicated above.
Decision is pronounced in the open court on 25th July 2012.