By Jagdish D. Shah
Jagdish T. Punjabi
Chartered Accountants
Mavani & Sons vs. ITO (Mumbai)
Members : B. R. Baskaran, AM and Pawan
Singh, JM
ITA No. 1374/Mum/2017
A.Y.: 2007-08. Dated: 16.03.2018.
Counsel for assessee / revenue: Ajay Singh /
V. Justin
FACTS
During the previous year relevant to the
assessment year under consideration, assessee filed its return of income
claiming a deduction of Rs. 52,91,537 u/s. 80IB(10) of the Act, in respect of a
housing project, known as Maruti Mahadev Nagar. The housing project undertaken
by the assessee was approved by the local authority on 9.1.2003 but the project
commenced in October 2003. As per sanctioned plans, the project consisted of
four wings – Wing Nos. 1 to 3 consisted of Blocks A to G and Wing No. 4
consisted of blocks H to K. The first
phase of completion certificate was issued vide occupation certificate dated
14.3.2007 and second completion certificate was issued on 26.3.2009. The
deduction of Rs. 52,91,537 was in respect of Blocks F and G under Building (sic Wing) No. 3.
The Assessing Officer (AO) while assessing
the total income u/s. 143(3) r.w.s. 147 of the Act denied the claim for
deduction u/s. 80IB(10) on the ground that the project was not completed within
a period of five years from the date of approval of the project and for this
purpose the period of five years has to commence with the date of approval of
the project and not from the date of commencement of work on the project. The project was partially completed on
14.3.2007 and was finally completed on 26.3.2009. According to the AO, partial completion was
not final completion as per provisions of section 80IB(10).
Aggrieved, the assessee preferred an appeal
to CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal
to the Tribunal where it was contended, on behalf of the assessee, for grant of
deduction u/s. 80IB(10), the conditions prevalent at the time of commencement
of the project need to be satisfied.
HELD
The Tribunal noted that the Madras High
Court has in the case of CIT vs. Jain Housing Construction Co [2013] 30
taxmann.com 131 (Mad.) while considering similar issues held that
furnishing of completion certificate to be produced as a condition for grant of
deduction u/s. 80IB(10) was introduced by Finance Act, 2004 w.e.f. 1.4.2005 and
prior thereto there was no such requirement and in the absence of any requirement
u/s. 80IB(10)(a) of the Act and going by the proviso as it stood during the
relevant year 2004-05, it is difficult to accept the contention of revenue that
claim for deduction rested on production of completion certificate. It also noted that the Delhi High Court has
in the case of CIT vs. CHD Developers Ltd. 362 ITR 177 (Del.) held that
when approval related to the project was granted prior to 2005 i.e. before
amendment, the assessee was not required to produce the completion certificate
to avail deduction u/s. 80IB. Similarly,
Hyderabad Bench of the Tribunal has in the case of ITO vs. Kura Homes (P.)
Ltd. [2004] 47 taxmann.com 161 held that furnishing of completion
certificate in respect of housing project was brought into statute only w.e.f.
1.4.2005 and would apply prospectively. The Apex Corut in CIT vs. Akash
Nidhi Builders & Developers [2016] 76 taxmann.com 86 (SC) has held that
assessee was entitled for proportionate profit in respect of different wings of
the project.
Considering the ratio of the decisions of
the Delhi High Court in CHD Developers (supra), Madras high Court in
Jain Housing & Construction Ltd. (supra) and Hyderabad Bench in
ITO vs. Kural Homes (P.) Ltd. (supra), the Tribunal held that condition
precedent for grant of deduction for seeking completion within the time
prescribed has to be treated as applicable prospectively and accordingly, the
assessee is not required to produce completion certificate as the project was
approved before the amendment to section 80IB(10).
The appeal filed by the assessee was
allowed.
