Issue for Consideration Section 80-IB(10) of the Income-tax Act, 1961 provides for a deduction of 100% of the profits derived from the undertaking of developing and building a housing project approved before 31st March 2008 by a local authority. One of the conditions, contained in clause(a) of s. 80IB(10), subject to which this deduction is granted is that the undertaking has commenced development and construction of the housing project on or after 1st October 1998, and completes such construction:
(i) where the housing project has been approved by the local authority before 1st April 2004, on or before 31st March 2008;
(ii) where the housing project has been approved by the local authority on or after 1st April 2004 but not later than 31st March 2005, within 4 years from the end of the financial year in which the housing project was approved by the local authority;
(iii) where the housing project has been approved by the local authority on or after 1st April 2005, within 5 years from the end of the financial year in which the housing project was approved by the local authority.
The explanation to clause (a) of this sub-section clarifies 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 the housing project is issued by the local authority.
Given the fact that there are often delays in issue of the completion certificate by the local authority, the question has arisen before the courts as to whether the benefit of the deduction would be available in a situation where the completion certificate is issued by the local authority beyond the specified time limit, though the actual construction may have been completed within the permissible time-limit. The issue has also arisen as to whether this time limit applies to housing projects whose plans have been approved prior to 1st April 2005, and whether the deduction would be available where the completion certificate has been obtained belatedly, though the housing project has been certified to have been completed within the specified time period.
While the Gujarat and the Delhi High Courts have taken the view that the deduction would be available in cases where completion certificate is not obtained within the prescribed time, the Madhya Pradesh High Court has taken a contrary view and held that the deduction would not be available in such cases.
CHD Developers’ case
The issue came up for consideration before the Delhi High Court in the case of CIT vs. CHD Developers Ltd. 362 ITR 177.
In that case, the assessee, a real estate developer launched a project in Vrindavan, for which it obtained the approval from the Mathura Vrindavan Development Authority on 16th March 2005. It applied for a completion certificate from the authority on 5th November 2008. For assessment year 2007-08, the assessee claimed a deduction u/s. 80-IB(10).
The assessing officer disallowed the claim for deduction u/s. 80-IB(10), on the ground that the completion certificate had not been granted for the project. The Commissioner(Appeals) upheld the order of the assessing officer.
The Tribunal allowed the benefit of the deduction to the assessee on the following grounds:
(i) the approval for the project was granted on 16th March 2005, before the insertion of the time limits for completion of the project u/s. 80-IB(10), which came into effect from 1st April 2005. Prior to insertion of these time limits for completion of the project, the only requirement of time was that the development and construction of the housing project should commence on or after 1st October 1998. Therefore, at the time of sanction of the project, there was no condition for production of completion certificate.
(ii) It is a settled position in law that the law existing at a particular point of time will be applicable unless and until it is specifically made retrospective by the legislature. The insertion of the requirement of completion certificate within a particular time frame was applicable prospectively and not retrospectively. Had the legislature so intended, nothing prevented the legislature from doing so.
(iii) It was evident from the letter filed for request of completion certificate on 5th November 2008 that the construction had been completed and the request was made for grant of completion certificate of phase I. Since the development authority had neither said that the project was not complete, nor completion certificate was issued to the assessee, the project was presumed to be complete as on 5th November 2008.
(iv) if such certificate was not issued to the assessee, the assessee could not be penalised for the act of an authority on which it had no control, in the absence of any variation or allegation.
Reliance was placed by the tribunal on the decision in the case of CIT vs. Anriya Project Management Services (P) Limited 209 Taxman 1 ( Karn.) for the proposition that the amendment was prospective and did not apply to projects approved before 1st April 2005, where the court had held that another amendment made at the same time to section 80-IB(10), inserting the definition of built-up area, was prospective in nature applicable from 1st April 2005, and did not apply to housing projects approved by the local authority prior to that date.
Besides various other decisions of the Tribunal, the Tribunal had also relied upon the decision of the Gujarat High Court in the case of CIT vs. Tarnetar Corporation 362 ITR 174, in deciding the issue in favour of the assessee.
The Delhi High Court, after considering the decision of the tribunal, noted the decisions of the Karnataka High Court in the case of Anriya Project Management Services (P) Limited (supra), the Bombay High Court in the case of CIT vs Brahma Associates 333 ITR 289, and the Gujarat High Court in the case of Manan Corpn. vs. Asst CIT 214 Taxman 373, all of which had taken the view that the amendments to section 80-IB(10) , effective 1st April 2005 were prospective in nature, and not retrospective.
The Delhi High Court also considered instruction number 4 of 2009 dated 30th June 2009 issued by the CBDT, where the CBDT had clarified that the deduction u/s. 80- IB(10) could be claimed on a year-to-year basis, where the assessee was showing profit from partial completion of the project in every year, and in case it was later found that the condition of completion of the project within the specified time limit of 4 years had not been satisfied, the deduction granted to the assessee in earlier years should be withdrawn. The Delhi High Court inferred from the said instruction that in the post-amendment period, strict adherence to completion period of 4 years was insisted upon where project completion method was followed, and that the limitation of period did not exist prior to the amendment. If an assessee was following percentage of completion method, it would have got the deduction for the earlier years prior to the amendment, but because it was following completed contract method, and the contract was completed after the amendment, the deduction was being denied to it. According to the Delhi High Court, the amendment could not discriminate against those assessees following project completion method.
The Delhi High Court noted that in the case before it, the approval of project for commencement was given prior to the amendment, which required the obtaining of completion certificate within the end of the 4 year period. It agreed with the Gujarat High Court, that the application of such stringent conditions, which were left to an independent body such as the local authority, which was to issue the completion certificate, would have led to not only hardship, but absurdity. Accordingly, the Delhi High Court held that the assessee was entitled to the deduction, and upheld the decision of the Tribunal.
A similar view was taken by the Gujarat High Court in the case of CIT vs. Tarnetar Corporation (supra). In that case, the assessee had applied and got approval for the housing project from the local authority before 1st April 2004, and therefore, had to complete the project by 31st March 2008. It completed the construction in the year 2006 and applied for completion certificate in February 2006. This application was rejected in July 2006 for technical reasons, and thereafter, after fresh effort, the completion certificate was received on 19th March 2009. In the meanwhile, several residential units were sold and occupied without the necessary permission before the last date for completion of construction, for which the assessee paid a penalty and got such occupation regularised.
The Gujarat High Court held that it was not in doubt that the assessee had completed the construction well before 31st March 2008. It was true that formal completion certificate was not granted by the municipal authority by that date, and that section 80-IB linked the completion of the construction to the completion certificate being granted by the local authority. However, according to the Gujarat High Court, not every condition of the statute could be seen as mandatory. If substantial compliance of the conditions was established on record, the court could take the view that minor deviation therefrom would not vitiate the very purpose for which deduction was being made available. Accordingly, the Gujarat High Court had held that the assessee was entitled to the benefit of the deduction in that case.
A similar view was also taken by the Bombay High Court in the case of CIT vs. Hindustan Samuh Awas Ltd. 377 ITR 150, holding that mere delay in receipt of completion certificate could not result in denial of the deduction.
Global Reality’s case
The issue came up again recently before the Madhya Pradesh High Court in the case of CIT vs. Global Reality 379 ITR 107.
In this case, the approval for the housing project was granted by the Municipal Corporation before 31st March 2004. The assessee on completion of the project applied to the Municipal Corporation for completion certificate on 16th January 2008. The Inspector of the Municipal Corporation inspected the site on 27th February 2008. The completion certificate was however issued on 4th May 2010, and the certificate did not mention the date of completion of the project. By a subsequent letter dated 23rd March 2011, the Municipal Corporation clarified that the date of completion of the project was 27th February 2008.
The assessee claimed deduction u/s. 80-IB(10) on the basis that the project was completed before the cutoff date, but this claim was rejected by the assessing officer on the ground that in spite of repeated opportunity given to the assessee during assessment proceedings, the completion certificate obtained before 31st March 2008 was not produced before him, and that on inquiry, in December 2008, the Municipal Corporation had confirmed that completion certificate had not been issued to the assessee till that date, and that the application of the assessee was still being processed. The assessee’s appeal was dismissed by the Commissioner(Appeals), but was allowed by the Income Tax Appellate Tribunal.
Before the High Court, it was argued on behalf of the revenue, that the tribunal had misconstrued the effect of section 80-IB(10)(a), as amended, and that the benefit was available only to specified housing projects, which were completed within the prescribed time. According to the revenue, the express provision introduced in the form of amended clause (a) of section 80-IB(10) must be construed on its own, and not on the logic applicable to other situations mentioned in the same section, where the courts had taken the view that the amended law applied only to projects approved on or after 1st April 2005. The stipulation contained in clause(a) was in the nature of withdrawal of benefit of deduction in respect of projects which had not or could not be completed within the stipulated time. The date of completion of construction had been defined to be the date on which the completion certificate was issued by the local authority. For that, sufficient time had been provided to the developer to complete the project and obtain completion certificate from the local authority well within time.
According to the revenue, in case of housing projects approved before the amendment, they were required to be completed before 31st March 2008, irrespective of the date of approval. In respect of housing projects approved on or after 1st April 2004, they were required to be completed within 4 years from the end of the financial year in which the housing project was approved by the local authority.
It was argued on behalf of the Department that as per clause (ii) of the explanation to section 80-IB(10)(a), compliance of this condition was mandatory. Any other interpretation would result in rewriting the amended provision and render the legislative intent of explicitly providing for the date on which completion certificate was issued by the local authority otiose. The very nature of amended provision in clause (a) showed that it could not be construed as having retrospective effect. Further, developers of housing projects had been treated evenly by giving 4 years time frame from the coming into force of the amendment to complete their projects and for obtaining completion certificate from the local authority with the same time. Any other interpretation would be flawed, as it would result in treating similarly placed persons unequally, as projects approved prior to the amendment would get an unlimited extended period to obtain completion certificate from the local authority to avail of the deduction. By providing an identical cut off period for obtaining completion certificate to similarly placed persons, no hardship whatsoever had been caused.
It was further argued that it was always open to the legislature to provide benefit of deduction to be availed of during a specified period on fulfilment of certain conditions. The 4 years time frame given to the respective class of developers could, by no standards, be said to be asking them to do something which was impossible. Further, it was not a case of withdrawal of benefit or of any vested rights in the concerned assessee, since no developer could claim vested right to continue with the project for an indefinite period. It was argued that the amended provision could neither be termed as amounting to change of any condition already specified nor could it said to be unreasonably harsh or producing absurd results.
On behalf of the assessee, reliance was placed on the Supreme Court decisions in the cases of CIT vs. Veena Developers 227 CTR 297 and CIT vs. Sarkar Builders 375 ITR 392, where the Supreme Court had held that section 80-IB(10) as a whole had prospective application and would not apply to housing projects approved by the local authority before the amendment. It was claimed that in any case, an assessee, who maintained books of accounts on work in progress method, as in the assessee’s case, would not be covered by the condition of obtaining completion certificate before the cut-off date. It was further argued that there was a substantial compliance with the condition, even if the completion certificate issued by the local authority was issued after the cut-off date, since the certificate unambiguously recorded the date of completion of project before the cutoff date. The assessee had no control over the working of the local authority, and once the application for issue of completion certificate had been filed prior to 31st March 2008, but the local authority finally issued the certificate after 1st April 2008, confirming that the project was in fact completed before the cut-off date, the assessee must be granted the benefit of the deduction. Taking a contrary view would result in asking an assessee to do something which was impossible and not within its control. The delay caused by the local authority in processing and issuing the completion certificate could not be the basis of denial of benefit to the assessee. Besides placing reliance on the two Supreme Court decisions, the assessee relied on various other High Court decisions, including those of the Gujarat High Court in the case of Tarnetar Corporation (supra) and of the Delhi High Court in the case of CHD Developers Ltd (supra).
The Madhya Pradesh High Court referred to the decision of the Supreme Court in the case of Sarkar Builders (supra). It noted that the issue in that case, as well as in the case of Veena Developers, related to non-compliance with the conditions in other clauses of section 80-IB(10), in particular, clause (d), relating to the commercial area not exceeding 5% of the total project area, and not in relation to the conditions in clause (a), which were the subject matter of the appeal before the High Court. In the case of Sarkar Builders, the Supreme Court had noted that all other conditions were fulfilled by the assessee, including the date by which approval was to be given and the date by which the projects were to be completed. The Supreme Court observed that if clause (d) was applied to projects approved prior to the amendment and completed within the specified time, it would result in an absurd situation and would amount to expecting the assessee to do something which was almost impossible. It was on that basis that the Supreme Court held that the provisions such as clause (d) would have prospective application, and would not apply to projects approved prior to the amendment. Since clause (d) was treated as inextricably linked with the approval and construction of the housing project, the assessee could not be called upon to comply with a new condition, which was not in contemplation either of the assessee or even of the legislature, at the time when the housing project was given approval by the local authority.
Further, the Madhya Pradesh high court observed, the Supreme Court noted that if such a condition was held applicable to projects approved prior to the amendment, then an assessee following the project completion method of accounting would not be entitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in assessment year 2005-06 or a subsequent year, while an assessee following the work in progress method of accounting would be entitled to the deduction u/s. 80-IB(10) up to assessment year 2004-05, and would be denied the benefit only from assessment year 2005-06. According to the Supreme Court, it could never have been the intention of the legislature that the deduction u/s. 80-IB(10) available to a particular assessee should be determined on the basis of the method of accounting followed. The Supreme court therefore held that section 80-IB(10)(d) was prospective in nature, and would not apply to projects approved prior to the amendment.
The Madhya Pradesh High Court, then referred to the decisions of the Delhi High Court in the case of CHD Developers and of the Gujarat High Court in the case of Tarnetar Corporation. The court noted that though the Delhi High Court had referred to the prospective applicability of clause (d) of section 80-IB(10), which was dealt with by the Supreme Court in Veena Developers and Sarkar Builders cases, it finally concluded on the basis that the application of a stringent condition, which was left to an independent body, such as a local authority, which was to issue the completion certificate, would result in causing hardship to an assessee and also result in absurdity. The court further noted that the Gujarat High Court had found that the assessee completed the construction well before the last date, and also sold several units which were completed and actually occupied, and it had also applied for the permission to the local authority before that date and the court’s decision was on the basis of the finding recorded by the tribunal that the construction was completed in 2006, and that the application for completion certificate was submitted to the principal authority in February 2006. It was in the context of those facts that the Gujarat High court went on to observe that not every condition of statute can be seen as mandatory and that a substantial compliance of such condition was substantiated, the court can take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available. The Madhya Pradesh High Court having noted the above stated facts and the reasons for the decisions by the high courts, expressed its inability to agree with the decisions of the Delhi and Gujarat High Courts.
According to the Madhya Pradesh High Court, the Supreme Court decisions in the case of Veena Developers and Sarkar Builders had to be understood only in the context of a new condition stipulated regarding the built-up area of the project, by way of an amendment through clause (d), with which the assessee could not have complied at all, even though the construction of the housing project was otherwise in full compliance of all conditions set out in the approval given by the municipal authority. In the view of the Madhya Pradesh High Court, clause (a) could not be considered as a condition that was sought to be retrospectively applied, and that too incapable of compliance, since it dealt with the time frame within which the incomplete housing project was expected to be completed to get the benefit of the prescribed deduction.
According to the Madhya Pradesh High Court, it could not be treated as a new condition linked to the approval and construction, or having retrospective effect as such, since it gave at least 4 years timeframe to both class of housing projects, those approved prior to 1st April 2004 or after 1st April 2004. The 4 years period obviously had prospective effect, though limiting the period for completion of the project to avail of the benefit and such period of 4 years could not be said to be unreasonable, harsh, absurd or incapable of compliance.
The Madhya Pradesh High Court was of the view that it was also not a case of withdrawal of vested right of the developer, since no developer could claim vested right to complete the housing project in an indefinite period. The right arising from section 80-IB was coupled with the obligation or duty to complete the project in the specified time frame. If the developer did not complete the housing project within the specified time, it would not receive that benefit. According to the Court, the provision for claiming tax deduction for profits could certainly prescribe reasonable conditions and time frame for completion of the project in larger public interest.
Addressing the argument as to whether the stipulation contained in clause(a) of section 80-IB(10) could be said to be directory, the Madhya Pradesh High Court observed that considering the substantial benefit offered by section 80-IB of 100% of the profits, which was a burden on the public exchequer due to waiver of commensurate revenue, and the purpose underlying the same, the stipulation for obtaining completion certificate from the local authority before the cut-off date must be construed as mandatory. The fact that compliance with this condition was dependent on the manner in which the proposal was processed by the local authority, could not make the provision a directory requirement. According to the Madhya Pradesh High Court, it was a substantive provision mandating issuance or grant of completion certificate by the local authority before the cut-off date, as a precondition to get the benefit of tax deduction. Otherwise, it would be open to an assessee to rely on other circumstances or evidence to plead that the housing project was complete, requiring enquiry into those matters by the tax authorities, in the absence of a completion certificate. According to the High Court, if the argument of substantial compliance were accepted, it would lead to uncertainty about the date of completion of the project, which was the hallmark for availing of the benefit of tax deduction. It was only with this intent, according to the High Court, that the legislature had laid down that the date of completion of construction was taken to be the date on which the completion certificate was issued by the local authority. The Madhya Pradesh High Court observed that to interpret it to include a subsequent certificate issued after the cut-off date would not only result in rewriting of the express provision, but also run contrary to the unambiguous position pronounced in the section and would be against the legislative intent.
According to the Madhya Pradesh High Court, the provision should then have read as “date of completion of construction of the housing project shall be taken to be the date certified by the local authority in that behalf”, irrespective of the date of issuance of such certificate by the local authority. The High Court observed that only if the assessee was able to prove that the completion certificate was in fact issued by the local authority before the cut-off date, but could not be produced by the assessee within the time due to reasons beyond its control, the argument of substantial compliance of the provision could be tested. Any other interpretation would result not only in uncertainty, but the finding regarding the date of completion also would depend upon the subjective satisfaction of the assessing authority and invest wide discretion in that authority, which eventually would lead to litigation. According to the High Court, if the assessee had failed to comply with the condition of obtaining completion certificate from the local authority before the cut-off date, it must bear the consequence thereof of the denial of benefit of tax deduction offered to it.
The Madhya Pradesh High Court therefore held that the issuance of completion certificate after the cut-off date by the local authority, though mentioning the date of completion of the project before the cut-off date, did not fulfil the conditions specified in 80-IB(10)(a) read with explanation (ii), and accordingly the assessee was not entitled to the benefit of the deduction.
Observations
The condition of obtaining the completion certificate within the prescribed time is applicable to all the projects irrespective of the date of commencement of project and, looked at from the said point of view, the issue on hand has wider implications. The ratio of the decision of the Madhya Pradesh High Court, if held to be laying down the correct law on the subject, can have serious ramifications. The courts generally, while dealing with the requirement of obtaining certificates by prescribed dates, have taken a liberal view in favour of assesses in cases where the compliance in principle is shown to have been ensured. On touchstone of this test, it may be fair to demand that the benefit of deduction u/s. 80IB(10) should not be denied in cases where the project has been completed by the prescribed date but the application for certificate has been delayed or the cases where the application has been made within the prescribed time but the certificate is issued after the prescribed date. This position in law can be supported by the ratio of the decisions of the Delhi and Gujarat High Courts, squarely and fairly. In our considered opinion, no issue should revolve around the situation discussed in this paragraph and the assesseee should be conferred with the benefit of deduction in respect of the profits and gains derived from a housing project.
In cases where the project has commenced on or after the amendment, difficulties would arise where the assessee has failed to even complete the project by the prescribed date. In such cases, it may be difficult for the assessee to be the beneficiary of the deduction unless the courts read down the explanation to clause(a) or grant deduction on liberal construction of incentive provisions. It may not be possible otherwise to claim deduction, as the legislature has not only forewarned the assessee but has given sufficient time for completion, unless of course the courts read down the said explanation that stipulates time for completion, independent of the main provision. It may not be appropriate to suggest that the condition providing for obtaining of certificate from a local body is absurd, simply because it is a local body. It may also not be possible for the post amendment projects to be covered by the ratio of the decision in Veena Developers’ case, which dealt with the pre amendment project, and that too a pre amended assessment year. Nor will it be possible to be covered by the ratio of the decision in the case of Sarkar Builders’ case which dealt with the pre amended project and post amendment assessment of such a project. The post amendment projects claiming deduction in post amendment assessment years can be said to be claiming deduction with eyes wide open, and would be expected to comply with the conditions. Seeking a ‘read down’ is the best option for them.
As regards the pre-amendment projects, claiming deduction in the post amendment assessment years’, the decision of the Madhya Pradesh High Court has added an interesting dimension by separating the condition of clause (a) from the remaining conditions in clauses(b) to (d) of section 80IB(10). Subsequent to the decision of the Supreme Court in the case of Sarkar Builders, it was widely believed that such project would not be subjected to the conditions of the post amendment period. The decision has expressly dissented with the decisions of the Gujarat High Court delivered on similar facts. The Madhya Pradesh High Court has chosen to distinguish the ratio of the Supreme Court decision by restricting the scope of the said decision to clauses (b) to (d). Whether such was the view of the apex court or not, that can be clarified by the court only. In the meanwhile, we hereafter explain how the views of the Gujarat and Delhi High Courts represent a better view.
The whole basis of the Madhya Pradesh High Court order seems to be on the fact that the approval granted is not inextricably linked to the period within which the project construction would be completed. It needs to be kept in mind that the provisions of section 80-IB applied only to large projects, where the project was on the size of a plot of land which had a minimum area of one acre. Obviously, such large projects take a substantial time to complete.
The approval granted by the local authority is of the plans of the project. In most cases, the developer would have planned a phased development of the project, on the basis of which the plans were submitted. If at the point of time of approval of the plans, there was no time limit for completion of the project, a subsequent time limit of 4 years laid down for completion of the project may not suffice to complete the phased development. In such a case, the developer would either need to change the entire plan of the project, so as to ensure completion within the time limit of 4 years, which process would need an amended approval, or would suffer the loss of the deduction u/s. 80-IB in the event of failure to do so. At times, a change of plan may also not be possible on account of the fact that the construction may have been carried out in a particular manner based on the original plan, which does not permit of alteration to reduce the time period of construction.
Therefore, in most cases, the approved plan and the period of construction are inextricably linked to each other, in the same manner as the breakup of the constructed area into commercial area and residential area is linked to the plans approved. Therefore, the ratio of the Supreme Court decisions in Veena Developers and Sarkar Builders applies equally to the period of construction, as it applies to the percentage of commercial area in the project. This commercial aspect does not seem to have been properly appreciated by the Madhya Pradesh High Court.
Secondly, the Madhya Pradesh High Court held that the time limit for issue of the certificate is mandatory, and not directory, on the ground that otherwise an assessing officer would have to make enquiries and use his discretion to find out the correct date of completion. Various decisions of High Courts and the Supreme Court, in the context of different time periods specified under the Income-tax Act, have held that the purpose of laying down a time limit for furnishing of a certificate or audit report is to ensure that the assessing officer is able to complete the assessment on the basis of the certificate or audit report, and that so long as the certificate or audit report is available before the completion of assessment, that would suffice to give the benefit of the deduction or exemption to the assessee, even though the law may have prescribed a time limit for filing of the certificate or audit report, beyond which limit it was actually furnished. In these decisions, it has been invariably held that while the requirement of furnishing of the certificate or audit report is mandatory, the requirement of the time limit within which it has to be furnished is directory. A few such cases where this view has been taken by the Supreme Court is in the cases of CIT vs. Nagpur Hotel Owners Association 247 ITR 201 in the context of application for accumulation u/s. 11(2), CIT vs. G.M. Knitting Industries (P.) Ltd 376 ITR 456 in the context of audit certificate for additional depreciation, CIT vs. AKS Alloys (P.) Ltd. 376 ITR 456 in the context of audit report for deduction u/s. 80-IB, etc.
Therefore, though the obtaining of the certificate should be regarded as mandatory, the time limit for obtaining such certificate should be regarded as directory, particularly so as the actual issue of the certificate is not within the control of the assessee, once he has applied for it within the specified time.
Once the plans had been approved prior to the amendment, and all the conditions then applicable for claim of deduction u/s. 80-IB(10) had been fulfilled, viz. commencement of development of the project on or after 1st October 1998, minimum size of plot of land of one acre, and residential units having a maximum built-up area as specified, the assessee had a right to claim the deduction u/s 80-IB. That was a vested right, which could not have been taken away by a subsequent amendment, adding an additional condition, as rightly held by the Supreme Court in the cases of Veena Developers and Sarkar Builders.
The whole purpose of obtaining the certificate of completion from the local authority was to ensure that the project has been completed within the specified time. This ensured that the objective of the deduction u/s. 80-IB(10) of making residential housing available was fulfilled. So long as the completion of the project before the specified date could be demonstrated, even if it was by a certificate issued on a later date, and so long as that evidence was available at the time of assessment, the benefit of the deduction should be granted to the assessee.
As held by the Supreme Court in the case of Bajaj Tempo Ltd .196 ITR 188, in case of an incentive provision, the law should be interpreted in a liberal manner so as to grant the benefit of the deduction of the assessee, rather than deny it to the assessee on technical grounds, particularly where there is substantial compliance by the assessee. In that case, the Supreme Court observed:
“A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally the restriction on it too has to be construed so as to advance the objective of the section and not to frustrate it.”
Therefore, the view taken by the Delhi and Gujarat High Courts, that the belated obtaining of the completion certificate beyond the prescribed time limit in cases where the plans were approved prior to 1st April 2005, is not fatal to the assessee’s claim for deduction u/s. 80- IB, so long as the completion of the housing project is within the prescribed time, seems to be the better view of the matter.
In any case, if a part of the project is completed and certificate of completion has been received for such part in time, the assessee would certainly be entitled to deduction in respect of the part of the project which has been completed, as held by the Gujarat High Court in the case of CIT vs. B. M. and Brothers 42 taxmann.com 24.
