2012-VIL-949-ITAT-PNE

Income Tax Appellate Tribunal PUNE

I.T.A. No. 84/PN/2011

Date: 25.07.2012

M/s . RAMSUKH PROPERTIES

Vs

DY CIT CIR. 2, PUNE

BENCH

SHRI SHAILENDRA KUMAR YADAV AND SHRI R.K. PANDA, JJ.

JUDGMENT

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.

 

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