DCIT, JAIPUR vs. GURU PRAGYA INFRA (P) LTD., JAIPUR

per assessee initially the Local Authority was JDA Jaipur

but when completion certificate was not issued by JDA, it

changed the Local Authority from JDA to Gram Panchayat.

Therefore, the changed stand has no substance. Further

the Sarpanch in her statement recorded on 21-03-2013

sated that the certificate has been issued without site

9 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

verification and therefore the certificate from Sarpanch

was obtained to deceive the department.

(e) The newspaper cuttings showing occupation by few

residents do not prove that the whole project was

complete on that date.

(ii) As per section 80-IB(10)(e)/(f), not more than one residential

unit should be allotted to any person other than individual and

in case of individual no other residential unit in the project is

allotted to his spouse or minor child or HUF. This condition is

effective from 01-04-2010. In five cases, assessee has violated

this condition where more than one residential unit is allotted

to individual and in one case this condition is violated where it

is allotted to person other than individual.

u/s 148 for AY 2009-10 on 07.08.2013 and disallowed claim of deduction

u/s 80-IB of Rs.1,16,92,294/-.

10 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

assessee in AY 2010-11 and following the same, it was allowed for AY

2009-10 also which has now being contested before us.

consideration are as under:

“The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day

of March 2008 by a local authority shall be hundred per cent of the

profits derived in the previous year relevant to any assessment year

from such housing project if, -

(a) 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

11 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

financial year in which the housing project is approved

by the local authority;

(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April,

2005, within five years from the end of the financial

year in which the housing project is approved by the

local authority.

Explanation.- For the purpose of this clause,-

(i) in a case where the approval in respect of the

housing project is obtained more than once, such

housing project shall be deemed to have been

approved on the date on which the building plan of

such housing project is first approved by the local

authority;

(ii) 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 such housing

project is issued by the local authority;

(b) the project is on the size of a plot of land which has a

minimum area one acre:

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Provided that nothing contained in clause (a) or

clause (b) shall apply to a housing project carried out in

accordance with a scheme framed by the Central

Government or a State Government for reconstruction or

redevelopment of existing buildings in areas declared to be

slum areas under any law for the time being in force and

such scheme is notified by the Board in this behalf;

the residential unit has a maximum built-up area of one (c)

thousand square feet where such residential unit is situated

within the cities of Delhi or Mumbai or within twenty-five

kilometers from the municipal limits of these cities and one

thousand and five hundred square feet at any other place;

the built-up area of the shops and other commercial (d)

establishments included in the housing project does not

exceed three per cent of the aggregate built-up area of the

housing project or five thousand square feet, whichever is

higher;

(e) not more than one residential unit in the housing project is

allotted to any person not being an individual; and

in a case where a residential unit in the housing project is (f)

allotted to a person being an individual, no other residential

13 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

unit in such housing project is allotted to any of the

following persons, namely:-

(i) the individual or the spouse or the minor children of

such individual,

(ii) the Hindu undivided family in which such individual is

the karta,

(iii) any person representing such individual, the spouse

or the minor children of such individual or the Hindu

undivided family in which such individual is the karta.]

the conditions stated in sub clause (b), (c) & (d). The dispute remains

only with reference to the conditions stated is sub clause (a), (e) & (f).

In present case, to decide the fulfillment of condition referred in clause

(a), (e) & (f), following issues needs to be considered:-

(i) Who is the Local Authority to approve the housing project and to issue the completion certificate of the housing project?

(ii) When the application for issue of the completion certificate is made within the prescribed time, any delay in issue of the completion certificate would relate back to the date of making of application or not?

14 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

(iii) Whether each block of housing complex in the project is to be considered separately or all block of the housing complex in the project is to be considered together for ascertaining the date of completion of the construction of the housing project?

(iv) Whether where some of the flats in a block are not fulfilling the condition of allotment of the flat, entire deduction is to be disallowed or the claim is to be restricted proportionately?

and the contentions of the assessee in relation to the same is dealt with

as under:-

9.1 Who is the Local Authority to issue the completion certificate of

the housing project?.

9.2 In this regard, the ld AR has submitted as under:

(a) The term Local Authority is not defined in section 80-IB(10).

However, section 10(20) of the Act defines the expression “Local

Authority” to mean Panchayat as referred to in clause (d) of article

243 of the constitution. As per article 243(d) of the constitution,

“Panchayat” means an institution (by whatever name called) of self

Government constituted under article 243B for rural areas.

Therefore, the Gram Panchayat where the project of the assessee

company is located is the Local Authority for granting the approval of

the project and for issue of the completion certificate.

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(b) The Jaipur Development Authority Act, 1982 (JDA) was enacted by

the Rajasthan State Legislature with the main object to secure the

integrated development of Jaipur Region. One of the object of JDA

as specified in section 16 of this Act is to formulate and sanction the

scheme for the development of Jaipur region or any part thereof.

Section 3(3) of this Act further provides that the Authority shall be

deemed to be a Local Authority within the meaning of the term

“Local Authority” as defined in Rajasthan General Clauses Act, 1955.

Thus, JDA is a deemed Local Authority under the JDA Act, 1982.

(c) In case of Sreevatsa Real Estate P. Limited 41 DTR 497

(Chennai)(Trib.) it was held that the village Administrative officer or

Dy. Director of town planning are the Local Authority for the purpose

of approval of the Housing Project/issue of completion certificate for

the housing project.

(d) In case of DCIT Vs. Arihant Foundations & Housing Ltd. 18

ITR(Trib.) 588 (Chennai) it is held that local authority has not been

defined in sec. 80-IB(10). However, sec. 10(20) explanation provides

that local authority will definitely include a Municipal Committee,

Panchayat and Cantonment Board. Thus local authority will include

Corporation of Chennai. Chennai Corporation was issuing building

permits to all the buildings including CMDA's special buildings, after

16 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

the planning permits were issued by CMDA. Hence, deduction u/s

80-IB(10) is allowed to the assessee as Corporation of Chennai has

given completion certificate.

(e) From the above it can be noted that the Gram Panchayat is the

competent authority for approval of the Housing Project and for

issue of the completion certificate in respect of the housing project.

(f) In the present case, approval of the Housing project from Gram

Panchayat was obtained on 10-04-2007. Thus, the period of five year

from the end of the financial year in which the project is approved

ends on 31-03-2013. The housing project was completed in Feb.

2012. Therefore, assessee moved an application for issue of the

completion certificate to Gram Panchayat on 01-03-2012. The

Sarpanch of the Gram Panchayat has issued the completion

certificate on 27-03-2012. The AO has recorded the statement of the

Sarpanch on 21-03-2013 where she stated that the certificate was

issued in good faith without site verification. However, the statement

of the Sarpanch was not confronted to the assessee. Therefore, such

statement recorded at the back of the assessee has no evidentiary

value. It is a settled law that a statement recorded at back of the

assessee and not confronted to him can’t be used against the

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assessee as held by the Supreme Court in its decision dt. 02.09.2015

in case of Andaman Timber Industries Vs. CCE 127 DTR 0241

wherein it was held that denial of opportunity to the assessee to

cross-examine the witnesses whose statements were made the sole

basis of the assessment is a serious flaw rendering the order a nullity

in as much as it amounted to violation of principles of natural justice.

(g) It is also submitted that the Gram Panchayat has not withdrawn

the completion certificate issued by it and thus it remains in force

even today. The observation of the AO that Gram Panchayat has no

technical person to approve the building map, there is a change in

the stand of the assessee, assessee has taken the plea of Gram

Panchayat certificate only at the fag end of the assessment

proceeding and therefore the certificate obtained from Sarpanch was

to deceive the department are all irrelevant issues more particularly

when the approval of maps from Gram Panchayat was obtained on

10-04-2007 which is not disputed by the AO. The fact that the

housing project was completed before 31-03-2012 is further evident

from following evidences:-

- Completion certificate dated 21-03-2012 issued by M/s Mishra

Garg and Associates who are architects, planners, registered

18 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

valuer and the technical person. This certificate given to the AO is

ignored by him.

- The newspaper cuttings dated 30-03-2012 to 05-04-2012 showing

the actual site photographs and the news of completion of the

construction of 576 flats in the housing project and the Grah

Pravesh by around 100 families in these flats.

- NOC issued by Chief Fire Brigade Officer, Nagar Nigam Jaipur on

30.03.2012 & 23.05.2012 for meeting the fire safety standard.

(h) Without prejudice to above, even if the JDA is deemed to be Local

Authority for approval and issue of completion certificate, it may be

noted that the JDA communicated the approval of maps to the

assessee in the month of August 2008 and Oct 2008 and therefore

the period of five years from the end of the financial year from the

communication of the approval ends on 31-03-2014. However, as

the project was completed in the month of Feb 2012, the assessee

also moved an application to JDA for issue of completion certificate

on 23-03-2012. The JDA after completing its formalities issued the

completion certificate on 01-08-2012/23-03-2013 but all these

certificate would relate back to the date of the application dated 23-

03-2012 as discussed below.

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From the above discussion it is evident that assessee has completed the

housing project prior to 31-03-2012 and also obtained the completion

certificate from Local Authority and therefore, the condition specified in

clause (a)(iii) to section 80-IB(10) is fully satisfied. Therefore, the Ld.

CIT(A) considering all these evidence has rightly held that the project

was completed prior to 31.03.2012.

9.3 We have heard the rival contentions and pursued the material

available on record. The term “local authority” has not been defined u/s

80IB(10) of the Act. Therefore, the expression “local authority” has to be

examined in the context of section 80IB(10) of the Act where it has been

used. This section requires that the deduction shall be available to an

undertaking developing and building the housing project which has been

approved by the local authority and completes such construction within a

period of five years from the end of the financial year in which the

housing project is approved by the local authority. In this context, the

local authority should be such an authority which has been authorized

and empowered to approve the development and building of housing

projects as well as issuing the completion certificate in respect of such

housing project which falls within its jurisdiction. The Ld. AR has

contended that the Gram Panchayat where the project of the assessee

company is located is the local authority for granting the approval of the

20 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

project and for issuance of the completion certificate. Further, our

reference was drawn to the Jaipur Development Authority Act, 1982

where JDA has been defined as a deemed local authority.

9.4 On perusal of the JDA Act, the preamble to the Act states that the

Jaipur City and areas contiguous to it are being progressively developed

and populated and the necessity is being increasingly felt for forming

this area into Jaipur Region and for setting up an authority for the

purpose of planning, coordinating and supervising the proper, orderly

and rapid development of these areas in which several Govt. Agencies,

local authorities and other organizations are at present engaged within

their own jurisdictions, to provide also that such authority be enabled

either itself or through other authority to formulate and execute plans,

projects and schemes for the development of Jaipur Region so that

housing, community facilities, civic communities and other infrastructure

are properly created for the population of Jaipur Region in the

perspective of 2001 AD or thereafter including the intermediate stages

and to provide for matters connected with the aforesaid. Thereafter,

Section 2(8) of JDA Act defines the Jaipur Region to mean the areas in

the limit of the cities, towns and villages specified in Schedule-I. The

term “Local authority” has been defined under Section 2(10) to mean a

Municipality or a Panchayat. The term “municipality” has been defined

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under Section 2(11) to mean a municipality established under the

Rajasthan Municipalities Act, 1959 in Jaipur Region. The term

“Panchayat” has been defined under Section 2(14) to mean a Panchayat

established under the Rajasthan Panchayat Act, 1953 (Rajasthan Act 21

of 1953) in Jaipur Region; or a Panchayat Samiti or Zila Parishad

constituted under the Rajasthan Panchayat Samitis and Zila Parishads

Act, 1959 (Rajasthan Act 37 of 1959) in Jaipur Region. Section 3(1)

talks about establishment of an authority to be called Jaipur

Development Authority for the purposes of this Act as notified by the

State Government. Section 3(3) states that the authority shall be

deemed to be a local authority within the meaning of the term “Local

Authority” as defined in the Rajasthan General Clauses Act, 1955.

Section 4 talks about composition of the Jaipur Development Authority

which shall consist of the following members:-

(i) a Chairman, who shall be the Minister-in-charge of Urban Development of the State of Rajasthan or a nominee of the Governor during President’s Rule; (ii) a Vice-Chairman, who shall be State Minister of Urban Development of the State of Rajasthan, or a nominee of the Governor during President’s Rules; (iii) Secretary to the Government, Urban Development and Housing Department;

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(iv) Jaipur Development Commissioner (appointed under this Act); (v) Chairman, Rajasthan Housing Board; (vi) Chief Engineer, Public Health Engineering Department; (vii) Chief Engineer, Public Works Department; (viii) District Collector, Jaipur; (ix) Chief Engineer, Rajasthan State Electricity Board; (x) Chairman/Administrator, Municipal Council, Jaipur; (xi) Zila Pramukh of Zila Parishad, Jaipur District; (xii) Chief Town Planner Rajasthan; and (xiii) Non-official members, not exceeding seven to be nominated by the State Government.

9.5 Section 16 defines the function of the JDA authority as under:-

“The main object of the Authority shall be to secure the integrated

development of the Jaipur Region and for that purpose the functions of

the Authority shall be:-

(a) urban planning including the preparation of Master Development Plan and Zonal Development Plans and carrying our surveys for the purpose and also making alterations therein as may be deemed necessary; (b) formulation and sanction of the projects and schemes for the development of the Jaipur Region or any part thereof; (c) execution of projects and schemes directly by itself or through a local authority or any other agency;

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(d) to make recommendations to the State Government on any matter or proposal requiring action by the State Government, Central government, any local authority or any other authority for overall development of the Jaipur Region; (e) participation with any other authority for the development of the Jaipur Region; (f) coordinating execution of projects or schemes for the development of the Jaipur Region; (g) supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme, the expenses of which, in whole or in part are to be met from the Jaipur Region Development Fund; (h) preparing schemes and advising the concerned authorities departments and agencies in formulating and undertaking schemes for development of agriculture, horticulture, floriculture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicare, tourism, entertainment and similar other activities; (i) execution of projects and schemes on the directions of the State Government; (j) undertaking housing activity in Jaipur Region, provided that the delineation of responsibility for housing between Rajasthan Housing Board and the Authority will be made by State Government effective from the date to be fixed by it;

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(k) to acquire, hold, manage and dispose of property, movable or immovable, as it may deem necessary; (l) to enter into contracts, agreements or arrangements with any person or organization as the Authority may deem necessary for performing its functions; (m) to prepare Master Plan for traffic control and management, devise policy and programme of action for smooth flow of traffic and matters connected therewith; (n) to perform functions designated by the State Government in the areas of urban renewal, environment and ecology, transport and communication, water energy resource management directly or through its Functional Boards or other departments/agencies as the State Government may specify; (o) regulating the posting of bills, advertisement hoardings, signpost, and name boards in Jaipur Region or in any part thereof as specified by the Authority; (p) regulating the erection or re-erection of buildings and projections, making material alterations therein and providing for open spaces in Jaipur Region or in any part thereof as specified by the Authority; (q) removing obstructions and encroachments upon public streets, open spaces and properties vesting in the Government or the Authority; (r) to do all such other acts and things which may be necessary for or incidental or conducive to, any matters which arise on account of its activity and which are necessary for

25 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

furtherance of the objects for which the Authority is established: and (s) to perform any other functions that the State Government may designate in furtherance of the objectives of this Act;

9.6 Section 17 of the JDA Act provides that no other authority or

person to undertake certain development without permission of the

authority which is as under:-

(1) Notwithstanding anything contained in any law for the time being in force, except with the previous permission of the Authority, no authority or person shall undertake any development within the Jaipur Region of the type as the Authority may from time to time specify, by notification published in the official Gazette, and which is likely to adversely affect the overall development of the Jaipur Region. (2) Any authority or person desiring to undertake development referred to in sub-section (1) shall apply in writing to the authority for permission to undertake such development; Provided that such person may apply for such permission through the concerned local authority and such local authority shall forward his application to the Authority with its recommendations, if any. (3) The Authority shall, after making such enquiry as it deems necessary and within sixty days from the receipt of an application under sub-section (2), grant such permission without any conditions or with such conditions as it may deem fit to impose or refuse to grant such permission. If such permission is not granted or refused within sixty days as aforesaid, the applicant may, by a written communication presented

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in person or through his authorized representative to the Secretary of the Authority or any other officer nominated by him in this behalf, call the attention of the Authority to the omission or neglect in granting or refusing permission, and if such omission or neglect in granting or refusing permission, and if such omission or neglect continues for a further period of thirty days from the receipt of such communication, the Authority shall be deemed to have permitted the proposed development and such development may be proceeded within the manner specified in the application: Provided that nothing herein contained shall be construed to authorize any person to act in contravention of any provision of this Act or the rules, regulations or order made thereunder, relating to any matters other than the requirement of obtaining permission of the Authority before undertaking or carrying out any improvement under this Act. (4) Any authority or person aggrieved by the decision of the Authority under sub-section (3), may, within thirty days, appeal against such decision to the State Government whose decision shall be final: Provided that, where the aggrieved authority submitting such appeal is under the administrative control of the Central Government, the appeal shall be decided by the State Government after consultation with the Central Government. (5) In case any person or authority does anything contrary to the decision given under this section, the Authority shall have power to pull down, demolish or remove any development undertaken contrary to such decision and recover the cost of such pulling down, demolition or removal from the person or authority concerned.”

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9.7 In light of above, it is clear that the authority which has been authorized and mandated to approve the development and construction of housing projects in the Jaipur region is the Jaipur Development Authority. Further, in terms of Section 3(1) read with section 3(3) of the JDA Act, the Jaipur Development Authority is deemed to be a local authority for the purposes of this Act which includes the development and construction of housing projects in the Jaipur region. The other local authorities such as Municipality or Gram Panchayat shall work in their respective jurisdictions and at the same time when it comes to the development and construction of housing projects, the applicant can seek the permission through the concerned local authority and such authorities shall foreward the application with their recommendations, if any to Jaipur Development Authority. The authority to approve the development and construction of housing projects lies with Jaipur Development Authority and it is up to Jaipur Development Authority whether to approve the housing project or not. In absence of approval from the Jaipur Development Authority, the assessee’s building plans and construction thereof would be in violation of the JDA Act and cannot be said to be approved. Further, on perusal of the application filed by the assessee for approval of maps as well as for issuance of completion certificates to the Gram Panchayat as well as to the JDA, it is again clear that it is JDA which is the final approving authority, the reason for the same is that had the Gram Panchayat being the ultimate authority, there was no necessity for the assessee to approach JDA for approval of its proposed building, plan as well as for issuance of the completion certificate. Given that the assessee has itself reached out to the JDA

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which establishes beyond any doubt that the project area falls within the jurisdiction and the authority of JDA and it is JDA which is to approve the building plan and issuance of the completion certificate. In light of above, we are of the considered view that housing project falls with the Jaipur region and the JDA is the approving authority for development and construction of the housing projects and it shall be the local authority for the purposes of claim of deduction under Section 80IB(10) of the Act.

10.1 In this regard, the ld AR has submitted as under:

(a) In case JDA is considered to be local authority for approval in issue of completion certificate, it can be noted that the assessee has also moved an application for approval of the map of the housing project to JDA on 26.03.2007 (PB 2 & 15) but the approval was conveyed on 26.08.2008 (17 months delay) for Block A to G (PB 2-3) and on 01.10.2008 (18 months delay) for Block H & I (PB 15-16). From the date of conveying the approval, the period of 5 years ends on 31.03.2014. However, as the project was completed in February, 2012, assessee moved application on 23-03-2012 to JDA for issuing the completion certificate. The completion certificate is issued by JDA for Block H & I on 01-08- 2012 (PB 21), for Block A to E on 21-03-2013 (PB 13) but the completion certificate for Block F & G was not issued for want of environment clearance certificate. However, the fact remains is

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that the flats in these blocks are occupied and used for residence by its owners.

(b) The AO at Pg 7 of the order has stated that he has inspected the file of the assessee with JDA on 15-03-2013 and found that on 08- 05-2012 (PB 10), JDA wrote a letter to the assessee in response to its application dated 23-03-2012 for issue of completion certificate and in that matter it is stated that out of seven blocks, work of block A, B, C & D is almost complete but the civil construction at Block E, F & G is in progress. The AO has further observed that assessee has also filed an application on 15-01-2013 submitting revised maps for issue of partial completion certificate in respect of Block A to E which shows that the project was incomplete as on 31-03-2012.

(c) It may be noted that that the letter dated 08-05-2012 issued by JDA was never received by the assessee. This letter was issued with reference to Block A to G. The letter is silent in respect of Block H & I. The issue of completion certificate in respect of Block H & I was considered in Building Map Committee on 11-07-2012 and completion certificate issued on 01-08-2012 (PB 21). Further, the Chief Fire Brigade officer has issued no objection certificate in respect of block H & I on 30-03-2012 (PB 20). This shows that the construction of block H & I were complete before 31-03-2012. Any delay in issue of the completion certificate by JDA would, therefore, relate back to the date of application. For this reliance is placed on the following cases:-

CIT Vs. Tarnetar Corporation 362 ITR 174 (Guj) (PB 30-31):

In this case AO did not allow the assessee deduction under section 80-IB(10) of the Income-tax Act, 1961, on development of a housing project on the grounds that the assessee did not complete the housing project within the statutory time frame. The Tribunal noted that the construction was completed in 2006. Application for

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building use permission to the Municipal Authorities was filed on February 15, 2006, but was rejected on July 1, 2006.Thereafter upon revised efforts from the assessee granted the same by order dated March 19, 2009. Several residential units were occupied without necessary permission. The assessee paid a penalty and got such occupation regularised.

On appeal the Court held that under sub-clause (i) of clause (a) of section 80-IB(10), since the assessee had got approval for the housing project from the local authority before April 1, 2004, it was required to complete the construction latest by March 31, 2008. The assessee had not only completed the construction two years before the final date but had applied for the building use permission. Such permission was not rejected on the ground that construction was not completed but on some other technical ground. Thus, granting the benefit of deduction could not be held to be illegal.

CIT v. Radomir Dzelatovic 206 ITR 320 (Bom.):

The assessee, a foreign technician, filed an application before the Central Government claiming exemption from payment of tax under section 10(6)(viia)(I)(B) of the Income-tax Act, 1961. The Central Government granted the approval on May 26, 1972, for a period of two years. On March 25, 1974, the assessee applied for extension of the exemption which was granted on October 4, 1975, i.e., beyond October 1, 1975, resulting in a delay of three days on the part of the Central Government. The Tribunal held that the assessee could not be denied the benefit of exemption for the assessment year 1975-76 for the delay on the part of the Central Government, that the approval, once accorded, related back to the date of the application and that hence the assessee was entitled to the exemption for the assessment year 1975-76. On a reference the court affirming the order of the Tribunal, held that the assessee was entitled to exemption under section

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10(6)(viia)(1)(B) of the Income-tax Act, 1961, for the assessment year 1975-76.

CIT Vs Akshay Eminence Developers (P.) Ltd. 206 Taxman 99 (Kar.)

In this case assessee company under took a project with regard to construction of a residential flats in Bangalore. It applied for approval of the said project before the Bangalore Development Authority (BDA) on 8-10-2004, the BDA granted the approval on 28-03-2005 but communicated the said approval to the assessee on 4-04-2005. The BDA also clarified that assessee’s project was approved for construction w.e.f. 4-04-2005 and the said approval would be in force till 3-04-2007. The AO, accordingly, denied the benefit of section 80-IB(10) for A.Y. 2005-06 to 2007-08 as project was not approved before 31-03-2005.

In appeal the CIT(A)/ITAT allowed the deduction to the assessee by holding that once approval is granted it should relate back to the date of application and therefore approval would relate back to 8-10-2004.

On further appeal the Hon’ble High Court held that it is not in dispute that the approval is granted on 28-03-2005. It is communicated on 4-04-2005. Because it was communicated to the assessee on 4-04-2005 and in law the assessee should have two year time to complete the construction, the said communication and the sanctioned letter made it clear the time for completing the construction start from 04-04-2005 and it ends on 3-04-2007. That is not the date of approval. The date of approval is 28-03- 2005. As per the judgment of the Bombay High Court, once approval is granted it relate back to the date of application. Even that exercise is not to be done in the instance case, as the date of approval is 28-03-2005, the assessee is entitled to the benefit u/s 80-IB(10) from the A.Y. 2005-06.

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CIT Vs. Hindustan Samuh Awas Ltd. (2015) 377 ITR 150 (Bom.)

In this case where application for issue of completion certificate was made prior to 31.03.2008 but the same was issued by the municipal corporation on 10.10.2008, the deduction u/s 80-IB(10) was held allowable by giving following findings in para 11 & 12 of the order:- “11. The question we raise here is whether the explanation introduced an element of harshness to such an extent that it rendered the main provision nugatory? In our view, the explanation is introduced recently to put an end to a controversy, which might arise before the Assessing Officer about the date of completion. The intention of the legislature in providing explanation to fix the date of completion of a project is quite helpful when this provision is utilized in practice. In our view the explanation has introduced an unnecessarily strictness in the provision which is in the nature of exemption and not in the nature of charging. Sub-section (10) mentions that a housing project should be complete before 31.03.2008 so as to get the exemption. Completion of housing project is a physical act. It can be demonstrated on the spot and also through a certificate issued by an architect who is appointed for supervising the construction work. He is a professional who would declare that the project is complete. Unfortunately, Sub-section (10) and the explanation do not give any importance to the issuance of such Completion Certificate by the concerned architect. It gives importance only to the certificate of Municipal authority. It is common knowledge that an application for Completion Certificate submitted to the Municipal Authorities is accompanied by a Completion Certificate issued by the concerned architect. No doubt, the Municipal authorities then cause inspection of the site and verify the claim. Thereafter, they issue Completion Certificate. But, if a project is really complete before 31.03.2008 and an application is moved quite in time, for seeking Completion Certificate from the Municipal

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authorities, and if they do not take steps urgently and delay the issuance of Completion Certificate from their side, can it be said that such certificate would alone decide the date of completion of the project? The answer is in negative.

Gera Developments Pvt. Ltd. Vs. JCIT (2015) 116 DTR 290 (Pune) (Trib.)

Clause (ii) of Explanation to section 80-IB(10)(a) states 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 such housing project is issued by the local authority. In the present case, assessee having completed the construction of the housing project much before the stipulated date of completion specified in section 80-IB(10)(a) and applied to the local authority i.e. PMC for obtaining occupancy certificate based on the architect’s certificate and other NOCs required for the said purpose, claim for deduction u/s 80-IB(10) could not be denied on the ground that the PMC has not issued the completion certificate before the stipulated date.

Sanghvi & Doshi Enterprise Vs. ITO (2011) 60 DTR 306/131 ITD 151(Chennai) (Trib.) (TM)

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Assessee can make an application for completion certificate only when the project is completed. Thus, grant of a completion certificate after verification by the competent authority on a subsequent date would relate back to the date on which the application is made.

Thus, there cannot be two views that construction of Block H & I was completed before 31-03-2012.

(d) In respect of Block A to G, the letter dated 8-05-2012 (PB 10) written by JDA to the assessee mentions that the work of block A to D is almost complete and the civil work of block E, to G is in progress. The letter does not specify the nature of civil work which is in progress. This letter was never received by the assessee. As against this, the Chief Fire Brigade Officer vide its letter dated 23- 05-2012 (PB 8-9) have stated that block A to G has been constructed for which no objection certificate is issued. How the fire fighting department could have issued no objection certificate on 23-05-2012 if the construction of block A to G were incomplete on 8-05-2012. This shows that the letter dated 08-05-2012 of JDA is vague and can’t be relied upon.

(e) The JDA vide letter dated 05-10-2012 (PB 11) has communicated that the issue of the completion certificate was put in the Building Map Committee on 08-08-2012 where it is stated that assessee has constructed more than 20,000 sq. mt. than the approved construction for which environment clearance is to be produced and it is to give an undertaking that the space below the water tank would not be used for residential or any other use. If the civil construction was in progress on 08-05-2012, in respect of block E to G, how in the meeting dated 08-08-2012, the maps already submitted on 23-03-2012 is put for approval. Again vide letter dated 07-01-2013 (PB 12), it is intimated to produce environment clearance certificate so that further action can be taken for issue of completion certificate. However, because of certain issues with

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reference to the environment clearance, the assessee filed letter dated 15-01-2013 for issue of completion certificate in respect of block A to D. This was issued by JDA on 21-03-2013 (PB 13) with reference to the meeting of Building Committee held on 28-08- 2012. All these fact shows that the JDA has not disputed that the construction of the blocks A to D was not complete before 31-03- 2012. It is only because the environment clearance certificate could not be obtained, there is a delay in issue of the completion certificate. However, once the environment clearance is obtained and the completion certificate is issued, it would relate back to the date of application as stated supra.

(f) So far as block E, F & G are concerned, it is stated in letter dated 08-05-2012 (PB 10) that the civil work is under progress. No detail of such work in progress is given. This letter is also not received by the assessee. If the civil work was in progress, how the matter of issue of completion certificate was placed in Building Map committee meeting on 28-08-2012. This shows that the block E, F & G were complete before 31-03-2012 as is evident from the certificate issued by architects, completion certificate issued by Gram Panchayat and the paper cuttings. The completion certificate for block E was also issued on 21-03-2013. This shows that even the block F & G were complete before 31-03-2012 but because there is delay in getting the environment clearance certificate, the completion certificate in respect of these blocks were not issued by JDA. This would not mean that the construction of block F & G was not complete before 31-03-2012.

In view of the above, it is proved beyond doubt that the construction of all the blocks of the housing project was complete before 31-03-2012. If there is delay on part of the JDA for issuing completion certificate or because of some technical reason such certificate is not issued by JDA but issued by Gram Panchayat, the condition of issue of completion certificate by Local Authority stands satisfied and therefore even if JDA is considered to be

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Local Authority u/s 80-IB(10), the condition referred in clause (a)(iii) of section 8IB(10) stands satisfied. In these facts and circumstances, the Ld. CIT(A) has rightly held that condition referred to in section 80-IB(10)(a)(iii) is fulfilled.

10.2 We have heard the rival contention and perused the material available on record. In this regard what is relevant to examine is firstly, when the housing project was approved by the JDA and secondly when the housing project was completed and completion certificate issued by the JDA.

10.3 Here it would be relevant to look at the provisions of section 80IB(10)(a)(iii) which provides that the amount of deduction in the case of an undertaking developing and building housing projects approved before 31.03.2008 by a local authority shall be 100% of the profits derived in the previous year relevant to any assessment year from such housing project where such undertaking commences development and construction of housing project on or after the 1st day of October, 1998 and completes such construction within 5 years from the end of the financial year in which the housing project is approved by the local authority. Further, explanation (i) to clause (iii) provides that in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. And explanation (ii) further provides that the date of completion of construction of the housing project shall be taken to be date on which the completion certificate in respect of such housing project is issued by the local authority.

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10.4 In the instant case, in respect of khasra No. 1 to 8 & 11 to 17 to 217 located at village Ajayrajpura, Tehsil Sanganer, Jaipur, the member secretary of building MAP committee of JDA has issued a letter dated 26.08.2008 wherein in context of the assessee‘s application dated 26.03.2007 for seeking approval of the building plan, it has been stated that the approval of the building plan committee has been given on 29.03.2007 and the approved building plan as well as the conditions to be fulfilled for the construction of building were stated therein. Similarly, in the context of Khasra no. 9,10,18 at village Nanakpura Alias HemaKi Nagal, Tonk Road Jaipur, in respect of the assessee’s application dated 26.03.2007, the member secretary of building MAP committee of JDA vide its letter dated 01.10.21008 has stated that the building plan has been approved by the building plan committee on 29.03.2007. In light of above, it is clear that respect of khasra No. 1 to 8 and 11 to 17 (block A to G) and Khasra no. 9,10,18 (Blocks H &I ),the building plan committee of JDA has approved the building plans on 29.03.2007. However, the first approval has been issued on 26.08.2008 and the second approval has been issued on 01.10.2008. On perusal of both these approvals and other material available on record, there is nothing to suggest what caused the undue delay on the part of JDA to convey the approval to the assessee after a gap of so many months. In any case, given that the building maps have been approved on 29.03.2007 even though the same has been conveyed at a later point in time to the assessee, it is clear that the building plans have been approved before the 31st day of March, 2008. Therefore, the first condition, requiring

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developing and building housing projects approved before 31.03.2008 by a local authority, is satisfied in the instant case.

10.5 Now coming to the issue of completion certificate issued by JDA, the ld. AR has submitted that the assessee has moved an application for approval of the map of the housing project to JDA on 26.03.2007 in respect of blocks A to G and Block H& I respectively. The JDA conveyed the approval on 26.08.2008 for the blocks A to G and on 01.10.2008 for the block H &I and from such date of conveying the approval, the period of 5 years for completion of the housing project ends on 31.03.2014. However, as the project was completed in February, 2012, the assessee moved application on 23.03.2012 to JDA for issuing the completion certificate in respect of blocks A to G as well as blocks H & I. Thereafter the completion certificate for blocks A to G was issued on 21.03.2013 and for blocks H & I on 01.08.2012. In respect of blocks F & G the completion certificate was not issued by JDA for want of environmental clearance certificate however, the facts remains that the flats in these blocks were occupied and used for residence by owners.

10.6 In this regard, firstly, as we have stated above, the housing project was approved on 29.03.2007, therefore the period of five years from the end of the financial year in which the housing project is approved by the local authority ends on 31.03.2012. Here, we are unable to accede to the contention of the ld AR that the period of five years should be counted from the date of issuance and communication of approval (26.08.2008/1.10.2008). Infact, this is the ratio decidendi of the decision of Hon’ble Karnataka High Court in case of Akshay

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Eminence Developers (supra). The reason for the same is that once a date of approval has been accepted for satisfaction of the one of the conditions of grant of approval, the same date forms the basis and starting point for the satisfaction of the second condition which talks about the completion of housing project within five years of end of the financial year in which the project has been approved. Both these conditions are inter-connected. In any case, enough leeway has been given by the statue itself where the period of five years is counted from the end of the financial year and not from the date of approval. Extending that period further, in our view, would not be reasonable. The assessee need to be consistent in its approach and cannot expect to take two different approaches/criteria for defining the date of approval and date of completion of the housing project. In light of above, the assessee needs to satisfy the condition that the housing project was completed on or before 31.03.12 and the completion certificate is issued by JDA.

10.7 Now coming to khasra No. 9, 10, 18 (block H&I), the assessee has moved an application to JDA on 23.03.2012 and thereafter in 121st meeting of JDA held on 11.07.2012, a decision was taken to approve the amended building plan and to issue the completion certificate and thereafter, on 1.08.2012, a letter was issued to the assessee conveying the decision taken in the meeting held on 11.07.2012. There is nothing on record to suggest that the blocks H & I were either not complete or there were certain deficiencies on the part of the assessee between the date of filing of the application and its approval thereof in the meeting held on 11.07.2012. The blocks H & I are therefore held to be complete

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as on the date of moving the application on 23.03.2012 even though the approval has been granted on 11.07.2012 and completion certificate issued on 1.08.2012.

10.8 In respect of khasra no. 1 to 8 and 11 to 17 (Blocks A to G), the JDA vide its letter dated 05.10.2012 has stated that the matter relating to the application filed by the assessee was taken up in the 122nd meeting of building plan committee held on 28.08.2012 wherein the assessee was asked to take certain actions steps. Firstly, it was stated that solar energy equipments have been installed in four towers, however, in respect of remaining 3 towers, solar energy equipment needs to be installed before the completion certificate is issued by JDA. Secondly, it was stated that the built up area is more than 20,000 sq. meters and therefore, environmental clearance from the environmental department needs to be produced. Thirdly, it was stated that in all the blocks, 2.90 ft. columns have been build on the terrace for water tank which were not approved earlier. In this regard, an undertaking was sought from the assessee that the area under the said columns on the terrace will not be used for housing or any other purposes. Thereafter, another letter was issued by JDA on 07.01.2013 wherein the assessee was again reminded about obtaining the environmental clearance which was still not been obtained and submitted to JDA and thereafter, finally on 21.03.2013, the JDA issued a letter stating that pursuant to decision taken in the 122nd meeting held on 28.08.2012, the amended building plan and completion certificate for block A to E is being issued. On perusal of these documents what is emerging that in the meeting held on 28.8.2012, the matter relating to assessee’s application dated

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23.03.2012 pertaining to all the 7 blocks (blocks A to G) were taken up and thereafter three issues as noted above were raised by JDA whereby the assessee was asked to take the necessary corrective steps and these were towards installation of solar energy equipments on three towers, obtaining the environmental clearance and furnishing an undertaking in respect of non-usage of area below the water tank columns constructed on the terrace on these Blocks. In other words, except for these three requirements, the construction in these Blocks were complete in all respect and thereafter on assesse taking the necessary corrective steps, the completion certificate was finally issued on 21.03.2013 in respect of Blocks A to E. However, as far as the blocks F and G were concerned, the completion certificate has not been issued by JDA for want of the environmental clearance.

10.9 The next question that arises for consideration is when it can be said that the construction of these blocks A to G were complete. Whether the construction got completed on the date of application i.e, 23.03.2012 or on/before the meeting of JDA held on 28.08.2012 or when the completion certificate was issued by JDA on 21.03.2013 (in respect of Block A to E). In this regard, the assessee has submitted that at the time of moving the application for issuance of the complete certificate as evidence by the architect report as well as issuance of the no objection certificate by the Chief Fire Brigade Officer, Nagar Nigam, Jaipur all blocks were completed in March, 2012 itself. However, the JDA has issued a letter dated 08.05.2012 wherein it is stated that on physical inspection, work in respect of block A to D is almost complete except some fitting/finishing and in respect of block E, F and G, the civil

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construction work is in progress. The assessee has challenged this letter of JDA dated 08.05.2012 stating that it doesn’t specify the nature of civil work which is in progress and secondly, this letter was never received by the assessee. In our view, there are not enough material on record for us to take a view in the matter. In the interest of justice and fair play, the matter require to be set-aside to the file of AO for fresh examination so that all relevant facts and documents are brought on record to determine the actual date of completion of blocks A to G.

10.10 In light of above, it is clear that in respect of bock H & I, the construction has been completed as on 31.03.2012 even though the approval has been granted on 11.07.2012 and completion certificate issued by JDA on 1.08.2012. The delay in issuance of completion certificate cannot be attributed to the assessee and the assessee cannot be penalized by way of denial of tax deduction which it is otherwise eligible to and solely on the ground of delay in issuance of completion certificate. As held by Hon’ble Bombay High Court in case of Hindustan Samuh Awas ltd (supra), the explanation has introduced an element of unnecessary strictness in the provision which is in the nature of exemption and not in the nature of charging and the completion of the housing project is a physical act which can be demonstrated on the spot. We are accordingly of the view that in respect of Block H & I, the assessee satisfies the condition of completion of construction before 31.03.2012.

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is to be considered together for ascertaining the date of completion of the construction of the housing project?

11.1 In this regard, the ld AR has submitted that the housing project of the assessee comprises of 9 blocks i.e. block A to I. The Gram Panchayat has issued completion certificate in respect of all the blocks. However, the JDA has issued completion certificate in respect of seven blocks. The completion certificate in respect of block F & G is not issued by JDA for want of environment clearance certificate by the State Pollution Control Board. Therefore, the issue arises that in the absence of completion certificate from JDA for block F & G, the entire claim of deduction u/s 80-IB(10) is to be disallowed or only the proportionate disallowance is to be made in case the completion certificate issued by Gram Panchayat is not accepted. The fact that each block of the housing project is a project in itself is also evident from the fact that the JDA itself has issued the completion certificate in respect of each block of the housing project and not to the complete project itself. Therefore, the assessee is entitled for deduction in respect of that block of the housing project in respect of which completion certificate has been issued. For this reliance is placed in case of Viswas Promoters Private Limited V. ACIT 81 DTR 68 (Mad.) (PB 37-38). In this case it was held that within a composite housing project, where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area. In this case the assessee completed four housing projects in the city of Madurai. Out of these, in two of the projects, the assessee constructed flats exceeding 1500 sq. ft. and also flats of less than 1500 sq.ft in area. The assessee claimed deduction under section 80-IB(10) of the Income-tax Act, 1961, in respect of flats which had area measuring less than 1500 sq. ft. The Assessing Officer denied the deduction because the housing project comprised residential units exceeding 1500 sq. ft. The Commissioner (Appeals) allowed the deductions under section 80-IB(10) in respect of the residential units with an area of less than 1500 sq. ft. On appeal by the Department, the Tribunal allowed the appeal by holding that the

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eligibility conditions under section 80-IB are that the built-up area should not exceed 1500 sq. ft. in the context of cities other than Delhi and Mumbai and the profits must be derived in the previous year from the housing project. This restriction is applicable for the entire project. If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit could not be extended to the project. On further appeal, Hon’ble Court held that within a composite housing project where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area. Further, Gujarat High Court in case of ITO Vs. Saket Corporation (2015) 234 Taxman 435 where assessee claimed deduction u/s 80-IB with respect to housing project consisting of 43 units which was disallowed on ground that Building Use (BU) permission and completion certificate was granted only with respect to 20 units within a period of four years from date of approval of project by local authority and not with respect to entire housing project consisting of 43 units, it was held that since assessee had completed construction of all 43 units and had applied for BU permission/completion certificate within prescribed time limit, it was entitled to deduction u/s 80-IB(10) notwithstanding fact that BU permission was granted with respect to 20 units only.

In view of the above, the disallowance of claim of deduction u/s 80-IB by the AO on this ground is incorrect. In any case, the Ld. CIT(A) after considering the entire evidence has concluded that all the blocks of the housing project were completed before 31.03.2012 and therefore, he has rightly allowed the entire claim of deduction u/s 80-IB.

11.2 We have heard the rival contentions and pursued the material available on record. The Madras High Court in case of Viswas Promoters Private Limited (supra) in the context of condition relating to built-up area not exceeding 1500 sq. ft has held that within a composite housing project where there are eligible and ineligible units, the assessee can

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claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built up area. No contrary authority has been brought to the notice of the Bench. In our view, similar analogy can be drawn in respect of housing project consisting of number of blocks where the construction has been completed and completion certificate issued in respect of some of the blocks. As we have noted above, the construction has been completed and completion certificate has been issued by JDA in respect of Block H & I. Accordingly, the assessee shall be eligible to claim proportionate deduction u/s 80-IB(10) in respect of Block H & I.

12.1 In this regard, the ld AR has submitted that:

(a) The AO has observed that assessee has allotted more than one flat to the persons covered under provisions of sec. 80-IB(10)(e) & (f). In the show cause notice, he has given reference to six instances. The assessee explained that out of these six cases except in case of M/s Rajasthan Patrika Pvt. Ltd., allotments were made prior to insertion of clause (e) & (f). It was further stated that even in these five cases, ultimately not more than one flat is allotted or two units were combined to make one unit, area of which does not exceeds 1500 sq. ft. The AO however, has not accepted the explanation given by the assessee. The AO further observed that certain flats were allotted to husband and wife and therefore condition of section 80-IB(10)(f) is violated. He therefore held that deduction of sec. 80-IB(10) is not available and therefore denied the claim of deduction.

(b) It may be noted that in all, AO has referred to 8 instances which according to him violates the condition of section 80-IB(10)(f). The

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explanation of the assessee in respect of these 8 instances is as under:- S.N Flat Name of the Explanation . No. customer 1 C-801 R. P. Saini The flat was blocked tentatively for his C-802 prospective customer, which was cancelled. No flat has been allotted to this party. 2 F-902 Lata Sharma The flat no. 902 was blocked by Lata Sharma F-903 but later on cancelled. Thus, only one flat was allotted to her. 3 B-801 Prakash Devi The flat was blocked tentatively for his C-403 prospective customer, which was cancelled. No B-805 flat has been allotted to B-808 this party. Further these flats were booked prior to insertion of the clause (f) of section 80-IB(10). 4 H-507 S.S. Sharma Both the units have been sold as one unit on the H-506 Sadhna Sharma request of the party. The total of both the units does not exceed 1500 sq. ft. Further, the flats was allotted prior to insertion of clause (f) of section 80-

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IB(10). 5 D-410 H.L. Mittal D-410 (receipt no.1551) is allotted to Kapil Mittal who D-401 Usha Mittal is major son of Usha Mittal and therefore requirement of section 80-IB(10)(f) is not defeated. 6 F-702 Rashmi Jain Both the flats were allotted prior to insertion of clause D-508 Amit Kumar Jain (f) of section 80-IB(10). 7 C-303 Anuradha Goyal Both the flats were allotted prior to insertion of clause C-302 J.P. Goyal (f) of section 80-IB(10). 8 C-301 Vinod Kumar C-301 is purchased by Chomal Vinod Kr. Chomal & D-302 D-302 is purchased by Nand Manju Sharma Kishore Sharma and not by Mrs. Manju Sharma.

(c) From the above table it can be noted that in none of the above cases, more than one flat (exceeding 1500 sq. ft.) has been allotted to the same person or to the spouse or minor child of such person. Further, except in case of S.S Sharma and H.L Mittal, the flats were allotted prior to insertion of clause (f) w.e.f. 01.04.2010. It may be noted that the emphasis of clause (f) is that two flats should not be allotted to the same individual or to the spouse or minor children of such individual. Therefore, even if the booking amount is received from such person in respect of two or more flats but ultimately not more than one flat is allotted to such person, the condition of clause (f) would not be violated. Further, this clause inserted from 01.04.2010 has prospective effect. Therefore, where the flats are allotted in respect of booking which is made prior to 01.04.2009,

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clause (f) would not apply. Gujarat High Court in case of Mannan Corporation Vs. ACIT (2013) 214 Taxman 373 and Bombay High Court in case of CIT Vs. Jogani Constructions Ltd. 217 Taxman 95 (Mag.) with reference to amendment made to section 80-IB(10)(d) w.e.f. 01.04.2005 held the same to be prospective in nature for the purpose of claim of deduction by assessee u/s 80-IB(10). On the same analogy, insertion of clause (e) and (f) w.e.f. 01.04.2010 are prospective in nature and therefore if more than one flat is booked in the name of same individual or in the name of spouse or minor children prior to 01.04.2009, the condition of clause(e)/(f) cannot be applied on the same.

(d) Otherwise also, if there is any violation of the conditions specified in clause (e) & (f) of section 80-IB(10), the deduction can’t be disallowed in entirety but should be restricted only with reference to those flats where there is a violation of the condition. For this, reliance is placed on the following cases:-

SJR Builders Vs. Ass. CIT 3 ITR 569 (Trib.) (Bang.)

In this case the assessee was engaged in real estate and construction business. For the assessment year 2005-06, it claimed deduction under section 80-IB(10) amounting to Rs. 2,02,08,690 being 100 percent of the profit in respect of a project. The deduction was claimed by the assessee on the ground that each dwelling unit/flat constructed in the project was less than 1500 sq. ft. per unit. There was a survey action under section 133A on February 8, 2007 which covered the project sites as well. It was found that some of the residential units measured more than 1500 sq. ft. The Assessing Officer held that the assessee was not entitled to deduction under section 80-IB(10). This was confirmed by the Commissioner (Appeals). On appeal to the Tribunal it was held that merely because some flats were larger than 1500 sq. ft., the assessee would not lose the benefit in its entirety. Only with

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reference to the flats which had more than the prescribed area, the assessee would lose the benefit.

Sreevatsa Real Estate Pvt. Limited 41 DTR 497 (Chennai.) (Trib.)

The fact of the case is that assessee was engaged in the business of property development. It obtained approval from Dy. Director Town Planning for construction on the plots. The built up area of all the houses was not less than 1500 sq. ft. and therefore assessee claimed deduction u/s 80-IB(10) on pro rata basis. The AO denied the claim by giving the reason that project was not exclusively for units with built up area less than 1500 sq. ft. and certificate from Village Administrative officer (VAO) could not be accepted since VAO was not the authority to issue approval for housing project. CIT(A) confirmed the action of the AO.

On further appeal the tribunal allowed the claim of assessee by holding that section 80-IB(10) requires approval by a local authority. Such local authority is not defined anywhere. It can’t be said that VAO or Dy. Director of town planning is not a local authority. Therefore, assessee having obtained approval from Dy. Director town planning for construction is the approval of local authority. Further, assessee is entitled for deduction u/s 80-IB(10) pro rata for housing units having built up area less than 1500 sq. ft.

Sanghvi and Doshi Enterprise v. Income-tax Officer Sri Mahalakshmi Housing v. Income-tax Officer Sri Mahalakshmi Builders v. ITO 18 ITR 608 (Trib.)(Chennai)

In these cases, by following the decision of Calcutta High Court in case of CIT Vs. Bengal Ambuja Housing Development Limited in I.T.A.No.458 of 2006 dated 5 January 2007, it was held that a pro rata deduction is permissible u/s 80-IB where some residential units exceeds 1500 sq. ft.

50 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

Sreevatsa Real Estate P. Limited 41 DTR 497 (Chennai)(Trib.)

In this case it was held that where the built up area of some of the housing units are more than 1500 sq. ft., assessee is entitled for deduction u/s 80-IB(10) on pro rata for housing units having built up area less than 1500 sq. ft.

(e) The Ld. CIT(A) after considering these evidences at Pg 34 of the order has rightly held that assessee has not violated requirement of sec. 80-IB(10)(f).

12.2 We have heard the rival contentions and pursued the material

available on record. Firstly, regarding the contention of the ld AR that

the clauses (e) and (f) inserted by the Finance Act, 2009 w.e.f 1.04.2010

is prospective in nature, we refer to notes to clauses and Memorandum

explaining the Finance Bill, 2009. The notes to clauses provides that

“The proposed amendment seeks to insert two new conditions by way of

two new clauses namely clause (e) which proposes to provide that not

more than one residential unit is allotted to any person not being an

individual and clause (f) which proposes to provide that in a case where

a residential unit in the housing project is allotted to a person being an

individual, no other residential unit in such housing project is allotted to

any of the following persons :—

(i) the spouse or minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta,

51 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. This amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.” 12.3 The Memorandum explaining the Finance Bill 2009 provides that

“Further, the objective of the tax benefit for housing projects is to build

housing stock for low and middle income households. This has been

ensured by limiting the size of the residential unit. However, this is being

circumvented by the developer by entering into agreement to sell

multiple adjacent units to a single buyer. Accordingly, it is proposed to

insert new clauses in the said sub-section to provide that the

undertaking which develops and builds the housing project shall not be

allowed to allot more than one residential unit in the housing project to

the same person, not being an individual, and where the person is an

individual, no other residential unit in such housing project is allotted to

any of the following person :—

(i) Spouse or minor children of such individual; (ii) the Hindu undivided family in which such individual is the karta; (iii) any person representing such individual, the spouse or minor children of such individual or the Hindu undivided family in which such individual is the karta. This amendment will take effect from the 1st day of April, 2010 and shall accordingly, apply in relation to assessment year 2010-11 and subsequent years.”

52 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

12.4 In light of above, clauses (e) and (f) are additional and new

conditions which have been brought on the statue by the Finance Act,

2009 to aid and supplement the existing condition of limiting the size of

the residential unit (less than 1500 sq. Ft) with an ultimate objective of

ensuring tax benefit for housing projects for low and middle income

households. Here we refer to the decision of the Hon’ble Gujarat High

Court in case of Manan Corpn. vs. Assistant Commissioner of Income-

tax, Circle-5 [2013] 29 taxmann.com 15 (Guj.) where in the context of

amendment by way of insertion of clause (d) to section 80IB(10), the

Hon’ble High Court has held that the criteria to hold the amendment in

question retrospective are absent as there is no explicit and specific

wording expressing retrospectivity and even if it is assumed for the sake

of arguments that the same is to be read by implication, the same does

not appear to be reasonable but, in fact emerges to be harsh and

unreasonable when it comes to implementation. Drawing an analogy in

the instant case, where the allotment of the flats has already been done

prior to 1.04.2009, it would be unreasonable to expect the builder to

cancel such allotment and refund the amount or forfeit the tax benefit

53 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

for the non-fulfillment of such conditions which either of the parties were

not aware at the time of allotment of the flats. Though the objective of

these conditions are to aid and supplement the existing conditions, at

the same time, the same cannot be read to apply retrospectively in

absence of any explicit and specific wording expressing retrospectivity

and also on ground of reasonableness. Therefore, the clauses (e) and

(f) shall apply in respect of allotment made on or after 1.04.2009.

12.5 Regarding the second contention of the ld AR that where there is

still any violation of the conditions specified in clause (e) & (f) of section

80-IB(10), the deduction can’t be disallowed in entirety but should be

restricted only with reference to those flats where there is a violation of

the condition. The decision of Hon’ble Madras High Court in case of

Vishwas Promoters Private Limited and various other decisions of the

Coordinate Benches referred supra support the contentions of the ld AR.

We agree with the contentions of the ld AR and are of the view that

where there is any violation of the conditions specified in clause (e) & (f)

of section 80-IB(10), the deduction can’t be disallowed in entirety but

should be restricted only with reference to those flats where there is a

violation of the said conditions.

54 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur 12.6 In light of above discussions, where the allotment of flats has been made prior to 1.4.2009, the assessee shall be eligible to claim the tax deduction in respect of such flats even if there is violation of clause (e) & (f) of section 80IB(10) of the Act. However, where the allotments of flats have been made after 1.4.2009, the assessee will necessarily be required to demonstrate the satisfaction of clauses (e) and (f) of section 80IB(10) of the Act. On perusal of assessment order, it is noted that complete details of allotees were not furnished before the AO and the AO based on limited information provided by the assessee, has identified certain cases where violation of above said conditions have been noted. The assessee has responded to these limited cases and even ld CIT(A) has upheld the contention of the assessee that the allotment has either not being made or booking of flats has happened prior to insertion of clause (f) of section 80IB(10) of the Act in these limited cases. In our view, the legislature has used the expression “allotment” and not the expression “booking” of the residential unit which precede the allotment of residential unit as generally understood in the housing sector. Unless, in a given case, where the booking and allotment are same as demonstrated through the contractual understanding between the builder and the allottee of the residential unit, it would not be correct to use these terms inter-changeably. In light of above directions, we accordingly set-aside the matter to the file of the AO to examine the allotment of flats made by the assessee in entirety and examine

55 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur

the satisfaction of conditions under clause (e) and clause (f) of section 80IB(10) of the Act.

12.7 In light of above discussions and taking into consideration the

entirety of facts and circumstances of the cases including the arguments

and legal authorities quoted before us, the Revenue’s appeal for both

the years is partly allowed with above directions for statistical purposes.

Assessee’s C.O. No. 39/JP/2015.

challenged the actions of the ld CIT (Appeals) in upholding the validity of

assessment framed u/s 147 of the Act and has relied upon the written

submissions made before the ld CIT(A). On perusal of records, it is

noted that the assessment was reopened within the period of 4 years

basis the completion of assessment for AY 2010-11 where the assessee’s

claim under section 80IB(10) was disallowed. The assessee was

provided copy of reasons recorded for reopening and after disposing off

the assessee’s objections, the impunged reassessment order has been

passed by the AO. The ld CIT(A) has upheld that the AO has sufficient

material evidence/information prior to issuance of notice under section

56 ITA No.417&418/JP/2015 D.C.I.T Vs. M/s Guru Pragya Infra (P) Ltd., Jaipur 148 and relying upon the decision of the Hon’ble Supreme Court decision

in case of Raymond Woollen Mills, has upheld the action of AO in

reopening of assessment u/s 147 of the Act. We see no reason to

interfere with the order of ld CIT(A) and hence, the cross-objection filed

by the assessee is rejected.

Order pronounced in the open court on 24/01/2017.

Sd/- Sd/- ¼dqy Hkkjr ½ ¼foØe flag ;kno½ (Kul Bharat) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 24 /01/2017. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- The D.C.IT, Circle-2, Jaipur. 2. izR;FkhZ@ The Respondent- M/s Guru Pragya Infra(P) Ltd., Jaipur. vk;dj vk;qDr@ CIT 3. 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 417&418/JP/2015}

vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत