THE ITO, 2(1), BHOPAL vs. M/S. GLOBUS HOUSING, BHOPAL

आदेश /O R D E R

PER SHRI C.M. GARG, JM

This appeal has been filed by the Revenue-appellant against

the order of the learned CIT(A), Raipur, Camp at Bhopal dated

22.3.2013 in First Appeal No. 211/10-11 for the assessment year

2006-07 on the following grounds :- 1

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 “On the facts and in the circumstances of the case, the CIT(A) has erred in :-

1 deleting the disallowance of Rs.43,29,927/- made by the A.O. u/s 80IB(10) of IT Act, 1961.

has acted in the capacity of contractor and did not even own the

land as also the colonizer licence was not obtained by it, the

assessee was not at all entitled to the claim u/s 80IB(10) of the Act.

He further submitted that in terms of Explanation (ii) to sub-clause

(iii) of clause (a) of section 80IB(10) of the Act, it is mandatory for

the assessee to obtain building completion certificate for claiming

the deduction u/s 80IB(10) of the Act, which condition the assessee

has failed to comply. He, therefore, prayed that since the assessee

has not complied with the mandatory provisions of the Income Tax

Act, 1961, the Commissioner of Income Tax (Appeals) was totally

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 unjustified in allowing the claim of the assessee against the very

spirit of the Act.

learned counsel for the assessee submitted that as per section 301

of the M.P. Municipal Corporation Act, there is no provision of

issuing completion certificate by the Municipal Corporation.

Therefore, the requirement of the same cannot be imposed and

enforced upon the assessee by the Income Tax Act, 1961. However,

he fairly accepted that the issue in the present appeal has been

decided against the assessee by the Hon'ble jurisdictional High

Court in the case of CIT vs. M/s Global Reality; ITA No. 40/2012.

the authorities below and the arguments of the respective parties.

we find that in a recent judgment, the Hon'ble jurisdictional High

Court of Madhya Pradesh in the case of CIT vs. M/s Global Reality;

ITA No. 40/2012 and others has decided the issue against the

assessee by holding as under :-

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 19. The provision such as clause (a) as amended, sensu

stricto, cannot be considered as a new condition and that too

incapable of compliance. Inasmuch as, clause (a) deals with

the time frame within which the housing project was

expected to be completed, to get the benefit of the prescribed

deduction. Notably, the amended Section 80IB (10) (a)

extends the benefit even to the housing projects approved by

the Local Authority before 31.03.2007, instead of

31.03.2005 - as was provided in the unamended provision.

Therefore, necessity was felt to make distinction between

the two classes of housing projects for specifying the time

frame for completion. The one approved by the Local

Authority before 1st day of April, 2004; and the other class

of housing project approved by the Local Authority on or

after 1st April 2004 till 31.03.2007. In either case, the time

frame for completion of project has been prescribed as four

years. In that, the project approved before 1st April, 2004

has been given time to complete before 31.03.2008; and in

the latter category I.T.A.Nos.40/2012, 36/2012 &

35/2012 within four years from the end of the financial 4

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 year in which the housing project was approved by the Local

Authority.

housing project has been given to both class of housing

projects. Moreover, the explanation below clause (a), in

particular (ii), applies to both class of housing projects

uniformly. It postulates that "the date of completion of

construction of housing project" shall be taken to be "the date

on which completion certificate" in respect of such housing

project "is issued by the Local Authority". If Explanation (ii) is

superimposed on the expression "completes such

construction" in Clause (a) of Section 80IB(10), it would

mean that the housing projects commenced on or after

01.10.1998 must possess completion certificate issued by

the Local Authority on or before the cut off date, as may be

applicable - to become eligible for tax deduction. As per

Explanation (ii), therefore, the synonym of "completes such

construction" would be the date on which completion

certificate is issued by the Local Authority. No more and no

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 less. Thus, enough indication and also sufficient time has

I.T.A.Nos.40/2012, 36/2012 & 35/2012 been given to both

the class of housing projects to fulfill that condition. The

provision is in the nature of limiting the benefit of deduction

to the specified housing projects, and not to those who fail to

fulfill the requirement of completion of construction in time

frame specified for the respective category of housing

projects. This has been done in larger public interest - to

ensure that the benefit is given only to such projects who

would further the goal of providing low cost economic houses

to the deserving persons in reasonable time.

extend benefit or privilege to certain class of persons and

also to withdraw the same for just reasons. That cannot be

questioned, unless shown to be unconstitutional in form or

its substance. It was thus open to the Parliament, to provide

for a cut off date for completion of the housing projects, as a

condition precedent to avail benefit of deduction. In the past,

such stipulation was in place, but, later on, it was done

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 away with. However, by amendment which came into effect

from 1st April, 2005, the condition for completion of project

within specified time has I.T.A.Nos.40/2012, 36/2012 &

35/2012 been reintroduced, while giving sufficient time

(four years) to the assessee to comply for being entitled to

get deduction.

less, with retrospective effect as has been argued before us;

unlike introduction of new condition in the shape of clause

(d) - which obviously could be applied only prospectively, as

held by the Supreme Court in the aforesaid decisions.

Clause (a) stands on a completely different pedestal. It

cannot be treated as a new condition linked to the approval

and construction or having retrospective effect as such. For,

it gives at least four years' time frame to both class of

housing projects; to wit, housing projects approved prior to

1st April, 2004 or after 1st April, 2004. The four years period

obviously has prospective effect, albeit limiting the period for

completion of the project, to avail of the benefit. Four years'

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 time frame for completion of the project, by no standards,

can be said to be unreasonable, harsh, absurd or incapable

of compliance. It is also not a case of withdrawal of vested

right of the developer, as such. No developer can claim

vested right to complete the housing project

I.T.A.Nos.40/2012, 36/2012 & 35/2012 in indefinite

period. The right arising from Section 80IB, is coupled with

the obligation or duty to complete the project in specified time

frame. If the developer does not complete the housing project

within specified time, will not receive that benefit. There is

no compulsion on him to complete the project in four years.

Notably, even the approvals to the construction of housing

project granted by the Local Authority specify the date

within which the construction must be completed, as per the

time frame specified in the permission. If the project is not

completed within the stipulated time, the developer is free to

get that period renewed or extended from the Local Authority

as per the applicable Rules and Regulations. The provision

for claiming tax deduction from profits, can certainly

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 prescribe for reasonable conditions and more so time frame

for completion of the project, in larger public interest.

between the new condition prescribed in terms of clause (d)

and that of clause (a). Condition in Clause (a), neither

operates retrospectively nor can be said to be absurd, unjust

or expecting I.T.A.Nos.40/2012, 36/2012 & 35/2012 the

assessee to comply with something which is impossible to

achieve.

whether the stipulation in Section 80IB(10)(a) can be said

to be directory. Considering the prodigious benefit offered in

terms of Section 80IB to the assessee (hundred per cent of

the profits derived in any previous year relevant to any

assessment year); and the purpose underlying the same -

which is inter alia burden on the public exchequer due to

waiver of commensurate revenue - the stipulation for

obtaining completion certificate from the Local Authority

before the cut off date, must be construed as mandatory.

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 The fact that compliance of that condition is dependent on

the manner in which the proposal is processed by the Local

Authority, the provision cannot be construed as a directory

requirement. It is a substantive provision mandating

issuance or grant of completion certificate by the Local

Authority before the cut off date or specified time, as a

precondition to get the benefit of tax deduction. Else, it will

then be open to the assessee to rely on other circumstances

or I.T.A. Nos. 40/2012, 36/2012 & 35/ 2012 evidence to

plead that the housing project is complete - requiring enquiry

into those matters by the Tax Authorities - sans a completion

certificate issued by the Local Authority in that behalf. A

priori, the argument of substantial compliance is sufficient,

would lead to uncertainty about the date of completion of the

project which is the hallmark for availing of the benefit of tax

deduction. Only with this intent the legislature in its wisdom

has predicated that, "the completion of construction" of the

housing project is taken to be "the date on which" the

completion certificate "is issued" by the Local Authority. To

interpret it to include an ex post facto certificate or such 10

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

certificate issued by the Local Authority after the cut off

date, would not only result in rewriting of the express

provision and run contrary to the unambiguous position

pronounced in the Section, but also doing violence to the

legislative intent. For, Explanation (ii) will then have to be

read as "date of completion of construction of the housing

project shall be taken to be the date as certified by the Local

Authority in that behalf", irrespective of the date of issuance

of such certificate by the I.T.A.Nos.40/2012, 36/2012 &

35/2012 Local Authority. Indeed, in a given case if the

assessee is able to substantiate that the completion

certificate "was in fact issued" by the Local Authority before

the cut off date, but could not be produced by him within

time due to reasons beyond his control, the argument of

substantial compliance of the provision can be tested. Any

other interpretation would result not only in uncertainty (in

finalization of assessment proceedings due to non-issuance

or delayed issuance of such certificate by the Local Authority

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

and prone to manipulations at the end of the Local

Authority); but also have to yield to the subjective

satisfaction of the Assessing Authority and of investing wide

discretion in that Authority, which, eventually, may only end

up in getting embroiled in litigation. If the assessee has

failed to comply with the condition of obtaining completion

certificate from the Local Authority before the cut off date, he

must take the consequence therefor and of denial of the

benefit of tax deduction offered to him on that count.

Laws of different States are not uniform in respect of

procedure for I.T.A.Nos.40/2012, 36/2012 &

35/2012 issuance of completion certificate. To wit, in some

States, the dispensation provided is to issue partial or full

occupation certificate; and thereafter issue completion

certificate after removal of all the deficiencies pointed out by

the Local Authority. In some States, the Municipal Law may

provide for issuing partial or full completion certificate. The

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

requirement of completion certificate issued by the Local

Authority, as envisaged in Section 80IB(10)(a) of the Income

Tax Act, which is a Central enactment dealing with the

special subject of taxation, however, is, of only one

certificate - which is full completion certificate issued by the

Local Authority before the cut off date. That is to lend

credence to the factum of completion of the entire housing

project in all respects as per the approval granted by the

Local Authority. It can be safely assumed that the legislature

was conscious of this position, for which, express provision

has been made as to the meaning of the date of completion

of the housing project linked to the "date on which"

completion certificate "is issued" by the "Local Authority", as

predicated in Explanation (ii) thereunder.

“26. We accordingly hold that issuance of completion

certificate, after the cut off date by the Local Authority but,

mentioning the date of completion of project before the cut off

date does not fulfill the condition specified in clause (a) of

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

Section 80IB (10) read with Explanation (ii) thereunder. We

reject the argument of the assessee that the effect of

amended clause (a) of sub-Section 10 of Section 80IB, which

has come into force with effect from 1st April, 2005 ,has

retrospective effect or that it is unjust in any manner or

incapable of compliance at all. Similarly, the requirement of

securing completion certificate issued by the Local Authority

before the cut off date is not directory, in view of the express

provision in Section 80IB(10)(a) and the Explanation (ii)

thereunder. The completion certificate granted by the Local

Authority must bear the date of having been issued before

the cut off date.

the stipulation in Section 80IB(10)(a) of completion

certificate issued by the Local Authority before the cut off

date, cannot be applied in the case of assessee following

the work in progress accounting method. In our opinion, the

provision in the form of Section 80IB (10)(a), applies

uniformly to all the assessees - be it following work in 14

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

progress accounting method or otherwise. The benefit of

deduction under this provision can be availed by the

assessee following the work in progress accounting

method, provided he has complied with the stipulation of

having produced completion certificate issued by the Local

Authority before the cut off date, as may be applicable in

his case. In other words, if the housing project was

approved by the Local Authority before 1st April, 2004, he

must submit completion certificate issued by the Authority

having been issued before the 31st March, 2008. Whereas,

in the case of housing project approved on or after 1st April,

2004, the assessee can avail of the benefit provided

completion certificate issued by the Local Authority is

within four years from the end of the financial year in

which the concerned housing project was approved by the

Local Authority. If this condition is not fulfilled, the

assessee who maintains work in progress accounting

method and has claimed deduction under Section

ITO vs. M/s Global Housing ITA No. 525/Ind/2913

80IB(10)(a) must suffer the consequence of disallowance or

withdrawal of the benefit claimed by him on that count.

judgment of the Tribunal is set aside; and in the facts of

the present case, the decision of the Assessing Officer to

disallow deduction under Section 80IB(10)(a) of the Income

Tax Act is upheld. No order as to costs.”

sweep of amended clause (a) of the provision under sub-section (10)

of section 80IB of the Act and held that the provisions of clause (a),

as amended, sen sustricto cannot be considered as new condition

and that too incapable of compliance. The clause deals with the

time frame within which the housing project was expected to be

completed to get the benefit of prescribed deduction. The Hon'ble

High Court has held that issuance of completion certificate after the

cut off date by the local authority but mentioning in the date of the

completion of project before cut off date, does not fulfil the

condition specified in clause (a) of section 80IB(10) read with

Explanation 2 thereunder. In view of this finding of the Hon'ble 16

ITO vs. M/s Global Housing ITA No. 525/Ind/2913 jurisdictional High Court, we find force in the appeal of the Revenue

and allow the same.

The order has been pronounced in open Court on 2nd May,

2017.

Sd/- sd/-

लेखा सद�य �या�यक सद�य (O.P.Meena) (C.M. Garg) Accountant Member Judicial Member

May 2, 2017.

Dn/