M/S. TRIDENT PROPERTIES,CHENNAI vs. ITO, COIMBATORE

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore, dated 30.09.2016 and pertains to assessment year 2012-13.

The only dispute is with regard to deduction claimed by the assessee under Section 80-IB(10) of the Income-tax Act, 1961 (in short 'the Act').

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee claimed deduction under Section 80-IB(10) of the Act in respect of housing project. The Assessing Officer, however, disallowed the claim of the assessee on the ground that the assessee could not produce the completion certificate after construction. According to the Ld. counsel, the assessee got approval for construction of three blocks in the subject land. The assessee completed two blocks, namely, A & C. Due to non- availability of service road, the assessee could not complete B- Block. According to the Ld. counsel, there was encroachment on the main road. The Corporation and the Highways authorities could not evict the encroachers. The encroachers were removed and evicted only in August, 2013. Therefore, the assessee could not complete the project in respect of B-Block. The construction of the project was stalled for years together. When the assessee approached the Corporation for completion certificate, according to the Ld. counsel, the Corporation authorities informed the assessee that they have decided not to give completion certificate as a matter of policy.

On the contrary, Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the assessee obtained approval for three blocks, namely, A, B & C. Admittedly, the assessee constructed only A & C Blocks. B-Block was not constructed by the assessee. According to the Ld. D.R., the assessee claimed that it was impossible to construct the B-Block since the service road was not provided by the Corporation and Highways authorities due to encroachment. Referring to CBDT circular, the Ld. D.R. submitted that for the purpose of claiming exemption under Section 80-IB(10) of the Act, the assessee has to complete the housing project within four years from the financial year in which housing project was approved by local authority. In this case, the assessee obtained planning permission for construction of three blocks. However, the assessee could not complete B-Block. Since the assessee could not complete one block within the due date, according to the Ld. D.R., the assessee cannot claim any deduction under Section 80- IB(10) of the Act.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the housing project was approved by the competent authority for construction of three blocks, namely, A, B & C. It is not in dispute that the assessee completed A & C blocks. Due to obstruction on the service road by encroachers, the assessee could not complete B-Block. It is also not in dispute that encroachers were evicted in August, 2013 by the Corporation and Highways authorities. No doubt, for the purpose of allowing deduction under Section 80- IB(10) of the Act, the assessee has to complete the project as per the approved plan.

Now the question arises for consideration is when the assessee could not complete the project due to encroachment in the service road and the Corporation and Highways authorities could not evict them within appropriate time, can the benefits provided under Section 80-IB(10) of the Act be denied? In somewhat similar matter, while granting deduction under Section 80-IB(10) of the Act, the Madras High Court found that when the assessee exceeded the plinth area in respect of some of the residential units, the assessee is eligible for proportionate deduction under Section 80-IB(10) of the Act in respect of the residential units which are less than 1500 sq.ft. This concept employed by the Madras High Court in respect of residential units, which exceed 1500 sq.ft., can also be extended to the assessee when the assessee could not complete B-Block for the admitted reason that encroachers could not be evicted by Corporation of Coimbatore and Highways authorities. Therefore, this Tribunal is of the considered opinion that rejection of the claim of the assessee on the ground that assessee could not complete B-Block, as per approved plan, could not be a reason for refusing the deduction under Section 80- IB(10) of the Act. The assessee is entitled for deduction on proportionate basis in respect of blocks A & C.

In view of the above, the assessee cannot be blamed for non-production of completion certificate from Corporation of Coimbatore. From the material available on record, it appears that the assessee has constructed a multistoried building. Therefore, the Assessing Officer has to examine and find out who is the competent authority for granting planning permission and building approval under Tamil Nadu Town and Country Planning Act, 1971.

With the above observation, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh as indicated above and thereafter decide the issue, in accordance with law, after giving a reasonable opportunity to the assessee.