HIGH RISE CONSTRUCTION,NAGPUR vs. I.T.O. WARD 1(5), NAGPUR

1 ITA No. 285/Nag/2015.

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER.

(S.M.C.) I.T.A. No. 285/Nag/2015 Assessment Year : 2012-13.

M/s High Rise Construction, The Income-tax Officer, Nagpur. Vs. Ward-1(5), Nagpur. PAN AAAFH7513D. Appellant. Respondent. Appellant by : Shri Manoj Moryani. Respondent by : Shri A.R. Ninawe.

Date of Hearing : 16-01-2017 Date of Pronouncement : 18th January, 2017.

O R D E R. This appeal by the assessee is directed against the order of learned CIT(Appeals)-I, Nagpur dated 30-07-2015 and pertains to assessment year 2012-13. The ground of appeal reads as under :

“ The learned C.I.T.(A) erred in dismissing appeal of assessee and thereby endorsing the disallowance u/s 80IB(10) of the I.T. Act, 1961.” 2. In this case the appellant is a builder and has constructed a housing project. The resultant profit of Rs.42,20,301/- has been claimed as deduction u/s 80IB(10) of the Act. The housing project was approved by the Gram Panchayat on 01-03-2006 for commencement of the construction. The AO has disallowed the claim of deduction on the ground, firstly, that the appellant has failed to submit the completion certificate of the housing project and secondly, that the firm has allotted more than one unit to an individual and his spouse. The AO on verification of Form No. 10CCB found that the date of completion of the

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housing project was not mentioned therein. The appellant also could not produce the completion certificate from the local authority by which the housing project was approved for commencement of construction of the project. The appellant though has submitted to AO that the housing project was completed on 15-02-2011 and has given sufficient evidence for project completion but the AO was not convinced. A.O. held that thus the appellant failed to comply with one of the basic conditions of section 80IB(10) of the Act. The AO further noted that the appellant firm has allotted more than one unit to an individual and his spouse which is violated to section 80IB(10(f) of the Act. The AO found that firm has allotted more than one unit to Shri Dhananjay Ramlalji Choudhary and in another case also two units from the same housing projects were allotted to Shri Ravindra R. Akulwar and his wife Smt. Ashwini Akulwar. In this regard, the AO further found that during the FY 2011-12 relevant to the year under appeal the major work of the housing project was incomplete. Accordingly AO made the impugned disallowance of exemption claimed.

“4,3 Shri Rajeev Menghal, CA and AR of the appellant appeared in response to the notice u/s 250 of the Act and filed written submission. The AR has submitted that the construction of the housing project was commenced on 02-03-2006 which was completed before due date i.e. 31- 03-2011. The AR admittedly has not been able to submit the completion certificate but submitted documents in the form of Gram-panchayat tax receipts, NOC for electrical connection, valuation certificate issued by the architect for financing loans, possession letter etc. as a proof of the project having been completed before 31-03-2011. The AO in this regard also contended that the appellant could not make application of completion of housing project within time due to absence of appropriate authority. The AR thus, contended that there is no violation of section 80IB(10) of the Act.

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5.0 I have carefully considered the submissions of the AR of the appellant, the order of the AO and the material on record. It is not disputed that the appellant has not furnished the completion certificate in respect of the housing project in question. The furnishing of information in Form No. 10CCB in respect of the housing project is mandatory to claim the deduction u/s 80IB(10). However, the form submitted by the appellant was incomplete and did not provide any information as regards to the date of completion of the housing project. The appellant has commenced the housing project after obtaining necessary approval from the ‘Gram-panchayat’ on 02,03.2006 and accordingly, the housing project ought to have been completed before 31.03.2011. But the assessee failed to furnish the completion certificate during the assessment proceedings from the prescribed competent local authority even after lapse of almost three years till the assessment was completed on 24.02.2015. Thus, there has been the violation of basic condition stipulated u/s 80IB(10) of the Act. 5.1 On careful examination of the material facts, it is seen that the appellant has also violated the condition stipulated u/s 80IB(10(f) of the Act. There is no dispute that the appellant has allotted more than one units to an individual and his spouse. The AO has established that the firm has allotted more than one unit to Shri Dhananjay Ramlalji Choudhary and in another case also two units from the sme housing projects were allotted to Shri Ravindra R. Akulwar and his wife Smt. Aswini Akulwa. The contention of the AR that the provisions of section 80IB(10)(f) as amended w.e.f. Finance Act-2009 i.e. 01.04.2010 are not applicable has no merits. The amended provision reads as under : “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 a housing project is allotted to any of the following persons namely- (i)The individual or the spouse or the minor children of such individual” 5.2 On bare perusal of the above provisions, it is become quite obvious that the appellant has violated the provisions of section 80IB(10(f) of the Act. 5.3 The contention raised by the AR that the appellant has submitted the circumstantial evidence in the form of Gram-panchjayat in the orm of ‘tax receipts’, ‘NOC’ for electrical connection, ‘valuation certificate’ issued by the architect for financing loans, ‘possession letter’ etc., does not carry much substance in as much as that the AO has clearly established from the analysis of the facts and figure as mentioned in para- 6 of the assessment order that the housing project was incomplete during

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the financial year 2011-12 under appeal. The AO’s finding is based on a chart given in the order. The relevant finding of the AO is as under : “The total of mclosing stock is shown at Rs.59,57,400/- and the ratio of total of construction expenses of Rs.31,37,124/- during the year to the closing stock comes to 52.65%. This shows that the major work was incomplete during the FY 2010-11 by which the project had to be completed. The above expenses indicated that the major works were still contained in the FY 2011-12 and the project was incomplete within the period by which the assessee had to completed its housing project and therefore no completion certificate was issued by the local authority and hence the firm was not eligible for benefit of provisions of section 80IB(10) of the Income Tax Act.” 5.4 It is quite manifest from the above finding recorded by the AO that the housing project was not completed by the prescribed due date of 31.03.2011. It is thus seen that the conditions stipulated u/s 80IB(10) does not sustain. I therefore, decline to interfere with the order of the AO and the disallowance made of Rs.42,20,301/- is confirmed.” 4. Against the above order the assessee is in appeal before the ITAT. 5. Learned counsel of the assessee submitted that the concerned housing project was approved by the Gram Pnchayat on 02-03-2006. He further submitted that the assessee has submitted that the housing project was completed on 15-02-2011 but the authorities below have drawn adverse inference that the completion certificate from the local authority was not furnished. Learned counsel submitted that the assessee has submitted Gram Panchayat tax receipt, NOC for electrical connection, valuation certificate issued by the Architect for loans, possession certificate etc. as a proof that the project has been completed on 31-03-2011. Learned counsel submitted that the assessee could not make application to the local authority within time due to absence of appropriate authority. However, learned counsel pleaded that in several case laws Gram Panchayat have been considered to be competent authority and evidences from the Gram Panchayat should be taken as sufficient compliance. In this regard learned counsel placed reliance upon various

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decisions including that from this Tribunal in ITA No. 35 & 36/Nag/2014 in the case of ITO vs. M/s Swapnashilp Developers vide order dated 24-11-2015 where similar issue was decided in favour of the assessee. Learned counsel further submitted that Hon’ble jurisdictional High Court has affirmed the order of the ITAT in Income Tax Appeal No. 25 & 26 of 2016 vide order dated 24- 10-2016. Learned counsel further submitted that the authorities below have drawn adverse inference on account of allotment of one house to one individual and his spouse by invoking the provisions of section 80IB(10)(f) of the Act. Learned counsel submitted that the said provision was not applicable to the assessee. In this regard learned counsel submitted the following in the form of paper book in support of his contentions :

Copy of detailed submissions filed before AO PB Page 1 to 5.

Copy of Audit Report Form 10CCB PB Page-6 to 11 Relevant 9 to 11 Letter of approval from Gram Panchayat Besa for different Duplex dated 02-03-2016 PB Page 13 to 18. Copies of letter sent to Deputy Collector dated 15-02-2011 PB Page 19.

Copy of sanction layout plan PB Page 20. Detail chart of purchaser alongwith possession letter. PB Page 21 to 43. Copies of Electric Bill and Tax Receipt alongwith NOC of Grampanchayat for issuing of electric meters. PB Page 44 to 88. Valuation report for Union Bank for “Bikram Gardalwar dated 29-01-2010 PB Page 89 to 95

Valuation report for State Bank of India for Dr. Narayan Dupare dated 08/0/2010 PB Page 96 to 97

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Valuation Report for Bank of India for Nitin Janwe dated 14/10/2010. PB Page 98 to 106 Valuation report for Union Bank for Mahendra Karemore dated 04-12-2011 PB 107 to 113. Valuation Report fior Union /Bank of India for Vinod Wankhede dated 29-11-2011. PB 114 to 122 Copy of paper cutting of Nav Bharat dated 05-07-2010. PB Page 123. Copies of Sale Deed alongwith Valuation Report Of Bungalow No. 9 alongwith NOC, Photographs PB Page 124 to 163. Copy of Sale Deed alongwith Valuation Report of Bungalow No. 17 alongwith NOC, Photographs. PB Page 164 to 206.

Further more learned counsel placed reliance upon several case laws as under : 1. Judgement of ITAT, Nagpur Bench fsyrf 24-11-2015 in ITA No. 35 & 36/Nag/2014 in the case of ITO vs. M/s Swapnashilp Developers. 2. Judgement of Hon’ble High Court at Bombay, Nagpur Bench, Nagpur dated 24-10-2016 vide Income Tax Appeal No. 25 & 26 of 2016 in case of Pr. CIT vs. M/s Swanashilp Developers. 3. CIT vs. Cajetano Mario Pereira (2014) 88 CCH 152 (HC Mumbai). 4. Judgement of ITAT, Pune Bench dated 27-05-2014 in ITA No. 667/PN/2013 in the case of Hiraman Nivrutti Bhujbal vs. ITO. 5. Vertex Home P. Ltd. vs. DCIT (2015) 43 ITR (Trib) 340 (Hyd.) 6. Patel Jashwantlal A & Patel Purnamchand N vs. ITO (2015) 38 ITR (Trib.) 135 (Ahd.). 7. ACIT vs. Ekta Sankalp Developers (2015) 152 ITD 805 (Mum.). 8. Judgement of ITAT, Pune Bench dated 03-02-2014 in ITA No. 1560/PN/2011 in the case of Kumar & Potnis Properties P. Ltd. vs. DCIT. 9. Siddhivinayak Kohinoor Venture vs. Addl.CIT (2014) 97 DTR 68 (Pune) (Trib.).

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“7. We have heard both the sides at some length. The assessee is a partnership firm engaged in the business of development of real estate. The assessee has entered into a development agreement nd by virtue of the said agreement obtained development rights to develop the entire piece of land bearing No. 28 to 41, 44 to 55 and 58 to 69 in Khasara No. 38/2, 38/3 admeasuring 45513.47 Sq.ft. The development plan was sanctioned by Gram Panchayat, Besa, Nagpur. The preliminary issue as raised by the AO was that whether the Gram Panchayat is a local authority or not. On this issue, the learned CIT(A) has discussed at length the factual as well as legal aspecs. The said completion certificates were annexed in the compilation. In one of the certificates, it was mentioned that the permission for construction was granted and the Gram Panchayat tax had also been deposited. The assessee has also placed on record a detailed map of the plots which were developed and informed that the

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said development plan was also sanctioned by the authority. Our attention has also been drawn on The Bombay Village Panchayat Act, 1958 which has provided that sanction of construction of building within the limits of village has to be granted by the Panchayat. So, the argument before us is that the village Panchayat is a local authority, therefore, competent to approve a housing project. On this issue, a judgement has been passed by ITAT Nagpur Bench, Nagpur in the case of ACIT vs. M/s Chintamoni Builders, order dated 30-10-2015 wherein a discussion of The Bombay Village Panchayat Act, 1958 was made and it was found that the sanction of the construction of a building being situated within the limits of village, the approval has to be granted by the Panchayat. Because of that reason, it was held that the Village Panchayat is a local authority. Relevant portion of the said order is reproduced below: “6. As far as the issue whether the Gram Panchayat is ‘local authority’ or not, the decision of ITAT, Pune Bench has been cited before us bearing No. 667/PN/2013 assessment year 2009-10 in the case of Hiraman Nivruti Bhujal, order dated 27-05-2014 wherein other decisions were discussed and finally came to the conclusion that the concerned Gram Panchayat was a competent local authority for the purpose of issuing approval and completion certificate for claiming deduction u/s 80IB(10) of I.T. Act. Moreover, the respondent-assessee has also placed reliance on a decision of CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. 196 ITR 149 (SC) for legal proposition that the provisions for deductions and exemptions should be construed reasosnably and in favour of the assessee. In our considered opinion since all the issues in hand have been covered either by the orders of the Tribunal in assessee’s own case or by respected coordinate Benches, therefore, we find no fallacy in the view taken by the learned CIT(Appeals). Resultantly, the same is hereby confirmed and the grounds raised by the Revenue are dismissed.” 8. The next objection was about the prescribed area for the purpose of claim of deduction u/ 80IB(10) of the Act. In support of the above claim, the assessee has furnished the copy of sanctioned map, lay out plan and demonstrated that the total plot area was above the prescribed limit of One Acre. In this regard, we have noted that hate first appellate authority has given a finding of facts demarcating the respective area of the plots and there upon came to the conclusion that the total area of the plots was above the prescribed limit of One Acre. We have noted hat the said finding of fact had not been controverted by the Revenue department. In the absence of any contrary material on record, we hereby confirm the

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findings of the learned CIT(A). As a result, the grounds raised by the Revenue Department are hereby dismissed.” The aforesaid matter was also the subject matter of appeal before the Hon’ble jurisdictional High Court in Income Tax Appeal No. 25 & 26 of 2016 and vide order dated 24th Oct., 2016 the Hon’ble jurisdictional High Court has held as under :

“ We find that the findings recorded by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) are based on a proper appreciation of the material on record and they do not give rise to any substantial question of law. The submission made on behalf of the appellant – Revenue that in similar matters in respect of other development projects, this Court has admitted the appeals on two substantial questions of law and, therefore, these appeals should be admitted is not well founded. We have perused Income Tax Appeals Nos. 16/2016, 17/2016 and 20/2010. In the said appeals, it was the case of the Revenue that there was no permission from the Loal Authority for the development of one acre of plot and separate permissions were secured for construction of houses of individual plot owners. Also, in those appeals it was the case of the Revenue that the housing project was not completed within the time prescribed under Section 80IB(10) of the Act. Such is not the case here. In the present matters, both the Authorities have concurrently recorded a finding of fact that the development of the housing project was completed within the time prescribed under Section 80IB(10) of the Act. In the admitted appeals, though it was sought to be canvassed on behalf of the Revenue that Grmm Panchyat, Besa was not the ‘local authority’, a substantial question of law was not framed in that regard. We further find from a reading of the judgment in the cse of Commissioner of Income Tax vs. Cajetano Mario Pereira reported in 2014 (88) CCH 152, that this Court had considered the permission – approval granted by the Village Panchayat for the housing project to be as one granted by the local authority in accordance with the provisions of Section 80IB(10) of the Act.” 8. I have examined the evidences submitted by the learned counsel of the assessee regarding the completion of the project. On the touch stone of above said case laws I find that the evidences duly established that the project has been duly completed for the deduction being claimed. Hence I find that adverse

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inference drawn on account of lack of completion certificate cannot be sustained.

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March, 2014 support the case of the assessee. Hence I direct the AO to examine the contentions of the assessee and if required, disallow the exemption qua the sale of flat which is attracted by the concerned provisions.

Order pronounced in the Open Court on this 18th day of January., 2017.

Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 18th January, 2017.