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Income Tax Appellate Tribunal, CHANDIGARH BENCHES ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 15.03.2016 of the Commissioner of Income Tax (Appeals), [hereinafter referred to as CIT(A)]-1, Chandigarh.
The assessee has taken the following grounds of appeal:- 1. The order passed by Ld. CIT(A) is contrary to the law & facts of the case.
The Ld. CIT(A) has erred in rejecting the claim of the assessee for deduction u/s 80IB(10) amounting to Rs. 49,51,216/- and holding that assessee is not eligible for deduction u/s 80-IB(10).
The Ld. CIT(A) has erred in law & facts in rejecting the claim of the assessee that project was approved before October 1998 whereas the approval for development and construction was accorded on 12.04.1999 vide memo No. 5DP(III)-99/4560 dated 12.4.1999
The Ld. CIT(A) has erred in law and facts in rejecting the claim of the assessee u/s 80IB(1) on the ground that assessee has failed to prove that the housing project was completed on or before 31.3.2008.
This is the third round of appeal before us. Earlier, the Revenue had
come up in appeal before the Tribunal agitating the action of the CIT(A) in
allowing the claim of the assessee. The Tribunal vide its order dated
23.11.2011 in ITA No. 330/Chd/2011 restored the matter to the file of the
CIT(A) to decide the same afresh. Thereafter the Ld. CIT(A) in compliance
of the directions of the Tribunal re-heard and again allowed the appeal of
the assessee vide his order dated 22.8.2011. The Department again
preferred the appeal before the Tribunal. However, the Tribunal vide order
dated 16.6.2015 set aside the order of the CIT(A) and again remanded the
matter to the file of the CIT(A) with directions to re-decide the appeal of
the assessee strictly in accordance with law and by following the earlier
order of the Tribunal dated 23.11.2011. Now, vide impugned order dated
15.3.2016, the Ld. CIT(A) has dismissed the appeal of the assessee. Thus,
the assessee has come in appeal before us.
The brief facts of the case are that M/s Swastik Construction, a
proprietorship concern of the assessee, had undertaken a construction
project at Panchkula and claimed profit from the project of Rs.
41,15,216/- as deduction u/s 80IB(10) of the Income-tax Act, 1961 (in
short 'the Act'). The Assessing officer (in short AO) denied the claim by
observing that the project was granted approval on 15.02.1996 i.e. much before 1st October, 1998 the stipulated date as provided in the relevant
provisions of the Act for claiming deduction u/s 80IB(1) of the Act. It was
further held by the Assessing officer that the assessee had also not
furnished completion certificate of the local authority that the project was
completed by 31.3.2008. The Assessing officer accordingly rejected
assessee’s claim of deduction u/s 80IB (1)) of the Act.
The Ld. CIT(A) vide impugned order has confirmed the disallowance
of deduction made by the AO. The assessee has, thus, come in appeal
before us.
Before further deliberating on the matter, we deem it appropriate to reproduce the relevant provisions of section 80IB(10) of the Act:- Section 80IB (10) (10) 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 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 purposes 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; ……. 7. The perusal of the above reveals that for the projects approved by the local authority before 1.4.2004, the development and construction of the housing project must commence on or after 1.10.1998. Further, it is the commencement, development and construction of the housing project which is relevant and not the commencement of project itself. The date of the completion 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. It is pertinent to mention here that it is nowhere mentioned in the relevant provisions of the section that the date of approval shall be taken as the date of commencement of the development and construction of the housing project.
The Ld. CIT(A) after examining the relevant evidences, the exchange of correspondence between the assessee and the local authorities i.e. the District Town Planner and Director, Town and Country Planning, Haryana etc. has given a categorical finding that it was evident that till 21.4.1998, the construction at the site had not commenced. He, however, held that there was nothing on record to substantiate the contention of the assessee that development and construction of the said project did not commence during the period between 21.4.1998 to 1.10.1998. To further clarify, it is penitent to note here that to be eligible for
deduction u/s 80IB (10) of the Act, the construction and development of the
project should have commenced on or after 1.10.1998.
Similarly, regarding the completion of the project, the Ld. CIT(A) held that it
was not proved on the file that the said housing project was completed on or
before 31.3.2008. He, therefore, affirmed the order of the Assessing officer
disallowing the claim of the assessee.
Before us, the Ld. Counsel for the assessee has placed reliance on Paper
book page 27, which is copy of the letter dated 16.2.1996 vide which the
permission for development of residential colony had been granted by the Dy.
Commissioner Periphery, Town & Country Planning, Chandigarh. The following
clauses of the said letter are relevant: …….
“I) That the colony is laid out to conform to the approval layout plan and development works are executed according to the approval designs and specifications. …… V) You will submit demarcation plan of the colony, before starting the development works in the colony and for approval of the zoning plan. …….. IX) That you shall also comply with any orders of the Deputy Commissioner (Periphery)-Cum-Director, Town & Planning, Haryana, and the provisions of the Punjab New Capital (Periphery) Control Haryana, Amendment Act, 1971 and rules framed thereunder.”
The Ld. Counsel thereafter has relied upon the Section 5 of the provisions
of Punjab New Capital (Periphery) Control, Act, 1952, which reads as under:-
“5. Restrictions in a controlled area – Except as provided hereinafter, no person shall erect any building or make or extend any excavation, or lay out any means of access to a road, in the controlled area save in accordance with the plans and restrictions and with the previous permission of the Director in writing.”
Further, Section 6 of the said Act laid down the procedure with regard to the application for permission and the grant of or refusal of such permission and further provides that the Director may grant the permission, subject to said condition, if any, as may be specified in the order or even may refuse the permission. Further section 12 of the said Act deals with offences and penalties. The relevant part of section 12(1) of the Act read as under: a. Erects or re-erects any building or makes or extends any excavation or lays out any means of access to a road in contravention of the provisions of section 5 or in contravention of any conditions imposed by an order under Section 6 or in Contravention of any conditions imposed by an order under Section 1 of Section 11. b ……. Shall be punishable with imprisonment of either description for a term which may extent to there years and with fine ….
The Ld. Counsel for the assessee, therefore, has submitted that the prior to start of construction of project, the assessee was required to comply with the provisions of Punjab New Capital (Periphery) Control Act, 1952 and the conditions laid down in the approval letter 15.2.1996. Further that as per the conditions of the approval and as per the provisions of the Punjab New Capital (Periphery) Control, Act, 1952, the assessee could start the construction after the building plans and service plans are approved from the office of the Director, Town & Country Planning, Haryana and not before that. Page 31 of the paper book is the copy of the letter dated 21.4.1998 from the Director, Town & Country Planning (Haryana) vide which the building plans have been approved, the relevant part of which is reproduced as under:- “…….. 1. The plans are valid for a period of two years from the sanction, subject to the validity of permission granted for this scheme. As the permission is not valid, the approval would not mean that the D.T.C.P. has agreed to the renewal of permission and the case of
renewal of permission will be examined separately on merits. The Promotor will not start the construction at site without getting the permission renewed. …. 5. That you shall furnish the service plans / estimates of this scheme in accordance with the approval site building plans within 60 days from the date of issue of this letter. …….. 9. No person shall occupy or allow any other person to occupy new building or part of the same for any purpose whatsoever until such building or part thereof has been certified by the Director or any person authorised by him in this behalf as having been completed in accordance with this permission granted and an occupation certificate in prescribed form has been duly issued in favour of the colonizer. Before grant of occupation certificate, the colonizer shall have to submit a notice of completion of the building in form BR-IV regarding completion of works described in the plans and it shall be accompanied by - (i) A structural stability certificate duly signed by the licensed structural Engineer / Architect. (ii)……”
The Ld. counsel, thereafter, has relied upon page 101 of the paper book, which is a copy of the letter dated 30.1.1998 (Form LC-VI) addressed to the Dy. Commissioner (Periphery)-cum-Director, Town & Country Planning, Haryana vide which the applicant has sought renewal of permission granted vide letter dated 15.2.1996 (supra) for construction of the project. In para 2(iv) of the said letter, it has been mentioned that an explanatory note indicating the details of developments works which have been completed or are in progress or are yet to the undertaken is attached. The explanatory note attached with the said application reads as: “Development work would be carried only after the approval of service estimates”.
Further at page 30 of the paper book is a copy of the letter dated 30.3.1998, vide vide which three sets of service estimates in respect of project have been
submitted to Director, Town & Country Planning (Haryana) with request to
approve the estimates so that assessee could start the internal development of
the project. It has been further submitted that since these service estimated
submitted vide letter 30.3.98 (supra) required some modifications, the same
were again submitted for approval vide letter dated 26.11.1998, copy of which
has been placed at page 36 of the paper book.
Thereafter, the Ld. counsel has placed reliance on the paper book page 104
which is a copy of the letter dated 27.4.1998 from Director, Town & Country
Planning, Haryana to the assessee vide which permission granted to the assessee
vide office letter dated 12.2.1996 for setting up of the housing project has been
renewed up to 12.2.1999.
Thereafter reliance has been placed on paper book page 4 which is copy of
the letter dated 12.4.1999 by the Director, Town & Country Planning, Haryana
vide which service plan estimate of the project in question has been approved.
The Ld. Counsel, thus, has contended that the assessee could start the
construction after getting the approval of the service plan and that prior to that
assessee was not authorised to carry out the construction.
The Ld. DR, on the other hand, has relied upon the findings of the lower
authorities.
As discussed above, the Ld. CIT(A), after appreciation of the evidences
on file, has already held that construction of the project had not commenced till
21.4.1998. However, he held that it was not proved on the file that the
construction of the said project has not commenced between 21.4.1998 to
1.10.1998. From the above referred evidences on the file in the shape of letters
seeking approvals of the plans, copies of the permission for approval of the
plans and conditions laid down therein and as per the provisions of Punjab New
Capital (Periphery) Control, Act, 1952, as per which no person is authorised to
erect any building or even lay out or means or access to a road in the controlled
areas, save in accordance with the plans and restrictions and with the previous
permission of the director in writing. Further, failure to comply the aforesaid
provisions would tatamount to an offence as laid down u/s 12 of the Act and is
liable to be punished with imprisonment which may extend to three years with
fine which may extend to Rs. 10,000/- and in any case of continuing
contravention, further fine which my extend to Rs. 500 for every day.
Hence in view of the strict provisions of the Act and in the light of the
evidences furnished on the file, we are convinced that the assessee could not
start the construction till the approval of the service plans on 12.4.1999. Even
otherwise, there is no evidence on file that the assessee had started the
construction of the project between the period from 21.4.1998 to 1.10.1998.
The assessee, in our view, has discharged his initial burden to prove that the
construction has not commenced till 1.10.1998 and no evidence in rebuttal has
been produced on the file by the Revenue. Under the circumstances, we hold
that the assessee has complied the first condition of commencement of
construction of the project on or after 1.10.1998.
Now, coming to the date of completion of the project, as per the relevant
provisions of Section 80IB, the housing project must be completed on or before
31.3.2008. The Ld. Counsel for the assessee in this regard has invited our
attention to paper book pages 31 to 35 being memo No. 5935 dated 21.4.1998 of
Director Town & Country Planning, Haryana Chandigarh vide which the
Approval of Building plans of Group Housing Scheme was granted. As per
Clause 9 of the said memo, the following condition was laid down:-
“9….. Before the grant of occupation certificate, the colonizer shall have to submit a notice of completion of building in form BR-IV regarding completion of works described in the plans and it should
be accompanied by a structural stability certificate duly signed by the Licensed Structural Engineer / Architect.”
The Ld. Counsel further submitted that in view of the above condition, assessee vide its letter No. SC-11753 dated 8.1.2008 submitted to the Dy. Commissioner (Periphery) cum Director Town and Country Planning, Haryana Chandigarh furnished certificate of completion dated 1.1.2008 from the Architect “Khanna Manmohan and Associate” in form BR V (copy placed at page 7 of the paper book) and also the certificate of completion from the owner and that the same was received by the concerned authority on 9.1.2008. Simultaneously, assessee filed another letter No. SC11755 date 8.1.2008 and requested the Deputy Commissioner (Periphery) cum Director, Town and Country Planning, Haryana Chandigarh for issuance of Completion Certificate of Swastik Vihar Colony. The Ld. counsel has further invited our attention to paper book page 76, which is copy of letter by Director, Town & Country Planning, Haryana to Dy. Commissioner of Income Tax wherein in response to
the query raised by Ld. DCIT, it has been informed as under:-
“a. Yes, the 2.99 acre site does not fall under the jurisdiction of Punjab New Capital Periphery Control Act 1952.
b. No. There is no statutory provisions under the Punjab New Capital Periphery Control Act 1952 regarding obtaining completion certificate for any project which is sanctioned under the said Act. c. Under the Haryana Development & Regulation of Urban Areas Rule 1976, the provisions for grant of completion certificate exists under rule 16, which is reproduced below for ready reference.
It is also confirmed that since the permission in the present case stands granted under the Punjab New Capital Periphery Control Act 1952, the provisions of Haryana Development and Regulation of Urban Area Act 1975 are not applicable on the above mentioned 2.99 acres colony developed by Sh. Sham Sunder.”
The Ld. counsel, therefore, has submitted that since the project of the assessee was approved under Punjab New Capital (Periphery) Control Act, 1952, there was no statutory provision therein regarding obtaining of the completion certificate of the project, what was required, was to obtain the occupation certificate. The Ld. Counsel thereafter has relied upon the copy of the ‘occupation certificate’ dated 18.5.2010 granted by the Director Town and Country Planning, Haryana to the assessee. Further, at paper book 79, is a copy of the letter dated 9.8.2010 vide which office of the Director, Town and Country planning has clarified that the Occupation Certificate dated 18.5.2010 may be considered as Completion Certificate. The Ld. Counsel has submitted that the assessee completed the project before 31.3.2008, and that it was the Departmental authorities who took time to grant him the occupation certificate. The Ld. Counsel for the assessee has relied on the
following case laws in this respect.
i) CIT Vs. Hindustan Samuh Awas Ltd (2015) 92 CCH 0381 / 377 ITR 0150 (Bom.)
ii) CIT Vs. Tarnetar Corporation reported in (2014) 362 ITR 174 (Guj.) (iii) ITO Vs. M/s Ambey Developer Pvt Ltd, Patiala ITA Nos 688/Chd/2014 & 852/Chd/2014 of ITAT, Chandigarh order dated 14.3.2016
The Ld. DR, on the other hand, has relied on the findings of the CIT(A) on this issue.
We have considered the rival submissions. As discussed above, the assessee had produced on file the copies of two letters of even dated 8.1.2008. In the first letter, copy placed at pags 37 of the paper book, the assessee has sought renewal of license / permission dated 15.2.1996 for the group housing project and along with the said letter the assessee had attached the requisite fee, certificate of completion from the Architect and the certificate of completion
from the owner as discussed above. In the second letter of the same date, the
addressed to the Dy. Commissioner (Periphery)-cum-Director Town & Planning
Haryana, the assessee has also requested for grant of the completion certificate.
There is no evidence on the file that in response to the aforesaid letters issued
by the assessee, the case of the assessee has ever been rejected for want of
completion of the construction at the site. The Ld. CIT(A) had also remanded
the case for verification of the completion certificate to the assessing officer.
Thereafter, certain queries were also raised by the Assessing officer to the
Director Town & Country Planning, Haryana, however, nothing is brought on
record to say that the assessee had not completed the construction prior to
31.3.2008. In such circumstances, the decision of the Hon'ble Bombay High
Court in the case of ‘CIT Vs. Hindustan Samuh Awas Ltd’ reported in (2015)
92 CCH 0381 / 377 ITR 150 (Bom) is squarely applicable to the case of the
assessee wherein the Hon'ble High Court has held that the provisions of
section 80IB(10) and explanation do not give any importance of issue of
completion of certificate by Architect rather they give importance only to the
completion certificate issued by the Municipal Authority. That it is common
knowledge that application for completion certificate submitted to the municipal
authority is accompanied by a Completion Certificate issued by the concerned
Architect. If the project is really completed before 31.3.2008 and application is
moved quite in time, for seeking completion certificate from municipal
authorities, if they do not take steps urgently and delay of issuance of
completion certificate from their side, then it cannot be said that such certificate
would alone decide the date of completion of the project. The Hon'ble Bombay
High Court, therefore, in the circumstances of that case observed that when the
Architect of the project had given a certificate prior to 31.3.2008, and the assessee had moved application to the municipal authority along with such
Certificate well in time on 25.3.2008, and the required fee was also deposited on
31.3.2008 and thereafter the certificate was issued in October 2008, the delay
cannot be attributable to the assessee. The Hon'ble High Court therefore, held
that under such circumstances the project for which exemption was sought was
completed prior to 31.3.2008 and that the assessee was entitled to the exemption
provisions of section 80IB (10) of the Act. The Hon'ble High Court while
holding so, has also referred to the decision of the Gujarat High Court in the
case of ‘CIT Vs. Tarnetar Corporation’ reported in (2014) 362 ITR 174
(Gujarat) wherein the Hon'ble High Court in the facts and circumstances of the
case has held that the requirement of section 80IB(10) of issuance of completion
certificate by the municipal authority was not mandatory and that if substantial
compliance thereof is established on record, in a given case, the Court may take
the view that minor deviation thereof would not vitiate the very purpose for
which deduction was being made available. The Hon'ble Gujarat High Court
observed that the assessee had completed the construction much before the final
date and applied for completion certificate and such permission was not rejected
on the ground that the construction was not completed but on some other
technical ground, the benefit of deduction u/s 80IB(10) cannot be denied to the
assessee. The above view has been further followed by the Coordinate Bench of
the Tribunal in the case of ‘ITO Vs. M/s Ambey Developers Pvt Limited’ ITA
No. 688/Chd/2014 vide order dated 14.3.2016
We may further point out here that the provisions of section 80IB(1) are
beneficial provisions with the objectives of encouraging the housing projects
and hence, the same are required to be interpreted liberally to achieve the
purposes for which they have been enacted. The case of the assessee, in our
view, is squarely covered by the above referred to decisions of the higher courts
and also with that of the co-ordinate Bench of the Tribunal.
In view of the above, we hold that the assessee has discharged its burden
to prove that the construction was completed prior to 31.3.2008. The assessee, is
thus entitled to deduction u/s 80IB (10) of the Act. The impugned orders of the lower authorities are therefore, set aside and the appeal of the assessee is hereby allowed. Order pronounced in open court on 09.02.2018
Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 09.02.2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR