M/s. Medha Constructions Private Limited, Hyderabad V. The Income Tax Officer, Ward 16(1), Hyderabad

ITA 206/HYD/2012

• Counselvise Citation: 20622514 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G KALYAN DAS
• Keywords: Opportunity of being heard; Competent authority
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.206/HYD/2012 ASSESSMENT YEAR 2008-2009 M/S. MEDHA CONSTRUCTIONS P. LTD., HYDERABAD PAN AADCM-8358-B VS. ITO, WARD 16 (1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE MR. G. KALYAN DAS FOR REVENUE MR. SOLGY JOSE T. KOTTARAM DATE OF HEARING 30.06.2014 DATE OF PRONOUNCEMENT 06.08.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-V, HYDERABAD DATED 05.12.2011 ON THE ISS UE OF NOT ALLOWING DEDUCTION UNDER SECTION 80IB. ALL THE GROU NDS RAISED BY THE ASSESSEE RUNNING FROM 1 TO 13 ARE NOTHING BU T STATEMENTS ON THE ISSUE OF NOT ALLOWING DEDUCTION U NDER SECTION 80IB OF RS.115.40 LAKHS. 2. BRIEFLY STATED, ASSESSEE COMPANY IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND HAS FILED R ETURN OF INCOME ON 30.09.2008 ADMITTING NIL INCOME AFTER CLA IMING DEDUCTION OF RS.1,15,39,999 UNDER SECTION 80IB OF T HE ACT. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED BY DI SALLOWING THE CLAIM UNDER 80IB ON THE REASON THAT ASSESSEE DI D NOT FURNISH COMPLETION CERTIFICATE. 2 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. 2.1. IT WAS THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE WAS FOLLOWING PERCENTAGE COMPLETION METHOD AND INCOME DURING THE YEAR WAS ESTIMATED. IN ORDER TO S ATISFY THE CONDITIONS, ASSESSEE SUBMITTED THAT THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY BEFORE OCTOBER, 2003 AND THE PROJECT WAS ON MORE THAN AC.1.00 PLOT. AS PER THE PROVISIONS, T HE PROJECT SHOULD BE COMPLETED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT WAS FIR ST APPROVED OR BEFORE 1 ST APRIL, 2008 WHICHEVER IS LATER. IN THIS CASE, SINC E THE PROJECT WAS APPROVED IN OCTOBER, 2003 THE COMPL ETION SHOULD BE BEFORE 31 ST MARCH, 2008. IT WAS ALSO FURTHER SUBMITTED THAT BUILT-UP AREA OF THE SHOPS OR COMMER CIAL ESTABLISHMENTS DOES NOT EXCEED 5% OF THE AGGREGATE BUILT-UP AREA OR 2000 SFT WHICHEVER IS LESS. IT WAS ALSO FUR THER SUBMITTED THAT BUILT-UP AREA OF EACH RESIDENTIAL UN IT IS LESS THAN 1500 SQ. FEET. HOWEVER, A.O. HAVING NOTICED VA RIATION IN THE APPROVED PLAN TO THAT OF SALE DEEDS I.E., APPRO VED PLAN BEING TWO BED ROOM HOUSE WHEREAS, THE SALE DEED CON TAINS THREE BED ROOM HOUSE ASKED FOR COMPLETION CERTIFICA TE OF THE PROJECT. ASSESSEE SUBMITTED THAT AN APPLICATION MAD E TO GHMC ON THE CERTIFICATE BY THE ARCHITECT THAT THE PROJEC T WAS COMPLETED BEFORE 31.03.2008, FILED THE LETTER AND C ERTIFICATE BY ARCHITECT. NOT SATISFIED WITH THE OTHER EVIDENCE FU RNISHED, IN THE ABSENCE OF COMPLETION CERTIFICATE FROM THE AUTH ORITIES, A.O. DISALLOWED DEDUCTION UNDER SECTION 80IB. 3. BEFORE THE LD. CIT(A), ASSESSEE SUBMITTED THAT IT HAS FURNISHED ALL RELEVANT EVIDENCES INCLUDING THE APPLICATION MADE TO GHMC FOR ISSUANCE OF CERTIFICATE OF COMPLET ION AND ALSO RELIED ON THE INSTRUCTIONS THAT IF NO SUCH CER TIFICATE WAS ISSUED WITHIN SIX MONTHS FROM THE DATE OF APPLICATI ON, IT 3 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. SHOULD BE CONSIDERED AS DEEMED APPROVAL. LD. CIT(A) , HOWEVER, IN HIS ORDER VIDE PARA 4.3 DISCUSSED THE ISSUE ELAB ORATELY AND HAS COME TO AN OPINION THAT IN THE ABSENCE OF COMPL ETION CERTIFICATE, ASSESSEE IS NOT ENTITLED FOR DEDUCTION . HE ALSO NOTED DOWN THE DISCREPANCY BETWEEN THE SANCTIONED PLAN AN D THE SALE DEEDS AND NO EXPLANATION FOR THE DEVIATION FRO M THE APPROVED PLAN. SINCE THE MANDATORY CERTIFICATE HAS NOT BEEN SUBMITTED, HE CONCURRED WITH THE A.O. AND DISMISSED THE APPEAL. 4. AGGRIEVED ON THE ACTION TAKEN BY THE AUTHORITIE S, IT WAS THE SUBMISSION THAT ASSESSEE HAS IN FACT PURSUI NG THE MATTER OF COMPLETION CERTIFICATE BUT THE GHMC AUTHO RITIES ARE NOT ACTING/ACCEDING TO THE REQUEST. LD. COUNSEL ALS O PLACED ON THE RECORD THE DIRECTIONS OF THE HONBLE HIGH COURT IN WPMP. NO.44525 OF 2013 DATED 26 TH DECEMBER, 2013 WHEREIN THE HONBLE HIGH COURT OPINED THAT IT SHALL BE OPEN TO THE CORPORATION TO CONSIDER THE REQUEST OF THE PETITION ER AND PASS APPROPRIATE ORDERS WITHIN SIX WEEKS. IT WAS SUBMIT TED THAT IN SPITE OF THE DIRECTIONS OF THE HONBLE HIGH COURT N O CERTIFICATE WAS ISSUED. WITH REFERENCE TO THE LAW ON THE POINT, LD. COUNSEL RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF ITO VS. M/S. KURA HOMES P. LTD., SECUNDERABAD ITA.NO.1621/HYD/2013 DATED 09.06.2014 TO SUBMIT THA T THE PROJECT HAVING BEEN APPROVED BEFORE THE AMENDMENT O F THE ACT, THERE IS NO NECESSITY TO FURNISH COMPLETION CERTIFI CATE OF HOUSING PROJECT. THEREFORE, A.O. IS NOT CORRECT IN DENYING THE DEDUCTION UNDER SECTION 80IB(10). 5. LD. D.R. HOWEVER, REFERRED TO THE OBSERVATIONS OF THE A.O. THAT THE PLANS APPROVED WERE DEVIATED AND ASSESSEE 4 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. HAS CONSTRUCTED 3 BED ROOM APARTMENTS WHEREAS THE APPROVED PLAN THEREIN SINGLE AND DOUBLE BED ROOM APARTMENTS WERE STATED. MOREOVER, IT IS NOT KNOWN WHY GHMC HAS NOT ISSUED COMPLETION CERTIFICATE AND THEREFORE, THE INSISTENC E ON COMPLETION CERTIFICATE. DR RELIED ON THE DECISION O F ITAT IN M/S. SAINATH ESTATES 142 ITD 370 THAT FURNISHING OF COMPLETION CERTIFICATE IS MANDATORY CONSEQUENT TO T HE AMENDMENT TO THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REFERE NCE TO THE FACT THAT ASSESSEE IS OTHERWISE ELIGIBLE FOR DEDUCT ION EXCEPT FOR FURNISHING OF COMPLETION CERTIFICATE. THIS PROJECT BEING APPROVED BEFORE 01.04.2005, AS CONSIDERED IN THE DE CISION OF M/S. KURA HOMES P. LTD. ASSESSEE IS NOT REQUIRED TO FURNISH COMPLETION CERTIFICATE. THE DECISION OF THE COORDIN ATE BENCH IN THE ABOVE REFERRED CASE IS AS UNDER : 9. ON A CAREFUL READING OF THE AFORESAID JUDGMENT OF THE HONBLE DELHI HIGH COURT AND MORE SPECIFICALLY THE OBSERVATION MADE IN PARA 10 OF THE JUDGMENT, THE PROPOSITION OF LAW WHICH CAN BE CUL LED OUT IS, FOR A HOUSING PROJECT WHICH IS APPROVED BY THE COMPETENT AUTHORITY PRIOR TO 01/04/2005 THERE IS NO REQUIREMENT UNDER THE UNAMENDED PROVISION U/S 80IB(10) TO FURNISH A COMPLETION CERTIFICATE FROM T HE LOCAL AUTHORITY BECAUSE LAW REQUIRING FURNISHING O F SUCH COMPLETION CERTIFICATE WAS BROUGHT INTO THE STATUTE ONLY WITH EFFECT FROM 01/04/2005, HENCE, WOULD APPLY PROSPECTIVELY. HOWEVER, IT NEEDS TO B E MENTIONED HERE THAT IN ASSESSEES OWN CASE FOR THE AY 2006-07 THE COORDINATE BENCH OF THIS TRIBUNAL IN PARAGRAPH 27 DID OBSERVE THAT SINCE THE ASSESSEE IS FOLLOWING PERCENTAGE OF COMPLETION METHOD THE ASSESSEE CANNOT BE EXPECTED TO FURNISH A COMPLETION CERTIFICATE IN EACH YEAR OF CONTINUATION OF THE PR OJECT, BUT, ONLY ON COMPLETION OF THE PROJECT. SIMILARLY, IN CASE OF SAINATH ESTATES PVT. LTD. V/S. CIT( (SUPRA ) A 5 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. COORDINATE BENCH OF THIS TRIBUNAL HELD THAT FURNISH ING OF COMPLETION CERTIFICATE FROM A LOCAL AUTHORITY IS MANDATORY TO PROVE COMPLETION OF PROJECT IN VIEW OF EXPLANATION (II) TO CLAUSE (A) OF SECTION 80IB(10 ) FOR ENTITLING THE ASSESSEE TO CLAIM DEDUCTION UNDER THE SAID PROVISION. HOWEVER, IN THE FACTS OF THE PRESEN T CASE, AS THE HOUSING PROJECT OF THE ASSESSEE IS APPROVED PRIOR TO 01/04/2005 BY APPLYING THE LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CASE O F CIT VS. CHD DEVELOPERS LTD., ITA NO. 298 OF 2013, DATED JANUARY 22, 2014 ASSESSEE IS NOT REQUIRED TO FURNISH COMPLETION CERTIFICATE IN TERMS WITH EXPLANATION (II) TO CLAUSE (A) OF SECTION 80IB(10 ). THEREFORE, THE ASSESSING OFFICER CANNOT INSIST UPON THE ASSESSEE TO FURNISH THE COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY FOR ALLOWING CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. IN THE EVENT, THE ASSESSEE IS ABLE TO PROVE THAT THE HOUSING PROJECT IS COMPLETE IN AL L RESPECTS WITHIN THE PRESCRIBED PERIOD AS PROVIDED U /S 80IB(10) AND THE ASSESSEE HAS FULFILLED ALL OTHER PRECONDITIONS OF THE SAID PROVISION THEN THE ASSESS EE WILL BE ENTITLED TO CLAIM DEDUCTION U/S 80IB(10) OF THE ACT. IT IS PATENT AND OBVIOUS FROM THE ASSESSMENT ORDER THAT THE AO HAS DISALLOWED DEDUCTION U/S 80IB(10) ONLY FOR THE REASON THAT ASSESSEE HAS NOT FURNISHED COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY. THEREFORE, IT IS TO BE PRESUMED THAT ALL OTHER CONDITIONS OF SECTION 80IB(10) ARE COMPLIED B Y THE ASSESSEE EXCEPT THE FACT OF COMPLETION OF HOUSI NG PROJECT. IN THESE CIRCUMSTANCES, IF THE ASSESSEE WI LL BE ABLE TO PROVE COMPLETION OF HOUSING PROJECT WITH IN STIPULATED TIME BY PROVIDING ANY OTHER EVIDENCE, TH EN CLAIM OF DEDUCTION U/S 80IB(10) CANNOT BE DENIED TO THE ASSESSEE. IN VIEW OF THE AFORESAID, WE DIRECT T HE ASSESSING OFFICER TO VERIFY THE COMPLETION OF THE PROJECT WITHOUT INSISTING UPON A COMPLETION CERTIFI CATE FROM THE LOCAL AUTHORITY AND THEREAFTER DECIDE THE ISSUE ACCORDINGLY AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. 7. THE LD. D.R. RELIED ON THE DECISION OF M/S. SAI NATH ESTATES P. LTD. VS. DCIT OF THE COORDINATE BENCH OF HYDERABAD 142 ITD 370 WHEREIN THE PROJECT WAS APPROVED AFTER 6 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. 01.04.2005 AND THE ITAT UPHELD THAT FURNISHING OF C OMPLETION CERTIFICATE IS A MUST TO CLAIM DEDUCTION UNDER SECT ION 80IB(10). THEREFORE, THESE TWO ORDERS HAVE BEEN GIVEN IN TWO DIFFERENT FACT CONDITIONS. 8. COMING TO THE PRESENT CASE, THE PROJECT WAS APPROVED BEFORE 01.04.2005 AND ASSESSEE SUBMITS THA T IT HAS COMPLETED THE BUILDING ON 31.03.2008. THEREFORE, ON PRINCIPLES OF LAW, ASSESSEE NEED NOT FURNISH THE COMPLETION CE RTIFICATE. HOWEVER, THE MATTER DOES NOT END THERE. AS OPINED B Y THE A.O. THERE WERE DEVIATIONS FROM THE PLAN. AS SEEN FROM T HE STATEMENTS BY THE ASSESSEE, ASSESSEE HAS INCURRED L OSSES IN THE NEXT TWO YEARS WHEN ASSESSEE STATED TO HAVE SOL D THE FINISHED APARTMENTS. WE ARE NOT SURE WHETHER ASSES SEE HAS INCURRED SOME MORE EXPENDITURE ON THE PROJECT AND S OLD THE SAME OR INCURRED LOSSES ON SALE OF SO CALLED COMPLE TED FLATS COULD NOT BE VERIFIED BY US, IN THE ABSENCE OF NECE SSARY BALANCE SHEETS/ ANNUAL REPORTS AND DETAILS. IT IS A FACT ON RECORD THAT ASSESSEE HAS INCURRED LOSSES IN LATER Y EARS AND WANTED THOSE LOSSES TO BE SET OFF TO THE INCOME ASS ESSED IN THIS YEAR, AS CAN BE SEEN FROM THE STATEMENTS BEFORE THE A.O. AND LD. CIT(A). THEREFORE, PRIMA FACIE A DOUBT ARISES W HETHER THE PROJECT WAS COMPLETED BEFORE 31.03.2008 OR WENT ON IN LATER YEARS ALSO. AS SEEN FROM THE PROCEEDINGS BEFORE THE HONBLE HIGH COURT ASSESSEE WAS PLEADING FOR COMPLETION CER TIFICATE WHICH IN SPITE OF THE DIRECTION HAS NOT YET BEEN IS SUED BY THE GHMC AUTHORITIES. WHETHER THE PROJECT IS WITHIN THE APPROVED PLANS OR NOT, WHETHER THERE ARE ANY DEVIATIONS AND THE REASONS WHY GHMC HAS NOT ISSUED COMPLETION CERTIFICATE ALSO REQUIRE VERIFICATION. THEREFORE, EVEN THOUGH ON LEGAL PRINC IPLES INSISTENCE OF COMPLETION CERTIFICATE IS NOT REQUIRE D FOR THE 7 ITA.NO.206/HYD/2012 M/S. MEDHA CONSTRUCTIONS P. LTD. HYDERABAD. PROJECT WHICH ARE APPROVED BEFORE 01.04.2005, ON TH E FACTS OF THE CASE, WE ARE OF THE OPINION THAT DEDUCTION CANN OT BE ALLOWED SIMPLY ON LEGAL PRINCIPLES WITHOUT VERIFYIN G THE FACTS. SINCE THE FACT THAT PROJECT WAS COMPLETED BEFORE 31 .03.2008 COULD NOT BE VERIFIED BY US, WE DIRECT THE A.O. TO EXAMINE THIS ISSUE AND ALLOW DEDUCTION, IN THE EVENT ASSESSEE PR OVES THAT IT HAD COMPLETED THE PROJECT BEFORE 31.03.2008. A.O. IS DIRECTED TO EXAMINE THE ANNUAL REPORTS OF LATER YEARS ALSO T O COME TO A CONCLUSION ON THIS ISSUE. IN CASE, GHMC ISSUES CERT IFICATE IN THE MEANTIME, A.O. SHOULD ALSO CONSIDER THE SAME. W ITH THESE OBSERVATIONS/ DIRECTIONS ISSUE IN THIS APPEAL IS RE STORED TO THE FILE OF A.O. FOR FRESH EXAMINATION AND TO DO THE NE EDFUL. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY OF HEARING . 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 06 TH AUGUST, 2014 VBP/- COPY TO 1. M/S. MEDHA CONSTRUCTIONS P. LTD., HYDERABAD C/O. M/S. KALYANDAS & CO., C.AS. 15, VENKATESHWARA COLONY, NARAYANAGUDA, HYDERABAD 500 029. 2. ITO, WARD 16(1), HYDERABAD. 3. CIT(A)-V, HYDERABAD 4. CIT-IV, HYDERABAD 5. D.R. B BENCH, ITAT, HYDERABAD.