J.C.D. Builders & Developers, Pune V. DCIT, Cir.-2, Pune

ITA 281/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56505 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: V L JAIN
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 281/PN/2010 (ASSTT. YEAR: 2006-07) J.C.D. BUILDERS & DEVELOPERS, ... APPELLANT 5/28, PRATIK NAGAR, YERWADA, PUNE 4110006. PAN: AAEFJ 4976 A V. DCIT, CIRCLE 2, PUNE RESPONDENT APPELLANT BY : SHRI V.L. JAIN RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING :26.8.11 DATE OF PRONOUNCEMENT: 07 .10.11 ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS THAT THE LD CIT(A) HAS ERRED IN CONFIRMING A DISALL OWANCE OF THE CLAIM U/S. 80IB (10) OF RS. 88,19,086/-. 2. WITHOUT PREJUDICE TO THE ABOVE, THE FIRST APPELL ATE ORDER HAS BEEN FURTHER QUESTIONED ON THE GROUND THAT LD CIT(A) HAS ERRED IN NOT ALLOWING A PRO-RATA CLAIM U/S. 80IB(10) WITH REFERENCE TO THE ELIGIBLE PORTIO N OF THE HOUSING PROJECT. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE, A PAR TNERSHIP FIRM CARRYING ON THE BUSINESS OF DEVELOPERS & BUILDERS UNDER THE NAME AN D STYLE OF M/S. JCD BUILDERS AND DEVELOPERS HAD CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT DURING THE YEAR FOR RS. 88,19,086/- WHICH HAS BEEN DISALLOWED BY THE A. O. THE A.O MENTIONED THAT THE HOUSING PROJECT OF THE ASSESSEE WAS AS PER COMMENCE MENT CERTIFICATE DATED 6/5/2003 ISSUED BY THE LOCAL AUTHORITY (I.E. THE PM C) AND THEREFORE, THE DATE OF ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 2 COMPLETION OF THE HOUSING PROJECT WAS STIPULATED AS 31 ST MARCH 2008. HOWEVER, DURING THE COURSE OF SURVEY, ON 5.6.2008 IT WAS NOT ICED THAT OUT OF THE ASSESSEES BUILDING NOS. A1,A2,B1,B2, B3, B4 & B5, IN RESPECT OF BUILDINGS A2,B3 AND B4, THE ASSESSEE HAD NOT RECEIVED THE COMPLETION CERTIFICAT E FROM THE PMC(PUNE MUNICIPAL CORPORATION) AS ON THE DATE OF SURVEY I.E. 5.6.2008 , THOUGH THEY HAD MADE AN APPLICATION ON 21 ST DECEMBER 2006. THE ASSESSEE EXPLAINED BEFORE THE A.O THAT DUE TO URBAN LAND CEILING ACT (ULC) COMPLIANCE PROBLEM, THE PMC HAD HELD UP THE FINAL COMPLETION CERTIFICATE. IT WAS EXPLAINED THAT IN T HE NOTICE NO. BCO/9078 DATED 6.3.2007, FOR THIS ULC COMPLIANCE, THE PMC HAD MENT IONED THAT 5 BUILDINGS NOS. A1,A2,B3, B4 & B5 UNDER THE PROJECT HAD BEEN COMPLE TED AS PER THE APPROVED PLANS. FURTHER, FOR BUILDINGS B1, & B2, THE COMPLET ION CERTIFICATES WERE ALREADY ISSUED ON 23.7.2004 AND 23.2.2005. THEREFORE, THE ASSESSEE STATED BEFORE THE A.O THAT PROJECT IS COMPLETED WITHIN THE STIPULATED TIM E. IT WAS EXPLAINED THAT THE ASSESSEE HAD INITIATED PROCEEDINGS AGAINST THE STAT E GOVERNMENT BEFORE THE HONBLE BOMBAY HIGH COURT IN THE MATTER PERTAINING TO ULC AND SAME WAS PENDING FOR DECISION. THE A.O DID NOT AGREE WITH THIS EXPL ANATION AND WHILE REFERRING TO THE PROVISIONS OF EXPLANATION (II) TO SECTION 80IB(10) OF THE ACT OBSERVES THAT THE COMPLETION CERTIFICATE FROM THE PMC WAS NOT A COMP LETE CERTIFICATE ISSUED BEFORE THE STIPULATED DATE. IT WAS FURTHER STATED THAT AN UNAUTHORIZED CONSTRUCTION WHICH IS NOT CERTIFIED BY THE LOCAL AUTHORITY WOULD NOT BE P ERMISSIBLE AND HAS GOT SOCIAL RAMIFICATIONS. IT IS IN THIS CONTEXT THAT THE CONC EPT OF COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY WAS INTRODUCED IN THE ACT AND T HE LOCAL AUTHORITY HAS TO ENSURE THE COMPLIANCE OF VARIOUS CONDITIONS AND LAWS, OBSE RVED THE A.O. THE A.O. ACCORDINGLY DISALLOWED THE CLAIMED DEDUCTION U/S. 8 0IB(10) DUE TO NON-COMPLIANCE OF ULC PROVISIONS BY THE ASSESSEE SINCE THE COMPLET ION CERTIFICATE HAS BEEN HELD UP BY THE PMC ON THIS GROUND. ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 3 4. DETAILED SUBMISSIONS WERE MADE BEFORE THE LD CIT (A) QUOTING EMPHASIS ON THE PLEA THAT IF THE LOCAL AUTHORITY DOES NOT ISSUE THE COMPLETION CERTIFICATE FOR ONE REASON OR OTHER WHICH IS NOT A MATERIAL REASON BUT DUE TO ITS OWN LACK OF TIME OR WHIM OR FANCY, THE ASSESSEE CANNOT BE EXPECTED TO COMPLY WITH IMPOSSIBILITY. IT WAS ALSO ARGUED THAT RULE 7.6 OF THE DEVELOPMENT CO NTROL RULES APPLICABLE IN MUNICIPAL AREA, PROVIDES THAT THE COMPLETION CERTIF ICATE IS TO BE SUBMITTED IN A PRESCRIBED FORM BY THE OWNER THROUGH THE LICENSED A RCHITECT, ENGINEER OR STRUCTURAL ENGINEER WHO HAS SUPERVISED THE CONSTRUCTION ACTIVI TY. THUS LOCAL AUTHORITY DOES NOT ISSUE ANY COMPLETION CERTIFICATE. UNDER THE CIRCUM STANCES, THE COMPLIANCE OF SECTION 80IB(10) IS RENDERED IMPOSSIBLE. THE COMPL ETION CERTIFICATE FROM THE SUPERVISING ARCHITECT AS REQUIRED BY RULE 7.6 HAS B EEN DULY ACQUIRED. THE ASSESSEE SUBMITTED FURTHER THAT UNITS HAVE ALREADY BEEN OCCU PIED BY THE PURCHASERS AS THE POSSESSION HAVE BEEN GIVEN TO THEM BEFORE 31 ST MARCH 2008. THIS FACT CONFIRMS THE POSITION THAT THE UNITS ARE COMPLETED BEFORE 31 ST MARCH 2008 THEREBY RESPECTFULLY COMPLYING WITH THE PROVISIONS OF SECTION 80IB(10) I N SO FAR AS COMPLETION IS CONCERNED. RELIANCE WAS PLACED ON THE FOLLOWING DE CISIONS : 1. DCIT VS. ANSAL PROPERTIES & INVESTMENTS LTD., 116 I TD 253 (DEL.) 2. SAROJ SALES CORPORATION VS. ITO, 115 TTJ (MUM) 485 3. CIT VS. BOMBAY CONDUCTORS & ELECTRICALS LTD., 301 I TR 328 (GUJ.) 4. CIT VS. GABRIEAL INDIA LTD., 282 ITR 58 (M.P.) 5. CIT VS. SHAPOORJI PALLONJI MISTRY, 44 ITR 891 (SC) 6. CIT VS. SHAMSUNDER CHHAPARIA, 220 CTR 172 (M.P) 5. DISCUSSING THE SUBMISSIONS MADE BY THE PARTIES I N DETAIL, THE LD CIT(A) HAS GIVEN FOLLOWING FINDING VIDE PARA NOS. 3.3 AND 3.4 OF THE FIRST APPELLATE ORDER : 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND MATERIALS AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT N O COMPLETION CERTIFICATE HAS BEEN ISSUED BY THE PMC IN RESPECT OF THE APPELLANT S BUILDINGS NOS. A2,B3 AND B4. SECTION 80IB(10)(A) SPECIFIES THE DATE OF COMPL ETION OF HOUSING PROJECT, ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 4 WHICH IN THIS CASE WOULD BE 31.03.2008, WHICH IS AN ADMITTED POSITION. FURTHER, EXPLANATION (II) BELOW SECTION 80IB(10)(A) CLEARLY STIPULATES THAT THE DATE OF COMPLETION WILL BE THE DATE ON WHICH THE C OMPLETION CERTIFICATE IS ISSUED BY THE LOCAL AUTHORITY. IT IS ON THIS BASIS THAT THE A.O HAS DISALLOWED THE CLAIM. THE A.O. HAS RIGHTLY POINTED OUT IN THE ORDER THAT THERE ARE LOTS OF CONDITIONS, THE FULFILLMENT AND COMPLIANCE OF WHI CH THE LOCAL AUTHORITY HAS TO ENSURE. A FULL DEDUCTION / EXEMPTION FROM THE PROVI SIONS OF TAXATION OR AN INCENTIVE PROVISION CANNOT BE MADE APPLICABLE TO AN ILLEGAL CONSTRUCTION OR ACTIVITY. SUCH A DEDUCTION WHICH HAS BEEN ENVISAGE D AS AN INCENTIVE CANNOT BE GIVEN FOR AN UNAUTHORIZED OR ILLEGAL CONSTRUCTIO N WHERE COMPLIANCE HAS NOT BEEN MADE TO AN IMPORTANT ENACTMENT LIKE ULC ACT. THE NOTICE ISSUED VIDE NO.BCO/9078 DATED 06.03.2007, BY THE PMC CLEARLY ME NTIONS THAT THE CONSTRUCTION OF BUILDING BEING CARRIED OUT BY THE APPELLANT WAS ILLEGAL AND PMC ORDERED THE APPELLANT TO IMMEDIATELY CLOSE DOWN THE CONSTRUCTION ACTIVITY ON RECEIPT OF THE NOTICE. IT WAS ALSO MEN TIONED IN THE NOTICE THAT IF WITHIN 03 DAYS OF RECEIPT OF NOTICE THE CONSTRUCTIO N ACTIVITY WAS STILL CARRIED ON, THEN THE PMC WAS LIABLE TO PROSECUTE THE PERSON AS PER DC RULES ETC. THE SPECIFIC DEFAULT UNDER THE ULC ACT WAS ALSO ME NTIONED IN THE NOTICE. MERELY BECAUSE UNDER THE HEAD CURRENT STATUS OF CO NSTRUCTION, IN THIS NOTICE, IT WAS MENTIONED THAT THE BUILDINGS A2,B3 A ND B4 WERE COMPLETE DOESNT MEAN THAT THE PMC HAD ISSUED A COMPLETION O R AN OCCUPANCY CERTIFICATE. WITH SO MANY DEFAULTS AND WHEN NOTICE FOR STOPPING OF CONSTRUCTION / PROSECUTION OF THE PERSONS INVOLVED HAS BEEN ISSUED, IT CANNOT BE HELD TO BE A VALID OR LEGAL CONSTRUCTION ON WHIC H AN INCENTIVE PROVISION LIKE THAT UNDER SECTION 80IB(10) COULD BE MADE APPLICABL E. UNDER THE CIRCUMSTANCES, THE APPELLANTS CLAIM IS NOT ACCEPTA BLE AND THE CLAIM U/S 80IB(10) IS NOT LEGALLY TENABLE. 3.4 IN THE APPELLANTS SUBMISSION DATED 13.01.2010, CERTAIN TRIBUNAL DECISIONS HAVE BEEN CITED FOR THE CLAIM THAT SINCE THE UNITS HAVE ALREADY BEEN OCCUPIED BY THE PURCHASERS, SUBSTANTIVE COMPLIANCE OF SECTION 80IB(10) HAS BEEN MADE. IT IS ALSO CONTENDED THAT THE DELHI TRI BUNAL IN THE CASE OF DCIT VS. ANSAL PROPERTIES & INVESTMENTS LTD., 116 ITD 25 3, HAS HELD THAT THOUGH THE COMPLETION CERTIFICATE WAS ISSUED AFTER THE DA TE OF ASSESSMENT, OCCUPANCY CERTIFICATE WAS ALREADY ISSUED AND ON THA T BASIS THE CLAIM WAS ALLOWED. THE APPELLANT ALSO CITED THE DECISION OF M UMBAI ITAT IN THE CASE OF SAROJ SALES CORPORATION VS. ITO, 115 TTJ 485 (MUM), HOLDING THAT AS THE OCCUPANCY CERTIFICATE WAS ISSUED PRIOR TO 31.03.200 8, THE CONDITION RELATING TO ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 5 COMPLETION OF CONSTRUCTION AS PRESCRIBED IN SECTION 80IB(10)(A) SHOULD BE TAKEN TO BE SATISFIED. BASED ON THESE DECISIONS, I T WAS CONTENDED THAT MERELY FOR TECHNICAL / VENIAL BREACH OF LAW DEDUCTION SHOU LD NOT BE DISALLOWED. THE APPELLANTS EXPLANATION HAS BEEN CONSIDERED BUT IS NOT FOUND TO BE ACCEPTABLE. IN THESE DECISIONS, THERE WAS AN ISSUE OF OCCUPANCY CERTIFICATE AND THERE WAS NO CASE OF ANY BREACH OF LAW LIKE THA T OF NON-COMPLIANCE OF PROVISIONS OF ULC ACT, WHICH IS APPLICABLE TO THE A PPELLANTS CASE. THEREFORE, THE FACTS OF THESE DECISIONS ARE CLEARLY DISTINGUIS HABLE WITH THE APPELLANTS CASE, HENCE THE RATIOS ARE NOT APPLICABLE. 6. REITERATING THE SUBMISSIONS MADE BEFORE THE AUTH ORITIES BELOW, THE LD. A.R. SUBMITTED FURTHER THAT THE PUNE BENCH OF THE TRIBU NAL IN ITS RECENT DECISION IN THE CASE OF SATISH BORA AND ASSOCIATES, ITA NOS. 713 & 714/PN/2010, A.YS. 2004-05 & 2005-06, ORDER DATED 07 TH JANUARY 2010, HAS GIVEN A FINDING THAT IN CASE OF FAILURE OF PMC WITHOUT ANY MATERIAL REASON, IN ISSUING OC CUPANCY CERTIFICATE, THEN, THE DEDUCTION CLAIMED U/S. 80 IB (10) CANNOT BE DENIED IN ABSENCE OF SUCH OCCUPANCY CERTIFICATE. WHILE HOLDING SO, THE TRIBUNAL HAS DIS CUSSED DEEMING PROVISIONS UNDER THE DEVELOPMENT CONTROL RULES APPLICABLE IN PMC WH ICH TALKS ABOUT IF ASSESSEE FURNISHES COMPLETION CERTIFICATE TO THE PMC AND PMC DOES NOT ISSUE OCCUPANCY CERTIFICATE ON THE BASIS OF COMPLETION CERTIFICAT E, WITHIN 21 DAYS AFTER RECEIPT OF THE COMPLETION CERTIFICATE BY IT, IT WILL BE DEEME D THAT PMC HAS NO ANY OBJECTION TO THE CLAIM OF THE ASSESSEE THAT BUILDING HAS BEEN C OMPLETED AS PER THE APPROVED PLAN. 7. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ORDERS OF THE AUTHORITIES BELOW. 8. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT CASE AS TO WHETHER THE BUILDINGS ON WHICH D EDUCTION U/S. 80 IB(10) CLAIMED WERE COMPLETED ON OR BEFORE ADMITTED PRESCRIBED DA TE 31 ST MARCH 2008. IT IS AN ADMITTED FACT THAT IN THE PRESENT CASE, OCCUPANCY CERTIFICATE, WHICH THE PUNE ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 6 BENCH OF THE TRIBUNAL IN THE CASE OF SATISH BORA & ASSOCIATES (SUPRA) HAS CONSIDERED AS COMPLETION CERTIFICATE IN THE CASE O F PMC TO MEET OUT THE SPIRIT OF THE PROVISIONS LAID DOWN U/S. 80 IB(10) OF THE ACT, , W AS NOT ISSUED TO THE ASSESSEE BY THE DATE 31 ST MARCH 2008. NOW WE HAVE TO EXAMINE AS TO WHETHER THE OCCUPANCY CERTIFICATE IN THE CASE OF THE ASSESSEE WAS NOT ISS UED DUE TO SOME SERIOUS LAPSE OR VIOLATION IN THE CONSTRUCTION AS PER APPROVED PLAN. ADMITTEDLY THE OCCUPANCY CERTIFICATE HAS NOT BEEN ISSUED TO THE PROJECT DUE TO SOME VIOLATION OF AN IMPORTANT ENACTMENT LIKE UR BAN LAND CEILING ACT. VIDE NOTICE (NO. BCO/9078) DATED 06.03.2007 THE PMC HAS CLEARLY MENTIONED THAT THE CONSTRUCTION OF BUILDING BEING CARRIED OUT BY THE A PPELLANT WAS ILLEGAL AND ORDERED THE APPELLANT TO IMMEDIATELY CLOSE DOWN THE CONSTRU CTION ACTIVITY ON RECEIPT OF THE NOTICE. IT WAS ALSO MENTIONED IN THE NOTICE THAT I F WITHIN 3 DAYS OF RECEIPT O THE NOTICE THE CONSTRUCTION ACTIVITY WAS STILL CARRIED ON, THEN PMC WAS LIABLE TO PROSECUTE THE PERSON AS PER DC RULES, ETC. THE SPECIFIC DEFA ULT UNDER ULC ACT WAS ALSO MENTIONED IN THE NOTICE. THUS WE ARE NOT INCLINED TO ACCEPT THE SUBMISSION OF THE LD. A.R. THAT NON-ISSUANCE OF COMPLETION/OCCUPANCY CERTIFICATE IN THE PRESENT CASE IS MERELY A VENIAL BREACH. NON-ISSUANCE OF THE OCCUPA NCY CERTIFICATE BY THE PMC UNDER SUCH CIRCUMSTANCES THUS CAN NOT BE IGNORED. THE SU BMISSION OF THE LD. AR ALSO REMAINED THAT THE APPELLANT HAS QUESTION THE VALIDI TY OF THE ALLEGED VIOLATION UNDER THE ULC ACT BEFORE THE HONBLE HIGH COURT, WHICH IS PENDING AND IN A SIMILAR MATTER IN THE CASE OF THE MUSLIM JAMAT HUSSEIN SHAH BABA T RUST VS. STATE OF MAHARASHTRA & ORS WRIT PETITION NO. 8699 OF 2007, THE HONBLE H IGH COURT VIDE ORDER DATED 29.6. 2010, HAS ALLOWED THE WRIT PETITION IN FAVOUR OF TH E PETITIONER THEREIN. CONSIDERING ALL THESE FACTS IN TOTALITY, WE HOLD THE ACTION OF THE AUTHORITIES BELOW IN NOT ALLOWING THE CLAIMED DEDUCTION U/S. 80 IB(10) OF THE ACT IN ABSENCE OF THE OCCUPANCY CERTIFICATE TO BE ISSUED BY PMC AS JUSTIFIED. HOWE VER, IN THE INTEREST OF JUSTICE WE GRANT LIBERTY TO THE APPELLANT TO APPROACH THE REVE NUE/A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80 IB (10), IF THE APPELLANT SUCCEED S BEFORE THE HONBLE HIGH COURT IN ITA . NO 281/PN/2010 JCD BUILDERS & DEVELOPERS A.Y. 2006-07 PAGE OF 7 7 ITS MATTER QUESTIONING THE VALIDITY OF OBJECTIONS RAISED UNDER THE ULC ACT AND OCCUPANCY CERTIFICATE IS ISSUED BY THE PMC RELATING BACK TO THE PERIOD UNDER WHICH PMC AFTER THE RECEIPT OF THE APPLICATION WITH COMP LETION CERTIFICATE FOR ISSUANCE OF OCCUPANCY CERTIFICATE WAS OUGHT TO ISSUE THE OCCUPA NCY CERTIFICATE, ON THE BASIS OF RELATE BACK THEORY. THE GROUND IS THUS PARTLY ALLO WED. 9. IN VIEW OF THE ABOVE FINDING ON THE MAIN GROUND, THE ALTERNATIVE GROUND TO ALLOW PRO-RATA CLAIM U/S. 80 IB(10) WITH REFERENCE TO THE ELIGIBLE PORTION HAS TURNED ACADEMIC, HENCE DOES NOT NEED ADJUDICATION. 10. IN RESULT, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 7TH OCTOBER 2011. SD/- SD/- (D.KARUNAKARA RAO) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 7TH OCTOBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -II, PUNE 4. THE CIT(A)-II, PUNE 4. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE /