M/s. Gera Developments Pvt. Ltd., Pune V. JCIT (OSD), Circle 1(2), Pune

ITA 598/PUN/2013

• Counselvise Citation: 59824514 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K TYAGI
• Keywords: Depreciation; Revenue expenditure
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER ITA NO. 598/PN/2013 (ASSESSMENT YEAR: 2009-10) M/S. GERA DEVELOPMENTS PVT. LTD., 200, GERA PLAZA, BOAT CLUB ROAD, PUNE 411001 PAN NO.AAACG6703F .. APPELLANT VS. JCIT(OSD), CIRCLE-1(2), PUNE .. RESPONDENT ITA NO.768/PN/2013 (ASSESSMENT YEAR: 2009-10) DY.CIT, CIRCLE-1(2), PUNE .. APPELLANT VS. M/S. GERA DEVELOPMENTS PVT. LTD., 200, GERA PLAZA, BOAT CLUB ROAD, PUNE 411001 PAN NO.AAACG6703F .. RESPONDENT ASSESSEE BY : SHRI S.K. TYAGI REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 18-12-2014 DATE OF PRONOUNCEMENT : 31-12-2014 ORDER PER G.S. PANNU, A.M. : THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE, WHICH ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME-TAX (APPEALS)-I, PUNE DATED 31-01-2013 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 26-12-2011 PASSED BY THE JOINT COMMISS IONER OF INCOME TAX (OSD), CIRCLE-2, PUNE (ASSESSING OFFICER) UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTA INING TO THE ASSESSMENT YEAR 2009-10. 2 ITA NO 598 AND 768/PN/2013 2. IN SO FAR AS APPEAL OF THE ASSESSEE IS CONCERNED ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT ESSENTIALLY THE DISPUTE IS ON TWO ISSUES. FIRSTLY, THE DISPUTE IS IN RELATION TO ADDITION OF RS.2,78,20,447/- MADE BY THE INCOME-TAX AUTHORITIES BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. SECONDL Y, THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE INCOME-TAX AUTHORITI ES IN DENYING ALLOWANCE OF DEPRECIATION IN RESPECT OF HONDA MOTOR CAR @50%. 3. IN SO FAR AS THE FIRST ISSUE IS CONCERNED, THE R ELEVANT FACTS ARE THAT THE ASSESSING OFFICER NOTICED THAT ASSESSEE HA D MADE PAYMENTS TO A NON-RESIDENT CONCERN, M/S. ARTHUR GENSLER AND ASS OCIATES WITHOUT DEDUCTION OF THE REQUISITE TAX AT SOURCE. AS PER T HE DISCUSSION CONTAINED IN PARA 5 OF THE ASSESSMENT ORDER, THE AS SESSING OFFICER HAS CONCLUDED THAT THE PAYMENTS OF RS.2,78,20,447/- MAD E TO M/S. ARTHUR GENSLER AND ASSOCIATES WERE IN THE NATURE OF FEE FO R TECHNICAL SERVICES, AND THEREFORE REMITTANCE OF SUCH AMOUNT TO THE SAID NON-RESIDENT CONCERN WAS LIABLE FOR DEDUCTION AT SOURCE. AS THE ASSESSEE HAD NOT DEDUCTED THE REQUISITE TAX AT SOURCE, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND MADE AN ADDITION OF RS.2,78,20,447/- TO THE RETURNED INCOME OF THE ASSE SSEE. THE CIT(A) HAS ALSO AFFIRMED THE SAID ADDITION AGAINST WHICH A SSESSEE IS IN APPEAL BEFORE US. 4. IN THE ABOVE BACKGROUND, THE LEARNED REPRESENTAT IVE FOR THE ASSESSEE HAS RAISED A PRELIMINARY OBJECTION CONTEND ING THAT THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT ARE NOT A TTRACTED IN THE PRESENT CASE, EVEN IF IT IS TO BE ACCEPTED THAT THERE WAS A DEFAULT IN THE DEDUCTION OF TAX AT SOURCE. EXPLAINING THE PRELIMI NARY OBJECTION, THE LEARNED REPRESENTATIVE SUBMITTED THAT SECTION 40(A) (I) CAN BE INVOKED TO 3 ITA NO 598 AND 768/PN/2013 DISALLOW AN EXPENDITURE WHICH HAS BEEN CLAIMED AS A DEDUCTION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROF ITS AND GAINS OF BUSINESS OR PROFESSION. WHEREAS IN THE PRESENT CAS E, THE IMPUGNED PAYMENT TO THE FOREIGN PARTY HAS NOT BEEN CLAIMED A S A DEDUCTION, AS THE SAID AMOUNT LIES CAPITALIZED IN THE CAPITAL WOR K-IN-PROGRESS WHICH IS DEPICTED IN THE BALANCE SHEET. IT WAS ALSO SUBMITT ED THAT THE HONBLE PUNJAB & HARYANA HIGH COURT, IN A SOMEWHAT SIMILAR CIRCUMSTANCE, IN THE CASE OF CIT VS. MARK AUTO INDUSTRIES LIMITED RE PORTED IN (2013) 358 ITR 43 (P&H) OBSERVED THAT NO EXPENDITURE COULD BE DISALLOWED U/S.40(A)(I) OF THE ACT IF SUCH EXPENDITURE WAS CAP ITALIZED AND NOT CLAIMED AS A REVENUE EXPENDITURE. 5. ON THIS PRELIMINARY OBJECTION, THE LD. DEPARTMEN TAL REPRESENTATIVE HAS NOT CONTROVERTED THE FACTUAL MAT RIX BUT HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW TO JUSTIFY THE DISALLOWANCE. ON THIS ASPECT, IT IS NOTED THAT THE CIT(A) IN PARA 5. 3 OF HER ORDER HAS DEALT WITH THE AFORESAID OBJECTION AS FOLLOWS :- 5.3 THEREFORE, DURING APPELLATE PROCEEDINGS, IT IS NOTICED THAT THE ONLY ISSUE BEING DISPUTED BY THE APPELLANT COMPANY IS REGARDING THE FACT THAT THE ARCHITECTURAL FEES OF RS.2,78,20,447/ - WAS NOT CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT FOR THE RELE VANT ASSESSMENT YEAR. MY ATTENTION HAS BEEN DRAWN TO SCHEDULE 11 O F THE PROFIT & LOSS ACCOUNT WHEREBY UNDER THE HEAD 'ADMINISTRATIVE AND OTHER EXPENSES' AN AMOUNT OF RS.81,00,668 ONLY HAS BEEN CLAIMED UND ER THE SUB HEAD 'LEGAL AND PROFESSIONAL FEES'. REGARDING THIS GROUN D TAKEN BY THE APPELLANT IT IS NOTED THAT THE ASSESSING OFFICER HA S ALREADY MET THIS OBJECTION BY REFERRING TO THE NOTES OF ACCOUNTS ANN EXED TO THE AUDIT REPORT FOR THE RELEVANT F.Y. 2008-09 WHICH MENTIONS THAT THE 'INVENTORIES OF UNSOLD UNITS OF FLAT IS VALUED AT L OWER OF COST AND NET REALIZABLE VALUE. WORK IN PROGRESS REPRESENTS DIREC TLY ATTRIBUTABLE TO THE EXPENDITURE INCURRED IN RESPECT OF PROJECTS UNDER D EVELOPMENT AND CARRIED AT COST. COST INCLUDES LAND, RELATED ACQUIS ITION EXPENSES, CONSTRUCTION COST, BORROWING COST ADDED TO WORK IN PROGRESS AND OTHER EXPENSES DIRECTLY ATTRIBUTABLE TO THE PROJECT'. I H AVE FURTHER EXAMINED SCHEDULE 14 OF THE NOTES FORMING PART OF THE FINANC IAL STATEMENTS WHICH CLEARLY MENTIONS ARCHITECT CONSULTANCY FEES OF RS.2 ,88,34,252 AS HAVING BEEN PAID DURING THE YEAR IN FOREIGN CURRENC Y. ACCORDINGLY, THIS OBJECTION OF THE APPELLANT IS NOT TENABLE. 4 ITA NO 598 AND 768/PN/2013 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. NOTABLY, THE CONTROVERSY BEFORE US PRIMARILY REVOLVES AROUND INV OKING OF SECTION 40(A)(I) OF THE ACT. BROADLY SPEAKING, SECTION 40( A)(I) OF THE ACT PRESCRIBES THAT NO DEDUCTION SHALL BE ALLOWED IN CO MPUTING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSI NESS OR PROFESSION OF THE AMOUNTS LIKE, INTEREST, ROYALTY, FEES FOR TE CHNICAL SERVICES OR OTHER SUMS CHARGEABLE UNDER THIS ACT WHICH ARE PAYA BLE OUTSIDE INDIA OR TO A NON-RESIDENT AND ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB OF THE ACT AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB- SECTION (I) OF SECTION 200 OF THE ACT. THE AFORESA ID SECTION HAS BEEN INVOKED BY THE ASSESSING OFFICER IN THE CONTEXT OF PAYMENT OF RS.2,78,20,447/- TO M/S. ARTHUR GENSLER AND ASSOCIA TES, A NON-RESIDENT CONCERN. ACCORDING TO THE ASSESSING OFFICER, THE A FORESAID REMITTANCE TO THE NON-RESIDENT AMOUNTS TO FEE FOR TECHNICAL S ERVICES AND IS THEREFORE WITHIN THE AMBIT OF SECTION 40(A)(I) OF T HE ACT. SINCE THE ASSESSEE HAD MADE THE AFORESAID REMITTANCE WITHOUT DEDUCTION OF TAX AT SOURCE, THE ASSESSING OFFICER DISALLOWED THE SAME BY INVOKING SECTION 40(A)(I) OF THE ACT AND ADDED THE SUM OF RS.2,74,44 ,270/- TO THE RETURNED INCOME. FIRSTLY, ASSESSEE RESISTED THE AD DITION BY CONTENDING BEFORE THE INCOME-TAX AUTHORITIES THAT THE REMITTAN CES MADE TO M/S. ARTHUR GENSLER AND ASSOCIATES ARE NOT SUBJECT TO TH E DEDUCTION OF TAX AT SOURCE IN INDIA. FOR THE PRESENT, WE ARE NOT CONCE RNED WITH THE SAID CONTROVERSY AS THE ASSESSEE HAS RAISED AN ALTERNATE PLEA TO THE EFFECT THAT SECTION 40(A)(I) OF THE ACT IS NOT APPLICABLE AT ALL. IN ORDER TO APPRECIATE THE SAID POINT, WE MAY REPRODUCE HEREINA FTER THE RELEVANT PORTION OF SECTION 40(A)(I) OF THE ACT :- 5 ITA NO 598 AND 768/PN/2013 AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, - (A) IN THE CASE OF ANY ASSESSEE (I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 19 38), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPAN Y OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSE QUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEE N DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCT ED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SEC TION 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. 7. THE POINT SOUGHT TO BE RAISED IS TO THE EFFECT T HAT SECTION 40(A)(I) OF THE ACT GOVERNS A SITUATION WHERE AN AMOUNT IS C LAIMED AS A DEDUCTION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND NOT OTHERW ISE. THE CASE MADE OUT BY THE ASSESSEE IS THAT THE AMOUNT OF 2,78 ,20,447/- PAID TO M/S. ARTHUR GENSLER AND ASSOCIATES IS NOT DEBITED T O THE PROFIT AND LOSS ACCOUNT AND IS THEREFORE NOT AN AMOUNT DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEADS PROFITS AND GAIN S OF THE BUSINESS OR PROFESSION. THEREFORE, SUCH AN AMOUNT DOES NOT FALL WITHIN THE PURVIEW OF SECTION 40 OF THE ACT ITSELF. THERE IS NO DISPUTE TO THE AFORESAID FACTUAL MATRIX. THE ONLY POINT RAISED BY THE CIT(A), WHICH WE HAVE REPRODUCED IN THE EARLIER PART OF THE ORDER, I S TO THE EFFECT THAT ASSESSEE HAS PAID THE AFORESAID SUM DURING THE YEAR UNDER 6 ITA NO 598 AND 768/PN/2013 CONSIDERATION IN FOREIGN CURRENCY. THE INSISTENCE O F THE REVENUE TO SAY THAT THE AMOUNT HAS BEEN PAID IN THIS YEAR AND THER EFORE IT IS COVERED WITHIN THE PRESCRIPTION OF SECTION 40(A)(I) OF THE ACT IS QUITE OTIOSE TO THE REQUIREMENTS OF SECTION 40(A)(I) OF THE ACT WHICH W E HAVE REPRODUCED ABOVE. THERE IS NO DISPUTE TO THE PROPOSITION THAT THE SAID PAYMENT HAS NOT BEEN CLAIMED AS A REVENUE EXPENDITURE WHILE COM PUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION IN THIS YEAR AND THEREFORE THE SAME WOULD NOT FALL FOR CONSIDERATION IN SECTION 40(A)(I) OF THE ACT. THUS, BY ADVERTING TO THE AFORESAID SHORT POINT, WE DO NOT FIND ANY JUSTIFICATION TO UPHOLD T HE ADDITION OF RS. 2,78,20,447/- MADE BY THE LOWER AUTHORITIES BY INV OKING SECTION 40(A)(I) OF THE ACT. THE ORDER OF THE CIT(A) IS SET-ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.2, 78,20,447/- . THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 8. THE SECOND GROUND OF APPEAL RAISED BY THE ASSESS EE IS WITH REGARD TO THE RATE OF ALLOWANCE OF DEPRECIATION ON HONDA MOTOR CAR. THE ASSESSEE CLAIMED DEPRECIATION ON HONDA MOTOR CA R @ 50% ON THE GROUND THAT IT WAS A LIGHT MOTOR VEHICLE AND WAS THEREFORE COVERED WITHIN THE MEANING OF A COMMERCIAL VEHICLE. THE AS SESSEE HAD RELIED UPON THE CBDT NOTIFICATION NO.10/2009 DATED 19-01-2 009 WHICH PRESCRIBES THAT ENHANCED DEPRECIATION @ 50% IS ALLOWABLE ON NEW COMMERCIAL VEHICLES ACQUIRED ON OR AFTER 01-01-2009 BUT BEFORE 01-04- 2009 AND WHICH ARE PUT TO USE BEFORE 01-04-2009 FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE ASSESSING OFFICER, HOW EVER, ALLOWED DEPRECIATION AT THE NORMAL RATE OF 15% ON THE GROUN D THAT THE ENHANCED RATE OF DEPRECIATION @ 50% ALLOWED BY THE CBDT NOTIFICATION DATED 19- 01-2009 (SUPRA) WOULD COVER ONLY TRUCKS AND OTHER H EAVY VEHICLES AND 7 ITA NO 598 AND 768/PN/2013 NOT A MOTOR CAR. THE CIT(A) HAS ALSO AFFIRMED THE AFORESAID STAND OF THE ASSESSING OFFICER, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 9. IN THIS CONTEXT, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE OBJECTION OF THE INCOME-TAX AUTH ORITIES THAT A MOTOR CAR DOES NOT AMOUNT TO A COMMERCIAL VEHICLE IS MISC ONCEIVED HAVING REGARD TO THE DEPRECIATION TABLE ANNEXED TO THE INC OME TAX RULES, 1962. IN THIS CONTEXT, IT IS NOTED THAT RULE 5(1) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) PRESCRIBES THAT THE DEP RECIATION ALLOWANCE IS TO BE CALCULATED AT THE PERCENTAGES SPECIFIED IN TH E TABLE IN APPENDIX-I THEREOF. THE CONTENTS OF THE TABLE SO FAR AS THEY ARE RELEVANT FOR OUR PURPOSE READ AS UNDER : III. MACHINERY AND PLANT (1) .. (2) .. (3) (I) TO (VI) . (VIA) NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON O R AFTER THE 1ST DAY OF APRIL, 2009 BUT BEFORE THE 1ST DAY O F [APRIL], 2009 AND IS PUT TO USE BEFORE THE 1ST DAY OF [APRIL], 2009 FOR THE PURPOSES OF BUSINESS OR PROFESSION. 10. FURTHER, PARAGRAPH 6 OF THE NOTES BELOW READ AS UNDER :- 6. COMMERCIAL VEHICLE MEANS LIGHT MOTOR VEHICLE, . THE EXPRESSIONS . LIGHT MOTO R VEHICLE, .. SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 19 98). 11. A CONJOINT READING OF THE AFORESAID PROVISIONS WOULD REVEAL THAT THE VEHICLE IN RESPECT OF WHICH ASSESSEE SEEKS TO C LAIM DEPRECIATION @ 50% IS A LIGHT MOTOR VEHICLE AND THEREFORE THE CL AIM FOR ENHANCED RATE OF DEPRECIATION IS ON A SOUND FOOTING. OSTENSIBLY, THE AFORESAID 8 ITA NO 598 AND 768/PN/2013 PROVISIONS OF THE DEPRECIATION TABLE ANNEXED AS APP ENDIX-I TO THE RULES CLEARLY APPLY AND THEREFORE THE LOWER AUTHORI TIES WERE NOT JUSTIFIED IN DENYING ASSESSEES CLAIM FOR ALLOWANCE OF DEPREC IATION @ 50% ON THE VEHICLE IN QUESTION, SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS. AS A CONSEQUENCE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE DEPRECIATION AL LOWABLE ON THE IMPUGNED VEHICLE AS PER OUR AFORESAID DIRECTION AND IN ACCORDANCE WITH LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS FOR ST ATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED, AS ABOVE. 13. IN SO FAR AS CROSS-APPEAL OF THE REVENUE IS CON CERNED, IT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ID. COMMISSIONER OF INCOME-TAX(APPEALS) GROS SLY ERRED IN ALLOWING DEDUCTION TO THE ASSESSEE U/S.80IB WHEN AS SESSEE COULD NOT COMPLETE THE HOUSING PROJECT AS REQUIRED UNDER PROV ISIONS OF SEC.80IB(10)(A)(III) OF THE INCOME-TAX ACT, 1961. 3. THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) GRO SSLY ERRED IN ALLOWING DEDUCTION TO THE ASSESSEE U/S.80IB WHEN TH E EXPLANATION (II) TO CLAUSE (A) OF SEC.80IB(10) PROVIDES THAT THE DAT E OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THAT THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF S UCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY AND NO SUCH CERTIF ICATE WAS SUBMITTED BY THE ASSESSEE. 4. THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) GRO SSLY ERRED IN INTERPRETING SECTION 80IB(10), IN THE CONTEXT OF AP PLICABILITY OF EXPLANATION (II) TO CLAUSE (A), IN A MANNER NEITHER CONTEMPLATED NOR PROVIDED FOR UNDER THE ACT. 5. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE ID. COMMISSIONER OF IN COME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 14. IN THE AFORESAID CONTEXT, THE RELEVANT FACTS AR E AS FOLLOWS. THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSIN ESS OF PROPERTY 9 ITA NO 598 AND 768/PN/2013 DEVELOPMENT. IN RESPECT OF A HOUSING PROJECT UNDER TAKEN BY IT, NAMED EMERALD CITY AT BANER, PUNE IT CLAIMED A DEDUCTIO N U/S.80IB(10) OF THE ACT OF A SUM OF RS.23,87,480/-. THE ASSESSING OFFI CER NOTED THAT THE DEVELOPMENT OF THE AFORESAID HOUSING PROJECT WAS CO MMENCED BY THE ASSESSEE IN TERMS OF A COMMENCEMENT CERTIFICATE DAT ED 21-11-2005 ISSUED BY THE LOCAL AUTHORITY, I.E. PUNE MUNICIPAL CORPORATION (IN SHORT THE PMC). THE ASSESSING OFFICER HELD THAT THE AS SESSEE WAS NOT ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT ON THE GROUND THAT IT HAD NOT COMPLIED WITH THE REQUIREMENTS OF S ECTION 80IB(10) (A)(III) OF THE ACT. AS PER THE ASSESSING OFFICER WHERE AN HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 01-04-2005, ITS CONSTRUCTION WAS LIABLE TO BE COMPLETED WITHIN 5 YE ARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. IN THE PRESENT CASE, THE ASSESSING OFFI CER NOTED THAT THE HOUSING PROJECT WAS APPROVED ON 21-11-2005 AS PER T HE COMMENCEMENT CERTIFICATE ISSUED BY PMC AND THEREFOR E THE CONSTRUCTION WAS TO BE COMPLETED BY 31-03-2011. TH E ASSESSING OFFICER ALSO NOTED THAT THE DATE OF COMPLETION WAS TO BE UNDERSTOOD AS THE DATE ON WHICH COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY, AS REQU IRED BY EXPLANATION (II) TO SECTION 80IB10(A) OF THE ACT. IN SO FAR AS ASSE SSEES PROJECT WAS CONCERNED, THE ASSESSING OFFICER NOTED THAT NO COMP LETION CERTIFICATE WAS ISSUED BY PMC BEFORE THE STIPULATED DATE AND TH EREFORE ACCORDING TO HIM, ASSESSEE DID NOT COMPLY WITH THE REQUIREMEN TS OF SECTION 80IB(10)(A)(III) R.W. EXPLANATION (II) THEREOF. TH EREFORE, HE DISALLOWED SUCH DEDUCTION. 15. THE CIT(A) HOWEVER NOTED THAT ASSESSEE HAD APPL IED FOR OBTAINING THE CERTIFICATE OF COMPLETION OF CONSTRUC TION TO PMC WITH ALL 10 ITA NO 598 AND 768/PN/2013 THE REQUISITE NOCS ON 04-12-2007 ITSELF. IT WAS AL SO OBSERVED BY THE CIT(A) THAT ASSESSEE WAS CONSISTENTLY POINTING OUT THAT HE HAD ACTUALLY COMPLETED THE CONSTRUCTION OF THE PROJECT AS PER TH E SANCTIONED PLANS AND ITS APPLICATION TO THE PMC FOR OBTAINING OF THE OCCUPANCY CERTIFICATE WAS BASED ON THE ARCHITECTS COMPLETION CERTIFICATE AND OTHER NOCS REQUIRED FOR SUCH PURPOSE. THE ASSESSEE ALSO POINT ED OUT THAT IN RESPONSE TO ITS APPLICATION DATED 04-12-2007 MADE T O THE PMC, THERE WAS NO REFUSAL OF THE OCCUPANCY CERTIFICATE. THERE FORE, IN TERMS OF THE RELEVANT DEVELOPMENT CONTROL RULES APPLICABLE TO TH E PMC, THE OCCUPANCY CERTIFICATE IS DEEMED TO HAVE BEEN GRANTE D WITHIN 21 DAYS FROM THE DATE OF ASSESSEES APPLICATION SEEKING COM PLETION CERTIFICATE, IF NO OBJECTIONS OR REFUSAL IS INTIMATED BY PMC. THUS , AS PER THE ASSESSEE, IN THE ABSENCE OF ANY REFUSAL FROM THE PM C, THE PROJECT IS DEEMED TO HAVE BEEN COMPLETED. FURTHER, ASSESSEE A LSO SUBMITTED BEFORE THE LOWER AUTHORITIES THAT SUCH DEEMED COMPL ETION CONCEPT WAS UPHELD BY THE PUNE BENCH OF THE TRIBUNAL IN THE CAS E OF SATISH BORA AND ASSOCIATES VIDE ITA NO.713 & 714/PN/2010 DATED 07.01.2011 IN THE CONTEXT OF EXAMINING THE COMPLIANCE WITH THE RE QUIREMENTS OF SECTION 80IB(10)(A) R.W. EXPLANATION (II) THEREOF. THE CIT(A) HAS ACCEPTED THE AFORESAID PLEA OF THE ASSESSEE. IT IS ALSO NOTABLE THAT CIT(A) MADE A REFERENCE TO THE PMC AND SOUGHT INFOR MATION U/S.133(6) OF THE ACT IN THE CONTEXT OF ASSESSEES APPLICATION FOR OBTAINING OCCUPANCY CERTIFICATE OF THE PROJECT. THE CIT(A) N OTED THAT NEITHER THE COMPLETION CERTIFICATE WAS ISSUED BY THE PMC AND NO R ANY OBJECTIONS OR REFUSAL WAS COMMUNICATED BY PMC TO THE ASSESSEE. T HEREFORE, THE CIT(A) PROCEEDED TO ALLOW THE PLEA OF THE ASSESSEE BY RELYING ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF SATISH BORA AND ASSOCIATES (SUPRA). THE RELEVANT DISCUSSION IN THE ORDER OF THE CIT(A) IS AS UNDER :- 11 ITA NO 598 AND 768/PN/2013 4.6. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT ALONG WITH THE RESPONSE RECEIVED FROM THE PUNE MUNICIPAL CORPORATION WITH RESPECT TO THE COMPLETION CERTIFICATE. THE APPELLAN T COMPANY HAS APPLIED FOR COMPLETION (OCCUPANCY) CERTIFICATE BEFO RE THE PMC ALONG WITH THE ARCHITECT'S COMPLETION CERTIFICATE AND ALL THE OTHER NOCS REQUIRED FOR THE COMPLETION CERTIFICATE ON 4.12.200 7. HOWEVER, NO SUCH COMPLETION CERTIFICATES HAVE BEEN ISSUED NOR ANY OB JECTIONS NOR REFUSAL HAS BEEN RECEIVED FROM PMC. THE DELAY IN ISSUING TH E OCCUPANCY- CERTIFICATE ON THE PART OF PMC IS STATED TO BE THE STAY ON THE SAID PROPERTY IMPOSED BY THE STATE GOVERNMENT DUE TO THE ONGOING DISPUTE UNDER THE URBAN LAND CEILING ACT. THE PMC HAS PROVI DED DOMESTIC WATER SUPPLY IN THE HOUSING PROJECT AND ON THE BASI S OF PROPERTY TAX ASSESSMENT MADE BY PMC, RESIDENTS OF THE HOUSING PR OJECT HAVE PAID THEIR PROPERTY TAXES TO PMC. THE APPELLANT HAS PLAC ED RELIANCE ON THE PUNE ITAT DECISION IN THE CASE OF SATISH BORA & ASS OCIATES IN ITA NOS. 713 &714/PN/2010 PARA 19 AND 20 OF THE SAID DE CISION IS AS UNDER: '19. FOR A READY REFERENCE OUR ABOVE FINDINGS ARE S UMMARIZED AS UNDER: 1. IN THE CASE OF PMC, THE COMPLETION CERTIFICATE I N PRESCRIBED FORM ISSUED BY THE LICENSED ARCHITECT ETC, WHO HAS SUPERVISED THE CONSTRUCTION IS FURNISHED WITH FOUR SETS OF COMPLET ION PLAN UNDER RULE 7.6 OF THE DC RULES OF THE PMC. THEREAFTER PMC IS R EQUIRED TO RETURN ONE OF THE SETS DULY CERTIFIED AS COMPLETION PLAN T O THE OWNER ALONG WITH THE ISSUE OF FULL OCCUPANCY PLAN TO THE OWNER ALONG WITH THE ISSUE OF FULL OCCUPANCY CERTIFICATE AFTER INSPECTION OF T HE WORK UNDER RULE 7.7 OF THE DC RULES. SINCE EXPLANATION (II) TO SECTION 80-IB(10)(A) OF THE I. T, ACT, REQUIRES COMPLETION CERTIFICATE ISSUED BY T HE LOCAL AUTHORITY TO BE TAKEN AS THE DATE OF COMPLETION OF THE CONSTRUCT ION, A GENERAL UNDERSTANDING IN OUR VIEW IS THAT A COMPLETION CERT IFICATE WHICH IS ISSUED BY THE LOCAL AUTHORITY AFTER CONDUCTING INSP ECTIONS OF CONSTRUCTION BY IT. IN CASE OF PMC, IT IS ONLY OCCU PANCY CERTIFICATE WHICH IS ISSUED ALONG WITH CERTIFIED COMPLETION PLA N AFTER INSPECTION OF THE CONSTRUCTION BY IT, WE HAVE TREATED THE DATE OF ISSUANCE OF SUCH OCCUPANCY CERTIFICATE, ALONG WITH CERTIFIED COMPLET ION PLAN AS THE DATE OF COMPLETION CERTIFICATE OF THE CONSTRUCTION FOR THE REQUIREMENT OF EXPLANATION (II) TO SECTION 80IB(10)(A) OF THE I.T. ACT. 2. SINCE IN FACT PMC DO NOT ISSUE OCCUPANCY CERTIFI CATE GENERALLY IN TIME AND WITH THIS UNDERSTANDING THE LEGISLATURE HAVE ALSO INTRODUCED A DEEMING PROVISION OF 21 DAYS TO PUT CO NSTRAINT UPON PMC, WE AFTER DETAILED DELIBERATION IN PRECEDING PARAGRA PHS HAVE COME TO A CONCLUSION THAT IN CASE OF SMALL OBJECTIONS OF PMC RAISED AFTER EXPIRY OF DEEMING PERIOD OF 21 DAYS UNDER RULE 7.7 OF DC R ULES UNDER PMC, THE DATE WHEN THE APPLICANT ACQUIRED DEEMING SANCTI ON WILL BE TREATED AS DATE WHEN THE APPLICANT ACQUIRED DEEMING SANCTIO N WILL BE TREATED AS THE DATE OF COMPLETION (OCCUPANCY) CERTIFICATE T O MEET OUT THE REQUIREMENT OF EXPLANATION (II) TO SECTION 80IB (10 )(A) OF THE ACT. WE HAVE ALREADY DISCUSSED HEREINABOVE WHAT WOULD BE TH E SMALL OBJECTIONS. IN BRIEF THOSE OBJECTIONS WHICH DO NOT AFFECT THE MAIN PROJECT AND ARE GENERALLY TEMPORARY CONSTRUCTIONS. 12 ITA NO 598 AND 768/PN/2013 20. WE THUS WHILE SETTING ASIDE ORDERS OF THE AUTHO RITIES BELOW DIRECT THE A. O. TO ALLOW THE CLAIMED DEDUCTION UND ER SECTION 80/8(10) OF THE I. T. ACT 1961 IN THE ASSESSMENT YEARS UNDER CONSIDERATION TREATING THE REQUIRED DATE OF COMPLETION OF CONSTRU CTION OF THE HOUSING PROJECT AS THE DATE WHEN ABOVE DISCUSSED DEEMING PR OVISION PERIOD OF 21 DAYS EXPIRED I. E. 20/11/2005. 4.5. IN VIEW OF THE BINDING DECISION OF THE JURISDI CTIONAL ITAT, IT IS TO BE HELD THAT DEDUCTION U/S 80IB(10) IN RESPECT OF E MERALD CITY BANER IS ALLOWABLE. GROUND NO. 2 OF THE APPEAL IS THUS ALLOW ED. 16. IN THE AFORESAID BACKGROUND THE LD. DEPARTMENTA L REPRESENTATIVE HAS MADE HIS SUBMISSIONS. ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE, EXPLANATION (II) TO SE CTION 80IB(10)(A) OF THE ACT PRESCRIBES THAT THE DATE OF ISSUANCE OF COM PLETION CERTIFICATE BY THE PMC IS TO BE UNDERSTOOD AS THE DATE OF COMPLETI ON OF CONSTRUCTION OF THE PROJECT, AND IN THE PRESENT CASE, IT IS QUIT E CLEAR THAT THE REQUISITE OCCUPANCY CERTIFICATE HAS NOT BEEN ISSUED BY PMC AN D THEREFORE SUCH A PROJECT COULD NOT BE SAID TO HAVE COMPLIED WITH THE REQUIREMENTS OF COMPLETION OF CONSTRUCTION CONTAINED IN CLAUSE (A) TO SECTION 80IB(10) OF THE ACT. 17. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR T HE RESPONDENT- ASSESSEE VEHEMENTLY POINTED OUT THAT THERE IS NO RE FUSAL OR ANY OBJECTIONS RAISED BY THE PMC WITH REGARD TO NON-COM PLETION OF CONSTRUCTION OF THE PROJECT AND THEREFORE THE CIT(A ) MADE NO MISTAKE IN FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRI BUNAL IN THE CASE OF SATISH BORA AND ASSOCIATES (SUPRA) WHILE ALLOWING T HE CLAIM OF THE ASSESSEE. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. QUITE CLEARLY, THE ENTIRE CASE OF THE ASSESSING OFFICER R ESTS ON EXPLANATION (II) TO SECTION 80IB(10)(A) OF THE ACT WHICH PRESCRIBES THAT THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT S HALL BE TAKEN TO BE 13 ITA NO 598 AND 768/PN/2013 THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RES PECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY. IN THE P RESENT CASE, THE LOCAL AUTHORITY, I.E. PUNE MUNICIPAL CORPORATION HAS NOT ISSUED THE REQUISITE COMPLETION CERTIFICATE (TO BE UNDERSTOOD AS OCCUPAN CY CERTIFICATE IN THE CONTEXT OF THE PMC) BEFORE THE STIPULATED DATE. HO WEVER, THE ASSESSEE HAS COUNTERED THE AFORESAID OBJECTION BY POINTING O UT THAT IN-FACT IT HAS COMPLETED THE CONSTRUCTION OF THE PROJECT ON 04-12- 2007 I.E. MUCH BEFORE THE STIPULATED DATE OF COMPLETION CONTAINED IN SECTION 80IB(10)(A) OF THE ACT, IT HAD APPLIED TO THE PMC F OR OBTAINING OF THE OCCUPANCY CERTIFICATE BASED ON THE CERTIFICATE OF T HE ARCHITECT AND THE OTHER NOCS REQUIRED FOR THE SAID PURPOSE. THE CIT( A) HAS ALSO CALLED FOR INFORMATION U/S.133(6) OF THE ACT FROM THE PMC AND ITS RESPONSE DID NOT REVEAL ANY OBJECTION ON THE PART OF THE PMC THA T THE CONSTRUCTION WAS NOT COMPLETE WITH RESPECT TO THE SANCTIONED PLA NS. THEREFORE, FACTUALLY SPEAKING, THERE IS NO CONTROVERSION TO TH E ASSERTIONS OF THE ASSESSEE THAT ITS PROJECT WAS OTHERWISE COMPLETE A S PER THE SANCTIONED PLANS WITHIN THE STIPULATED DATE. IN THIS BACKGROU ND, IN OUR VIEW, THE CIT(A) MADE NO MISTAKE IN ALLOWING THE CLAIM OF THE ASSESSEE AND HER APPROACH IS NOT ONLY CONSISTENT WITH THE DECISION O F THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SATISH BORA AND ASSOCIA TES (SUPRA) BUT IT IS ALSO IN LINE WITH THE JUDGEMENT OF THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT VS. TARNETAR CORPORATION, (2014) 362 IT R 174 (GUJ). THE RELEVANT PORTION OF THE JUDGEMENT OF THE HONBLE GU JARAT HIGH COURT IN THE CASE OF TARNETAR CORPORATION (SUPRA) IS REPRODU CED HEREINUNDER :- IN THE PRESENT CASE, THEREFORE, THE FACT THAT THE A SSESSEE HAD COMPLETED THE CONSTRUCTION WELL BEFORE 31 ST MARCH 2008 IS NOT IN DOUBT. IT IS, OF COURSE, TRUE THAT FORMALLY BU PERMISSION WAS NOT GRANTED BY THE MUNICIPAL AUTHORITY BY SUCH DATE. IT IS EQUALLY TR UE THAT EXPLANATION TO CLAUSE (A) TO SECTION 80IB(10) LINKS THE COMPLETION OF THE CONSTRUCTION TO THE BU PERMISSION BEING GRANTED BY THE LOCAL AUT HORITY. HOWEVER, NOT EVERY CONDITION OF THE STATUTE CAN BE SEEN AS M ANDATORY. IF 14 ITA NO 598 AND 768/PN/2013 SUBSTANTIAL COMPLIANCE THEREOF IS ESTABLISHED ON RE CORD, IN A GIVEN CASE, THE COURT MAY TAKE THE VIEW THAT MINOR DEVIAT ION THEREOF WOULD NOT VITIATE THE VERY PURPOSE FOR WHICH DEDUCTION WA S BEING MADE AVAILABLE. IN THE PRESENT CASE, THE FACTS ARE PECULIAR. THE A SSESSEE HAD NOT ONLY COMPLETED THE CONSTRUCTION TWO YEARS BEFOR E THE FINAL DATE AND HAD APPLIED FOR BU PERMISSION. SUCH BU PERMISSION WAS NOT REJECTED ON THE GROUND THAT CONSTRUCTION WAS NOT COMPLETED, BUT THE SOME OTHER TECHNICAL GROUND. IN THAT VIEW OF THE MATTER, GRAN TING BENEFIT OF DEDUCTION CANNOT BE HELD TO BE ILLEGAL. 19. FOLLOWING THE AFORESAID DISCUSSION, WE THEREFOR E FIND NO REASON TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CI T(A) IN ALLOWING ASSESSEES CLAIM FOR DEDUCTION U/S.80IB(10) OF THE ACT AMOUNTING TO RS.23,87,480/-. AS A CONSEQUENCE, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND REVENUE FAILS IN ITS APPEAL. 20. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED, THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER, 2014. SD/- SD/- (R.S.PADVEKAR) (G .S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE, DATED : 31 ST DECEMBER, 2014 SATISH/SUJEET COPY TO:- 1. ASSESSEE; 2. DEPARTMENT; 3. THE CIT (A)-I, PUNE; 4. THE CIT-I, PUNE; 5. THE DR, A BENCH, I.T.A.T., PUNE; 6. GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE