► Head notes :

Assessee claimed proportionate deduction u/s 80IB(10) for completed units of its housing project, based on completion certificate issued by the PCMC – AO disallowed the claim firstly on the ground that there was no ambiguity with regards to completed project in sec 80IB(10) and no proportionate deduction is allowable if the project is not completed within stipulated time

Pune ITAT -  The jurisdictional ITAT in the case of CIT Vs. Bramha Associates supports the contention of assessee that if part project is completed within stipulated time, and is completely habitable, assessee is entitled for a proportionate deduction – Here the completed units on which deduction was claimed were not habitable – There was no compound wall and no proper drainage system – No deduction u/s 80IB(10) allowable

► Name of Judge : Shri S.S. Godara JM & Shri Dipak P. Ripote AM

► Order:

Shri S.S. Godara

These three Revenue’s appeals for AYs. 2012-13 & 2013-14 pertain to a single assessee – M/s. Aswani Developers. Its first and foremost appeal ITA No.576/PUN/2020 for A.Y.2012-13 is directed against the Commissioner of Income Tax (Appeals)-6, Pune’s order dated 28.07.2021 passed in Case No. PPN/CIT(A)-6/DCIT, Circle- 8/10036/2015-16 in proceedings u/s.143(3) of the Income Tax Act, 1961, in short “the Act”.
 

2.    The Revenue’s latter twin appeals IT(SS)A Nos.02 & 03/PUN/2021 for A.Yrs.2012-13 & 2013-14 arise against the Commissioner of Income Tax (Appeals)-12, Pune’s separate orders,; both dated 28.02.2021, passed in Case Nos. ITBA/APL/S/250/2020- 21/1031080634(1) and No. ITBA/APL/S/250/ 2020-21/1031080679(1); respectively, involving proceedings u/s.153A r.w.s.143(3) of the Income Tax Act, 1961, in short “the Act”.

Heard both the parties. Case files perused.

3.    We first of all take up the Revenue’s appeal ITA No.576/PUN/2020. Delay of 194 days in filing stands condoned since falling in Covid-19 pandemic outbreak period.
 

4.    Next comes the Revenue’s sole substantive grievance raising the issue of section 80IB(10) deduction. The Assessing Officer had disallowed the assessee’s corresponding claim to the tune of Rs.10,73,04,401/- in his assessment order dated 30-01-2015. This 80IB(10) deduction claim pertains to the assessee’s “Green Lands” residential project at Rahatani, Pune.   Both the learned representatives at this stage take us to the CIT(A)’s detailed discussion allowing the assessee’s claim as follows :

“5.     In Ground No.l, the Appellant has contested the disallowance of Rs.10,73,04,401/- claimed under section 80IB(10) of the Act. It is stated by the appellant that in the relevant assessment year the appellant completed a Housing Project viz. 'Green Lands' at Rhatani, Pune. The project consisted of 07 residential buildings bearing Nos. A to G and one commercial building. The project was sanctioned by PCMC under Commencement certificate dated 30.07.2007. The part completion certificate in respect of residential building Nos. C, D, E & F was issued by PCMC on 29.03.2012. Regarding building Nos. A, B & G; the completion certificate was issued by the PCMC on 27.08.2014. Since the appellant could not complete the entire project before 31.03.2012, it claimed proportionate deduction u/s.80IB(10) of the Act in respect of profits earned from Building Nos. C, D, E & F. It is stated that the profits earned from Building Nos. A, B & G and Commercial building were offered for tax without claiming any deduction u/s.80IB(10) of the Act in the respective assessment years. However, the A.O. did not allow the proportionate deduction claimed by the appellant in respect of Building Nos. C, D, E &F. The A.O. also held that there is no ambiguity in the provisions of Section 80IB(10) regarding completion of project.lt is further seen from the assessment order, that the AO also disallowed the claim for another reason, i.e. on grounds of violation of provisions of Section 80IB(10)(f) of the Act. The A.O. in para 6 of his assessment order, has observed that the appellant had sold two flats in Building 'C' (i.e. Flat No.1001 & 1101) to Smt. Seema Devdas Shetty and Shri. Devidas P. Shetty, respectively. As both these persons were found to be spouse of each other, the A.O held that the appellant had violated the provisions of Section 80IB(10)(f) of the Act. However, the appellant contended before the A.O. that the deduction on profit of these two flats may be disallowed and the remaining amount of profits should be allowed as deduction u/s.80IB(10). However, the A.O. did not agree to this argument and held that the appellant had violated the provisions of Section 80IB (10)(f) and therefore he is not liable for the deduction claimed.

6.    During the course of appeal, the appellant filed written submissions reiterating the arguments taken before the AO.

7.    I have carefully considered the submissions of the appellant and the observations of the A.O. Regarding the issue of allowing deduction on pro-rata basis in respect of buildings completed by the appellant, I find that issue involved is covered in favour of the appellant by various decisions of the Hon'ble ITAT, Pune. However, one of the latest decisions in this case is that of Om Associates, ITA No.438/PUN/2017, wherein the Hon'ble jurisdictional bench, vide order dated 19.03.2019, on similar set of facts, has held as below :

"6. We heard both the sides on the limited issue of allowing deduction u/s.80IB(10) of the Act and perused the orders of AO and the CIT(A) and the decisions relied upon by the assessee. On going through the finding of CIT(A) on this issue, we find the CIT(A) has rightly allowed the deduction u/s.80IB(10) of the Act to the assessee after considering the following important aspects:

1. It is undisputed fact that the assessee completed construction of 108 flats and obtained completion certificate for the same.

2.  As per the Valuation Officer's report, the assessee has complied with the conditions provided in section 80IB(10) and AO ignored the same and failed to comment on the eligibility of section 80IB(10) of the Act.

3.
 

4. AO failed to appreciate the judgment of jurisdictional High Court in the case of CIT Vs. Brahma Associates (supra) in the right perspective and chose to reproduce part of the judgment to his convenience to deny the claim of the assessee. It is a settled legal proposition that the claim of deduction is allowable on pro-rata basis qua the complete part of the project. Considering the above, we are of the opinion that the assessee is entitled to pro-rata deduction u/s.80IB(10) of the Act for the buildings B, C and D. We therefore, uphold the order of CIT(A). The grounds raised by the Revenue are dismissed."
 

6. The aforesaid decision of the Tribunal has not been set aside, stayed or over-ruled by Higher Judicial Authorities. Before us, Revenue has also not placed any material on record to point out any distinguishing feature in the facts of the present case and that of earlier year nor has placed any contrary binding decision in its support. We therefore following the decision of Co- ordinate Bench of the Tribunal in assessee's own case in A.Y. 2011-12 and for similar reasons find no reason to interfere with the order of Ld.CIT(A) and thus the grounds of the Revenue are dismissed."

8.Respectfully following the ratio laid down by Hon'ble Jurisdictional ITAT, Pune, in the above case, it is held that the appellant is entitled to deduction u/s 80IB(10) on the buildings completed within the prescribed time limit. However, the deduction claimed is subject to the discussion that follows in the ensuing paras.

9.Regarding the second issue of making disallowance u/s.80IB(10)(f) of the Act for allotting flats to the spouses, it is seen that the same is again directly covered by the decision of Hon'ble ITAT, Pune in the case of M/s. Namrata Developers in ITA No.l975/PUN/2016, wherein vide order dated 25/09/2018, the Hon'ble Jurisdictional ITAT, on identical set of facts, in A.Y.2012-13, has held as below:

20. We have heard the rival contentions and perused the record. The assessee had claimed deduction under section 80IB(10) of the Act in respect of project 'Leelawati Greens'. Under the provisions of section 80IB(10)(f) of the Act, which came into force w.e.f. 19.08.2009, where more than one residential unit was allotted to person being an individual, no other residential unit in such housing project is to be allotted to the individual or the spouse or the minor children of such individual or Hindu Undivided Family in which such individual was the Karta or any person representing such individual, then where the assessee has violated the provisions of the Act, would not be eligible for the claim of deduction under section 80IB(10) of the Act. It may be pointed out that the assessee had violated the aforesaid provisions of clause (f) of section 80IB(10) of the Act, wherein flat Nos.A8-302 and 303 were allotted to Mrs.KhushbooKularia and Mr. Ashok Kularia (wife & husband) and A2-103 and 104 were allotted to Mrs. Snehlata Joshi and Mr. Vasant Hoshi (wife & husband). The Assessing Officer thus, denied entire claim of deduction under section 80IB(10) of the Act. The CIT(A) was of the view that two units allotted to spouses of individual being A8-302 and A2-103 had violated the conditions of section 80IB(10)(f) of the Act. He relied on the ratio laid down by the Hon'ble High Court of Madras in CIT Vs. Arun Excello Foundation Pvt. Ltd. reported in 86 DTR 99 (Mad) and Vishwas Promoters Pvt. Ltd. Vs. ACIT reported in 81 DTR 58 (Mad) and was of the view that the assessee was entitled to claim prorata deduction on the profits of balance project excluding two flats which were allotted to spouses of individuals. We are in conformity with the findings of CIT(A), where the violation of clause (f) of section 80IB(10) of the Act has been made by the assessee, then in respect of profits on flats allotted to spouses of individuals is to be excluded and is not entitled to the claim of deduction under section 80IB(10) of the Act. The CIT(A) has already directed the Assessing Officer to verify the correctness of profits worked out by the assessee on sale of above said flats and consequently, upholding the said directions, we dismiss the grounds of appeal raised by the Revenue."

10.The facts in the case of the appellant are identical to the case of Narmada Developers cited above. Respectfully following the decision of Hon'ble jurisdictional I TAT, Pune, in the case of Narmada Developers (supra), it is held, that the appellant is entitled to claim prorata deduction on the profits of balance project excluding two flats which were allotted to the spouses. Accordingly, the AO is directed to verify the correctness of profits worked out by the appellant on sale of above said flats and disallow the deduction only to that extent. Ground No. 1 is allowed subject to these directions.”

5.Suffice to say, the dispute between the parties herein is regarding the assessee’s claim u/s.80IB(10) deduction vis-à-vis the completion of the corresponding residential project namely “Green Lands”. We make it clear that the assessee’s instant project got first approval by the concerned authorities on 30-03-2007. Meaning thereby that the scheduled date of completion thereof would be 30-03-2012 u/s. 80IB(10) Explanation (i) of the Act. The assessee’s case all along has been that it is entitled for the proportionate deduction since it had duly completed “C to F” towers as per the part completion certificate dated 29-03-2012 coming from the municipal authority. Learned counsel has also placed on record the necessary correspondence dated 29-03-2012 to this effect. The Revenue on the other hand placed on record the corresponding site plan of the assessee’s full project namely “Green Lands”. A perusal of this said site plan read with the assessee’s completion certificate dated 29-03-2012 indicates in very clear terms that it had failed to complete the project in terms of section 80IB(10) Explanation (ii). It’s part completion certificate dated 29-03-2012 reveals that the Pimpri Chinchwad Municipal Corporation “PCMC” had found the assessee to have completed “C to F wings” only whereas going by the site plan before us, we do not see even the compound wall, sewage treatment plant “STP”, common parking floor for all towers (Wing-G) completed on or before the above scheduled date 30- 03-2012 (supra). Mr. Khandelwal could not further rebut the clinching stipulation in the foregoing certificate dated 29-03-2012 that the assessee had to complete the drainage system of these four wings at its own cost. We are completely in dark as to when the assessee had incurred its own expenditure to complete the drainage works.
 

6.We had heard all these three cases on 23-06-2022 and sought for the necessary part completion certificate as well as the site plan. The same came to be filed on 13-09-2022. We kept the matter as part-heard thereafter for 15-09-2022. We have gone through the site plan with the able assistance of both the parties. It emerges that the assessee has only completed “C to F wings” which could hardly be termed as “habitable” in absence of compound walls, sewage treatment plant, drainage and parking etc. Mr. Khandelwal at this stage quoted (2012) 19 taxmann.com 316 (Bom.) CIT Vs. Vandana Properties, (2013) 29 taxmann.com 19 (Mad.) Vishwas Promoters (P) Ltd. Vs. ACIT, (2012)
76 taxmann.com 73 (Bom.) CIT Vs. Akash Nidhi Builders & Developers upheld in (2016) 76 taxmann.com 86 (SC) similar other coordinate benches’ decisions that even a single residential tower could be taken as an eligible housing project and therefore, these four wings ought to be treated as independent housing projects eligible for 80IB(10) deduction on stand-alone basis.
 

7. All these assessee’s arguments failed to evoke our concurrence.

We wish to clarify here that hon’ble apex court’s recent decisions in Pr.CIT Vs. Wipro Limited (2022) 140 taxmann.com 223 (SC), Commissioner of Customs Vs.M/s. Dilip Kumar and Company (2018) 9 SCC 1 (SC) (FB) and CIT Vs. G.M. Knitting Industries Limited (2015) 376 ITR 456 (SC) have settled the law that provisions in a taxing statute; including deductions, ought to be strictly interpreted. We keep in mind this settled proposition and note that their lordships in Vandana Properties (supra) had come across an instance wherein all the project amenities had already been completed (in towers A to D) before the said assessee sought 80IB(10) qua ‘E building as the eligible residential project. We reiterate that the factual position is just the opposite before us since this taxpayer has failed to prove that its “C to F wings” had been completed along with all the foregoing amenities; before the date of part completion certificate dated 29-03-2012 (supra).
 

8.Learned authorised representative further sought to draw support from the Municipal Corporation’s subsequent approval to the completed project on 28-07-2014 that the assessee had duly complied with all the requirements of the entire project. We are afraid that this latter completion would hardly help the assessee once he is supposed to complete “C to F wings” to make them habitable before 29-03-2012 only. We thus find merit in the Revenue’s sole substantive grievance seeking to revive this 80IB(10) disallowance pertaining to “Green Lands” project to the tune of Rs.10,73,04,401/-. It’s instant first appeal ITA No.576/PUN/2020 succeeds.
 

9.Next come the Revenue’s latter appeals IT(SS) A Nos.02 & 03/Pun/2021 wherein the CIT(A) has allowed the assessee’s corresponding appeals claiming section 80IB(10) deduction(s) qua the very project’s “A, B and G” wings. The fact remains that the CIT(A) has not considered this latter issue of assessee’s 80IB(10) on merits regarding A, B and G wings involving 43, 43 and 35 flats; respectively since he has merely gone by the detailed discussion qua “C to F” wings (supra). Faced with this situation, we restore the Revenue’s instant latter twin appeals IT(SS)A Nos.02 & 03/PUN/2021 back to the CIT(A) for his afresh adjudication on merits as per law. Ordered accordingly.
 

10.Delay of one day each in Revenue’s latter twin appeals is condoned since falling in Covid-19 pandemic outbreak period.

To sum up, the Revenue’s first and foremost appeal ITA No.576/PUN/2020 is allowed and latter twin appeals IT(SS) A Nos.02 & 03/PUN/2021 are allowed for statistical purposes in above terms. A copy of this common order be placed in the respective case files

► Summery :

Pune ITAT: Proportionate deduction claimed u/s 80IB(10) for completed portion of the project allowable only if the said completed portion is actually habitable