Sudha Simhal v. DCIT 1(1), Bhopal
[Citation -2016-LL-1028-134]

Citation 2016-LL-1028-134
Appellant Name Sudha Simhal
Respondent Name DCIT 1(1), Bhopal
Court ITAT-Indore
Relevant Act Income-tax
Date of Order 28/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags construction of housing project • completion certificate • substantive provision • condition precedent • prospective effect • accounting method • work in progress • public interest
Bot Summary: If Explanation is superimposed on the expression completes such construction in Clause of Section 80IB(10), it would mean that the housing projects commenced on or after 01.10.1998 must possess completion certificate issued by the Local Authority on or before the cut off date, as may be applicable - to become eligible for tax deduction. The provision is in the nature of limiting the benefit of deduction to the specified housing projects, and not to those who fail to fulfill the requirement of completion of construction in time frame specified for the respective category of housing 4 Smt. Sudha Simhal ITA 881 Ind 2016 projects. 40 2012, 36 2012 35 2012 evidence to plead that the housing project is complete - requiring enquiry into those matters by the Tax Authorities - sans a completion certificate issued by the Local Authority in that behalf. For, Explanation will then have to be read as date of completion of construction of the housing project shall be taken to be the date as certified by the Local 9 Smt. Sudha Simhal ITA 881 Ind 2016 Authority in that behalf, irrespective of the date of issuance of such certificate by the I.T.A.Nos. We accordingly hold that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date does not fulfill the condition specified in clause of Section 80IB read with Explanation thereunder. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is 13 Smt. Sudha Simhal ITA 881 Ind 2016 within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. The Hon'ble High Court has held that issuance of completion certificate after the cut off date by the local authority but mentioning in the date of the completion of project before cut off date, does not fulfil the condition specified in clause of section 80IB(10) read with Explanation 2 thereunder.


Smt. Sudha Simhal ITA 881 Ind 2016 , IN INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE , BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. No.881 Ind 2016 Assessment Year: 2008-09 Smt. Sudha Simhal Bhopal PAN ACTPS 8702M :: Appellant Vs DCIT 1(1) Bhopal :: Respondent Revenue by Shri Hitesh Chimnani Assessee by Shri Mohd. Javed 5.10.2016 Date of hearing 5.10.2016 Date of pronouncement O R D E R PER SHRI D.T. GARASIA, JM This appeal has been filed by assessee against order of learned CIT(A), Ujjain, Camp at Bhopal), dated 30.6.2016. 1 Smt. Sudha Simhal ITA 881 Ind 2016 2. only ground raised in this appeal is that learned CIT(A) was not justified in confirming disallowance of Rs.32,68,024 - in respect of claim of deduction u s 80IB(10) of Act. 3. We have considered submissions of both sides. So far as deduction u s 80IB(10) of Act is concerned, we find that in recent judgment Hon'ble jurisdictional High Court of Madhya Pradesh in case of CIT vs. M s Global Reality; ITA No. 40 2012 and others has decided issue against assessee by holding as under :- 19. provision such as clause (a) as amended, sensu stricto, cannot be considered as new condition and that too incapable of compliance. Inasmuch as, clause (a) deals with time frame within which housing project was expected to be completed, to get benefit of prescribed deduction. Notably, amended Section 80IB (10) (a) extends benefit even to housing projects approved by 2 Smt. Sudha Simhal ITA 881 Ind 2016 Local Authority before 31.03.2007, instead of 31.03.2005 - as was provided in unamended provision. Therefore, necessity was felt to make distinction between two classes of housing projects for specifying time frame for completion. one approved by Local Authority before 1st day of April, 2004; and other class of housing project approved by Local Authority on or after 1st April 2004 till 31.03.2007. In either case, time frame for completion of project has been prescribed as four years. In that, project approved before 1st April, 2004 has been given time to complete before 31.03.2008; and in latter category I.T.A.Nos.40 2012, 36 2012 & 35 2012 within four years from end of financial year in which housing project was approved by Local Authority. 20. Thus understood, similar time frame for completion of housing project has been given to both class of housing projects. Moreover, explanation below clause (a), in particular (ii), applies to both class of housing projects 3 Smt. Sudha Simhal ITA 881 Ind 2016 uniformly. It postulates that "the date of completion of construction of housing project" shall be taken to be "the date on which completion certificate" in respect of such housing project "is issued by Local Authority". If Explanation (ii) is superimposed on expression "completes such construction" in Clause (a) of Section 80IB(10), it would mean that housing projects commenced on or after 01.10.1998 must possess completion certificate issued by Local Authority on or before cut off date, as may be applicable - to become eligible for tax deduction. As per Explanation (ii), therefore, synonym of "completes such construction" would be date on which completion certificate is issued by Local Authority. No more and no less. Thus, enough indication and also sufficient time has I.T.A.Nos.40 2012, 36 2012 & 35 2012 been given to both class of housing projects to fulfill that condition. provision is in nature of limiting benefit of deduction to specified housing projects, and not to those who fail to fulfill requirement of completion of construction in time frame specified for respective category of housing 4 Smt. Sudha Simhal ITA 881 Ind 2016 projects. This has been done in larger public interest - to ensure that benefit is given only to such projects who would further goal of providing low cost economic houses to deserving persons in reasonable time. 21. Concededly, it is within domain of Parliament to extend benefit or privilege to certain class of persons and also to withdraw same for just reasons. That cannot be questioned, unless shown to be unconstitutional in form or its substance. It was thus open to Parliament, to provide for cut off date for completion of housing projects, as condition precedent to avail benefit of deduction. In past, such stipulation was in place, but, later on, it was done away with. However, by amendment which came into effect from 1st April, 2005, condition for completion of project within specified time has I.T.A.Nos.40 2012, 36 2012 & 35 2012 been reintroduced, while giving sufficient time (four years) to assessee to comply for being entitled to get deduction. 5 Smt. Sudha Simhal ITA 881 Ind 2016 22. priori, it is not case of imposing new condition, much less, with retrospective effect as has been argued before us; unlike introduction of new condition in shape of clause (d) - which obviously could be applied only prospectively, as held by Supreme Court in aforesaid decisions. Clause (a) stands on completely different pedestal. It cannot be treated as new condition linked to approval and construction or having retrospective effect as such. For, it gives at least four years' time frame to both class of housing projects; to wit, housing projects approved prior to 1st April, 2004 or after 1st April, 2004. four years period obviously has prospective effect, albeit limiting period for completion of project, to avail of benefit. Four years' time frame for completion of project, by no standards, can be said to be unreasonable, harsh, absurd or incapable of compliance. It is also not case of withdrawal of vested right of developer, as such. No developer can claim vested right to complete housing project I.T.A.Nos.40 2012, 36 2012 & 35 2012 in indefinite period. right arising from Section 80IB, is coupled with 6 Smt. Sudha Simhal ITA 881 Ind 2016 obligation or duty to complete project in specified time frame. If developer does not complete housing project within specified time, will not receive that benefit. There is no compulsion on him to complete project in four years. Notably, even approvals to construction of housing project granted by Local Authority specify date within which construction must be completed, as per time frame specified in permission. If project is not completed within stipulated time, developer is free to get that period renewed or extended from Local Authority as per applicable Rules and Regulations. provision for claiming tax deduction from profits, can certainly prescribe for reasonable conditions and more so time frame for completion of project, in larger public interest. 23. Suffice it to observe that, no comparison can be drawn between new condition prescribed in terms of clause (d) and that of clause (a). Condition in Clause (a), neither operates retrospectively nor can be said to be absurd, unjust or expecting I.T.A.Nos.40 2012, 36 2012 & 35 2012 7 Smt. Sudha Simhal ITA 881 Ind 2016 assessee to comply with something which is impossible to achieve. 24. next question that needs to be answered, is, whether stipulation in Section 80IB(10)(a) can be said to be directory. Considering prodigious benefit offered in terms of Section 80IB to assessee (hundred per cent of profits derived in any previous year relevant to any assessment year); and purpose underlying same - which is inter alia burden on public exchequer due to waiver of commensurate revenue - stipulation for obtaining completion certificate from Local Authority before cut off date, must be construed as mandatory. fact that compliance of that condition is dependent on manner in which proposal is processed by Local Authority, provision cannot be construed as directory requirement. It is substantive provision mandating issuance or grant of completion certificate by Local Authority before cut off date or specified time, as precondition to get benefit of tax deduction. Else, it will 8 Smt. Sudha Simhal ITA 881 Ind 2016 then be open to assessee to rely on other circumstances or I.T.A. Nos. 40 2012, 36 2012 & 35 2012 evidence to plead that housing project is complete - requiring enquiry into those matters by Tax Authorities - sans completion certificate issued by Local Authority in that behalf. priori, argument of substantial compliance is sufficient, would lead to uncertainty about date of completion of project which is hallmark for availing of benefit of tax deduction. Only with this intent legislature in its wisdom has predicated that, "the completion of construction" of housing project is taken to be "the date on which" completion certificate "is issued" by Local Authority. To interpret it to include ex post facto certificate or such certificate issued by Local Authority after cut off date, would not only result in rewriting of express provision and run contrary to unambiguous position pronounced in Section, but also doing violence to legislative intent. For, Explanation (ii) will then have to be read as "date of completion of construction of housing project shall be taken to be date as certified by Local 9 Smt. Sudha Simhal ITA 881 Ind 2016 Authority in that behalf", irrespective of date of issuance of such certificate by I.T.A.Nos.40 2012, 36 2012 & 35 2012 Local Authority. Indeed, in given case if assessee is able to substantiate that completion certificate "was in fact issued" by Local Authority before cut off date, but could not be produced by him within time due to reasons beyond his control, argument of substantial compliance of provision can be tested. Any other interpretation would result not only in uncertainty (in finalization of assessment proceedings due to non-issuance or delayed issuance of such certificate by Local Authority and prone to manipulations at end of Local Authority); but also have to yield to subjective satisfaction of Assessing Authority and of investing wide discretion in that Authority, which, eventually, may only end up in getting embroiled in litigation. If assessee has failed to comply with condition of obtaining completion certificate from Local Authority before cut off date, he must take consequence therefor and of denial of benefit of tax deduction offered to him on that count. 10 Smt. Sudha Simhal ITA 881 Ind 2016 25. We cannot be oblivious of fact that Municipal Laws of different States are not uniform in respect of procedure for I.T.A.Nos.40 2012, 36 2012 & 35 2012 issuance of completion certificate. To wit, in some States, dispensation provided is to issue partial or full occupation certificate; and thereafter issue completion certificate after removal of all deficiencies pointed out by Local Authority. In some States, Municipal Law may provide for issuing partial or full completion certificate. requirement of completion certificate issued by Local Authority, as envisaged in Section 80IB(10)(a) of Income Tax Act, which is Central enactment dealing with special subject of taxation, however, is, of only one certificate - which is full completion certificate issued by Local Authority before cut off date. That is to lend credence to factum of completion of entire housing project in all respects as per approval granted by Local Authority. It can be safely assumed that legislature was conscious of this position, for which, express provision has been made as to meaning of date of completion 11 Smt. Sudha Simhal ITA 881 Ind 2016 of housing project linked to "date on which" completion certificate "is issued" by "Local Authority", as predicated in Explanation (ii) thereunder. 26. We accordingly hold that issuance of completion certificate, after cut off date by Local Authority but, mentioning date of completion of project before cut off date does not fulfill condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder. We reject argument of assessee that effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005 ,has retrospective effect or that it is unjust in any manner or incapable of compliance at all. Similarly, requirement of securing completion certificate issued by Local Authority before cut off date is not directory, in view of express provision in Section 80IB(10)(a) and Explanation (ii) thereunder. completion certificate granted by Local Authority must bear date of having been issued before cut off date. 12 Smt. Sudha Simhal ITA 881 Ind 2016 27. That takes us to argument of assessee that stipulation in Section 80IB(10)(a) of completion certificate issued by Local Authority before cut off date, cannot be applied in case of assessee following work in progress accounting method. In our opinion, provision in form of Section 80IB (10)(a), applies uniformly to all assessees - be it following work in progress accounting method or otherwise. benefit of deduction under this provision can be availed by assessee following work in progress accounting method, provided he has complied with stipulation of having produced completion certificate issued by Local Authority before cut off date, as may be applicable in his case. In other words, if housing project was approved by Local Authority before 1st April, 2004, he must submit completion certificate issued by Authority having been issued before 31st March, 2008. Whereas, in case of housing project approved on or after 1st April, 2004, assessee can avail of benefit provided completion certificate issued by Local Authority is 13 Smt. Sudha Simhal ITA 881 Ind 2016 within four years from end of financial year in which concerned housing project was approved by Local Authority. If this condition is not fulfilled, assessee who maintains work in progress accounting method and has claimed deduction under Section 80IB(10)(a) must suffer consequence of disallowance or withdrawal of benefit claimed by him on that count. 28. Accordingly, these appeals succeed. impugned judgment of Tribunal is set aside; and in facts of present case, decision of Assessing Officer to disallow deduction under Section 80IB(10)(a) of Income Tax Act is upheld. No order as to costs. 4. Hon'ble jurisdictional High Court has considered sweep of amended clause (a) of provision under sub-section (10) of section 80IB of Act and held that provisions of clause (a), as amended, sen sustricto cannot be considered as new condition and that too incapable of compliance. clause deals with time frame within 14 Smt. Sudha Simhal ITA 881 Ind 2016 which housing project was expected to be completed to get benefit of prescribed deduction. Hon'ble High Court has held that issuance of completion certificate after cut off date by local authority but mentioning in date of completion of project before cut off date, does not fulfil condition specified in clause (a) of section 80IB(10) read with Explanation 2 thereunder. In view of this finding of Hon'ble jurisdictional High Court, we find no merit in appeal of assessee and dismiss same. 5. In result, appeal of assessee stand dismissed. Pronounced in open Court on 5th October, 2016 Sd - sd - (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member Dated : 28 October, 2016. 15 Smt. Sudha Simhal ITA 881 Ind 2016 Dn 16 Sudha Simhal v. DCIT 1(1), Bhopal
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