The Commissioner of Income-tax, Bangalore / The Income-tax Officer Ward-4(3), Bangalore v. Mahaveer Marvel
[Citation -2020-LL-0902-12]

Citation 2020-LL-0902-12
Appellant Name The Commissioner of Income-tax, Bangalore / The Income-tax Officer Ward-4(3), Bangalore
Respondent Name Mahaveer Marvel
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 02/09/2020
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags completion certificate • occupancy certificate • prescribed authority • benefit of exemption • claim of exemption • profits derived • housing project • local authority • levy of tax
Bot Summary: The Assessing Officer by an order dated 29.12.2009 inter alia held that the assessee had not complied with the condition incorporated under Section 80IB(10)(a) of the Act inasmuch as assessee has sold built up area of 2,60,960. 70 square feet, whereas, the project was approved for 1,53,066 square feet and therefore, the built up area was not in accordance with the approved plan and therefore, the project put up by the assessee was not approved by the local authority and provisions of Section 80IB(10) of the Act are not applicable and therefore, the claim of exemption under Section 80IB(10) of the Act was disallowed and the profits earned from the project in question i.e., Rs.3,05,61,970/- were treated as income and subjected to levy of tax and interest. On the other hand, learned Senior counsel for the assessee submitted that the Assessing Officer has passed an order solely on the ground that since, the assessee has not completed the project as approved by the local authority the project built and completed by the assessee does not have approval of local authority. Learned Senior counsel for the assessee has submitted that there is no requirement of obtaining completion certificate under the Bangalore Development Authority Act, Karnataka Municipal Corporation Act and under Karnataka Municipalities Act. For the purposes of this clause, in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in 12 respect of such housing project is issued by the local authority; Thus, it is evident that Section 80IB(10)(a) of the Act not only mentions a particular date before housing project has to be approved by the local authority but even a date by which housing project has to be completed. The project built and completed by the assessee does 16 not have an approval of the local authority. The Bangalore Development Authority Act, Karnataka Municipal Corporation Act and Karnataka Municipalities Act do not contain any provision to obtain completion certificate and therefore, it was not necessary for the assessee to obtain any completion certificate in the absence of any provisions in the aforesaid Acts.


1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 2ND DAY OF SEPTEMBER 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.13/2013 BETWEEN: 1. COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD BANGALORE. 2. INCOME-TAX OFFICER WARD-4(3), C.R. BUILDING QUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI.K.V.ARAVIND, ADV.,) AND: M/S. MAHAVEER MARVEL NO.1, 24TH MAIN MAHAVEER TOWERS J P NAGAR, 6TH PHASE BANGALORE-560078. ... RESPONDENT (BY SRI.A.SHANKAR SR. ADV. A/W SRI.M.LAVA, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 31.08.2012 PASSED IN ITA NO.154/BANG/2011 FOR ASSESSMENT YEARS 2007-08, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: 2 (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (I) ALLOW APPEAL AND SET ASIDE ORDER DATED 31.08.2012 PASSED BY ITAT, BANGALORE IN ITA NO.154/BANG/2011 CONFIRMING ORDER OF APPELLATE COMMISSIONER AND CONFIRM ORDER PASSED BY INCOME TAX OFFICER, WARD-4(3), BANGALORE. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2007-08. appeal was admitted by bench of this Court vide order dated 23.01.2013 on following substantial questions of law: (i) Whether appellate authorities were correct in holding that assessee firm is eligible for deduction under Section 80IB(10) of Income-Tax Act despite fact that there was large scale violations and deviations to sanctioned plan of local authority by assessee firm in carrying out Housing Project without appreciating 3 fundamental nature of legislature for providing such relief? (ii) Whether appellate authorities were correct in construing that deviations and violations committed by assessee while undertaking housing project and yet to be paid compounding fee for regularizing default is fairly enough to claim deduction under Section 80IB(10) without appreciating intended structure of legislative provisions of Section 80IB? 2. Facts leading to filing of this appeal briefly stated are that assessee is partnership firm, which had sold 66 flats. net profit to firm from sale proceeds of 66 flats was to extent of Rs.3,05,61,975/-. assessee claimed whole of aforesaid amount of profit of Rs.3,05,61,975/- as deduction under Section 80IB(10) of Act and declared income as NIL for Assessment year 2007- 08. case was selected for scrutiny and notices under 4 Section 143(2) and 143(1) of Act were issued to assessee. Assessing Officer by order dated 29.12.2009 inter alia held that assessee had not complied with condition incorporated under Section 80IB(10)(a) of Act inasmuch as assessee has sold built up area of 2,60,960.70 square feet, whereas, project was approved for 1,53,066 square feet and therefore, built up area was not in accordance with approved plan and therefore, project put up by assessee was not approved by local authority and provisions of Section 80IB(10) of Act are not applicable and therefore, claim of exemption under Section 80IB(10) of Act was disallowed and profits earned from project in question i.e., Rs.3,05,61,970/- were treated as income and subjected to levy of tax and interest. 3. Being aggrieved, assessee filed appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) by order 5 dated 10.11.2011 inter alia held that after construction of residential apartments, modified building drawing was submitted, which was duly approved by Bruhat Bengaluru Mahanagara Palike (BBMP). It was further found that subsequently authorities of BBMP instructed building for issuance of occupancy certificate and found that there is deviation in construction with reference to modified building plan, which was in permissible limits as per revised master plan and therefore, compounding fee was levied, which was paid by assessee and permission was granted to occupy building for residential purposes. It was also held that Section 80IB(10) being beneficial provision should be liberally construed and there was no justification in reducing deduction claimed by assessee. It was held that project was approved by local authority as housing project and therefore, in view of Central Board of Direct Taxes (CBDT) Circular dated 04.05.2010, assessee 6 is entitled to benefit of exemption under Section 80IB(10) of Act. revenue filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal , for short). Tribunal by order dated 31.08.2012 dismissed appeal preferred by revenue. In aforesaid factual background, this appeal has been filed. 4. Learned counsel for revenue submitted that mandatory conditions prescribed under Section 80IB(10) of Act have to be complied with in order to claim exemption under aforesaid provision. It is further submitted that admittedly, housing project in question was completed in violation of sanction plan and completion certificate was also not obtained. It is further pointed out that Assessing Officer found that excess built up area was 70.50% and therefore, Assessing Officer rightly held that since, construction was not put up as per approved plan, therefore, project as built and completed by assessee does not 7 have approval of local authority. It is further submitted that Commissioner of Income Tax (Appeals) grossly erred in not recording findings of fact and proceeded to decide appeal merely on basis that benefit of beneficial provision has to be extended. It is also submitted that Tribunal has failed to record any finding whether completion certificate was obtained. It is also argued that if housing project is not completed as per sanction plan, it ceases to be project under Section 80IB(10) of Act. It is further submitted that beneficial provision cannot be interpreted liberally but has to be construed strictly. In support of aforesaid submissions, reference has been made to decisions of Supreme Court in COMMISSIONER OF INCOME-TAX-19, MUMBAI VS. SARKAR BUILDERS , (2010) 57 TAXMANN.COM 313 (SC), DEPUTY COMMISSIONER OF INCOME-TAX VS. ACE MULTI AXES SYSTEMS LTD. , (2018) 400 ITR 141 (SC) and RAMNATH & CO. VS. COMMISSIONER OF INCOME- 8 TAX , (2020) 116 TAXMANN.COM 885 (SC) as well as form of completion certificate as prescribed under bye law 5.6.1 of bye laws framed by BBMP. 5. On other hand, learned Senior counsel for assessee submitted that Assessing Officer has passed order solely on ground that since, assessee has not completed project as approved by local authority, therefore, project built and completed by assessee does not have approval of local authority. It is also pointed out that there is no finding in order of assessing authority with regard to issuance of completion certificate and therefore, Commissioner of Income Tax (Appeals) did not have occasion to consider issue of completion certificate. It is further submitted that form of completion certificate has to be filled in by architect. It is also pointed out that no substantial questions of law have been framed with regard to completion certificate and therefore, issue with 9 regard to completion of certificate does not arise for consideration in this appeal. It is also argued that law contemplates modification of building plan and assessee had got building plan modified and had subsequently paid compounding fee and had also obtained permission to occupy building for residential purposes. It is also pointed out that occupancy certificate was issued by BBMP on 25.04.2009. Learned Senior counsel for assessee has submitted that there is no requirement of obtaining completion certificate under Bangalore Development Authority (BDA) Act, Karnataka Municipal Corporation Act and under Karnataka Municipalities Act. Therefore, revenue cannot insist on production of completion certificate as revenue cannot insist on assessee to do something, which is impossible in law. In support of aforesaid submission, reliance has been placed on division bench decision of this court in COMMISSIONER OF INCOME-TAX, CENTRAL 10 CIRCLE, BANGALORE VS. ITTINA PROPERTIES (P.) LTD , (2014) 49 TAXMANN.COM 201 (KARNATAKA). It is also urged that if there is any violation in respect of building plan, prescribed authority i.e., BBMP alone has authority to determine issue of violation and to take consequential action. In support of aforesaid submission, reference has been made to decision of Supreme Court in MANASA HOUSING CO- OPERATIVE SOCIETY LTD. VS. MARIKELLAIAH & ORS. , AIR 2006 KARNATAKA 273. It is also submitted that ratio laid down in case of Ramnath & Co. supra supports case of assessee. 6. We have considered submissions made by learned counsel on both sides and have perused record. Before proceeding further, it is apposite to take note of Section 80IB(10) of Act, which reads as under: 11 80-IB. (10) amount of deduction in case of undertaking developing and building housing projects approved before 31st day of March, 2008 by local authority shall be hundred per cent of profits derived in previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998 and completes such construction, (i) in case where housing project has been approved by local authority before 1st day of April, 2004, on or before 31st day of March, 2008; (ii) in case where housing project has been, or, is approved by local authority on or after 1st day of April, 2004 but not later than 31st day of March, 2005, within four years from end of financial year in which housing project is approved by local authority; (iii) in case where housing project has been approved by local authority on or after 1st day of April, 2005, within five years from end of financial year in which housing project is approved by local authority. Explanation. For purposes of this clause, (i) in case where approval in respect of housing project is obtained more than once, such housing project shall be deemed to have been approved on date on which building plan of such housing project is first approved by local authority; (ii) date of completion of construction of housing project shall be taken to be date on which completion certificate in 12 respect of such housing project is issued by local authority; Thus, it is evident that Section 80IB(10)(a) of Act not only mentions particular date before housing project has to be approved by local authority but even date by which housing project has to be completed. These dates have specific purpose with view to give time to developers to arrange their affairs in such manner that housing project is started and finished within dates stipulated in Section 80IB(10)(a) of Act. basic object of Section 80IB(10) is to encourage developers of housing project for weaker section of society and in order to qualify for deduction under provision conditions mentioned therein have to be fulfilled. 7. At this stage, we may advert to well settled legal principles with regard to interpretation of taxing statutes. It is trite law that subject is not to be taxed without clear words for purpose and also that 13 every Act of Parliament must be read according to natural construction of its word. well established rule in familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, is that if person sought to be taxed comes within letter of law he must be taxed, however, great hardship may appear to judicial mind to be. On other hand, if Crown seeking to recover tax, cannot bring subject within letter of law, subject is free, however apparently within spirit of law case might otherwise appear to be. In other words, if there be admissible in any statute, what is called equitable construction, certainly, such construction is not admissible in taxing statute where you can simply adhere to words of statute. [See: PRINCIPLES OF STATUTORY INTERPRETATION, JUSTICE G.P.SINGH, 14TH EDITION, PAGE 879]. 14 8. It is equally well settled legal proposition that exemption is available on complying with certain conditions, those conditions have to be strictly complied with. [See: EAGLE FLASK INDUSTRIES LTD., VS. COMMISSIONER OF CENTRAL EXCISE , (2004) 7 SCC 377 AND STATE OF JHARKHAND VS. ANBAY CEMENTS , (2005) 1 SCC 368, STATE OF BIHAR VS. KALYANPUR CEMENTS LTD. , (2010) 3 SCC 274 and DEPUTY COMMISSIONR OF INCOME TAX, CIRCLE 11(1), BANGALORE VS. ACE MULTI AXES SYSTEMS LTD. , AIR 2017 SC 5660]. constitution bench of Supreme Court in COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VS. DILIP KUMAR AND COMPANY AND ORS. has held that incentive provision is subjected to strict interpretation and until stage of finding out eligibility to claim deduction, ambit and scope of provision for purpose of its applicability cannot be expanded or widened, but once, eligibility is decided in favour of person claiming 15 such deduction, it could be construed liberally with regard to other requirements, which may be formal or directory in nature. aforesaid decision was referred to with approval by Supreme Court in Ramnath & Co. supra. 9. In backdrop of aforesaid well settled legal principles, we may advert to issues arising out of substantial questions of law in facts of case in hand. In instant case, there is no dispute that assessee has complied with provisions of clauses (b) to (f) of Section 80IB(10) of Act. only issue, which arises for consideration in this appeal is whether assessee has complied with requirement contained in Section 80IB(10)(a) of Act. In substance, housing project is required to be approved by local authority. Assessing Officer has held that construction of project has been carried out in violation of sanction plan. Therefore, project built and completed by assessee does 16 not have approval of local authority. Commissioner of Income Tax (Appeals) has in para 3.2 and 3.3 has held as follows: 3.2 plan was sanctioned for construction of residential apartments consisting of stilt plus ground floor and 3 upper floors at survey No.1 & others, Katha No.54 in Kodichikkanahalli Village, Begur Hobli, Bangalore South Taluk vide LP No.274/05-06 dated 01.08.2005. Subsequently, modified building drawing was submitted the same was approved by BBMP. 3.3 subsequently, authorities of BBMP inspected building for issue of occupancy certificate and it was observed that there was deviation in construction with reference to modified building plan, which is well within permissible limit of regularization as per revised Master Plan 2015 with levy of compounding fee. appellant has paid compounding fee and subsequently, permission was granted to occupy building for residential purposes. 17 10. aforesaid finding of fact has been affirmed by Tribunal and it has been held that assessee has fulfilled conditions mentioned in Section 80IB(10) of Act. Thus, aforesaid findings of fact are based on meticulous appreciation of evidence on record. Bangalore Development Authority Act, Karnataka Municipal Corporation Act and Karnataka Municipalities Act do not contain any provision to obtain completion certificate and therefore, it was not necessary for assessee to obtain any completion certificate in absence of any provisions in aforesaid Acts. Thus, from findings recorded by Commissioner of Income Tax (Appeals) as well as Tribunal, it is evident that project undertaken by assessee was approved by local authority and therefore, it had complied with conditions mentioned in Section 80IB(10)(a) of Act. 18 In view of preceding analysis, substantial questions of law framed by this court are answered against revenue and in favour of assessee. In result, appeal fails and same is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax, Bangalore / Income-tax Officer Ward-4(3), Bangalore v. Mahaveer Marvel
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