Disallowance under Section 40(a)(ia) cannot be made if the assessee has not claimed a deduction
Section 40(a)(i) of the Act governs a situation where an amount is claimed as a deduction in computing the income chargeable under the head “Profits and gains of business or profession” and not otherwise. 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 to the Profit and Loss Account and is therefore not an amount deducted in computing the income chargeable under the heads ‘Profits and gains 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, is to the effect that assessee has paid the aforesaid sum during the year under consideration in foreign currency. The insistence of the Revenue to say that the amount has been paid in this year and therefore 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 we have reproduced above. There is no dispute to the proposition that the said payment has not been claimed as a revenue expenditure while computing the income chargeable under the head ‘Profits and gains of business 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 the addition of Rs. 2,78,20,447/- made by the lower authorities by invoking section 40(a)(i) of the Act. The order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the addition of Rs.2,78,20,447/- . Thus, on this aspect assessee succeeds.
Deduction U/s. 80IB(10) cannot be denied merely because completion certificate has not been issued by the Municipality if the assessee has completed construction before the due date
Entire case of the Assessing Officer rests on Explanation (ii) to section 80IB(10)(a) of the Act which prescribes that the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. In the present case, the local authority, i.e. Pune Municipal Corporation has not issued the requisite completion certificate (to be understood as occupancy certificate in the context of the PMC) before the stipulated date. However, the assessee has countered the aforesaid objection by pointing out 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 for obtaining of the occupancy certificate based on the certificate of the 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 that the construction was not complete with respect to the sanctioned plans. Therefore, factually speaking, there is no controversion to the assertions of the assessee that it’s project was otherwise complete as per the sanctioned plans within the stipulated date. In this background, 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 of the Pune Bench of the Tribunal in the case of Satish Bora and Associates (supra) but it is also in line with the judgement of the Hon’ble Gujarat High Court in the case of CIT vs. Tarnetar Corporation, (2014) 362 ITR 174 (Guj). The relevant portion of the judgement of the Hon’ble Gujarat High Court in the case of Tarnetar Corporation (supra) is reproduced hereinunder :-
“In the present case, therefore, the fact that the assessee had completed the construction well before 31st 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 true that explanation to clause (a) to section 80IB(10) links the completion of the construction to the BU permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available.
In the present case, the facts are peculiar. The assessee had not only completed the construction two years before 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, granting benefit of deduction cannot be held to be illegal.”
Following the aforesaid discussion, we therefore find no reason to interfere with the ultimate conclusion of the CIT(A) in allowing assessee’s claim for deduction u/s.80IB(10) of the Act amounting to 23,87,480/-. As a consequence, the order of the CIT(A) is hereby affirmed and Revenue fails in its appeal.