Case Law Details
HIGH COURT OF MADRAS
Commissioner of Income-tax
Versus
Jain Housing & Constructions Ltd.
TAX CASE (APPEAL) NO. 759 OF 2010
NOVEMBER 2, 2012
JUDGMENT
Mrs. Chitra Venkataraman, J. – This Tax Case (Appeal), filed by the Revenue as against the order of the Tribunal relating to the assessment year 2004-05, was admitted on the following substantial question of law:
“Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law in allowing deduction under Section 80IB(10) when the assessee company has not furnished the necessary completion certificates?”
2. It is seen from the order passed by the Commissioner of Income Tax in exercise of his jurisdiction under Section 263 of the Income Tax Act that the Assessing Officer allowed the claim of deduction under Section 80IB(10) of the Income Tax Act even in respect of projects which are not covered by necessary completion certificates, as required under Section 80IB(10)(a) of the Income Tax Act. On a perusal of the records, the Commissioner, pointed out that in respect of projects Jains Sagarika, MRC Nagar, Chennai and Jains Swarnakamal, Vadapalani, Chennai, the assessee had obtained completion certificates from the Local Authority on 28.12.2007 and 30.1.2008 and the same were enclosed along with the reply to the Commissioner of Income Tax. Noting the same, the Commissioner of Income Tax set aside the order of assessment, thereby directed the Assessing Officer to verify that the certificates produced by the assessee are in accordance with law.
3. As regards the project Jains Prakriti at Bangalore, the assessee had stated that there was no claim for deduction on the project. However, the Assessing Officer allowed the assessee’s claim for deduction to the extent of Rs. 3,97,54,441/-, which was available in the statement filed along with the return of income. Since the assessee had stated that there was no claim on the project, the Assessing Officer was directed to verify the details of the flats constructed on this project, whether the contentions were in conformity with the claim made in the return and in compliance with the provisions of Section 80IB of the Income Tax Act.
4. As far as the projects at Velachery, Chitlapakkam and Virugambakkam are concerned, the assessee pointed out that it had obtained completion certificates signed by the Local Authority. The Commissioner directed the Assessing Officer to verify the certificates and grant the relief in accordance with law.
5. As regards the projects at Manapakkam and Pallavaram, the Commissioner pointed out that the assessee had not filed the completion certificate from the Local Authority, but had filed only sewerage connection and power supply connection certificates. In the circumstances, the Commissioner remitted the matter back to the Assessing Officer for examination afresh. Aggrieved by this, the assessee went on appeal before the Income Tax Appellate Tribunal questioning the jurisdiction of the Commissioner of Income Tax under Section 263 of the Income Tax Act as well as on merits.
6. Pointing out that the assessee had produced completion certificates in respect of some of the projects before the Commissioner, the Tribunal referred to the insertion of Explanation in sub-section (10) of Section 80IB of the Income Tax Act, effective from 01.04.2005 and held that the non-submission of completion certificate would not, per se, be a ground to reject the assessee’s claim. The Tribunal pointed out that in so far as Jains Prakriti at Bangalore was concerned, the completion certificate was dated 4th May, 2006 and the assessment was completed on 29th December, 2006. Nevertheless, the Commissioner came to the conclusion that some of the residential units had exceeded 1500 sq.ft. built-up area; since the assessment order had not referred to the grant of deduction and the since the completion certificate in respect of the projects were produced before the Commissioner only on exercise of jurisdiction under Section 263 of the Income Tax Act, no fault could be found on the exercise of jurisdiction under Section 263 of the Income Tax Act. However, pointing out to the insertion of Explanation in Finance No.(2) Act of 2004, effective from 1.4.2005, and prior to this amendment, there was no obligation on the part of the assessee to file completion certificate, in so far as the non-furnishing of the completion certificate was concerned, there could be no error found in the order of assessment. Consequently, while upholding the order of the Commissioner of Income Tax in respect of the project Jains Prakriti at Bangalore, whereby the Commissioner directed the Assessing Officer to find out the extent of the built-up area of the flats exceeding 1500 sq.ft., the Tribunal accepted the contention of the assessee as regards the furnishing of completion certificate. The Revenue, hence, is now on appeal questioning the order of the Tribunal on the question of furnishing of completion certificate.
7. Learned counsel appearing for the assessee pointed out that the requirement regarding furnishing of the completion certificate to be produced as a condition for grant of deduction was introduced only under Finance No. (2) Act of 2004, effective from 1.4.2005. Prior to substitution, the provision, as it existed did not contain any such requirement. The Section, as it stood during the assessment year 2004-05, reads as under:
“Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
80IB(10) : The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if, –
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998;
(b) the project is on the size of a plot of land which has a minimum area of one acre; and
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place.”
8. Section 80IB(10) was amended with effect from 01.04.2005, which reads as under:
“Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
80IB(10) : The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, –
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction, –
(i) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority.
Explanation : For the purposes of this clause –
(i) 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;
(ii) 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;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum area under any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and
(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.”
9. As is evident from the substitution of Section 80IB(10) (1) of the Act, prior to the amendment, there was no such requirement as regards furnishing of completion certificate and the deduction provision pointed out to the grant of 100% deduction on the profits derived from a housing project, if the undertaking had commenced development and construction of the housing project on or after 1st October, 1998. Thus, till 2005, there was no clause dealing with completion, in which event, one cannot read into the provision as a condition, which is not specifically provided for therein.
10. As far as the present case is concerned, it relates to the assessment year 2004-05. The substitution of Explanation to clause (a) to sub-section (10) of Section 80IB of the Income Tax Act was brought in under Finance No.(2) Act of 2004, effective from 01.04.2005. Thus, in the absence of any such requirement read into the Section, we find it difficult to accept the case of the Revenue that the claim for deduction has to be rejected on the ground that the assessee had not furnished the completion certificate. Leaving that aside, as is evident from the reading of the Commissioner’s order, in any event, the assessee had produced the completion certificate in respect of the projects Jains Sagarika, MRC Nagar, Chennai and Jains Swarnakamal, Vadapalani, Chennai and the projects at Velacherry, Chitlapakkam and Virugambakkam. As far as the projects at Manapakkam and Pallavaram are concerned, if the assessee had submitted certificates from sewerage and Electricity Board, which according to the Commissioner would not satisfy the requirement of the Rules, as already pointed out, in the absence of any requirement under Section 80IB(10)(a) of the Income Tax Act and going by the provision, as it stood during relevant assessment year, 2004-05, it is difficult to accept the contention of the Revenue that the claim for deduction rested on the assessee’s production of completion certificates.
11. In the light of the above-said view that we have taken, we reject the appeal filed by the Revenue. Accordingly, this Tax Case (Appeal) stands dismissed. No costs.
