Commissioner of Income Tax vs Jain Housing and Constructions Ltd.

Chitra Venkataraman, J.—This tax case (appeal), filed by the Revenue as against the order of the Tribunal relating to the asst. yr. 2004-05,

was admitted on the following substantial question of law:

Whether on the facts and circumstances of the case; the Tribunal was right in law in allowing deduction under s. 80-IB(10) when the assessee

company has not furnished the necessary completion certificates?

It is seen from the order passed by the CIT in exercise of his jurisdiction under s. 263 of the IT Act that the AO allowed the claim of deduction

under s. 80-IB(10) of the IT Act even in respect of projects which are not covered by necessary completion certificates, as required under s. 80-

IB(10)(a) of the IT Act. On a perusal of the records, the CIT, 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 28th Dec., 2007 and 30th

Jan., 2008 and the same were enclosed along with the reply to the CIT. Noting the same, the CIT set aside the order of assessment, thereby

directed the AO to verify that the certificates produced by the assessee are in accordance with law.

As regards the project Jains Prakriti at Bangalore, the assessee had stated that there was no claim for deduction on the project. However, the

AO 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 AO 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 s. 80-IB of the

IT Act.

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 CIT directed the AO to verify the certificates and grant the relief in accordance with law.

As regards the projects at Manapakkam and Pallavaram, the CIT 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 CIT remitted the matter

back to the AO for examination afresh. Aggrieved by this, the assessee went on appeal before the Tribunal questioning the jurisdiction of the CIT

under s. 263 of the IT Act as well as on merits.

Pointing out that the assessee had produced completion certificates in respect of some of the projects before the CIT, the Tribunal referred to

the insertion of explanation in subs. (10) of s. 80-IB of the IT Act, effective from 1st April, 2005 and held that the non-submission of completion

certificate would hot, per se, be a ground to reject the assessee''s claim. The Tribunal pointed out that insofar as Jains Prakriti at Bangalore was

concerned, the completion certificate was dt. 4th May, 2006 and the assessment was completed on 29th Dec:, 2006. Nevertheless, the CIT 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 CIT only on exercise of jurisdiction

under s. 263 of the IT Act, no fault could be found on the exercise of jurisdiction under s. 263 of the IT Act. However, pointing out to the insertion

of Explanation in Finance No. (2) Act of 2004, effective from 1st April, 2005, and prior to this amendment, there was no obligation on the part of

the assessee to file completion certificate, insofar 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 CIT in respect of the project Jains Prakriti at Bangalore, whereby the

CIT directed the AO to find out the extent of the built-up area of the flats exceeding 1,500 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.

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 1st April, 2005. Prior to substitution, the

provision, as it existed did not contain any such requirement. The section, as it stood during the asst. yr. 2004-05, reads as under:

80-IB. Deduction in respect of profits and gains from certain industrial-undertakings other than infrastructure development undertakings--....

(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.

Sec. 80-IB(10) was amended w.e.f. 1st April, 2005, which reads as under:

80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings--.....

(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 cl. (a) or cl. (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 kilometers 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.

As Is evident from the substitution of s. 80-IB(10) 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 per cent 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 Oct., 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.

As far as the present case is concerned, it relates to the asst. yr. 2004-05. The substitution of Explanation to cl. (a) to sub-s. (10) of s. 80-IB of

the IT Act was brought in under Finance No. (2) Act of 2004, effective from 1st April, 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 Reduction 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 CITs 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 Velachery, 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 CIT would not satisfy the requirement of the

rules, as already pointed out, in the absence of any requirement under s. 80-IB(10)(a) of the IT Act and going by the provision, as it stood during

relevant asst. yr., 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. 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.