The Commissioner of Income TaxCentral-I, Chennai v. M/s.Jain Housing & Constructions Ltd.

In the High Court of Judicature at MadrasDated: 02.11.2012CoramThe Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Mr.JUSTICE K.RAVICHANDRABAABUTax Case (Appeal) No.759 of 2010The Commissioner of Income TaxCentral-I, Chennai..... Appellant/RespondentVs.M/s.Jain Housing & Constructions Ltd.,11, Somasundaram Street,T.Nagar, Chennai – 600 017..... Respondent/AppellantAPPEAL under Section 260-A of the Income Tax Act against theorder dated 09.10.2009 made in I.T.A.No.519/Mds/2009 on the file ofthe Income Tax Appellate Tribunal, Madras 'D' Bench for theassessment year 2004-05. Against the order of the Commissioner ofIncome Tax, Chennai-I, Chennai.No.121, Uthamar Gandhi Road, Ch-34.PAN No AAACJ1132 H dated 25.3.2009 for the Assessment year 2004-2005.Against the order of the Additional Commissioner of Income Tax,Company Range-II, Chennai- 34 for the Assessment year 2004-2005 dated29.12.2006.For Appellant : Mr.T.RaviKumar Standing Counsel for Income TaxFor Respondent: Mr.R.Sivaraman--------J U D G M E N T(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.)This Tax Case (Appeal), filed by the Revenue as against theorder of the Tribunal relating to the assessment year 2004-05, was https://hcservices.ecourts.gov.in/hcservices/ 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 allowingdeduction under Section 80IB(10) when the assessee companyhas not furnished the necessary completion certificates?"2. It is seen from the order passed by the Commissioner ofIncome Tax in exercise of his jurisdiction under Section 263 of theIncome Tax Act that the Assessing Officer allowed the claim ofdeduction under Section 80IB(10) of the Income Tax Act even inrespect of projects which are not covered by necessary completioncertificates, as required under Section 80IB(10)(a) of the Income TaxAct. On a perusal of the records, the Commissioner, pointed out thatin respect of projects Jains Sagarika, MRC Nagar, Chennai and JainsSwarnakamal, Vadapalani, Chennai, the assessee had obtainedcompletion certificates from the Local Authority on 28.12.2007 and30.1.2008 and the same were enclosed along with the reply to theCommissioner of Income Tax. Noting the same, the Commissioner ofIncome Tax set aside the order of assessment, thereby directed theAssessing Officer to verify that the certificates produced by theassessee are in accordance with law. 3. As regards the project Jains Prakriti at Bangalore, theassessee had stated that there was no claim for deduction on theproject. However, the Assessing Officer allowed the assessee's claimfor deduction to the extent of Rs.3,97,54,441/-, which was availablein the statement filed along with the return of income. Since theassessee had stated that there was no claim on the project, theAssessing Officer was directed to verify the details of the flatsconstructed on this project, whether the contentions were inconformity with the claim made in the return and in compliance withthe provisions of Section 80IB of the Income Tax Act.4. As far as the projects at Velachery, Chitlapakkam andVirugambakkam are concerned, the assessee pointed out that it hadobtained completion certificates signed by the Local Authority. TheCommissioner directed the Assessing Officer to verify thecertificates and grant the relief in accordance with law. 5. As regards the projects at Manapakkam and Pallavaram, theCommissioner pointed out that the assessee had not filed thecompletion certificate from the Local Authority, but had filed onlysewerage connection and power supply connection certificates. In thecircumstances, the Commissioner remitted the matter back to theAssessing Officer for examination afresh. Aggrieved by this, theassessee went on appeal before the Income Tax Appellate Tribunalquestioning the jurisdiction of the Commissioner of Income Tax underSection 263 of the Income Tax Act as well as on merits.6. Pointing out that the assessee had produced completion https://hcservices.ecourts.gov.in/hcservices/ certificates in respect of some of the projects before theCommissioner, the Tribunal referred to the insertion of Explanationin sub-section (10) of Section 80IB of the Income Tax Act, effectivefrom 01.04.2005 and held that the non-submission of completioncertificate would not, per se, be a ground to reject the assessee'sclaim. The Tribunal pointed out that in so far as Jains Prakriti atBangalore 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 ofthe residential units had exceeded 1500 sq.ft. built-up area; sincethe assessment order had not referred to the grant of deduction andthe since the completion certificate in respect of the projects wereproduced before the Commissioner only on exercise of jurisdictionunder Section 263 of the Income Tax Act, no fault could be found onthe 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 thisamendment, there was no obligation on the part of the assessee tofile completion certificate, in so far as the non-furnishing of thecompletion certificate was concerned, there could be no error foundin the order of assessment. Consequently, while upholding the orderof the Commissioner of Income Tax in respect of the project JainsPrakriti at Bangalore, whereby the Commissioner directed theAssessing Officer to find out the extent of the built-up area of theflats exceeding 1500 sq.ft., the Tribunal accepted the contention ofthe assessee as regards the furnishing of completion certificate.The Revenue, hence, is now on appeal questioning the order of theTribunal on the question of furnishing of completion certificate. 7. Learned counsel appearing for the assessee pointed out thatthe requirement regarding furnishing of the completion certificate tobe produced as a condition for grant of deduction was introduced onlyunder Finance No.(2) Act of 2004, effective from 1.4.2005. Prior tosubstitution, the provision, as it existed did not contain any suchrequirement. The Section, as it stood during the assessment year2004-05, reads as under: "Deduction in respect of profits and gains fromcertain industrial undertakings other than infrastructuredevelopment undertakings80IB(10) – The amount of profits in case of anundertaking developing and building housing projectsapproved before the 31st day of March, 2005 by a localauthority, shall be hundred per cent of the profitsderived in any previous year relevant to any assessmentyear from such housing project if, - (a) such undertaking has commenced or commencesdevelopment and construction of the housing project on orafter the 1st day of October, 1998;(b) the project is on the size of a plot of landwhich has a minimum area of one acre; and https://hcservices.ecourts.gov.in/hcservices/ (c) the residential unit has a maximum built-up areaof one thousand square feet where such residential unitis situated within the cities of Delhi or Mumbai orwithin twenty-five kilometres from the municipal limitsof these cities and one thousand and five hundred squarefeet 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 certainindustrial undertakings other than infrastructuredevelopment undertakings80IB(10) – The amount of deduction in the case of anundertaking developing and building housing projectsapproved before the 31st day of March, 2007 by a localauthority shall be hundred per cent of the profitsderived in the previous year relevant to any assessmentyear from such housing project if, - (a) such undertaking has commenced or commencesdevelopment and construction of the housing project on orafter the 1st day of October, 1998 and completes suchconstruction, - (i) in a case where a housing project has been, or,is approved by the local authority on or after the 1st dayof 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 dayof April, 2004, within four years from the end of thefinancial year in which the housing project is approvedby the local authority.Explanation – For the purposes of this clause -(i) in a case where the approval in respect of thehousing project is obtained more than once, such housingproject shall be deemed to have been approved on the dateon which the building plan of such housing project isfirst approved by the local authority;(ii) the date of completion of construction of thehousing project shall be taken to be the date on whichthe completion certificate in respect of such housingproject is issued by the local authority;(b) the project is on the size of a plot of landwhich has a minimum area of one acre:Provided that nothing contained in clause (a) orclause (b) shall apply to a housing project carried outin accordance with a scheme framed by the CentralGovernment or a State Government for reconstruction orredevelopment of existing buildings in areas declared tobe slum area under any law for the time being in forceand such scheme is notified by the Board in this behalf; https://hcservices.ecourts.gov.in/hcservices/ (c) the residential unit has a maximum built-up areaof one thousand square feet where such residential unitis situated within the city of Delhi or Mumbai or withintwenty-five kilometres from the municipal limits of thesecities and one thousand and five hundred square feet atany other place; and(d) the built-up area of the shops and othercommercial establishments included in the housing projectdoes not exceed five per cent of the aggregate built-uparea 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 asregards furnishing of completion certificate and the deductionprovision pointed out to the grant of 100% deduction on the profitsderived from a housing project, if the undertaking had commenceddevelopment and construction of the housing project on or after 1stOctober, 1998. Thus, till 2005, there was no clause dealing withcompletion, in which event, one cannot read into the provision as acondition, which is not specifically provided for therein. 10.As far as the present case is concerned, it relates to theassessment year 2004-05. The substitution of Explanation toclause (a) to sub-section (10) of Section 80IB of the Income TaxAct was brought in under Finance No.(2) Act of 2004, effectivefrom 01.04.2005. Thus, in the absence of any such requirementread into the Section, we find it difficult to accept the caseof the Revenue that the claim for deduction has to be rejectedon the ground that the assessee had not furnished the completioncertificate. Leaving that aside, as is evident from the readingof the Commissioner's order, in any event, the assessee hadproduced the completion certificate in respect of the projectsJains Sagarika, MRC Nagar, Chennai and Jains Swarnakamal,Vadapalani, Chennai and the projects at Velacherry, Chitlapakkamand Virugambakkam. As far as the projects at Manapakkam andPallavaram are concerned, if the assessee had submittedcertificates from sewerage and Electricity Board, whichaccording to the Commissioner would not satisfy the requirementof the Rules, as already pointed out, in the absence of anyrequirement under Section 80IB(10)(a) of the Income Tax Act andgoing by the provision, as it stood during relevant assessmentyear, 2004-05, it is difficult to accept the contention of theRevenue that the claim for deduction rested on the assessee'sproduction of completion certificates. https://hcservices.ecourts.gov.in/hcservices/

11. In the light of the above-said view that we have taken, wereject the appeal filed by the Revenue. Accordingly, this Tax Case(Appeal) stands dismissed. No costs. sd/-Assistant RegistrarTrue Copy/-Sub Assistant RegistrarslTo1. The Income Tax Appellate Tribunal, Madras 'D' Bench.2. The Commissioner of Income Tax, Chennai – I, Chennai – 34.3. The Assistant Commissioner of Income Tax, Company Range-II, Chennai – 34.+1 cc to Mr.R.Sivaraman, Advocate sr 67862 T.C.(A) No.759 of 2010SKD-COKV – 21/1/2013