Bombay High Court Allows Deduction On Issuance Of Completion Certificate

The Bombay High Court has allowed the income tax deduction under Section 80-IB on the grounds that a completion certificate was issued by the competent authority.

The division bench of Justice Dhiraj Singh Thakur and Justice Valmiki S.A. Menezes, while upholding the order of the Income Tax Appellate Tribunal (ITAT), observed that there was no allegation by the survey team during the earlier survey conducted in the year 2006 that the assessee was not raising the construction as per the approved plan. It was also held that if there was any modification to a completed residential unit for which a completion certificate had been issued by the competent authority, the assessee could not be held responsible.

The assessee or respondent is an undertaking that has developed a residential project in Andheri, Mumbai. It claims a deduction in terms of Section 80IB(10), which was refused by the Assessing Officer on the ground that some of the flats constructed in Tower "A" of its housing project exceeded the area of 1000 sq. ft. as envisaged under the Section. The conclusion was reached by the assessing officer based on the survey report, which was conducted in 2011.

The project is a residential development that began in 2002 and was completed in 2008. The completion certificate was obtained by the respondent upon completion of the residential project in the year 2008 itself, i.e., much before the survey was conducted by the respondent in the year 2011.

The assessee appealed before the CIT (A) against the order of the AO. The CIT(A) held that the plan layout prepared by the architects and approved by BMC shows that the area of each of the individual flats has a built-up area of less than 1000 sq. The area measurement given by the appellant in their written submissions is as per the actual area of each flat on completion of the building's construction, and the same is also certified by the engineers of the Mumbai Municipal Corporation.

The department appealed before the ITAT against the order of the CIT (A). The tribunal held that the project was completed as early as March 28, 2008, and on the basis thereof, a completion certificate was issued by the competent authority. A completion certificate can only be issued if the construction was in accordance with the sanctioned plans dated April 15, 2012.

The department contended that the tribunal could not have summarily brushed aside the second report submitted pertaining to the year 2011, which clearly reflected that there were only three units on each floor exceeding 1000 sq. ft. It was urged that the assessee could not be held entitled to the benefit of a 100% deduction in terms of Section 80IB(10).

The High Court has held that the revenue has failed to establish that fact. Not only this but even the completion certificate could not have been issued by the competent authority, as rightly held by the Tribunal, if there had been any violation of the approved plans by the municipal authorities.

Case Title: The Principal Commissioner of Income Tax Versus M/s. Vardhan Builders

Citation: ITA No. 244 Of 2016

Date: 24.11.2022

Counsel For Appellant: Advocate Suresh Kumar

Counsel For Respondent: Senior Advocate Firoze Andhyanrujina

Citation: 2022 LiveLaw (Bom) 504  

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