The Pr. Commissioner Of Income Tax, Patiala v. M/S Ambey Developer Pvt. Ltd

Gurbax SinghIN THE HIGH COURT OF PUNJAB AND HARYANA AT 2017.08.22 12:14CHANDIGARH ITA No.263 of 2016 (O&M) Date of decision: 20.7.2017 The Pr. Commissioner of Income Tax, Patiala Vs. .…Appellant M/s Ambey Developer Pvt. Ltd. …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE AMIT RAWAL Present: Mr. Zora Singh Klar, Sr. Standing Counsel for the appellant. Mr. Jagmohan Bansal, Advocate for the respondent. Ajay Kumar Mittal,J. izThis order shall dispose of ITA No.263, 271 of 2016 and 177 of 2017 as according to the learned counsel for the appellant-revenue, theissue involved in all these appeals is identical. However, the facts arebeing extracted from ITA No.263 of 2016. |2.ITA No.263 of 2016 has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short, “the Act”) againstthe order dated 14.3.2016 passed by the Income Tax Appellate Tribunal,Division Bench, Chandigarh (in short, “the Tribunal’), in ITANo.852/Chd/2014 for the assessment year 2010-11, claiming followingsubstantial question of law:- “Whether on the facts and circumstances of the case and inlaw, the Hon’ble ITAT was justified in relying upon the order of Hon’ble Gujarat High Court in the case ofCIT vs.Tarnetar Corporation, (2014) 362 ITR 174 and holding|that approval has been granted at a later date withoutraising any objection whereas the completion certificatewas given by Municipal Corporation after expiry of fiveyears from date of approval?” 3.A few facts relevant for the decision of the controversyinvolved as narrated in ITA No.263 of 2016 may be noticed. The assesseeis a builder. During the assessment year under consideration, the assesseeclaimed deduction under Section 80IB of the Act amounting toz92,14,936/-. The Assessing officer noticed that the assessee had filedcompletion certificate from Municipal Town Planner, MunicipalCorporation, Patiala dated 30.12.2011 alongwith a letter written toCommissioner, Municipal Corporation, Patiala dated 29.3.2010 requestingfor completion certificate. It was further noticed that the housing projectapproved on 1.4.2005 should have been completed within five years fromthe end of the month in which the same was approved 1.e.. 31.3.2010. Theassessee submitted that grant of completion certificate after verification onsubsequent date would relate back to the date on which application ismade. The Assessing Officer disallowed the deduction under SectionSOIB(10) of the Act and added back the same to the assessee’s taxableincome. Aggrieved by the order, the assessee filed appeal before theCommissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated29.8.2014, the CIT(A) allowed the appeal holding that the assesseecompany applied for completion certificate alongwith architect’scertificate in the prescribed form on 29.3.2010 1.e. within the stipulatedperiod of five years as prescribed under section 80IB(10) of the Acct.However, the local authority granted certificate only on 30.12.2011 on account of various stages involved in the process and thus the delay inissuance of completion certificate was beyond the control of the assesseeand was not attributable to him. Not satisfied with the order, thedepartment filed appeal before the Tribunal. Vide order dated 14.3.2016,Annexure A.3, the Tribunal dismissed the appeal and contirmed thefindings recorded by the CIT(A). Reliance was placed on judgment of theGujarat High Court inTarnetar Corporation’scase (supra). It was heldthat approval had not been refused by the local authority to the assesseebut had been granted to it on a later date and that too without raising anyobjection. Hence the instant appeals by the revenue. account of various stages involved in the process and thus the delay inissuance of completion certificate was beyond the control of the assesseeand was not attributable to him. Not satisfied with the order, thedepartment filed appeal before the Tribunal. Vide order dated 14.3.2016,Annexure A.3, the Tribunal dismissed the appeal and contirmed thefindings recorded by the CIT(A). Reliance was placed on judgment of theGujarat High Court inTarnetar Corporation’scase (supra). It was heldthat approval had not been refused by the local authority to the assesseebut had been granted to it on a later date and that too without raising anyobjection. Hence the instant appeals by the revenue. 4Learned counsel for the appellant-revenue relied uponExplanation (11) to Section 80IB(10)(a) of the Act to submit that the dateof the completion of construction of the housing project shall be taken tobe the date on which the completion certificate in respect of such housingproject is issued by the local authority. Reliance was also placed on FullBench judgment of this Court inCIT vs. Punjab Financial Corporation>(2002) 254 ITR 6 to urge that the word ‘shall’ has to be interpreted asmandatory. 5. We have heard learned counsel for the appellant-revenue. © 6.The primary question that arises for consideration in theseappeals is the interpretation of Explanation (11) to Section 80IB(10) (a) ofthe Act, which reads thus: “the date of completion of construction of the housing projectShall be taken to be the date on which the completioncertificate in respect of such housing project is issued by thelocal authority.” It has been categorically recorded by the CIT(A) that the assessee appliedfor completion certificate alongwith architect’s certificate in the prescribed form on 29.3.2010 1.e. within the stipulated period of five yearsas prescribed under section 80IB(10) of the Act. The Assessing Officer inhis report submitted that the explanation of the assessee was plausiblewith respect to procedural delay at the end of the Municipal authorities.The assessee also referred to the possession certificate issued to the flatowners upto 31.3.2010, registered sale deeds, no objection certificate fromfire safety officer, Punjab State electricity Board etc. Further, theMunicipal Corporation Patiala had also accepted that the approval wasgranted on the basis of application filed by the assessee on 29.3.2010 andthe delay in issuing completion certificate was on account of variousStages involved in the process. The delay in issuance of completioncertificate was beyond the control of the assessee. Thus, it was clear thatthe project was completed before the due date as envisaged under SectionSOIB(10) of the Act. The relevant findings recorded by the CIT(A) readthus:- “4.6. It is further noted that in the immediately next)assessment year i.e. A.Y.2010-11, the Assessing Officermade enquiry with the Municipal Corporation, Patialaregarding the date of completing the project. The AssessingOfficer during the course of assessment proceedingsSubmitted a copy of the reply given by the MunicipalCorporation, Patiala which is reproduced as under:-| “As per the clarification demanded by your office, it is| hereby stated thatM/s Ambey Developers Pvt. Limitedundertook the approved housing project and had applied forthe completion certificate vide this application dated29.3.2010 alognwith the certificate of architect dated29 3.2010. It is further stated that each constructed flat wasphysically inspected, compared with the approved map,physically check the civic amenities availability as approved,after that the developer’s file is sent to the Chief Town “As per the clarification demanded by your office, it is| hereby stated thatM/s Ambey Developers Pvt. Limitedundertook the approved housing project and had applied forthe completion certificate vide this application dated29.3.2010 alognwith the certificate of architect dated29 3.2010. It is further stated that each constructed flat wasphysically inspected, compared with the approved map,physically check the civic amenities availability as approved,after that the developer’s file is sent to the Chief Town Planner (CTP) Local Govt. for the technical clearance fromthe government who after carefully considering all thecompliances issues the technical clearance certificate. Aftergetting the technical clearance certificate from _ thgovernment the completion certificate was issued to thedevelopers by the Municipal Corporation, Patiala. Theprocess of issuing completion certificate and technicalcertificate passes through many stages as such it generallytakes time as stated above.” 4.7. In the present case, therefore, it is an admitted fact thatthe appellant applied for the completion certificate alongwitharchitect’s certificate in the prescribed form, copy ofapproved map etc. on 29.3.2010 1.e. within stipulated periodof five years as enumerated in Section 80IB(10) of the Acct. Itis also observed during the course of assessment proceedingsthat the assessee has sold flats and same were occupied bysome of the owners NOC was also obtained from variousdepartments. The Assessing Officer in his report hassubmitted that the explanation of the assessee is plausiblewith respect to procedural delay at the end of Municipalauthorities. Further, the appellant has submitted that thecompletion certificate issued clearly refers to the requestletter of appellant dated 29.3.2010, and that the completioncertificate was issued with reference to the appellant’sapplication dated 29.3.2010. There is no mention of anydefect or discrepancy in the project on record. The appellanthas also referred to the possession certificate issued to the flatowners upto 31.3.2010, the registered sale deeds, noobjection certificate from Fire Safety Officer, Punjab StateElectricity Board etc. Permanent Electricity connection hasbeen given by Punjab State Electricity Board in the names ofthe respective buyers before 31.3.2010. Further the approvingauthority i.e. Municipal Corporation, Patiala has alsoaccepted that the approval was granted on the basis ofapplication filed by the appellant on 29.3.2010 and the delay in issuing completion certificate is because of the various Stages involved in the process. The delay in issuance ofcompletion certificate is beyond the control of the appellantand is not attributable to him. Thus from the submission ofthe Assessing Officer, the appellant and from the letter of themunicipal authorities, it is amply clear that the project wascompleted before the due date as envisaged under sectionSOIB(10) of the Act and the completion certificate was alsoawarded on the basis of certificate dated 29.33.2010. Underthe facts of the case, I am of the opinion that the ratio ofvarious decisions discussed above is squarely applicable tothe facts of the present case. Therefore, looking intosubmission made and the facts of the case and respectfullyfollowing the decisions as discussed above, the deductionclaimed under Section 80IB(10) is allowed and the additionmade by the Assessing Officer is hereby deleted.”| 7.The findings recorded by the CIT(A) were upheld by theTribunal. Relying upon the judgment of the Gujarat High Court inTarnetar Corporation’scase (Supra), it was recorded that every conditionof the statute cannot be seen as mandatory. If substantial compliancethereof is established on record in a given case, the court may take theview that minor deviation thereof would not vitiate the very purpose forwhich deduction was being made available. The approval in the presentcase had been granted to the assessee on a later date but without raisingany objection. Thus, the Tribunal rightly upheld the view taken by theCIT(A) granting deduction claimed under section 80IB of the Act anddeleting the addition made by the Assessing officer. The relevant findingsrecorded by the Tribunal read thus:- “8. We have heard the learned representatives of boththe parties, perused the findings of the authorities below andconsidered the material available on record. Though there area number of judgments in favour of the assessee in the said circumstances, we would like to refer to the judgment ofGujarat High Court in the case ofCIT vs. VarnetarCorporation, reported in (2014) 362 ITR 174(Gusarat)Where the Hon’ble High Court observes as under:- ‘In the present case, therefore, the fact that the assesseehad completed the construction well before 31 March 2008—is not in doubt. It is, of course, true that formally BUpermission was not granted by the Municipal authority bysuch date. It is equally true that explanation to clause (a) toSection 801B(10) links the completion of the construction tothe BU permission being granted by the local authority.However, not every condition of the statute can be seen asmandatory. If substantial compliance thereof is establishedon record, in a given case, the court may take the view thatminor deviation thereof would not vitiate the very purposefor which deduction was being made available. In thepresent case, the facts are peculiar. The assessee had not onlycompleted the construction two years before the final dateand had applied for BU permission. Such BU permission wasnot rejected on the ground that construction was notcompleted but on some other technical ground. In that viewof the matter granting benefit of deduction cannot be held tobe illegal.’ 9. The facts of the present case are on a strong footing, in thesense that the approval has not been refused to it and in facthas been granted to it on a later date, that too without raisingany objection. Since the facts are the same, respectfullyfollowing the order of the Hon’ble High court, we confirmthe order of the learned CIT(Appeals).” 8.Adverting to the interpretation and meaning to be assigned toExplanation (11) to Section 80IB(10(a) of the Act, essentially it has to beseen whether the term “shall” used therein is to be treated as mandatory orit is in the nature of a directory requirement. In our opinion, though the 9. The facts of the present case are on a strong footing, in thesense that the approval has not been refused to it and in facthas been granted to it on a later date, that too without raisingany objection. Since the facts are the same, respectfullyfollowing the order of the Hon’ble High court, we confirmthe order of the learned CIT(Appeals).” 8.Adverting to the interpretation and meaning to be assigned toExplanation (11) to Section 80IB(10(a) of the Act, essentially it has to beseen whether the term “shall” used therein is to be treated as mandatory orit is in the nature of a directory requirement. In our opinion, though the word used in Explanation (11) to Section 801B(10)(a) of the Act is “shall”,but it would not necessarily mean that in every case, it shall be taken to bemandatory requirement instead would depend upon the intent of thelegislature and not the language in which the provision is clothed. Themeaning and the intent of the legislature would be gathered not on thebasis of the phraseology of the provision but keeping into consideration itsnature, its design and the consequences which would follow frominterpreting it in a particular way alone. The purport of the saidExplanation (11) to Section 80IB(10)(a) of the Act is to safeguard theinterest of the revenue wherever the construction has not been completedwithin the stipulated period. Thus, it cannot mean that the requirement ismandatory in nature and would disentitle an assessee to the benefit ofSection 80IB(10)(a) of the Act even in respect of those cases where theassessee had completed the construction within the stipulated period andhad made an application to the local authority within the prescribed time.The issuance of the requisite certificate was within the domain of thecompetent authority over which the assessee had no control. From thefindings recorded by the CIT(A) as affirmed by the Tribunal, it was clearthat the construction had been completed before the stipulated date i.e.31.3.2010. It was also not disputed that the certificate of completion wasapplied on 29.3.2010 which was issued to the assessee on 31.12.2011. Theassessee in such circumstances could not be denied the benefit of SectionSOIB(10)(a) of the Act. The CIT(A) and the’ Tribunal had rightlyadjudicated the issue in favour of the assessee-respondent. Learnedcounsel for the appellant revenue has not been able to show any illegalityOr perversity in the findings recorded by the CIT(A) as well as theTribunal, warranting interference by this Court. OQ.In|Punjab Financial Corporation’scase (Supra) the issuebefore the Full Bench of this Court was whether Section 32AB(5) of theAct was mandatory or directory and delayed filing of audit report woulddisentitle an assessee from claiming the benefit of deduction under section32AB(1) of the Act. It was held that Section 32AB(5) of the Act is notmandatory and the Assessing Officer has the discretion to entertain theaudit report even though the same had not been filed with the return andgive benefit of deduction to the assessee in terms of Section 32AB(1) ofthe Act. The proposition of law enunciated therein is unexceptionable. Inthe facts and circumstances of the case as noticed hereinabove, it does notadvance the case of the revenue. 10.)In view of the above, no substantial question of law arisesand the appeals stand dismissed. (Ajay Kumar Mittal)|JudgeJuly 20, 2017(Amit Rawal)JudgeWhether speaking/reasonedYes.Whether reportableYes (Ajay Kumar Mittal)|Judge