HC Grants Tax Claim Deduction
In a recent decision the Gujarat High Court (HC) has held that if the construction of a housing project is completed within the prescribed time, and there has been a delay in obtaining a construction certificate, it should not impact the eligibility to claim deduction under section 80IB(10) of the Income-tax Act 1961. Taxand India investigates the case which led to this decision.
Tarnetar Corporation (the Taxpayer) claimed deduction under section 80IB(10) of the Act for the development and building of a housing project. They had completed construction in 2006 and applied for grant of a completion certificate. Due to technical errors, the completion certificate was delayed beyond the deadline for eligibility to claim deduction.
The Revenue Authorities contended section 80IA(10) requires that the construction should be completed before 31 March 2008, and since the completion certificate was granted after this date, the Taxpayer had not fulfilled one of the essential conditions required for claiming the deduction.
Ruling in favour of the Taxpayer, the HC concluded that not only had the Taxpayer completed the construction two years before the statutory date, but had also applied for permission to the relevant local authority within such time. Such permission was not rejected on the ground that construction was not completed, but was delayed due to some other technical reason.
This ruling has affirmed the principle that substantial compliance with a procedural provision should suffice. When the matter was heard at the Tribunal, it was observed that if such certificate of completion of construction is available at the time of assessment before the tax officer, it should constitute satisfactory compliance.