Quest

Opinion
Housing Project u/s. 80-IB(10)

ABC ... Querists

The querist is an Association of Persons and is engaged in the business of developing and building housing projects.

The querist is in the process of acquiring development rights of a land for developing housing project, the details of which are as under:

• Total area of the plot to be developed is 4446.70 sq. mtrs.; i.e., more than one acre.
   

• On the abovesaid plot, a road has to be constructed by the querist on 2280.90 sq.mtrs. of land which has to be handed over to the B.M.C.
   

• After handing over the area covered by the road to B.M.C. the net area of the plot available to the querist for development of the housing project is 2165.80 sq.mtrs. which is less than one acre.
   

• In lieu of handing over the area covered by the road to B.M.C. the querist will be eligible and entitled to the equivalent F.S.I. available for development of the said plot.
   

• Thus, the total area of F.S.I. available for development to the querist is more than one acre.

Based on the above facts, the querist has raised the following queries:

1. Whether the querist will be eligible for deduction under section 80IB(10) of the Act in view of the fact that after handing over the area reserved for the road to B.M.C. the net area of the plot available for construction of the housing project will be less than one acre?
    

2. Whether the querist will be eligible for deduction under section 80IB(10) of the Act in view of the fact that the total of FSI received from the B.M.C. ( in lieu of handing over the area for the road) and FSI available on the said plot for development is more than one acre?

3. Explanation (ii) to section 80(IB)(a) provides as under:
   
   
   “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.”
   If the querist has obtained occupation certificate and not the completion certificate from the local authority, can it be said that the querist has satisfied the above said conditions which are enumerated in explanation)\(ii) to clause 80(IB)(10(a) of the Act ?
    

4. Since the querist is an Association of Persons and not a firm. whether provisions of S. 194C of the Act will be applicable in respect of any sum which is paid in pursuance of any contract?

The project under consideration undoubtedly covers an area which is more than one acre. Only because the sanction of the project is given subject to the condition that a part of the said project area must be used for construction of road and after completion of the road construction the same is to be transferred to the Corporation, in no way, takes away the said area on which the road is to be constructed out of the project. The entire project covers road development as a part of the project. It must be noted that the road is also to be constructed by the querist. Only because, some part of the land is to be used for construction of the road and that such constructed road is to be handed over to the Corporation, the same being a part of the project itself and particularly that is one of the conditions required for development of the property in question for the said construction of the road, it does not cease to take away the said part of the project to be developed by the querist. As such, as the total area covered by the project is more than one acre, though a part of it is to be used to construct roads it would be a housing project covering more than one acre and, as such, the conditions of S. 80IB(10) are fulfilled and the querist will have no difficulty in claiming deduction on the profits arising out of the said housing project. This view is supported by Dept. circular no.5/2005 dated 15-7-2005 where in it was opined that area limit of the plot has to be construed with reference to the area of the site on which the housing project is construed and not with reference to the demarcation of land done by land development authority. However by way of caution the road constructed may be handed over to the Corporation after the project is completed.

Now, coming to the second issue as per the provisions of S. 80-IB(10) the project in question has to be completed within four years from the date of commencement of the project. Now, the date of completion of the construction of the project is defined to be the date on which the completion certificate in respect of such housing project is issued by the local authority. Though the section uses the words “Completion Certificate,” once the construction is completed and the architect of the querist certifies that the construction is completed and the occupation certificate is obtained and only because certain modifications are to be made as per the certificate and only after carrying out those changes as required by the authority, the certificate of completion is to be issued does not mean that it is completed only when the final certificate is obtained. Once the Occupation Certificate is obtained on the basis of the completion of the project and, only because the Occupation Certificate provides that Completion Certificate will be issued after the suggested alterations or changes as suggested by the authority are to be carried out, does not mean that it is completed only when the final certificate is obtained. As such, Occupation Certificate on the basis of completion would be sufficient for the purpose of claiming that the project is complete, and only because the final certificate is obtained only on following the directions issued as per the authority are carried out and ultimately the Completion Certificate is to be issued. It cannot be said that the project is not completed. As such, in my opinion, if the Occupation Certificate is issued on the basis of completion of the construction of the project, would be the date of completion and, therefore, the date of occupation obtained on the basis of completion of the project would be sufficient compliance and the same would be considered as date of completion of the construction of the housing project for the purpose of S. 80IB(10)

The next question is, whether as the querist being an Association of Persons and not a firm, the provisions of S. 194C of the Act would be applicable ?

If one goes through the provisions of S. 194C, the said provisions would be applicable only to payment by specified persons. In the said specified persons, a partnership firm is included but an AOP is not included. Though there are many common features between a partnership firm and AOP, still they are not one and the same. AOP is a separate taxable entity under the provisions of the Act and, as such, the provisions of S. 194C would not be applicable to AOP. As such, the querist need not deduct tax at source in respect of its payment to the contractors.

In view of the above discussion, my answers to the queries raised are as under:

1. Only because part of the area is to be used for the purpose of construction of the roads, the querist will not lose the benefit under the provisions of S. 80-IB(10), as the area to be covered by the road to be constructed will also be a part of the housing project and, as such, the area of project will not be less than one acre. As such, the querist can claim the benefit of S. 80-IB(10).
    

2. The fact that some additional FSI is given to the querist in respect of the road to be constructed will have no impact on the issue in question because one has to take into account the area under construction and not the FSI.
    

3. Certificate for Occupation on the basis of completion of the construction would be considered as the date of completion of the construction for the purpose of S. 80-IB(10).
    

4. The querist being an AOP, there is no obligation to deduct tax at source.