Chandra Poojari, Accountant Member - This appeal by the assessee is directed against the order of the CIT(A)-III, Hyderabad dated 30.11.2009 for assessment year 2006-07.

2. The first ground in this appeal is with regard to disallowance of deduction u/s. 80IB(10) of the Income-tax Act, 1961 on the reason that there is no completion certificate in respect of housing project carried on by the assessee.

3. Brief facts of the issue are that the assessee company is a builder and engaged in construction of flats. For the A.Y. 2006-07, it has filed the return of income on 30/11/2006 showing an income of Rs. 7,47,150. During scrutiny of the return/ the Assessing Officer noticed that the assessee has received an amount of Rs. 7.3 crores from development and sale of flats, in addition to other income of Rs 4.38 lakhs, on which it has shown profit of Rs. 98,13,125 and the same was claimed as deduction u/s. 80IB(10) of the Act. Explaining such claim of the deduction, the assessee has submitted that it has taken up a venture at M.G. Road/ Secunderabad on development basis and constructed a residential complex on land of 5,500 sq. yards. The sanctioned plan for the project was obtained in September, 1999 and each flat was less than 1500 sq. ft. It was submitted that the construction was completed during FY 2005-06. It was further submitted that total 95 flats were constructed and as per development agreement 60% thereof i.e. 58 flats have come to the share of the builder. Stating that the flats were completed and handed over during 2004-05 and 2005-06, the assessee submitted that the exemption u/s. 80IB(10) was claimed in both the years.

4. The assessee further submitted that in respect of said venture, land owners are Sri Karan Singh and five other persons have sold the land to M/s. Labham Estates Pvt. Ltd. for a consideration and have given GPA without receiving entire sale consideration. Later, they have entered into development agreement with M/s. Labham Estates Pvt. Ltd., for construction of the complex. Since M/s. Labham Estates Pvt. Ltd. could not pay the agreed sale consideration to the land owners, they were forced to pay an amount of Rs. 1,88,47,438 to them on behalf of the said concern and recovered the same by selling the share of flats of M/s. Labham Estates Pvt. Ltd.

5. During the course of assessment proceedings, from verification of the development agreement-cum-deed of appointment of attorney, which was executed on 07/07/2000 between Sri Karan Singh and the five others as 'land owners', M/s, Labham Estates Pvt. Ltd., shown as 'consenting party' and M/s. Kura Homes Pvt. Ltd., shown as builder, the Assessing Officer noticed that as per clause IV of the said deed the proposed residential complex has to be constructed in accordance with the plan sanctioned by the Municipal Corporation, Hyderabad (MCH in short). From the said deed, the Assessing Officer noticed that the plan was approved by Municipal Corporation of Hyderabad vide permit bearing number 16/4/235/TP7/SDE/97 dated 07/09/1999 for construction of 80 flats. The said approval which was given in the names of Sri Karan Singh and Sri Bhanwarilal, GPA holder, is subject to conditions, viz., (a) that a fit for occupancy certificate should be obtained from MCH before the building is put to actual use; (b) that the construction should be made strictly in accordance with the sanctioned plan; if any modifications are necessary, then prior approval should be obtained; (c) that the builder and architect should construct the building in accordance with the approved building plan, failing which liable for legal action as per undertaking 21/07/1999. From the copy of the approved plan furnished by the assessee, the AO further noticed that such plan approval was accorded as per directions of the Hon'ble High Court in WP No. 26505/98 dated 17/06/1999. From the notings on the reverse side of the plan approval, the Assessing Officer further observed that there was another plan prior to th