try this

;with data_cte
as    (
        SELECT

                A.Custom2 as State,
                Case
                    when A.Defecttype = 'BUG' then 1 else 0
                end as BCNT,
                Case
                    when A.Defecttype = 'ENHANCEMENT' then 1 else 0
                end as ECNT
        FROM    IM_V_Defects A
        WHERE        A.ProjectName = ' Billing'
                and A.Status <> 'Closed'
                and A.Defecttype IN ('BUG','ENHANCEMENT')
        GROUP    BY A.Custom
    )    

Select    
        State,
        SUM(BCNT) as BCNT,
        SUM(BCNT) as ECNT

from    data_cte    a    
Group by
        State