Amended tax provision not retroactive; assessee's housing project qualifies for deduction.

The Tribunal held that the amended provisions of section 80IB(10) from 01.04.2005, specifically clause 'd', do not apply to housing projects approved before this date. The assessee's project, meeting the conditions under the law at the time of approval, qualifies for the deduction under section 80IB(10). The Revenue's appeals were dismissed, affirming the CIT(A)'s decision.

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Issues Involved:
1. Eligibility to claim deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Applicability of amended provisions of section 80IB(10) w.e.f. 01.04.2005 to housing projects approved prior to this date.
3. Interpretation and application of clause 'd' of section 80IB(10) regarding built-up area of shops and commercial establishments.

Issue-wise Detailed Analysis:

1. Eligibility to claim deduction under section 80IB(10) of the Income Tax Act, 1961:
The core issue revolves around the eligibility of the assessee to claim deduction under section 80IB(10) for the assessment years 2006-07 and 2007-08. The assessee, engaged in developing housing projects, claimed the deduction on the grounds that it met all the stipulated conditions under the said section. The conditions included commencement of the project after 1st October 1998, the plot area being not less than one acre, and each residential unit not exceeding a built-up area of 1000 sq.ft. in Mumbai. The projects were approved and commenced before the amendment date of 31.03.2004, and completion certificates were obtained within the stipulated period.

2. Applicability of amended provisions of section 80IB(10) w.e.f. 01.04.2005 to housing projects approved prior to this date:
The amendment to section 80IB(10), effective from 01.04.2005, introduced clause 'd', which limits the built-up area of shops and commercial establishments to 5% of the aggregate built-up area or 2000 sq.ft., whichever is less. The AO contended that the assessee violated this condition as the built-up area of the shops exceeded 2000 sq.ft., thus disqualifying the assessee from claiming the deduction. However, the assessee argued that the amended provisions should not apply to projects approved before the amendment date. The CIT(A) supported this view, referencing the ITAT Pune Special Bench decision in Brahma Associates, which held that the law as on the date of project approval should apply.

3. Interpretation and application of clause 'd' of section 80IB(10) regarding built-up area of shops and commercial establishments:
The AO's position was that the built-up area of shops in the assessee's project exceeded the 2000 sq.ft. limit, thus violating clause 'd' introduced in the amendment. The assessee countered that this clause should not retroactively apply to their project, which was approved and commenced before the amendment date. The CIT(A) and subsequent Tribunal decisions, including those of the Hon'ble Bombay High Court in Brahma Associates and the Hon'ble Gujarat High Court in Manan Corporation, supported the view that the amended clause 'd' is prospective and not applicable to projects approved before 01.04.2005.

The Tribunal upheld the CIT(A)'s decision, affirming that the amended provisions of clause 'd' are prospective and cannot be applied to the assessee's project, which was approved and commenced before the amendment date. The Tribunal emphasized the binding nature of the jurisdictional High Court's decision and dismissed the Revenue's appeals, thereby allowing the assessee's claim for deduction under section 80IB(10).

Conclusion:
The Tribunal concluded that the amended provisions of section 80IB(10) w.e.f. 01.04.2005, particularly clause 'd', do not apply to housing projects approved prior to this date. The assessee's project, having met the conditions as per the law at the time of approval, is eligible for the deduction under section 80IB(10). The appeals filed by the Revenue were dismissed, and the order of the CIT(A) was upheld.

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