Amended tax law not retroactive for approved projects pre-2005

The Tribunal held that the amended provisions of Section 80IB(10) would not apply retrospectively to projects approved before 1-4-2005. The Tribunal directed the Assessing Officer to reconsider the deduction under Section 80IB(10) in line with the CIT (A)'s directions. The appeals were allowed, overturning the CIT (A)'s decision.

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Issues Involved:
1. Rejection of the claim of deduction under Section 80IB(10) of the Income Tax Act.
2. Applicability of amended provisions of Section 80IB(10) to projects approved before 1-4-2005.
3. Ownership and development rights of the land.
4. Role of the assessee as a developer or merely as an agent/contractor.
5. Approval of the project not being in the name of the assessee firm.

Issue-wise Detailed Analysis:

1. Rejection of the claim of deduction under Section 80IB(10) of the Income Tax Act:
The CIT (A) erred in confirming the rejection of the claim of the assessee under Section 80IB(10) on the grounds that the assessee failed to satisfy the conditions laid in the Act. The Assessing Officer disallowed the claim for various assessment years due to non-compliance with the prescribed conditions, including the built-up area of commercial establishments exceeding the specified limit and the project approval not being in the name of the assessee firm.

2. Applicability of amended provisions of Section 80IB(10) to projects approved before 1-4-2005:
The CIT (A) held that the commercial area exceeded 5% of the aggregate built-up area, thus violating Clause (d) of Section 80IB(10). However, the assessee argued that the amendment introduced by the Finance Act, 2004, effective from 1-4-2005, should not apply to projects approved before this date. The Tribunal relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. M/s. Veena Developers & Others, which stated that Clause (d) is prospective and not retrospective. Additionally, the jurisdictional High Court in Manan Corporation vs. ACIT held that the amendment could not be applied retrospectively and should not discriminate against those following the project completion method.

3. Ownership and development rights of the land:
The Assessing Officer contended that the land was not in the name of the assessee firm and that ownership of the land is essential for claiming the deduction. The assessee argued that they had possession of the land through an agreement dated 26-7-2002 and had developed the project accordingly. The Tribunal did not find this argument sufficient to deny the deduction, as the primary condition was the development and construction of the housing project.

4. Role of the assessee as a developer or merely as an agent/contractor:
The Assessing Officer claimed that the assessee acted merely as an agent for collecting land consideration on behalf of the landowner and as a contractor for constructing houses on behalf of unit holders. The Tribunal, however, focused on the fact that the assessee had developed the project and offered profits from the sale of commercial portions for taxation, thereby fulfilling the role of a developer.

5. Approval of the project not being in the name of the assessee firm:
The Assessing Officer noted that the project approval was not in the name of the assessee firm, which was considered a violation of the conditions for claiming the deduction. The Tribunal, however, emphasized that the approval and development of the project were carried out by the assessee, and the conditions laid down in the Act were satisfied, except for the commercial area condition, which was addressed by the prospective application of Clause (d).

Conclusion:
The Tribunal concluded that Clause (d) of Section 80IB(10) introduced w.e.f. 1-4-2005 would not apply to projects approved before this date. The Tribunal set aside the order of the CIT (A) and directed the Assessing Officer to consider the issue in light of the directions of the CIT (A) regarding the allowability of the deduction under Section 80IB(10). The appeals were allowed, and the order was pronounced on 19th June 2015 at Ahmedabad.

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