TaxTMI 
TaxTMI 
2007 (2) TMI 264
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....Authorised Representative of the assessee submitted before the Bench that the assessee is not pressing the first ground of the appeal regarding issuance of notice under s. 143(2) and hence, he is withdrawing this ground. The learned Departmental Representative had no objection in withdrawing this ground by the assessee. Hence, this ground of the assessee is dismissed as withdrawn. 4. In the ground Nos. 2 to 4, the assessee has raised the following issues: "(i) The order of the learned CIT(A) dt. 4^th Oct., 2006 is contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice, equity and fair play and in any case the order of the CIT(A) is erroneous for confirming the denial of deduction under s. 80-IB. (ii) The learned CIT(A) ought to have appreciated that there was no ambiguity nor scope for interpretation in view of the clear language of the section which did not postulate any restriction regarding the extent of shops and commercial establishments under s. 80-IB(10) and such restrictions with retrospective effect imposed only by Finance Act, 2004 w.e.f. asst. yr. 2005-06 and allowed the claim of deduction under s. 80....
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....h of the apartment constructed was less than 1.500 sq. ft. 3. Raagamalika-II: Since the assessee was following project completion method of recognizing revenue and since Raagamalika-II was not completed during the previous year relevant to the asst. yr. 2003-04, no claim under s. 80-IB(10) was made. 4. Raagamalika-III: At the time of survey, construction work was in progress. During the course of subsequent hearings, it was pointed out to the assessee that the claim of deduction under s. 80-IB(10) was proposed to be disallowed for the following reasons: 1. Extent of commercial area: Even though, as per the sanctioned plan approved by CMDA and Medavakkam Panchayat, the approved commercial area was only 994 sq. ft. However, during the course of survey, it was found that in Raagamalika-I commercial establishments were found in the ground floor and first floor totalling in all to 9,790 sq. ft. 2. Sales to interested persons: The commercial area of 9,790 sq. ft. were purchased by the managing director of the assessee company, his wife, his brother, brother's wife and one Shri Rajaji and his wife. Though, Shri Rajaji is not related, he is ....
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.... cannot afford the luxury of a house within the city limits. Hence, to encourage housing in the outskirts of the city, which was promoted by persons, who would construct flats, not exceeding 1,500 sq. ft., so as to make such units commercially viable for the intended public. • Of the total constructed area of 1,05,135 sq. ft., the commercial area accounts for 9.31 per cent. • The persons, to whom such area was allotted, were none other than the managing director and his relatives. • The assessee, being a closely-held company, cannot escape, by saying that the persons who purchased the said area, have registered the same as only residential units and thereafter utilised the same for commercial purposes. • Normally residential flats will have partition, but what was seen in respect of the area used as commercial space was a big hall. Hence, right from the beginning, it was clear that the said space was to be used as commercial area. • Besides, if the said area was sold to an outsider, at least some credence could be attached to the assessee's claim. But, however, unfortunately, only the managing director of the asse....
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....t the legislature has given some flexibility to the assessees claiming deduction under s. 80-IB that 5 per cent of the built-up area or 2,000 sq. ft. whichever is less can be constructed and sold out as commercial area in the approved housing projects. The said flexibility has however been permitted w.e.f. asst. yr. 2005-06 onwards only. I am further of the view that in view of the decision of the Hon'ble Supreme Court in the case of Varas International (P) Ltd., the provisions of cl. (d) of s. 80-IB(10) cannot be applied retrospectively. The important point to be noted here is that this very argument of learned Authorised Representative goes against the appellant itself because the flexibility with reference to the commercial area provided by the legislature is available from asst. yr. 2005-06 onwards only. The assessment years involved in the dispute are 2003-04 and 2004-05. For these years, appellant was required to construct only the approved housing projects for middle class segments of the society. But the facts clearly point out that the appellant had constructed substantial commercial areas also which were sold out to persons having beneficial interest in the company. I....
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....previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1995, and completes the same before the 31st day of March, 2001; (b) the project is on the size of a plot of land which has minimum area of one acre; and (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place." For bringing this provision, the Notes on Clauses to the Finance Bill, 1999 has explained that, "the provision also seeks to provide that for approved housing projects the profits which are fully deductible, the built-up area in regions other than outside twenty-five kms. of municipal limits of Delhi and Mumbai, the built-up area of the residential units does not exceed one thousand five hundred square feet". 11. Further, the Memo contained in Finance Bill, 1999 has explained the provision....
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...., 2005- (1) In a case where housing project has been approved by the local authority on or before 1st April, 2004, on or before 31st March, 2008. (2) Where housing project has been approved by the local authority on or after 1st April, 2004 within four years from the end of the financial year in which housing project has been approved by that local authority. 13. Further, the Explanation as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 for the purposes of this clause reads as under: "(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) 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." and condition (b) is that the project has to be on the size of a plot of land which has a minimum area of one acre. Further, the proviso to s. 80-IB(10) at the end of cl. (b) as brought....
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....inance (No. 2) Act, 2004 which reads as under: "Under the existing provisions contained in sub-s. (10), hundred per cent deduction of the profits of an undertaking developing and building housing projects is allowed if the housing project is approved by a local authority before the 31st March, 2005 subject to the conditions specified in cls. (a) to (c) of the said sub-section. The existing provisions of the said sub-section provides that (a) the undertaking should have commenced development of the housing project after the 1st day of October, 1998, (b) the project should be on a size of a plot of land which has a minimum area of one acre, and (c) the residential unit should have a maximum built-up area of one thousand square feet where such residential units are situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Sub-cl. (d) seeks to substitute sub-s. (10) of the said section so as to provide, inter alia, a hundred per cent deduction of the profits derived by an undertaking developing and building housing projects approved by a loc....
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.... The deduction is subject to the conditions that the undertaking should have commenced development of the housing project after the 1st day of October, 1988, the project should be on a size of a plot of land which has a minimum area of one acre and that the residential unit should have a maximum built-up area of one thousand square feet where such residential unit is situated in Delhi or Mumbai and one thousand and five hundred square feet at other places. It is proposed to substitute the existing sub-section so as to rationalize the provisions and provide additional incentives. With a view to allow more housing projects to avail of the tax holiday under this provision, it is proposed to extend the time-limit for obtaining approval from the local authority to 31st March, 2007. However, it is also proposed to provide a time-limit for the completion of the housing project within 4 years from the end of the financial year in which the project is approved by the local authority. It is proposed to take the date of approval as the date on which the building plan is first approved by the local authority and the date of completion of the housing project as the date on which the co....
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....e case of R. Rajagopal Reddy vs. Padmini Chandrasekharan (1995) 124 CTR (SC) 311 : (1995) 213 ITR 340 (SC) wherein the Hon'ble apex Court has held as under: "As regards reason No. 3, we are of the considered view that the Act cannot be treated to be declaratory in nature. Declaratory enactment declares and clarifies the real intention of the legislature in connection with an earlier existing transaction or enactment, it does not create new rights or obligations. On the express language of s. 3, the Act cannot be said to be declaratory but in substance it is prohibitory in nature and seeks to destroy the rights of the real owner qua properties held benami and in this connection it has taken away the right of the real owner both for filing a suit or for taking such a defence in a suit by benamidar. Such an Act which prohibits benami transactions and destroys rights flowing from such transactions as existing earlier is really not a declaratory enactment. With respect, we disagree with the line of reasoning which commended to the Division Bench. In this connection, we may refer to the following observations in 'Principles of Statutory Interpretation', 5th Edn., 199....
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.... law or the meaning or effect of any statute. The conclusion, however, that s. 4 applied also to past benami transactions may be supportable on the language used in the section.' No exception can be taken to the aforesaid observations of learned author which in our view can certainly be pressed in service for judging whether the impugned section is declaratory in nature or not. Accordingly it must be held that s. 4 or for that matter the Act as a whole is not a piece of declaratory or curative legislation. It creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transactions and for whom new liabilities are created by the Act." 18. In view of the above case law of the Hon'ble apex Court, the principle laid down is regarding retrospective or prospective of the legislation depending upon its curative in nature or its explanatory or it will take effect from a particular date. Here, in the Notes on Clause and memo explaining provisions in Finance (No. 2) Act, 2004 it has been very categorically stated that these amendments will take effect from the asst. yr. 2005-06 and subsequent years. In view of ....