TaxTMI 
TaxTMI 
2007 (2) TMI 264
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 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 Hence, this ground of the assessee is dismissed as withdrawn. 4.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. 4th 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-IB of the appellant. (iii) Without prejudice to the above grou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct 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 one of the directors of the company. 3. Extent of area exploited for commercial purposes: Even though s. 80-IB was amended w.e.f. the asst. yr. 2005-06....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 assessee company and his relatives has purchased the said area. * Hence, inasmuch as the provision governing the claim of deduction under s. 80-IB does not permit any commercial area, that too exceeding 2,000 sq. ft, the assessee's claim of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-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 am of the humble view that deduction under s. 80-IA cannot be allowed to an assessee who does not fulfil all the conditions prescribed in the said section. Construction of houses for the public at large in accordance with the approved plans is one of the important conditions contained in the said section. Furthermore, c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re; 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 provisions brought by the legislature w.e.f. 1st April, 2000 and the same reads asunder: "TAX INCENTIVE FOR PROMOTION OF HOUSING Liberalisation of tax holiday to approved housing projects-Under s. 80-IA of the IT Act, profits of approved housing projects where the development and construction commences on or after 1st Oct., 1995 and is completed by 31st March, 2001 are fully deductible. The cond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il, 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 out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 provides as under: "nothing contained in cl. (a) or cl. (b) of s. 80-IB(10) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf." Clauses (c) and (d) as brough....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ober, 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 local authority before 31st March, 2007 instead of 31st March, 2005 under the existing provisions, subject to the conditions that (a) such undertaking has commenced or commences development and construction of the housing project on or after 1st Oct., 1998 and completes the construction within four years, from the end of the financial year in which the housing project is approved by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre except in the case of a housing project carried out in accordance wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 completion certificate is issued by such authority. It is further proposed to provide that the built-up area of the shops and other commercial establishments including in the housing project shall not exceed five per cent of the aggregate built-up area of the housing project or 2,000 sq. ft., whichever is less. With a view to encourage the redevelopment of slum dwellings, it is proposed to relax the condition of minimum plot size of one acre in the case of a housing project, carried out in accordance with a scheme framed by the Central Government or a State Government for reconstructio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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., 1992, by Shri G.P. Singh, at p. 315 under the caption 'Declaratory statutes': 'The presumption against retrospective operation is not applicable to declaratory statutes. As stated by Crales and approved by the Supreme Court: 'For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sactions 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 this, the first issue whether cl. (d) as brought in the statute book w.e.f. 1st April, 2005 by the Finance (No. 2) Act, 2004 is only prospective and not retrospective and in view of these facts and circumstances, we decide this issue in favour of the assessee. 19. As regards second issue, the provisions of s. 80-IB(10) are very clear. The three conditions laid down in the provisions are-(1) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998; (2) the project is on the size of a plot of land which has a minimum area of one acre; and (3) the residential unit has a maximum b....