TaxTMI 
TaxTMI 
2012 (9) TMI 700
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....- and Rs.5,2,28,874/- totalling the sum of Rs.6,84,44,461/-. On two counts, namely, that the assessee failed to carry out its obligation necessary for claiming such deduction so also on the ground that the assessee violated the condition laid down under the said provision, such claim was rejected. The principal objection is of non-fulfillment of the condition of limitation for built up area being more than 1500 sq.feet and its ratio to commercial shops being more than 5% of the created built up area of housing project or 2000 sq feet which ever is less, according to the Assessing Officer, such assessee would not be eligible for the deduction. 2. It is the say of the assessee appellant that condition of limiting the commercial establishment/ shop to 2000 sq.feet came in force with effect from 1.4.2005 and, therefore, the same would be applicable for the projects approved on or after 1.4.2005 and as the approval of both these projects was prior to 31.3.2005 i.e. 28.12.2004 for Krishna Park project and 18.1.2003 for Prashiddhi Project, the amended provision would have no application for these projects. Such contentions was not accepted and after completing the assessment, claim of ....
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....is contrary to the spirit of the very provision. He urged that when these projects were approved by the competent authority, clause(d) of Section 80IB(10) was not on the statute book and only requirement expected from the assessee was the compliance of clause(a),(b) and (c) of Section 80IB(10) and, therefore, clause (d) inserted by Finance (No.2) Bill, 2004 cannot be made applicable for the projects approved prior to 31.3.2005. 6. He further submitted that the issue is squarely covered in case of Saroj Sales Organization vs. ITO reported in (2008) 115 TTJ 485 (Mum) and also by a decision of co-ordinate Tribunal rendered in case of Hiranandani Akruti Jv vs. DCIT reported in(2010) 39 SOT 498(Mum). He further urged that before the Bombay High Court, one of the questions raised was whether clause (d) of Section 80IB(10) is applicable for assessment year 2005-06 or whether the same needed to be applied retrospectively. The project in that case was approved by the competent authority before 31.3.2005 and the assessment year before the Bombay High Court was 2003-2004 and in such circumstances, the Bombay High Court held that with effect from 1.4.2005, deduction under Section 80IB(10) w....
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....any doubt by following project completion method in preference to the work-in-progress method. He, therefore, urged further that if the assessee would have followed the percentage completion basis/work-in-progress method, he could have walked away with deduction from profit by preceding years. Such unjust discrimination between the same class of assessee could have never been contemplated, as urged by the learned counsel. It is the say of the learned advocate that when application was made by the assessee and approved prior to 1.4.2005 by the local authority, neither the assessee nor the local authority could have assumed that the legislative amendment would structurally change the provision of Section 80IB(10) of the Act and it would be substituted at a later date so as to disentitle the assessee of its legitimate claim, during the validity of the period of approval for completion of work upto 31.3.2008 as per Section 80IB(10) (a)(1) of the Act. Reliance is also placed on the decision of the Apex Court reported in CIT vs. J.H.Gotlareported in (1985)156 ITR 323, wherein it is held that the interpretation should be such that it does not result into absurd result. The Court nee....
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....e facts and circumstances of the case the Tribunal has erred in law in applying the amendment made in the provision of section 80IB(10) (d) of the Act with effect from 1.4.2005 retrospectively by implication?" 11. Although there are two questions framed, essentially the central question is one, namely whether the amendment in the provision of Section 80IB(10)(d) of the Act having been made effective from 1.4.2005 is to be held retrospective or prospective for the purpose of deduction claimed by the assessee. 12. Reproduction of Section 80IB(10) prior to the amendment of 1.4.2005 and in postamendment period is to be made profitably at this stage:- "Section 80IB(10) prior to the amendment of 1.4.2005:- Subs.by Finance (No.2) Act, 2004 (23 of 2004), sec.18(d), for sub-section(10) w.e.f.1-4- 2005). Earlier sub-section(10) was amended by the Finance Act, 2000 (10 of 2001), sec.39(e)(i) and (ii) (w.e.f.1.402001), by Finance Act, 2003 (32 of 2003), Sec(c)(i) and (ii) (w.e.f. 10402002). Sub-section(10), before substitution by Finance (No.2) Act, 2004, stood as under: "(10) The amount of profits in case of an undertaking developing and building housing projects approved befor....
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....te in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause(a) or clause(b) 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; (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 kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent. of the aggregate built-up area of the housing project of five thousand square feet, whichever is higher." 13. Section 80IB(10) originally indicated 100% deduction on the profits derived from housing projects....
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....ther commercial establishments included in the housing project, which should not exceed 3% ( with effect from 1.4.2005) of the aggregate built up area of housing project or 5000 sq.feet, which ever is higher ( 2000 sq.feet) which ever is less from 1.4.2010. In other words, it can be capsulized that Section 80IB(10) provides for deduction of 100% of the profit derived by an undertaking developing and building housing projects, subject to certain conditions. It can be also noted that amended provision provides for time limit for completion of the project, which was not there in the earlier Section. The date of such completion certificate also appears to be relevant for the said purpose in the amended provision. It will be apt to mention that the issue regarding construction of shopping in the housing project in accordance with the permission of the Municipal laws was requested to be considered adequate for the purpose of Section 80IB(10). It also further can be deduced that the deduction which was available if the project is on a plot land of minimum area of 1 acre has been in the amended provision liberalized in accordance with the scheme framed by the Central or the State Govern....
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....etion method for claiming the profit admittedly prior to 31.3.2005. As far as Krishna Park project is concerned, the building has been completely constructed and BUC in the entire project was also obtained prior to 31.3.2005. As noted above, provision of Section 80IB(10) (a) requires such undertaking to develop and build "housing project" as approved by the local authority and such project has been approved by the local authority. Certificate to that effect also has been obtained from Surat Municipal Corporation. The whole project was approved and completed prior to the insertion of amended provision of Section 80IB(10) of the Act with effect from 1.4.2005. 17. It can also further be noted that as per the criteria laid down by the Municipal Corporation, the permissible Common Open Plot ( "COP" for short) for the residential project is minimum 10% of the total are of land, which is to be utilized for the project. While for commercial project, the minimum 15% of the total area of land requires to be kept as COP. It is not in dispute that the assessee has kept 10% of COP for its residential project as required under the rules and regulations of the local authority and the area work....
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....nd in Prashiddhi it is 3.5%, which is below 10% of the total built up area. The vital question, however, is whether this amendment would have a bearing on the claim of assessee whose project is approved prior to the amendment which became effective from 1.4.2005. 19. Before the Bombay High Court the housing project was approved by the competent authority before 31.3.2005 and the assessment year concerned was 2003-2004. In the instant case, heavy reliance is again placed on the judgment Brahma Associates(supra) by the Tribunal and relying upon the said decision, it chose not to avail the benefit of deduction of the profit to the appellant assessee. As far as question of violation of clause (d) of Section 80IB(10) of the Act is concerned, it noted that one of the questions raised before the Bombay High Court was whether clause (d) of Section 80 IB(10) of the Act was applicable for assessment year 2005-2006 or whether it applied retrospectively and it noted thus:- "Under these facts, it was held by Hon'ble Bombay High Court that with effect from 01-04-2005, deduction u/s. 80IB(10) would be subject to the restriction set out in clause-(d) of Section 80IB(10). The relevant para of....
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....ed itself in interpreting paragraph 25 of the said judgment and thereby denying the benefit of Section 80IB(10) to the appellant herein in as much as before the Bombay High Court it was Revenue's case that residential project having commercial construction cannot be held entitled to the benefit under Section 80IB(10) of the Act and for supporting its version, reliance was placed on inclusion of clause (d) of Section 80IB(10) from 1.4.2005, which restricts area of commercial construction in residential project. It was a project of residential housing with commercial user for assessment year 2003-2004 as noted above. In this backdrop, the Court rejected/ refuted such version and for fortifying its denial, it mentioned inclusion of clause(d) from 1.4.2005 by holding that by insertion of clause(d) of Section 80IB(10) of the Act, Legislature made it clear that though the housing project approved by local authority with commercial user to the extent permissible under the rules and regulations were entitled to Section 80IB(10) deduction, such deduction would be subject to the restriction set out in clause (d) of section 80IB(10) from 1.4.2005. In our opinion, Tribunal has quoted the ju....
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....ent of Section 80IB(10) and the insertion of clause (d) with effect from 1.4.2005 should be applied retrospectively was held to be without any merit in following words, in paragraph 32 of the Bombay High Court, which is reproduced as under:- "Lastly, the argument of the Revenue that section 80-IB(10) as amended by inserting clause (d) with effect from April 1, 2005 should be applied retrospectively is also without any merit, because, firstly, clause (d) is specifically inserted with effect from April 1, 2005 and, therefore, that clause (d) seeks to deny section 80-IB(10) deduction to projects having commercial user beyond the limit prescribed under clause (d), even though such commercial user is approved by the local authority. Therefore, the restriction imposed under the Act for the first time with effect from April 1, 2005 cannot be applied retrospectively. Thirdly, it is not open to the Revenue to contend on the one hand that section 80- IB(10) as it stood prior to April 1, 2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from April 1, 2005 should be applied retrospectively. Th....
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....accounting methods has expected either of them to be followed in cases of individual assessee. However, in post amendment period, strict adherence to completion period of four years is insisted upon where project completion method is followed. This limitation of period did not exist prior to the amendment, what is vital to draw from this is that the amendment cannot discriminate those following project completion method if in the interregnum period, amendment is brought in the statute. The say of the assessee therefore gets further fortified when it says that only because it chose to follow the method of accounting of project completion basis, whose completion date falls after 1.4.2005, they can be denied the deduction on profits derived and those assessee who claim deduction on work-in-progress basis, they would be entitled to such deduction. However, it necessitated strict compliance of the provisions and completion of the same within the stipulated time period. 27. The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissibl....
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.... is open for the Legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the Legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute retrospectively. Four factors are suggested as relevant : (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the Legislature contemplated (page 388). The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right (page 392)." 29. In the case of Commissioner of Income-Tax vs. TVS Lean Logistics Ltd. reported in [2007]293 ITR 432(Mad), the Hon'ble Madras High Court has held as under : "In a case where the statutor....