TaxTMI 
TaxTMI 
2015 (5) TMI 555
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....ion of 100% of profits in the case of an undertaking developing and building housing projects when such profits are derived in the previous year relevant to any assessment year from such housing projects, provided the conditions contained in the said sub-section are satisfied. High Courts have taken the same view holding that these assessees would be entitled to the deduction under Section 80IB(10) of the Act. We may also point out at this stage itself that though Section 80IB has been on the statute book for quite some time, a new Section 80IB had been introduced by the Finance Act, 1999 w.e.f. 01.04.2000. All these cases are covered by the said Section, as introduced. However, insofar as sub-section (10) is concerned, with which we are directly concerned, there have been amendments in that provision from time to time. We are concerned with the amendment to the said sub-section carried out by Finance No.2 Act, 2004 w.e.f. 01.04.2005. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01.04.2005 when amended provision has come into operation. It is also not in dispute that the amendment is prospective in natu....
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....000 sq. feet whichever is less" the words "5000 sq. feet, whichever is higher" have been substituted. However, we are not concerned with this amendment). The question, thus, that arises for consideration is as to whether in respect of those housing projects which finished on or after 01.04.2005, though sanctioned and started much earlier, the aforesaid stipulation contained in clause (d) also has to be satisfied. All the High Courts have held that since this amendment is prospective and has come into effect from 01.04.2005, this condition would not apply to those housing projects which had been sanctioned and started earlier even if they finished after 01.04.2005. 4) As there is a commonality of issue and the judgments of the various High Courts have spoken in one voice which are questioned on identical grounds by the appellant Revenue, all these appeals were heard analogously and by this judgment, we propose to answer the question of law involved and as formulated above in order to give quietus to this surging debate. 5) Before we come to the grip of the aforesaid central issue, it would be of some relevance to mention certain other disputes which had arisen between the R....
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....; the assessee is entitled to a deduction on the entire profit including the commercial establishments portion. We would also like to point out that following this judgment of the Bombay High Court, or independently, other High Courts had also taken similar view. Against the aforesaid judgments, special leave petitions were filed by the Revenue in this Court. All these SLPs have been disposed of by this Court vide order dated 29.04.2015, we would like to reproduce the said order in entirety hereunder: "All these special leave petitions are filed by the Revenue/ Department of Income tax against the judgments rendered by various High Courts deciding identical issue which pertains to the deduction under Section 80IB(10) of the Income Tax Act, as applicable prior to 01.04.2005. We may mention at the outset that all the High Courts have taken identical view in all these cases holding that the deduction under the aforesaid provision would be admissible to a "housing project". All the assessees had undertaken construction projects which were approved by the municipal authorities/local authorities as housing projects. On that basis, they claimed deduction under Section 80....
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....ult, the questions raised in the appeal are answered thus:- a) Upto 31/3/2005 (subject to fulfilling other conditions), deduction under Section 80IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under DC Rules/Regulations framed by the respective local authority. b) In such a case, where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules/ Regulation, the deduction under Section 80IB(10) upto 31/3/2005 would be allowable irrespective of the fact that the project is approved as 'housing project' or 'residential plus commercial'. c) In the absence of any provisions under the Income Tax Act, the Tribunal was not justified in holding that upto 31/3/2005 deduction under Section 80IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user upto 10% of the total built-up area of the plot. d) Since deductions under Section 80IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Trib....
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....le granting 100% deductions, the area covered by shops and commercial establishments was also includible. This position has changed with the insertion of clause (d) to sub-section (10). As per the amendment carried out and made effective from 01.04.2005, even if the local authority had sanctioned larger area for shops and commercial establishment, the benefit of Section 80IB(10) would not be admissible to these assessees/developers in case the area utilised for shops and commercial establishment exceeded 5% of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less. 7) In the aforesaid scenario, we revert back to the question that is to be answered. We have already pointed out that the parties are ad idem that the amendment is prospective in nature and, therefore, it operates from 01.04.2005. We have also mentioned that in the instant appeals, all these assessees had got the housing projects sanctioned prior to 01.04.2005 and the construction of the said housing project also started before 01.04.2005. All other conditions mentioned namely the date by which approval was to be given and the dates by which the projects were to be completed as on the d....
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....argument of retroactivity was not even raised by the Revenue in the High Courts or before the lower forum or even in the special leave petitions filed in this Court. He further submitted that it was necessary to keep the objective of the amendment in mind which would clearly evince that the conditions in clause (d) could not be applied in respect of those projects which had been sanctioned and commenced prior to 01.04.2005. He further argued that vested rights had accrued in favour of such persons which could not be taken away by the amendment. He also advanced various reasons, as would be noted later, necessitating the approach as to why the principle of tax law that the law in force in the Assessment Year is to be applied, insisting that it was a case where departure was needed and such a departure is recognised in certain circumstances, by the courts. He relied upon the judgments of this Court in Commissioner of Income Tax v. Shah Sadiq and Sons (1987) 166 ITR 102 (SC) and Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited (2015) 1 SCC 1. Senior counsel who appeared for other assessees argued on the same lines drawing our attention to the reason....
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....housing project without or with commercial user to the extent permitted under the Rules/Regulations, then, deduction under Section 80IB(10) would be allowable. In other words, if a project could be approved as a housing project having residential units with permissible commercial user, then it is not open to the income tax authorities to contend that the expression 'housing project' in Section 80IB(10) is applicable to projects having only residential units. 23. Once it is held that the local authorities could approve a project to be housing project without or with the commercial user to the extent permitted under the DC Rules, then the project approved with the permissible commercial user would be eligible for Section 80IB(10) deduction irrespective of the fact that the project is approved as 'housing project' or approved as 'residential plus commercial'. In other words, where a project fulfills the criteria for being approved as a housing project, then deduction cannot be denied under Section 80IB(10) merely because the project is approved as 'residential plus commercial'. 24. The fact that the deduction under Section 80IB(10) pri....
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....5 the legislature for the first time allowed Section 80IB(10) deduction to housing projects having commercial user cannot be accepted. xx xx xx 29. Lastly, the argument of the revenue that Section 80IB(10) as amended by inserting clause (d) with effect from 1.4.2005 should be applied retrospectively is also without any merit, because, firstly, clause (d) specifically inserted with effect from 1.4.2005, and therefore, that clause cannot be applied for the period prior to 1.4.2005. Secondly, clause (d) seeks to deny Section 80IB(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 1.4.2005 cannot be applied retrospectively. Thirdly, it is not open to the revenue to contend on the one hand that Section 80IB(10) as stood prior to 1.4.2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from 1.4.2005 should be applied retrospectively. The argument of the revenue is mutually contradi....
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....in such a case he filed his return for an assessment year after 01.04.2005 and for the purpose of assessment of the said return, law prevailing as on that date would be applicable? Answer has to be in the negative on the principle that with the aforesaid planning as per the law prevailing prior to 01.04.2005, these assessees acted and acquired vested right thereby which cannot be taken away. It is ludicrous on the part of the Revenue authorities to expect the assessees to do something which is almost impossible 13) In M/s. Reliance Jute and Industries Ltd. v. C.I.T., West Bengal, Calcutta (1980) 1 SCC 139, this Court had, no doubt, pointed out the cardinal principle of tax law that the law to be applied has to be the law in force in the assessment year. However, this is qualified by the exception when it is provided otherwise expressly or by necessary implication, as is clear from the following observations: "6. The assessee claims a vested right under Section 24(2)(iii), as it stood before its amendment in 1957, to have the unabsorbed loss of 1950-51 carried forward from year to year until the loss is completely absorbed. The claim is based on a misconception of the fu....
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....rity before 31.03.2001. Before this amendment there was no date prescribed for the approval being granted by the local authority to the housing project. Prior to this amendment, as long as the development/construction commenced on or after 1.10.1998 and was completed before 31.03.2001, the assessee was entitled to the deduction. Also by this amendment, the date of completion was changed from 31.03.2001 to 31.03.2003. Everything else remained untouched. Thereafter, by Finance Act, 2003, further amendments were made to Section 80IB(10), which read as under: "(10) The amount of profits in case of an undertaking developing and, building housing projects approved before the 31st day of March 2005 by a local authority, shall be hundred per cent of the profits derived in any 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 1998; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (c) the residential unit has a maximum built-up area of one thousand square ....
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.... balconies, as increased by the thickness of the walls, but did not include the common areas shared with other residential units. 19) Can it be said that in order to avail the benefit in the assessment years after 1.4.2005, balconies should be removed though these were permitted earlier? Holding so would lead to absurd results as one cannot expect an assessee to comply with a condition that was not a part of the statute when the housing project was approved. We, thus, find that the only way to resolve the issue would be to hold that clause (d) is to be treated as inextricably linked with the approval and construction of the housing project and an assessee cannot be called upon to comply with the said condition when it was not in contemplation either of the assessee or even the Legislature, when the housing project was accorded approval by the local authorities. 20) Having regard to the above, let us take note of the special features which appear in these cases: (a) In the present case, the approval of the housing project, its scope, definition and conditions, all are decided and dependent by the provisions of the relevant DC Rules. In contrast, the judgment in M/s. R....
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....its the builders to have 5000 sq.ft. or 3% of the aggregate built up area, 'whichever is higher'. In contrast, the provision earlier was 5% or 2000 sq.ft., 'whichever is less'. (g) From this provision, therefor, it is clear that the housing project contemplated under sub-section (10) of Section 80IB includes commercial establishments or shops also. Now, by way of an amendment in the form of Clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005. 21) These aspects are dealt with by various High Courts elaborately and convincingly in their judgments. It is not necessary to go into the detailed reasoning given by these High Courts. However, we would like to extract the following discussion from the jud....
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.... of section 80-IB(10) has to be revisited and/or looked at and complied with in the assessment year in which the profits are offered to tax by the Assessee. When the Assessee claims a deduction under section 80-IB(10), the Assessee is required to comply with such a condition only if it is on the statute-book on the date of the approval of the housing project and it has nothing to do with the year in which the profits are brought to tax by the Assessee. We have come to this conclusion only because we find that clause (d) of section 80-IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/construction of the same, and has nothing to do with the profits derived therefrom. We may hasten to add that if a particular condition is not inseparably linked to the date of approval of the housing project, different considerations would arise. However, we are not called upon to decide any such condition and hence we are not laying down any general proposition of law, save and except that clause (d) of section 80-IB(10), being a condition linked to the date of the approval of the housing project, would not apply to any housing project that....