TaxTMI 
TaxTMI 
2016 (6) TMI 482
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....iming deduction u/s 80IB(10) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee filed its return of income after claiming deduction u/s 80IB(10) of the Act which was granted in the original assessment framed u/s 143(3) of the Act dated 15.12.2006. Later the assessment was sought to be reopened u/s 147 of the Act for withdrawing the claim of deduction u/s 80IB(10) of the Act on the ground that commercial area of the project exceeded 2000 sq.ft as laid down in section 80IB(10)(d) of the Act. The assessee company owned a plot of land at 105, Ultadanga Main Road, Kolkata - 700067, measuring in aggregate 4.03 acres area, The assessee set up and executed two housing projects on the said land. The assessee obtained approvals for the said housing projects from the Kolkata Municipal Corporation. The plans were sanctioned by the Corporation on 17-07-2000. The first housing project, comprising of 3 buildings, was completed in FY 2003-04 relevant to AY 2004-05. The said housing project consisted of 3 multistoried buildings, namely Block-A, Block-B and Block-C. The total constructed area comprised in the said 3 buildings was 1,59,664....
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....he deduction u/s 80IB(10) by observing as follows: The submission of the A/R is considered but found not tenable. The primary contention of the assessee that the amendment in section 80IB( 10) has been bought about by the Finance (No.2) Act 2004 and is therefore not applicable to the relevant FY 2004-05. The assessee has further stated that only the profits derived from residential flats was claimed as deduction whereas profit of the commercial area was not deducted u/s 80IB(I0) of the Act. However, such contention of the assessee has no merits. Section 80(IB)( I0) which was amended by the Finance (No.2) Act 2004 provided that the housing project has to be primarily a residential complex and not a commercial one and in any case, it could not include commercial area exceeding 2000 sq. ft. The said amendment brought into the section adequately clarifies this aspect. In the present case, the commercial area comprises of 14088 sq. ft which is far excess that the limit prescribed by the aforesaid amendment. Further, there is no provision in section 80IB( 10) to allow pro-rata deduction. Thus the deduction claimed by the assessee amounting to Rs. 3,51,86,897/- is disallowed and ....
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....or to AY 2005-06 there was no such statutory restriction with respect to commercial establishments. Hence the only question is whether the amendments in section 80IB(l0) bought w.e.f. 01-04-2005 has retrospective applicability. The Learned CITA placed reliance on the Special Bench of Pune ITAT in the case of Brahma Associates Vs. JCIT (119 ITD 255) wherein it was held that the amendment made by the Finance (No.2) Act 2004 enacting clause (d) in section 80(IB)(10) was not retrospective in operation and would be applicable only from AY 2005-06. He also found that the above decision was also upheld by Hon'ble Mumbai High Court. The Hon'ble High Court in its decision reported in 197 Taxman 459 in the case of CIT-II vs Brahma Associates affirmed the view of the Tribunal and held that the amendment brought by the Finance (No.2) Act 2004 imposing restriction on commercial area within the housing project was applicable w.e.f. 01-04-2005. The High Court further held that prior to 01-04-2005, deduction u/s 80lB(l0) would be available to any housing project which is approved by local authority without or with commercial user and irrespective of the fact that project is approved as ....
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....case and in law, the ld.CIT(A) erred in law as well as in fact by deleting the disallowance made by the A.O u/s. 80IB(10) of the Act. " 5. When the case was called up for hearing, it was found that the Learned CIT/ DR had sought adjournment for 15 cases out of 27 cases listed for hearing. The Learned AR stated that the issue under dispute is settled by the decision of the Hon'ble Supreme Court . In view of the same, we are not inclined to accept the adjournment request of the revenue for these appeals and we proceed to dispose off the appeals after hearing the Learned AR and after perusing the materials available on record. The Learned AR stated that the issue is covered by the decision of the Hon'ble Supreme Court in the case of CIT vs Sarkar Builders reported in (2015) 375 ITR 392 (SC) and accordingly prayed for dismissal of the appeals of the revenue. He further argued that the cross objection of the assessee is with regard to assumption of jurisdiction within the meaning of section 147 of the Act. He further submitted that since the issue is settled in favour of the assessee on merits, the cross objections of assessee are not pressed. 6. We have heard the Learned AR and p....
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....owledge that there are Municipal Acts of specific Local Acts governing the construction of buildings, commercial as well as residential, in every State. For undertaking any such construction authority, it is necessary to have the building plans sanctioned from the local authorities in accordance with the provisions of such local acts. There are local laws relating to the development and building of 'housing projects' by the developers/builders which also need a sanction from the local authorities as per the law prevailing in that particular area where the housing project is developed. Such local laws, while sanctioning the housing projects, also permit use of certain area in the housing projects in a specified manner for shopping and commercial purposes as well. The question that had arisen was - whether deduction under section 80-IB(10) would be admissible when commercial establishment is constructed in a housing project? That is, whether it would still retain the character of housing project within the meaning of this provision. The Bombay High Court in the case of CIT v. Brahma Associates [2011] 333 ITR 289/197 Taxman 459/9 taxmann.com 289 held that since the expression ....
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.... 1-4-2005, the developers/assessees who had got their projects sanctioned from the local authorities as 'housing projects', even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100 per cent deduction of their income from such projects under section 80-1B. Their projects were sanctioned much before 1-4-2005. As per the permissible commercial user on which the project was sanctioned, they started the projects and the date of commencing such projects is also before 1-4- 2005. All these assessees were made known of the provision by which these projects are to be completed as those dates have been specified from time to time by successive Finance Acts in the same provision under section 80-1B. In instant cases, completion dates were after 1-4-2005. Once they arrange their affairs in this manner, the revenue cannot deny the benefit of this section applying the principle of retroactivity even when the provision has no retrospectivity. With the aforesaid planning as per the law prevailing prior to 1-4-2005, these assessees acted and acquired vested right thereby which cannot be taken away. It ....
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....uction. Also by this amendment, the date of completion was changed from 31-3-2001 to 31-3-2003. Everything else remained untouched. Thereafter, by Finance Act, 2003, further amendments were made to section 80-IB(10). [Para 15] * Now the only changes that were brought about were that with effect from 1-4-2002: (i) the housing project had to be approved before 31-3-2005; and (ii) there was no time limit prescribed for completion of the said project. Though these changes were brought about by the Finance Act, 2003, the Legislature thought it fit that these changes be deemed to have been brought into effect from 1-4-2002. All the remaining provisions of section 80- IB( 1 0) remained unchanged. [Para 16] * Thereafter, significant amendment, was carried out by Finance (No. 2) Act, 2004 with effect from 1-4-2005 with which the Legislature made substantial changes in sub-section (10). Several new conditions were incorporated for the first time, including the condition mentioned in clause( d). This condition/restriction was not on the statute book earlier when all these projects were sanctioned. Another important amendment was made by this Act to sub-section (14) of sectio....
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....uld make no difference if the construction of the said project was completed on or after 1-4-2005 or that the profits were offered to tax after 1-4-2005 i.e. in assessment year 2005-06 or thereafter. The condition/restriction laid down in clause (d) 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. [Para 21] * Thus, in view of the aforesaid discussion it is to be concluded that the judgments of the High Courts, which are impugned in these appeals have taken correct view that the assessees were entitled to the benefit of section 80-IB(10). [Para 23]. We also find that the issue is also settled by another decision of the Hon'ble Supreme Court in the case of CIT vs Veena Developers reported in (2015) 66 taxmann.com 353 (SC), wherein it was held that :-. The assessee....