TaxTMI 
TaxTMI 
2017 (4) TMI 530
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....tions of law raised therein were similar as involved in other two appeals and judgment was already reserved, hence learned counsel for parties adopted earlier arguments, and judgment was reserved on 06.03.2017. 4. Since question basically raised in all these appeals are common and interconnected, hence these Appeals are being decided by this common judgment. 5. Details of appeal numbers, date of orders of Tribunal, Assessment Years and Appeal numbers before Tribunal are being given as under:- Sr. No. Appeal Numbers Date of Orders of Tribunal Assessment Years Appeal numbers before Tribunal 1. 9 of 2014 29.11.2013 2007-08 284/LKW/2013 2. 16 of 2014 30.01.2014 2006-07 60/LKW/2010 3. 13 of 2017 17.10.2016 2011-12 871/LKW/2014 6. Income Tax Appeal No. 9 of 2014 was admitted on 03.08.2015 on the following substantial questions of law:- "(i) Whether ITAT has erred in law in holding that area of open balcony of flat would be considered at 50% of the actual area for the purpose of deduction u/s 80-IB(10) of the Income Tax Act. (ii). Whether ITAT on the facts and circumstances of the case has err....
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...."(i) Whether ITAT has erred in law and on facts in holding that the amended provisions with effect from 01.04.2005 are not applicable in the case of Assessee for the relevant year A.Y. 2011-12 as project for which deduction u/s 80-IB of Act claimed, had commenced prior to 01.04.2005. (ii) Whether ITAT has erred in law and on facts while relying on case law which apply only to sub-clause (d) of section 80-IB(10), while as per section 80-IB(10), Assessee was required to fulfill all the conditions to avail benefit of deduction u/s 80-IB(10) of the I.T. Act. (iii) Whether under the facts and circumstances, ITAT has failed to appreciate that on the issue of completion of project, Assessee ought to have completed project within 4 years from financial year in which housing project was approved by local authority. (iv) Whether ITAT has failed to consider explanation (i) of sub-section 10(a) of section 80-IB regarding date of approval, ignoring construction plan/building plan's approval date of Assessee. (v) Whether ITAT has failed to consider that as per clause (i) and (ii) of sub-section 10(a) of section 80-IB, benefit can be extended to Assessee on....
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....ded 1500 sq. ft.; project was not completed by 31.03.2008 and Assessee constructed commercial area on 31638 sq. ft. which exceeded 5% of built up area or 2000 sq. ft. whichever is less as provided in Section 80-IB(10)(d) of Act, 1961. Assessee preferred appeal before CIT(A) which was rejected on 23.11.2009 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 31.01.2014. Income Tax Appeal No. 13 of 2017 13. Return of income was filed on 29.09.2011 declaring total income of Rs. 1,54,88,102/-. Assessee claimed exemption under Section 80-IB(10) of Rs. 92,06,536/-. Rejecting claim of deduction Assessing Officer completed assessment vide order dated 23.12.2013 for a total sum of Rs. 2,46,94,638/-. Appeal preferred before CIT(A) by Assessee was dismissed on 08.09.2014 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 17.10.2016. Common admitted facts:- 14. Since deduction under Section 80-IB(10) has been allowed by Tribunal, hence all these appeals have come up under Section 260-A of Act, 1961. There are some more common facts which are undisputed but would be relevant to decide questions ra....
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....e of 31368 sq. ft. which was more than prescribed limit of Section 80-IB(10)(d) of Act, 1961, hence deduction was not admissible. Amended Section 80-IB is applicable. Since project approved before 01.04.2004 had not completed on or before 31.03.2008, hence no deduction was admissible. 19. Sri J.N. Mathur, learned Senior Advocate assisted by Sri Dhruv Mathur, learned counsel for Assessee, on the other hand, contended that amendment of Section 80-IB(10) made w.e.f. 01.04.2005 is neither applicable retrospectively nor retroactively. If a housing project was approved before 31.03.2005 and completed after 01.04.2005, Assessee has a vested right of Assessment as per law as it stood prior to 01.04.2005. He further submitted that Assessee has satisfied requirement of Section 80-IB(10). This is a finding of fact recorded by Tribunal, hence questions raised by appellant would have to be answered in favour of Assessee and appeals deserve to be dismissed. 20. Before considering rival submissions in the light of relevant provisions, we may also notice at this stage that Tribunal has passed order dated 30.01.2014 which is subject to appeal in Income Tax Appeal No. 16 of 2014 by simply foll....
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.... "(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2001 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 and completes the same before the 31st day of March, 2003; (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 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." 25. The scope and effect of Amendment was explained by CDBT vide circular no. 794 dated 09.08.2000. It also provides that amendment will take effect from 01.04.2001 and shall be applicable for Assessment Year 2001-02 and subsequent years. 26. Thereafter by Finance Act, 2003 w.e.....
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....1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation : For the purposes of this clause - (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; (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 area 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 ....
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....he aggregate "built-up area" or 2000 sq. ft. whichever is less. 32. Section 80-IB(10) provides deduction for income of an undertaking, developing and building housing projects. A developer may have many projects, and each project can be considered to be a separate undertaking for the purpose of deduction under Section 80-IB(10). Ownership of land is not a criteria to attract deduction under Section 80-IB(10). Sub-section (10) does not require that developer must be owner of land. A promoter would qualify for deduction since it runs an undertaking for developing and constructing a housing project and conditions for relief were satisfied. If developer is not the owner, approval of plan also, may not be in its own name, since local bodies usually insist to grant approval to title holder. However, this would neither give any right to owner to claim deduction under Section 80-IB(10) nor forfeit right of developer to claim deduction. 33. In CIT Vs. Radhe Developers, 2012 (341) ITR 403 (Gujarat), question arose, whether developer claiming deduction must be owner of land and whether approval of local authority as well as permission to develop project and permission to commence constr....
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....e consider facts of our case in the backdrop of Section 80-IB(10) as it evolved with passage of time, we find that project was approved by LDA on 08.01.2002. Section 80-IB(10) as it stood on 08.01.2002 did not cover Assessee for the reason that it requires commencement of Project on or after 01.10.1998 but approval of housing project by local authority before 31.03.2001. The date of completion was also mentioned as 31.03.2003. Assessee in fact got an occasion for the benefit under Section 80-IB(10) when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, since date of approval was changed and extended to all housing projects approved before 31.03.2005. However, there was no time-limit prescribed for completion of project under Section 80-IB(10) as it stood amended by Finance Act, 2003 w.e.f. 01.04.2002, since this requirement was omitted. Thus, Assessee got right to be governed by Section 80-IB(10) as amended by Finance Act, 2003 w.e.f. 01.04.2002, due to changes made therein. 38. Question as to whether benefit became available to Assessee for deduction under Section 80-IB(10), when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, can be considered a vested right, is no....
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....t. When only 50% area of open balcony was considered, size of all residential units came down within 1500 sq. ft. and this was demonstrated by CIT(A) as under:- S.No. Type of Flat Area as per DVO Less 50% open balconies Square feet Area for the purposes of 80-IB(10) of Act Square feet 1 A1 1537.93 53.15 1484.78 2 A2 1519.96 53.15 1466.81 43. Revenue contended that definition of "built up area" as came into existence by amendment made w.e.f. 01.04.2005, would include entire balcony and that has to be applied. 44. CIT(A) and Tribunal have observed that this definition of "built-up area" is prospective and prior thereto "terrace" was not included in built-up area. If "terrace" is excluded, residential units were not beyond 1500 sq. ft. 45. The question with regard to "built-up area", whether would include balcony/terrace and whether will be applicable to housing projects approved prior to 01.04.2005, has been considered by Karnataka High Court in Commissioner of Income Tax Vs. Anriya Project Management Services (P.) Ltd., (2013) 353 ITR 12 (Karnataka) wherein Court has said:- "the definition of "built, up "area" ....
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....art 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. 26. Having regard to the above, let us take note of the special features which appear in these cases:- 26.2. The position of law and the rights accrued prior to enactment of the Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible." 48. Submission of learned counsel for Revenue that Assessee sold residential units mentioning in sale deeds total area of flat which included area for balcony also, will have no relevance for question up for consideration, for the reason, that applicability of statutory provision has to be examined in the light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. 49. In v....
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....l built-up area of the plot. d) Since deductions under Section 80-IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting Section 80-IB(10) deduction only to a part of the project. However, in the present case, since the assessee has accepted the decision of the Tribunal in allowing Section 80-IB(10) deduction to a part of the project, we do not disturb the findings of the Tribunal in that behalf. e) Clause (d) inserted to Section 80-IB(10) with effect from 01.04.2005 is prospective and not retrospective and hence cannot be applied for the period prior to 01.04.2005." (emphasis added) 52. Supreme Court agreed with Bombay High Court's answer given above but with a minor modification with regard to para 5 and para 6 of judgment which reads as under:- "We are in agreement with the aforesaid answers given by the High Court to the various issues. We may only clarify that insofar as answer at para (a) is concerned, it would mean those projects which are approved by the local authorities as housing projects with commercial element therein." 53. In Commissioner ....
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....for commercial purpose in order to bring its development activities within prescribed limits of new provision and to avail benefit under Section 80-IB(10), only because of the reason that project was not complete as on 01.04.2005. Court said that answer would have to be given in negative on the principle that planning as per law prevailing prior to 01.04.2005 has been observed and acted upon by Assessee. It has acquired vested right thereof which can not be taken away. Revenue authorities cannot be allowed to ask Assessee to do something which is almost impossible. 55. Similar view was taken in another decision in Commissioner of Income Tax Vs. Veena Developers (2015) 277 CTR Reports 297 (SC). 56. Thus, question (iv) in Income Tax Appeal No. 9 of 2014 is answered against Revenue and in favour of Assessee. 57. Question (ii) in Income Tax Appeal No. 16 of 2014 is a mixed question, already answered, hence is answered against Revenue and in favour of Assessee. 58. Now we take up question (iii) of Income Tax Appeal No. 9 of 2014, questions (iii), (iv) and (v) of Income Tax Appeal No. 13 of 2017, since all these questions relate to sub-section 10(a) of Act, 1961, i.e., comple....
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....d to be absurd, unjust or expecting the assessee to comply with something which is impossible to achieve. 24. The next question that needs to be answered, is, whether the stipulation in Section 80IB(10)(a) can be said to be directory. Considering the prodigious benefit offered in terms of Section 80IB to the assessee (hundred per cent of the profits derived in any previous year relevant to any assessment year); and the purpose underlying the same - which is inter alia burden on the public exchequer due to waiver of commensurate revenue - the stipulation for obtaining completion certificate from the Local Authority before the cut off date, must be construed as mandatory. The fact that compliance of that condition is dependent on the manner in which the proposal is processed by the Local Authority, the provision cannot be construed as a directory requirement. It is a substantive provision mandating issuance or grant of completion certificate by the Local Authority before the cut off date or specified time, as a precondition to get the benefit of tax deduction. Else, it will then be open to the assessee to rely on other circumstances or evidence to plead that the housing proj....
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....ent in Manan Corporation Vs. AICT (2013) 356 ITR 44 (Gujarat). 63. There is another judgment of Delhi High Court in CIT Vs. CHD Developers Ltd. (2014) 362 ITR 177 (Delhi) which followed Manan Corporation Vs. ACIT (supra) but aforesaid judgment has been rendered after following judgment in CIT Vs. Veena Developers (supra) wherein clause (d) of sub-Section 10 was considered and then it was observed that Section 80-IB(10) as amended w.e.f. 01.04.2005 is prospective and not retrospective. 64. There is another judgment of Gujarat High Court in CIT Vs. Tarnetar Corporation (2014) 362 ITR 174 (Gujarat) but as a matter of fact, therein construction completed well before 31.03.2008 and hence those judgments did not consider Section 80-IB(10)(a) in the light of fact that requirement of completion of project within specified time had continued since inception and was inapplicable for a smaller period of three years. 65. Looking to objective and purpose of conditions of completion of project and the fact that it is not a provision which came for the first time altogether into existence on 01.04.2005, we are inclined to follow Madhya Pradesh High Court's judgment in The Commissione....