TaxTMI 
TaxTMI 
2017 (6) TMI 953
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....rgument advanced on behalf of the assessee is that the project of the assessee was approved on 17/07/2003 and the assessee applied for completion certificate on 06/07/2005. Our attention was invited to page-84 of the paper book. Reliance was placed upon the decision from Hon'ble jurisdictional High Court in the case of CIT vs Hindustan Samuh Awas Ltd. (2015) 62 taxman.com 175 (Bom.); 377 ITR 150 (Bom.), CIT vs Sarkar Builders (2015) 57 taxman.com 313 (Supreme Court); 375 ITR 392(Supreme Court). 2.1. On the other hand, Shri Rajesh Kumar Yadav, ld. DR defended the addition made by the Ld. Assessing Officer by placing reliance upon the decision in ITA No.4929/Mum/2012. 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is in the business as a builder and developer, constructed a project in Shriprastha Layout, Village Nallasopara (W), Vasai. The assessee developed a building names as Akash Tower. The assessee claimed deduction of Rs. 22,74,167/- u/s 80IB(10) of the Act. The assessee furnished the details, as required by the Assessing Officer, like size of plot of land, approval of the housing proj....
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....tive in nature. Interestingly, when the housing project was approved by a local authority, which is the requirement under sub-section (10) of Section 80IB, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 01.04.2005 is not fulfilled. In this scenario, the question is as to whether the new conditions mentioned in the amended provision have also to be fulfilled only because the housing projects in question, though started before 01.04.2005, were completed after the said date. The question of law, that arises for discussion that needs to be answered is thus common in all these appeals and can be formulated as under: "Whether Section 80-IB(10)(d) of the Income Tax Act, 1961 applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005?" 3. As pointed out above, sub-section (10) stipulates certain conditions which are to be satisfied in order to avail the benefit of the said provision. Further, it is also clear that the benefit is available to those undertakings which are developing and building ....
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....n the Revenue and the assessees/developers of the housing projects concerning interpretation of sub-section (10) of Section 80IB. That dispute primarily related to the meaning that is to be assigned to 'housing projects' prior to 01.04.2005 because of the reason that there was no clause (d) earlier and there is no express provision in this sub-section dealing with the consequence of having a commercial establishment within a housing project. One of the requirements contained in sub-section (10) is that in order to be entitled to have the deduction under this provision, housing project is to be approved by a local authority. It is a matter of common knowledge 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 th....
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....laimed deduction under Section 80IB(10) of the Act. This provision as it stood at that time, i.e., prior to 01.04.2005 reads as under: - Section 80IB(10) [as it stood prior to 01.04.2005] "(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 crore; 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." However, the income tax authorities rejected the claim of deduction on the ground that the projects were not "housing project" inasmuch as some commercial activity w....
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....icting Section 80IB(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 80IB(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 80IB(10) with effect from 1/4/2005 is prospective and not retrospective and hence cannot be applied for the period prior to 1/4/2005." 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. There was much debate on the answer given in para (b) above. It was argued by Mr. Gurukrishna Kumar, learned senior counsel, that a project which is cleared as "residential plus commercial" project cannot be treated as housing project and therefore, this direction is contrary to the provisions of Section 80(I)(B)(10) of the Act. However, reading the direction in its entirety and particularly the first sentence thereof, we find that commercial u....
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.... by the assessees. Notwithstanding this position, the argument of Mr. S. Gurukrishna Kumar, learned senior counsel appearing for the Revenue is that amendment w.e.f. 01.04.2005 is retroactive even if not retrospective. He has, thus, endeavoured to draw a fine distinction between the retroactive nature of amendment in contrast with retrospectivity of a provision. He argued that once the project is financed after 01.04.2005 and on the completion of the said project, a particular assessee has earned the income which is shown by the assessee in a particular assessment year, it is that assessment year which would be the determinative factor and the law prevailing on the date relevant to the assessment year will have to be applied. On that basis, it was argued that since the assessment years are post 01.04.2005, clause (d) of sub-section (10) of Section 80IB of the Act gets attracted. In support of this plea, he referred to the judgment of this Court in CIT v. Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308/172 Taxman 386 and, particularly, the discussion contained in paras 9 and 16 which are reproduced hereunder: "9. In Reliance Jute and Industries Ltd. v. CIT [1980] 1 SCC 139, it....
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....ents and supporting those reasons. 10. We have given our due consideration to the respective submissions. 11. As pointed out above, the judgment pronounced by the Bombay High Court in Brahma Associates case (supra) has already been upheld by this Court on the interpretation given to the expression 'housing project' occurring in sub-section (10) of Section 80IB of the Act. Interestingly, in the batch of appeals decided by the High Court in that very judgment, the issue with which we are concerned was also taken up. The Revenue had argued that clause (d) inserted with effect from 01.04.2005 should be applied retrospectively, which argument was repelled by the High Court. Therefore, for better understanding, we would like to begin our discussion with the meaning given to 'housing project' along with the issue of retrospectivity of clause (d), as raised by the Revenue, which was dealt with by the High Court and repelled. That portion of the discussion contained in the High Court judgment, which has some bearing on the issue at hand, runs as under: "21. Thus, on the date on which the legislature introduced 100% deduction under the Income Tax Act, 1961 on the pro....
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....ts constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under Section 80IB(10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view to make available large number of affordable houses to the common man and not with a view to deny commercial user in residential buildings. In other words, the restriction under Section 80IB(10) regarding the size of the residential unit would in no way curtail the powers of the local authority to approve a project with commercial user to the extent permitted under the DC Rules/Regulations. Therefore, the argument of the Revenue that the restriction on the size of the residential unit in Section 80IB(10) as it stood prior to 1.4.2005 is suggestive of the fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted. 25. The above conclusion is further fortified by Clause (d) to Section 80IB(10) inserted with effect from 1.4.2005. Clause (d) to Section 80IB(10) inserted w.e.f. 1.4.2005 provides that even though s....
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....e to be rejected. Thus, in our opinion, the Tribunal was justified in holding that clause (d) inserted to Section 80IB(10) with effect from 1.4.2005 is prospective and not retrospective and hence cannot be applied to the period prior to 1.4.2005." 12. The issues dealt with from paras 21 to 25 by the High Court already stands approved by this Court. In para 29, the High Court has held that clause (d) has prospective operation, viz., with effect from 01.04.2005, and this legal position is not disputed by the Revenue before us. What follows from the above is that prior to 01.04.2005, these 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% deduction of their income from such projects under Section 80IB of the Act. Their projects were sanctioned much before 01.04.2005. 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 01.04.2005. All these assessees were made known o....
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....s a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication..." 14. In the same paragraph, the Court also remarked that 'a right claimed by an assessee under the law in force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year'. Thus, it clearly follows that though normally the law which is in force in the assessment year would prevail, but this is not an absolute principle as the Court itself carved out exceptions thereto by making it clear that such exception can be either express or implied by necessary implication. Even the principle which is mentioned is qualified with the words 'ordinarily available'. 15. On examining the scheme of sub-section (1) of Section 80IB of the Act, its historical turn around by amendments from time to time and keeping in view of the real purpose behind such a provision, we are of the view that in the peculiar scenario as projected in this provision, the aforesaid cardinal principle of tax law is not to be applied as, by necessary implication, application thereo....
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....within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place." 16. As can be seen from the aforesaid provision, 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 31.03.2005; 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 80IB(10) remained unchanged. 17. Thereafter, significant amendment, with which we are directly concerned, was carried out by Finance (No.2) Act, 2004 with effect from 1.4.2005. This amendment has already been noted above. 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 S....
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....he rights accrued prior to enactment of Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible. (c) The provisions of Section 80IB(10) mention not only a particular date before which such a housing project is to be approved by the local authority, even a date by which the housing project is to be completed, is fixed. These dates have a specific purpose which gives time to the developers to arrange their affairs in such a manner that the housing project is started and finished within those stipulated dates. This planning, in the context of facts in these appeals, had to be much before 01.04.2005. (d) The basic objective behind Section 80IB(10) is to encourage developers to undertake housing projects for weaker section of the society, inasmuch as to qualify for deduction under this provision, it is an essential condition that the residential unit be constructed on a maximum built up area of 1000 sq.ft. where such residential unit is situated within the cities of Delhi and Mumbai or within 25 kms. from the municipal limits of these cities and 1500 sq.ft. at any other place. (e) It is the cardinal principle of interpretation that a....
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....wing manner: "36. There is yet another reason for coming to the aforesaid conclusion. Take a scenario where an Assessee, following the project completion method of accounting, has completed the housing project approved by the local authority complying with all the conditions as set out in section 80-IB(10) as it stood prior to 1st April, 2005. If we were to accept the argument of the Revenue, then in that event, despite having completed the entire construction prior to 1st April, 2005 and complying with all the conditions of section 80-IB(10) as it stood then, the Assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-06. In contrast, if the same Assessee had followed the work-in-progress method of accounting, he would have been entitled to the deduction under section 80-IB(10) upto the A.Y. 2004-05, and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction under section 80-IB(10) available to a particular Assessee would be determined on the basis of the accounting method followed. This, to our mind and a....
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.... the said provision was brought into force." 22. At this juncture, we would like to quote the following passage from Shah Sadiq & sons (supra): "14. Under the Income Tax Act of 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses against profits made from that business in future years. The right of carrying forward and set off accrued to the assesee under the Act of 1922. A right which had accrued and had become vested continued to be capable of being enforced notwithstanding the repeal of the statute under which that right accrued unless the repealing statute took away such right expressly or by necessary implication. This is the effect of Section 6 of the General Clauses Act, 1897. 15. In this case the 'savings' provision in the repealing statute is not exhaustive of the rights which are saved or which survive the repeal of the statute under which such rights had accrued. In other words, whatever rights are expressly saved by the 'savings' provision stand saved. But, that does not mean that rights which are not saved by the 'savings' provision are extinguished or stand ipso facto terminate....
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....t to the local authorities. The expression 'housing project' is not defined even under the DC Rules/Regulations framed by the local authorities. Therefore, which project would qualify to be called as a housing project has to be gathered from the rules/regulations framed by the local authority. Thus, on the date on which the legislature introduced 100 per cent deduction under the IT Act, 1961 on the profits derived from housing projects approved by a local authority, it was known that the local authorities could approve the projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective local authority. In other words, it was known that the local authorities could approve a housing project without or with commercial user to the extent permitted under the DC Rules. If the legislature intended to restrict the benefit of deduction only to the projects approved exclusively for residential purposes, then it would have stated so. However, the legislature has provided that s. 80-IB(10) deduction is available to all the housing projects approved by a local authority. Since the local authorities could approve a project to be a housing pro....
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....cent of the aggregate built-up area of the housing project or two thousand square feet whichever is lower. By Finance Act, 2010, cl. (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet whichever is higher. The expression 'included' in cl. (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting cl. (d) to s. 80-IB(10) the legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules/Regulations were entitled to s. 80-IB(10) deduction, w.e.f. 1st April, 2005 such deduction would be subject to the restriction set out in cl. (d) of s. 80-IB(10). Therefore, the argument of the Revenue that w.e.f. 1st April, 2005 the legislature for the first time allowed s. 80- IB(10) deduction to housing projects having commercial user cannot be accepted. (Paras 16, 17 & 21 to 25) The alternative argument of the Revenue that the projects with convenient shopping could be considered as housing projects under s. 80-IB(10) upto 1st April,....
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..... 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to s. 80-IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to s. 80-IB(10) deduction on the profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, the decision of the Tribunal in restricting the s. 80-IB(10) deduction only in respect of the profits derived from 15 residential buildings is not disturbed. (Para 28) Lastly, the argument of the Revenue that s. 80-IB(10) as amended by inserting cl. (d) w.e.f. 1st April, 2005 should be applied retrospectively is also without any merit, because, firstly, cl. (d) is specifically inserted w.e.f. 1st April, 2005 and, therefore, that clause cannot be applied fo....