AI Drafter 
TaxTMI 
TaxTMI 
2017 (11) TMI 684
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.... the housing project Dayanand Gardens approved on 6101999 and was still incomplete by 31.03.2008 in violation of section 80IB(10)(a)(i) of the Act which requires such project to be completed before 31.03.2008? 2) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in allowing the claim u/s.80IB(10) of the Act on partial completion of the housing project holding that such deduction was available on standalone basis without appreciating the fact that the housing project was approved by the local authority on 6101999 wherein construction of complete A to F buildings and were sanctioned and completion certificate was admittedly not issued by Pune Municipal Corporation with respect to building G of Dayanand Gardens since the project also comprised of "G" building which contains 10 shops admeasuring 2490 sq. ft and violated the condition given u/s 80IB(10)(d)? 3) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in allowing the deduction u/s. 80IB(10) of the Act to the housing project Dayanand Gardens since the project also comp....
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....y them that such questions as are proposed in these matters have been admitted in the following Appeals: 1. Order dated 4th February, 2013 in the case of The Commissioner of Income TaxII vs M/s. Rahul Construction Co. [Income Tax Appeal (L) No.1404 of 2012], 2. Order dated 8th April, 2015 in the case of The Commissioner of Income TaxIII, Pune vs Runwal Multihousing Private Limited [Income Tax Appeal No. 1493 of 2013], 3. Order dated 28th January, 2013 in the case of The Commissioner of Income TaxII, Pune vs M/s. Aditya Developers [Income Tax Appeal (L) No.1090 of 2012 & Income Tax Appeal (L) No.1091 of 2012], 4. Order dated 18th June, 2014 in the case of The Commissioner of Income Tax20 vs Shri Laiq Ahmed Shaikh [Income Tax Appeal No. 313 of 2012 with Income Tax Appeal No.314 of 2012], 5. Order dated 29th August, 2016 in the case of The Commissioner of Income TaxII vs Kumar Builders Consortium [Income Tax Appeal No. 250 of 2014], 6. Commissioner of IncomeTax vs Vandana Properties, reported in [2013] 353 ITR 36 (Bom), 7. Order dated 4th February, 2016 in the case of The Commissioner of Income Tax21 vs M/s. Aakash Nidhi B....
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....Leave Petitions were disposed of by upholding the High Court's view. 11. Mr. Gupta was at pains to point out that irrespective of this clarification, the Tribunals throughout have been relying upon the judgments in Brahma Associates (supra) and Vandana Properties (Supra) to hold that a housing project do not cease to be as such even if that project is divided into construction of number of buildings, some of whom are entirely commercial and still the deduction cannot be disallowed. That is without finding out whether such commercial users are permitted within an exclusive residential zone, and therefore, residential buildings and the commercial buildings can qualify for the expression "housing project" or whether such commercial buildings should be excluded from the purview of the same. Similarly, when the housing project comprises of or envisages construction of several buildings, some of whom are constructed earlier but some later on, whether the later buildings can be construed as independent housing projects for the purpose of Section 80IB( 10) deduction or whether they being part and parcel of a single housing project, it would be only on the clear stipulations in the p....
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....day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 but not later than the 31st day of March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority; (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five 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: ....
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.... a housing project has been approved by the local authority before 1st April 2004, on or before 31th March, 2008; and in a case where a housing project has been or is approved by the local authority on or after 1st April, 2004 but not later than 31st March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority. 16. Then there is a third category and which deals with the projects approved by the local authority on or after the 1st April, 2005, and therefore, it should be within five years from the end of the financial year in which the housing project is approved by the local authority. 17. Then there is an explanation and for the purpose of this clause, namely clause (a) of Section 80IB( 10), which clarifies that 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 approved by the local authority and 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 hou....
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....l's Benches, and particularly, the Pune Bench dealing with an identical controversy. 28. Pertinently, in not all the cases where the Tribunal relied upon its own orders passed in cases of distinct assessee, but dealing with identical questions and factual issues, the Revenue has filed Appeals. As is the criticism of the Revenue, its selective approach leads to further confusion and conflict. That is not to the benefit of anybody. 29. However, it is conceded that Appeals were filed in the case of Varun Developers for the assessment year 20082009 being Income Tax Appeal (L) No. 1204 of 2013 and filed on 29th July, 2013 and for the assessment year 20092010 being Income Tax Appeal (L) No. 944 of 2014 filed on 5th May, 2014. The orders passed in the case of Varun Developers may not be before us, but what is material for our purpose is that there was an Appeal brought before this Court in the case of one Rahul Construction Co. The very questions proposed as substantial questions of law were proposed in that case also. Similarly, in the case of Vandana Properties (supra) as well, the Commissioner of Income Tax, Mumbai, brought an Appeal. It is contended that the Revenue has not ....
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....ever, fairly brought to our notice the judgment and order passed in the case of Vandana Properties. In Vandana Properties, the facts were that on a plot of land admeasuring 2.36 acres situated at Kandivali (West), Mumbai, the assessee constructed buildings "A" to "D" over a period of years. The commencement certificate/IOD (Intimation of Disapproval) as is commonly known in the Mumbai Municipal limits, was granted during the year 1993 to 1996. By following the workinprogress method of accounting, the assessee offered to tax the income earned by construction of buildings "A", "B", "C" and "D" from time to time. Deduction under Section 80IB( 10) of the IT Act on the income earned from these buildings was not claimed as the approval for construction of these buildings was granted prior to 1st October, 1998. Pursuant to an order of the State Government in the year 2001 permitting conversion of the status of the land, the assessee became entitled to construct an additional building "E" on the aforesaid plot of land. The building plan for construction of building "E" with several residential units on the said plot of land was submitted by the assessee. The building plan for construction ....
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....us that the amount of deduction under section 80IB( 10) of the Act is available to an undertaking where the development and construction of the housing project has commenced on or after October 1, 1998, and is completed within the time stipulated therein. In the present case, approval for construction of the "E" building was granted on October 11, 2002, as and by way of extension of the approval granted to the earlier housing project consisting of the A, B, C and D buildings. Since approval to the housing project consisting of the A, B, C, D and E buildings was first granted in the year 1993, it must be held in view of the Explanation to section 80IB( 10)(a) of the Act that the housing project has commenced development and construction when the first approval was granted in the year 1993 and to such a housing project which has commenced prior to October 1, 1998, the deduction under section 80IB( 10) could not be granted. 13. Counsel for the Revenue further submitted that for claiming deduction under section 80IB( 10), the housing project must be on the size of a vacant plot of land which has a minimum area of one acre. The submission is that, unless the housing project has....
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....0IB( 10) would have to be construed as commonly understood. 19. As rightly contended by Mr. Inamdar, learned senior advocate appearing on behalf of the assessee and Mr. Mistri, learned senior advocate and Mr. Joshi, learned advocate appearing on behalf of the intervenors, the expression "housing project" in common parlance would mean constructing a building or group of buildings consisting of several residential units. In fact, the Explanation in section 80IB( 10) supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ("E" building in the present case) would constitute a "housing project" under section 80IB( 10) of the Act. 20. The question, then, to be considered is, whether construction of the "E" building is an independent housing project or extension of the housing project already existing on the plot in question. It is the contention of the Revenue that since the approval for construction of the "E" building was granted by the local authority sub....
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....sion of the earlier housing project, it is not open to the incometax authorities to contend that approval to the housing project granted by the Municipal Corporation on October 11, 2002, constitutes extension of the housing project which was approved in the year 1993. 22. Reliance placed by the Revenue on the Explanation to section 80IB( 10)(a) which was introduced with effect from April 1, 2005, is also misplaced. What the said Explanation contemplates is that where the approval in respect of a housing project is granted more than once, then, that 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. For example, in respect of a housing project, the assessee may seek amendment of the building plan at several stages of the construction and the same may be approved. In such a case, the Explanation provides that for the purposes of section 80IB( 10) the housing project shall be deemed to have been approved on the date on which the first approval was granted by the local authority. Thus, the Explanation to section 80IB( 10)(a) refers to the approval granted to the same hou....
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....of the common man. However, in the absence of defining the expression "housing project" and in the absence of specifying the size or the number of housing projects required to be constructed on a plot of land having minimum area of one acre, even one housing project containing multiple residential units of a size not exceeding 1000 square feet constructed on a plot of land having minimum area of one acre would be eligible for section 80IB( 10) deduction. If the construction of section 80IB( 10) put forth by the Revenue is accepted, it would mean that if on a vacant plot of land, one housing project fulfilling all conditions is undertaken, then deduction would be available to that housing project and if thereafter several other housing projects are undertaken on the very same plot of land, the deduction would not be available to those housing projects as the plot ceases to be a vacant plot after the construction of the first housing project. Such a construction if accepted would defeat the object with which section 80IB( 10) was enacted. 39. The Division Bench, in paragraphs 27, 28 and 29, referred to the CBDT circulars, the provisions in details and negatived the arguments of th....
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....April, 2005, the Division Bench adverted to the question, namely, whether the project "Brahma Estate" consisting of 15 residential buildings and 2 commercial buildings answers the expression "housing project". The Division Bench then, in paragraphs 18, 19, 20, 21, 22 and 23, held thus: "18. As noted earlier, the expression "housing project" is not defined under the Act. However, section 80IB( 10) refers to housing projects which are approved by local authorities. Therefore, for the purposes of section 80IB( 10) which project should be treated as a housing project is left to the local authorities. The question, therefore, to be considered is, whether a local authority can approve a project to be a housing project with commercial establishments. 19. Development of every region is regulated by the concerned local authority in accordance with the Development Control Rules/Regulation framed by the local authority. The Development Control Rules/Regulation are framed by the local authority depending upon the needs of that region and hence differ from region to region. We have perused Development Control Rules framed by the authority at Pune and Mumbai. In both cases, it ....
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.... user in a residential building by way of convenient shopping/ancillary use is permitted between 2 per cent and 50 per cent of the total area depending upon the location of the plot. Similarly, the DC Regulation of Greater Mumbai, provides that in a residential building commercial user by way of convenient shopping/ancillary use could be between 5 per cent and 50 per cent of the total area. 43. The Division Bench concluded that thus, on the date on which the legislature introduced 100% deduction on the profits derived from housing projects approved by a local authority, it was present to its mind that local authorities could approve projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective local authorities. In other words, such projects could be approved and if those are approved, there is no question of the incometax authorities going beyond such approval and determining the deduction claim by applying user test. In other words, whether the housing project is of only and purely residential units and not commercial units or no commercial user is contemplated by it, was an issue or question not open for the incometax au....
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....ction 80IB( 10) as it stood prior to April 1, 2005 is suggestive of the fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted. 45. Thereafter, the Division Bench fortified and supported its above conclusions by relying upon the insertions in the provision after or with effect from 1st April, 2005. In paragraphs 29 and 30, the alternate argument of the Revenue was also considered, and particularly that the projects with convenient ('convenience' ought to be the correct expression) shopping could be considered as housing projects under Section 80IB( 10) up to 1st April, 2005. That argument has also been rejected by holding that the incometax authorities cannot contend that the projects with convenience shopping alone could be considered as housing projects and whether the local authority could have approved any project as a housing project without convenience shopping. Therefore, the commercial user should be restricted to that phrase and expression, which was the contention or argument raised in the alternate, came to be rejected. 46. The Special Bench judgment under Appeal in Brahma Associates (supra) was part....
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.... project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb the decision of the Tribunal in restricting the section 80IB( 10) deduction only in respect of the profits derived from 15 residential buildings." 47. Then, the argument of retrospective operation of the amended clause (d) in Section 80IB( 10) with effect from 1st April, 2005 was rejected in paragraph 32. 48. Then, the conclusions have been summarized questionwise in paragraph 33 which reads as under: "33. In the result, the questions raised in the appeal are answered thus: (a) Up to March 31, 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 the Development Control 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 Development Control Rules/Regulation, the deduction under section 80IB( 10) up to March 31, 2005 w....
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....taken an identical view holding that the deduction under Section 80IB( 10) would be admissible to a housing project. 52. After referring to the questions and the conclusions in paragraph 3 of this order, the Hon'ble Supreme Court refers to the interpretation of the High Courts of the expression "housing project". The High Courts held that a grammatical meaning thereof has to be given as that expression is not defined in the IT Act. Such a project which is undertaken as housing project is approved by a local authority, then, upon its approval, it has to be treated as a housing project and in that regard, the High Court made observations by relying on the Development Control Regulations under which the local authority sanctions the housing projects and noted that in these Development Control Regulations itself, an element of commercial activities is provided, but the total project is still treated as housing project. 53. The Hon'ble Supreme Court, in paragraphs 4, 5 and 6 of its order held as under : "4. 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 concern....
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....n of this expression as also the nature of the users envisaged and permitted therein (residential and commercial) in a housing project. 55. To our mind, therefore, once the Revenue has not been successful in having the judgments of this Court in Bramha Associates and Vandana Properties reversed, in an oblique and indirect manner and by referring to Veena Developers case and the observations therein, we cannot be persuaded to take a different view. What judicial discipline demands is that we must follow the binding judgments of this Court and in law, any hair splitting of its findings and conclusions in the manner suggested by the Revenue would be plainly violating not only the rule of precedents but also the discipline. It would also be doing violence to the language of those statutes to which we have made a reference in details in the foregoing paragraphs. 56. Hence, we are of the view that the questions which we have reproduced above in all these Appeals would have to be answered in favour of the assessees and against the Revenue. They having been so answered, these Appeals cannot be entertained. Once all these questions stand concluded and answered authoritatively by this ....