TaxTMI 
TaxTMI 
2012 (10) TMI 1216
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 80-IB(10) of the Income Tax Act, (hereinafter referred to as the 'Act'), in respect of project called "Raagamalika Phase -I" and "Raagamalika Phase-II" respectively. A survey operation was carried out under Section 133A of the Act to verify the claim of deduction under Section 80-IB(10) of the Act. The Assessing Officer noticed that the extent of commercial area in both the projects as per the sanctioned plan were 974 sq.ft. and 1075 sq.ft. respectively. On a specific question put to the assessee on the project, the assessee gave the details of the persons who had purchased the unit as well as the area, which reads as follows:- BLOCK I Ground Floor Sq. ft P. Suresh + Shanthi Suresh 825 P. Karthikeyan 750 P. Karthikeyan + Anandhi Karthikeyan 685 P.Karthikeyan 955 Ananthi Karthikeyan + P.Karthikeyan 675 Shanthi Suresh + P.Suresh 685 Total 4,575 First Floor A.M. Sundar + Sukanya Sundar 750 S. Rajaji 845 S. Rajaji 860 Sukanya Sundar + A.M.Sundar 925 S.Rajaji + Shyamala Rajaji 910 S.Rajaji + Shyamala Rajaji 925 Total 5,215 3. In the course of the statement r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and has to be liberally construed. Having taken such a stand, the assessee pointed out that the flats constructed therein were principally residential units only, which satisfied sub-clause (c) of Section 80-IB (10) of the Act. The presence of a small extent of area of commercial nature could not lead to total denial of the claim for deduction under Section 80-IB of the Act. Thus, as an alternative plea, the assessee contended that as the assessee had satisfied the conditions stipulated in Section 80-IB(10), the relief be granted on pro-rata basis to the extent of compliance of 80IB(10)(c) of the Act. The assessee submitted that disallowance made by the Assessing Officer in toto, hence, is not correct and the same, at best, could be restricted to the area exceeding the limit prescribed under Section 80IB(10)(c) of the Act and the relief on pro-rata basis to the built-up area be granted. 5. The first Appellate Authority pointed out that the assessee had undertaken construction of housing projects for middle class segments of the society. However, considering the introduction of Section 80-IB of the Act and that the benefit being with reference to construction of 100% residentia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e claim in respect of residential units alone on pro-rata basis, the Tribunal allowed the assessee's appeal that the deduction would be allowed on the residential units constructed on pro-rata basis. The assessee was not entitled for deduction for commercial area to the extent of 9.31%. 8. As regards the amendment brought forth by introduction of clause (d) to Section 80-IB(10) of the Act under Finance Act 2 of 2004, with effect from 1.4.2005, the Tribunal agreed with the assessee that clause (d) being brought into statute book with effect from 1.4.2005 only, the same was prospective and not retrospective. As such, the provisions as it stood during the relevant time could not be interpreted based on the subsequent amendment. Aggrieved by the same, the Revenue has come on appeal before this Court. 9. Learned standing counsel appearing for the Revenue contended that Section 80IB of the Act is clear enough to say that the deduction is only in respect of housing project and the conditions for grant of the deduction, viz., clauses (a), (b) and (c) to sub-clause (10) of Section 80IB of the Act have to be cumulatively satisfied for the purpose of grant of relief. Learned standin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s contained under Section 80IB(10) of the Act, learned counsel referred to the decision reported in CCE v. Hari Chand Shri Gopal [2011] 1 SCC 236 and submitted that the housing project referred to therein being residential project alone, the assessee is not entitled to the relief on the admitted fact that the project is not, pure and simple, a residential one. Thus, being a beneficial provision, the Section must receive a strict construction. 12. Referring to the Development Control Rules, under which approval is granted and the contention of the assessee that even on the different zones ear-marked, a residential zone also contemplated commercial buildings too, he submitted that in interpreting Section 80IB, no assistance could be drawn from these Rules, as to what 'housing project' meant. He further pointed out that zone and project being different in their content and meaning, Development Control Rules are not relevant to understand the scope of the expression 'housing project'. The relief contemplated under the Section is for the 'housing project', meaning thereby, the project of residential unit alone and not for anything else. Hence, the question of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sage in a housing project limited to an extent of 5% alone on the aggregate built-up area of the housing project or two thousand square feet, whichever is less. Contrary to the assertion of the Revenue that for the first time alone, the amended provisions recognised housing project including the commercial area, learned senior counsel appearing for the assessee submitted that the amendment, in fact, supports the cause of the assessee that hitherto, the project, which could have had a commercial area unrestricted, after the amendment brought forth in 2005, is now sought to be restricted to 5% of the aggregate built-up area of the housing project or 2000 sq.ft., whichever is less. 16. Referring to the Development Control Rules, learned senior counsel appearing for the assessee further referred to zones divided therein. Even in residential zone, the Development Rules contemplated construction of buildings, which may cater to the infrastructural needs of the residential zone. 17. Replying to the contention of the Revenue that the provisions should receive strict construction, he submitted that there is no quarrel over this proposition. The Section needs only strict construction. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....connection, learned senior counsel appearing for the assessee placed reliance on the decision reported in Tata Engg. & Locomotive Co. Ltd. v. Gram Panchayat [1976] 4 SCC 177 wherein the Apex Court had given wide meaning to the expression of 'housing' to include non-residential project too. Thus, in the context of Explanation to Section 80HHBA of the Act, he submitted that the assessee would be entitled to the deduction as sought for. He further submitted that the assessee's case herein is 100% compliance and hence, there could be no rejection of the claim made by the assessee. 19. As far as the Revenue placing reliance on the National Housing Policy is concerned, he pointed out that a reading of the said policy shows that the policy is not with reference to construction of the houses alone, but it is more concerned on overall infrastructural development, which means, development of residential units as well as non-residential units, to go side by side, to go for an overall development in all spheres. In the light of the above, the submission of the learned senior counsel for the assessee is that no exception could be taken to the view of the Tribunal. 20. He furth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....80IB(10) of the Act during the Assessment Year 2004-05: "Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings: 80IB(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 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." 26. Section 80IB(10) of the Act after the amendment under Finance (No.2), 2005 with effect from 01.04.2005, reads as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aggregate built-up area of the housing project or two thousand square feet, whichever is less." 27. The amendment to Section 80IB(10) on clause (d) and under Finance (No.2) Act, 2010 with effect from 01.04.2010, is as follows: "(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher." 28. As already pointed out in the preceding paragraphs, the only other provision which deals with deduction on housing project is, Section 80HHBA of the Act. This Section deals with deduction in respect of projects executed on the basis of global tender and aided by World Bank. Explanation to said Section defines 'housing project', which reads as follows:- Deduction in respect of profits and gains from housing projects in certain cases. Section 80 HHBA (1) ...... (2), (3) and (4)** ** ** Explanation : For the purposes of this sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in a related deduction provision under the same Chapter VIA, we feel, it would be more appropriate to go by the definition of the expression 'housing project', as available under Section 80HHBA for the purpose of understanding the said expression of 'housing project' under Section 80-IB of the Act. 31. As seen already, 'housing project' defined under Section 80HHBA refers not only building, but also road, bridge or other structure in any part of India. Going by the deduction contemplated under Section 80-IB of the Act Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings and Section 80 IA of the Act specifically deals with deductions on an enterprises carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructural facility as defined in the Explanation, we hold that the housing project contemplated under Section 80-IB(10) refers construction of "any building" and widest possible meaning has to be given to the word "building" and cannot be restricted to and as referable to a housing project covering r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tipulated under Section 80-IB(10) of the Act are satisfied, the assessee would be entitled to the benefit of deduction under the said provision. 34. It is also a matter of relevance that the Development Control Rules also draws divisions of the zones as residential zones, commercial zones and mixed zones. Even here, residential zone is not a watertight compartment to have houses alone, given the need for providing for other infrastructural facilities, the zonal classification takes note for the space for commercial establishment in prime housing zone also. 35. As far as the assessee's case is concerned, the Revenue does not deny the fact that the assessee had complied with clauses (a) and (b) and that it had commenced the development of construction of the project on 1st October 1998 and that the area of the land satisfies the minimum required area of one acre. The one and only dispute herein is as to the built-up area, as regards the residential unit, later on converted as commercial unit. 36. It may be seen that the built-up area of 8.33%, as relatable to commercial area, has nothing to do with the dispute raised, since the assessee has not made any claim for deducti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduction under Section 80IB(10). The fact that the housing project has residential flats and commercial user, by itself, cannot, in any way, stand in the way of granting deduction. The restriction under Section 80IB(10)(c) cannot be construed as a negative condition to deny the benefit to an assessee, when the approved project has residential units of more than 1500 s.q.ft. The idea of prescribing such restriction is to encourage construction of affordable houses to common man and the restriction is not by way of negative condition to reject a claim where the housing projects have units with the built-up area exceeding the prescribed limit as well as within the limits. So too, in a case where the project contains commercial as well as residential area. 38. As far as the law as it stood during the relevant assessment year or even thereafter upto 2004-05 is concerned, the Section contains no condition that the housing project has to be out and out a residential one or is there a ceiling referable to commercial usage. For the first time in 2005, clause (d) was inserted under Finance (No.2) Act of 2004, which restricted the built-up area of the shops and other commercial establishme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion into the expression "housing project" to mean the residential project alone and that if and when the projects have mixed built-up area of commercial and residential, the question of disallowance will arise only if and when the residential flats are beyond the limit as provided under sub clause (c) of Section 80-IB(10) of the Act and not otherwise. Even herein, the disallowance could be only proportionate to the extent of units in violation of the area prescribed under Clause (c). In a pure commercial housing project, the question of applicability of sub-clause (c) does not arise at all. 41. It is seen from the order of the Tribunal that the assessee made an alternative submission that to the extent of compliance of the built-up area under residential unit, pro-rata relief be given to the assessee. As far as this relief is concerned, in similar circumstances, in the decision reported in H.P.T.D.C. v. Union of India [1999] 238 ITR 38/104 Taxman 1, the Himachal Pradesh High Court considered the possibility of granting the proportionate relief on pro-rata basis to the extent of compliance of the provisions. It is no doubt true that the Section does not provide any such working.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e approved as a housing project having residential units with permissible commercial user, then it is not open to the IT authorities to contend that the expression 'housing project' in Section 80-IB(10) is applicable to projects having only residential units. " 44. The Bombay High Court held that by the date on which the Legislature introduced 100% deduction under the Income Tax Act, it was known that the local authorities could approve a housing project, without or with the commercial user to the extent permitted under the Development Control Rules. 45. When the project fulfils the criteria for being approved as a housing project, then, deductions cannot be denied under Section 80IB(10) of the Act, merely because the project is approved as residential plus commercial. The Bombay High Court held that if the conditions specified under Section 80-IB are satisfied, then deduction is allowable on the entire project and there is no question of allowing deduction to a part of the project alone. Since the project was approved in accordance with Development Control Rules, the assessee would be entitled to 100% deduction on the entire project approved by the Local Authority. H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n. In the case of mixed projects, the assessee's claim has to be allowed in full, if all the residential units satisfied clause (c); otherwise, to the extent of compliance, the relief has to be worked out. A housing project of commercial premises is entitled to 100% deduction, there being no necessity of looking at clause (c) for compliance. Thus, the assessee would be entitled to the benefit of deduction on satisfaction of clauses (a), (b) and (c) of Section 80-IB(10) of the Act and that the requirement as regards clause (c) would arise, wherein, in a given building, where there is a residential unit, the same has to satisfy the maximum built-up area specified under sub-clause (c) of Section 80-IB(10) of the Act. Even though the provisions under sub-clauses (d), (e) and (f) of Section 80-IB(10) of the Act are prospective in nature, yet, for the purpose of understanding the scope of deduction under the provisions of the Act, we do not have any hesitation in drawing assistance from these provisions to decide on the scope of Section 80IB of the Act, as it stood at the material point of time. 48. In the course of the argument, learned senior counsel appearing for the assessee r....