TMI Blog2011 (7) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... Y PAL RAO, JJ. For the Appellant: S.C. Tiwari For the Respondent: Kusum Ingale ORDER Pramod Kumar, Accountant Member. By way of these cross appeals, the appellants have called into question correctness of CIT(A)'s separate orders dated 30-3-2009, passed in the matter of assessment under section 143(3) read with section 147 of the Income-tax Act, 1961, for the assessment years 2003-04 and 2004-05. 2. Common grounds raised by the assessee in both the assessment years are as follows:- 1. (a) The ld. CIT(A) erred in restricting the deduction under section 80-IB(10) on a proportionate basis of the total profit of the project in proportion to the eligible square feet area sold. (b) The ld. CIT(A) erred in failing to specifically deal with the appellant's claim that it was entitled to a deduction under section 80-IB(10) of ₹ 6,54,82,573 for assessment year 2003-04 and ₹ 1,91,72,008 for assessment year 2004-05. (c) The appellant submits that its housing project complied with all the conditions mentioned in section 80-IB(10) and, accordingly, the claim for deduction amounting to ₹ 6,54,82,573 for asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowance of proportionate deduction. 4. Briefly stated the relevant material facts are as follows. The assessee is engaged, inter alia, in the business of real estate development. One of the housing project developed by the assessee, known by the name of 'Garden Enclave', was claimed to be eligible for deduction under section 80-IB(10), and, accordingly, deduction of ₹ 6,54,82,573 for assessment year 2003-04 and ₹ 1,91,72,008 for assessment year 2004-05 was allowed to the assessee. However, in the course of a survey subsequently conducted on the assessee, it was noticed that some of the residential units had area exceeding 1,000 sq. ft. inasmuch as it was found that the assessee had sold the flat by two separate agreements to the members of the same family, though, as such, such pairs of flats sold separately would be viewed only as one unit. On the basis of these findings, as also the admission made by the assessee in survey proceedings, the stand taken by the Assessing Officer was that in order to be eligible for deduction under section 80-IB(10), the total area of residential unit should not exceed 1,000 sq.ft. but as these pairs of flats could be v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., reported in 196 ITR 188 has observed that the provisions should be interpreted liberally. Further, following the Hon'ble ITAT decision in the case of Bengal Ambuja Housing Development Ltd., Kolkata, the Hon'ble Mumbai ITAT allowed the assessee's claim on pro rata basis on qualifying units which satisfied the conditions laid down by section 80-IB(10). The Hon'ble ITAT, Kolkata in the case of Bengal Ambuja Housing Development Ltd. v. DCITG [ITA No. 1595/Kol/2005, assessment year 2002-03], Bench 'C' order dated 24-3-2006 (2007) 39-D BCAJ 546 has held that even if the units constructed are both smaller and larger units with reference to the stipulated area, the profit derived from the construction of the smaller units i.e., within the stipulated area of 1000 sq.ft. builtup area ought to have allowed as deduction under section 80-IB(10) of the Act. The above decision is approved by the Hon'ble Kolkata High Court as referred in the decision of ACTI v. Shree Balaji Developers (ITA No. 2592/M/2006, assessment year 2004-05, Bench 'C' order dated 21-10-2008), wherein, the theory of pro rata deduction is approved and held the deduction under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as long each flat was an independent residential unit, deduction under section 80-IB(10) could not be declined. It is important to bear in mind the fact that what section 80-IB(10) refers to is 'residential unit' and, in the absence of anything to the contrary in the Income-tax Act, the expression 'residential units' must have the same connotations as assigned to it by local authorities granting approval to the project. The local authority has approved the building plan with residential units of less than 1,000 sq.ft. and granted completion certificate as such. That leaves no ambiguity about the factual position. We have further noted that the prohibition against sale of more than one flat in a housing project to members of a family has been inserted specifically with effect from 1-4-2010, and, in our humble understanding, this amendment in law can only be treated as prospective in effect. What is, therefore, clear is that so far as pre-amendment position is concerned , as long a residential unit has less than specified area, is as per the duly approved plans and is capable of being used for residential purposes on standalone basis, deduction under section 80-IB(10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-2011 and subsequent years. 8. It is thus clear that the aforesaid amendment has been brought with prospective effect i.e., from 1-4-2010, and there is no indication whatsoever to suggest that these restrictions need to be applied with retrospective effect. The amendment seeks to plug a loophole but restricts the remedy with effect from 1-4-2010, i.e., assessment year 2010-2011. The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature. It will, therefore, be contrary to the scheme of law to proceed on the basis that wherever adjacent residential units are sold to family members, all these residential units are to be considered as one unit. If law permitted so, there was no need of the insertion of clause (f) to section under section 80-IB(10). It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for particularly as the amendment is not even stated to be 'for removal of doubts'. On the contrary, this amendment shows that no such eligibility conditions could be read into pre-amendment legal position. 9. As regards the Assessing Officer's stand that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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