2018 (7) TMI 2260 - HC - Income Tax

Deduction u/s 80IB - Whether the amendment in 2005 to Section 80-IB(10) which was pertinent for the relevant assessment year 2005-06 was prospective in its operation or retrospective ? - HELD THAT - Whether the amendment would operate prospectively or otherwise the Tribunal has relied on an order of the Bombay High Court 2011 (2) TMI 373 - BOMBAY HIGH COURT . The assessee now refers to a Supreme Court judgment in CIT v. Veena Developers 2015 (5) TMI 193 - SUPREME COURT which endorses the Bombay view. The first question raised by the Revenue is accordingly answered in terms of the Supreme Court judgment that the amendment will operate prospectively. Whether the benefit of deduction under Section 80-IB(10) could be given to an assessee in respect of a project otherwise covered by the sub-section but where some of the residential units exceed the area indicated in clause (c) thereof ? - Section 80-IB(10) of the Act refers to projects and at the first blush the Revenue s contention appeals. However a closer scrutiny of such provision reveals that there are several conditions that have to be complied with before the benefit of deduction under such provision can be availed of by an assessee. Clause (c) is one of several such conditions. In such a situation when an assessee complies with the other conditions and substantially complies with the condition in clause (c) the assessee may be justified in claiming deduction for the proportionate profit of the project referable to the residential units upto the ceiling limit indicated in the provision. Since the deduction which has been permitted by the order impugned passed by the Appellate Tribunal does not cover the proportionate profit pertaining to the residential units exceeding 1500 sq.ft. in area the reasoning of the Tribunal that a liberal construction of the provision should be made to give such benefit that the assessee may be entitled to does not call for any interference.

Summary

Issues:
1. Whether the 2005 amendment to Section 80-IB(10) is prospective or retrospective?
2. Can an assessee claim deduction under Section 80-IB(10) for a project where some residential units exceed the specified area limit?

Analysis:

Issue 1:
The first issue pertains to the prospective or retrospective operation of the 2005 amendment to Section 80-IB(10). The Tribunal relied on a Bombay High Court order, but the assessee cited a Supreme Court judgment endorsing the Bombay view. The Court, following the Supreme Court judgment, held that the amendment operates prospectively.

Issue 2:
Regarding the second issue, it is acknowledged that the assessee's project meets other conditions of Section 80-IB(10) but falls short in some residential units exceeding the specified area limit. The Tribunal's previous orders and the Court's dismissal of appeals confirm a consistent view favoring the assessee. Although the Revenue's contention seems valid at first glance, a detailed examination of the provision reveals that compliance with other conditions may justify claiming deduction for the proportionate profit related to residential units within the limit. As the Tribunal's decision did not cover profit from units exceeding the limit, the Court upheld the Tribunal's liberal construction of the provision to grant the entitled benefit to the assessee.

In conclusion, the Court disposed of the appeals without interfering with the Tribunal's order, considering the consistent view in previous cases. The Court emphasized the need to interpret the provision liberally to grant benefits to the assessee as entitled.