TMI Blog2012 (9) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... ssentially remained residential housing projects and that is also quite apparent from the certificates issued by the local authority and, therefore neither on the ground of absence of such provision of commercial shops nor on account of such commercial construction having exceeded the area contemplated in the prospective amendment can be made applicable to the appellant assessee whose plans are sanctioned as per the prevalent rules and regulations by the local authority for denying the benefit of deduction of profit derived in the previous year relevant to the assessment year as made available otherwise under the statue. The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissible ratio for construction is 5% of the total built up area, reduction of this ratio to 3% of the total built up area has to be necessarily on prospective basis - Criteria to hold this amendment retrospective are are absent as there is no as explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 for Krishna Park project and 18.1.2003 for Prashiddhi Project, the amended provision would have no application for these projects. Such contentions was not accepted and after completing the assessment, claim of appellant regarding the deduction under Section 80IB(10) was disallowed. 3. When questioned before CIT(Appeals), the CIT(Appeals) favoured the assessee following the decision of the Special Bench of Tribunal and allowed the deduction in case of Brahma Associates vs. JCIT reported in 119 ITD 255(PUNE) (SB). Revenue appealed against the said order of CIT(Appeals) where heavy reliance was placed on the judgment of Bombay High Court rendered in the case of Brahma Associates vs. JCIT reported in[2011] 333 ITR 289(Bom.) on the count that such amendment can not be not respected in absence of explicit provision and should be held to have effect retrospectively as were argued before the Tribunal for and on behalf of the assessee that neither the Bombay High Court nor the Special Bench has held that clause (d) of Section 80IB(10) is applicable to those projects, which were approved on or before 31st March, 2005. Both the decisions have held that amendment of Section 80IB(10) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority before 31.3.2005 and the assessment year before the Bombay High Court was 2003-2004 and in such circumstances, the Bombay High Court held that with effect from 1.4.2005, deduction under Section 80IB(10) would be subject to the restrictions set out in clause (d) of Section 80IB(10). 7. It is also further submitted that the Tribunal's interpretation is contrary to the notes on clause to memorandum explaining the substituted provision of Section 80IB(10) with new clause (d) with effect from 1.4.2005. On the basis of approval obtained from 1.4.2005 the assessee is entitled to complete the housing project by 31.3.2008 as per Section 80IB(10)(a)(1). Hence on approval, the assessee would acquire the vested statutory right to claim deduction under section 80IB(10) since deduction is in respect of profits derived in any previous year relevant to any assessment year from such housing project on fulfillment of conditions since projects had commenced prior to 1.4.2005. It is also urged that deduction under Section 80IB(10) of the Act is inseparably linked to the approval and not to the assessment year in which the deduction is claimed. He further urged that the post amendment from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the Apex Court reported in CIT vs. J.H.Gotlareported in (1985)156 ITR 323, wherein it is held that the interpretation should be such that it does not result into absurd result. The Court needs to modify the language used by the Legislature so as to achieve the intention for bringing about the rational result. 8. He also urged this Court that the assessee's claim for deduction under Section 80IB(10) of the Act is supported by ratio of Commissioner of Income-Tax vs. Brahma Associates (supra), irregardless of the fact that the Bombay High Court was concerned with assessment year 2003-04. He urged this Court to set aside the order of Tribunal and answer the question in favour of assessee. 9. Learned Senior Counsel Mr.M.M.Bhatt appearing for the Revenue has heavily relied upon the decision of the Bombay High Court and strenuously urged that the conditions as prevalent on the date when the assessment was carried out shall need to be fulfilled by the assessee. He also further urged that there may be onerous conditions but it is not for the assessee to say that these are onerous conditions and, therefore, they need not apply. According to him, there are two stages. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section(10), before substitution by Finance (No.2) Act, 2004, stood as under: (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 minimum area of one acre; and (c) the residential unit has a minimum 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 fiver hundred square feet at any other place. Section 80IB(10) in the post-amendment period :- (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent. of the profits derived in the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project of five thousand square feet, whichever is higher. 13. Section 80IB(10) originally indicated 100% deduction on the profits derived from housing projects approved by local authority subject to certain conditions set out in the provision. By virtue of the amendment having come into effect from 1.4.2005, deduction is permissible to housing project having residential units with commercial units to the extent permitted therein. 14. It needs to be noted, at this stage that Section 80IB provides for the deduction in respect of profits and gains from certain industrial undertaking other than the infrastructure development undertakings. This Section applies to the industrial undertakings, permitting them to compute the total income after deduction from such profit and gain of an amount equal to such percentage and if such number of assessment years as specified in Section provided fulfillment of certain conditions. 15. The provision as that stood prior to the amendment permitted 100% of the profits if the industrial undertaking develops and builds housing project approved before 31st day of March, 2005, the profit to be derived in any previous year relating to any ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject is on a plot land of minimum area of 1 acre has been in the amended provision liberalized in accordance with the scheme framed by the Central or the State Government. Again, the deduction was available if the built up area for the residential unit does not exceed 1000 feet in the city of Delhi, Mumbai or within 25 kms from Municipal Limit of these cities and 1500 sq.feet at any other place. This 'built up' area appears to have been defined in the amended provision. However, in respect of the housing projects, which have been approved and commenced prior to 1.4.2005, the issue of applicability of this provision is a question that requires to be answered by the Court. 16. As mentioned hereinabove there are two projects of the present appellant, namely, Krishna Park and Prashiddhi Project, in respect of which the assessee has claimed deduction under Section 80IB(10) of the profits earned from these projects. As also noted hereinabove, the Assessing Officer disallowed such deduction and CIT(Appeals) allowed the same. The Tribunal concurred with the Assessing Officer following the decision of the Bombay High Court in Brahma Associates (supra) and denied such benefit to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in dispute that the assessee has kept 10% of COP for its residential project as required under the rules and regulations of the local authority and the area worked out of commercial offices is 5.12% of the total built up area of the project. This bifurcation is indicated in a tabular form in the order of assessment, which is as follows: PROJECT KRISHNA PARK SR.No. Residential Unit (Tenement) Total Built up Area in Sq.ft Area of Plot in Sq.mts. 1 99 Units 89,966 11,197 2 8+4 Shops 4,607 428 TOTAL 94,573 11,625 % of Built-up Area for shops to total Built up Area 4607/94573* 100=5.12% 428/11625* 100=3.68% As far as Prashiddhi project is concerned, it has been developed on an area, which is more than 1 acre. The plan has been approved on 18.1.2003 and BUC has been obtained on 29.12.2004. For tower A1, A2 and B1 and for B2, the BUC was obtained on 30.6.2007. Vide an application dated 20.7.2005. This housing project was approved by the local authority as is apparent form the certificate of the Surat Municipal Corporation and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80 IB(10) of the Act was applicable for assessment year 2005-2006 or whether it applied retrospectively and it noted thus:- Under these facts, it was held by Hon'ble Bombay High Court that with effect from 01-04-2005, deduction u/s. 80IB(10) would be subject to the restriction set out in clause-(d) of Section 80IB(10). The relevant para of this judgment of Hon'ble Bombay High Court i.e. para-25 is reproduced as under:- 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 shops and commercial establishments are included in the housing project, deduction under section 80IB(10) with effect from 1/4/2005 would be allowable where such commercial user does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet whichever is lower. By Finance Act, 2010, clause (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built area of the housing project or fiver thousand square feet whichever is higher. The expression 'included' in clause (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de it clear that though the housing project approved by local authority with commercial user to the extent permissible under the rules and regulations were entitled to Section 80IB(10) deduction, such deduction would be subject to the restriction set out in clause (d) of section 80IB(10) from 1.4.2005. In our opinion, Tribunal has quoted the judgment out of context to deny the said benefit to the appellant erroneously. 21. Neither the assessee nor local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and/or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act being 3% of the total built up area or 5000 sq.feet which ever is higher (now in post 2010 period)or 5% of the aggregate built up area or 2000 sq.feet whichever is less. Revenue is also in error to suggest that even if such conditions are onerous, they are required to be fulfilled. The entire object of such deduction is to facilitate the construction of residential housing project and while approving such project when initially there was no such restriction in taxing st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospectively. Thirdly, it is not open to the Revenue to contend on the one hand that section 80- IB(10) as it stood prior to April 1, 2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from April 1, 2005 should be applied retrospectively. The argument of the Revenue is mutually contradictory and hence liable to be rejected. Thus, in our opinion, the Tribunal was justified in holding that clause (d)inserted to Section 80-IB(10) with effect from April 1, 2005 is prospective and not retrospective and hence cannot be applied to the period prior to April 1, 2005. 24. Karnataka High Court in the case of Commissioner of Income-Tax, Central Circle vs. Anriya Project Management Services (P.) Ltd. reported in [2012] 21 taxmann.com140 (Karnataka) was also examining this provision where the question was whether the definition of 'built-up area' inserted by Finance (No.2) Act, which became effective from 1.4.2005 is prospective or retrospective in nature and it held that the same to be prospective in nature. It held that amendment provision would have no application to housing projects, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it necessitated strict compliance of the provisions and completion of the same within the stipulated time period. 27. The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissible ratio for construction is 5% of the total built up area, reduction of this ratio to 3% of the total built up area has to be necessarily on prospective basis. 28. It would be apt to consider ratio of retrospectivity at this stage. In the case ofCommissioner of Income-Tax vs. Gold Coin Health Food P. Ltd. reported in 304 ITR 308, the Hon'ble Supreme Court of India has held as under : In Zile Singh v. State of Haryana [2004] 8 SCC 1, it was observed as follows : 13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right (page 392). 29. In the case of Commissioner of Income-Tax vs. TVS Lean Logistics Ltd. reported in [2007]293 ITR 432(Mad), the Hon'ble Madras High Court has held as under : In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner only because of harsh consequences arising therefrom. The court cannot enlarge the scope of legislation or intention when the language of the provision is plain and unambiguous, cannot add or subtract words to a statute or read something into it which is not there and cannot rewrite or recast legislation. The language employed in a statute is the determination factor of the legislature event and even assuming there is a defect or any omission in the words used in the legislation, the court cannot correct or make up the deficiency, especially when a literal reading thereof produces an intelligible result and any interpretation which is not permissible and which would be destruction of judicial discipline. 30. In the case of National Agricultural Co-operative Marketing Fede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.H.Gotla(supra) by the Apex Court such strict construction of the statute if leads to absurd interpretation the same may not subserve the intent and object of legislation. 32. Again, as held in the case of Mysore Minerals Ltd. vs. Commission of Income- Taxreported in 239 ITR 775, Apex Court with two possibilities of interpretation of a taxing statute, one which is favourable to the assessee should be always preferred. 33. As also laid down in the case of Bajaj Tempo Ltd. vs. Commissioner of Income- Taxreported in 196 ITR 188 (SC), taxing statute granting incentives for promoting economic growth and development should be liberally construed to facilitate and advance the objectives of the provision. 34. Above discussion cumulatively when examined with the objectives and intent it sought to achieve in bringing about the said provision of Section 80IB(10), this amended taxing statute requires to be interpreted in favour of the assessee rather than insisting upon strict compliance leading to absurdity. 35. It can be also held that this being a substantive amendment and not a clarificatory amendment, the amendment of this nature cannot have retrospective effect. 36. Resultantl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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