TMI Blog2014 (2) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... ible limit - the assessees had started the project in the year 2001 when sub-clause (d) to Section 80IB(10) was not in existence, hence it cannot be applied on such projects - By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005, the Legislature always intended that the project must be approved by the local authority - thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved – thus, the amended provisions under Section 80 IB(10) w.e.f. 1.4.2005 are not applicable and the assessees are eligible for the claimed deduction u/s 80 IB (10) of the Act – Decided in favour of Assessee. - ITA No. 219/PN/2009, ITA No. 17/PN/2009 - - - Dated:- 31-5-2011 - Shri I. C. Sudhir (JM) And Shri D. Karunakara Rao (AM),JJ. For the Appellant : Shri S. U. Pathak For the Respondent : Shri Hareshwa Sharma/ Abhay Damle ORDER Per I. C. Sudhir, J. M. In these appeals, the assessees have questioned first appellate order on common grounds. These appeals have been heard together and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O found that there were 32 shops in the project admeasuring 5960 sq.ft. According to the A.O, the words Housing Project mean purely residential project which cannot include the area for commercial establishments/shops. The Legislature, amended the Section w.e.f. 1.4.2005 wherein it is provided that in the housing project, the built up area of the commercial premises should not exceed 2000 sq.ft. or 5% of the total built up area, whichever is less. The Ld CIT(A) has upheld the action of the A.O. which has been questioned before us. 7. The contentions raised before the authorities below have been reiterated by the Ld A.R. before us. The main thrust of his argument remained that the project in question was commenced prior to the amendment and thus, the question of application of the amended provisions is not justified. He submitted that prior to the said amendment in Section 80 IB(10) w.e.f. 1.4.2005, there was no restriction on the area for commercial purpses. By Finance Act 2004, the Legislature provided a ceiling of 2000 sq.ft. or 5% of the total area whichever is less. Hence, if a project was commenced prior to A.Y. 2005-06, there is no limit prescribed and accordingly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction has started and completed before 1.4.2005, the Ld. A.R.pointed out that the issue is directly covered by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V. v/s. DCIT, ITA No. 5416/Mum/2009 (A.Y. 2006-07) dt. 30th March 2010 (copy supplied). He submitted that on an identical issue in the case of Hiranandani Akruti J.V. (supra), the Tribunal has held that the amended Section would apply to the projects started after 1.4.2005. The basic reason given by the Bench is that if the project is commenced earlier, the assessee had not known that the Legislature would put such a restriction in future. The Tribunal in this regard has placed reliance on the decision of Hon ble Supreme Court in the case of CIT v/s. Shah Sadiq and Sons, 166 ITR 102 (SC) for the proposition that accrued rights are saved unless they are expressly taken by repealing Statute either expressly or by implication. The Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V. v/s. DCIT (supra) has also considered the Special Bench decision in the case of Brahma Associates now upheld by the Hon ble jurisdictional Bombay High Court vide its order dated 22.2.2011 (Supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the old Section, there was no limit prescribed on the commercial area at all. The deduction was eligible in the case of a Housing Project and Special Bench of the Tribunal in the case of Bramha Associates (supra) now upheld by Hon ble Bombay High Court, vide its order dated 22.2.2011 (Supra), has held tha the term Housing Project could mean Residential and Commercial project and not only a purely residential project. Hence, the assessees were given an assurance by the Legislature that the profits from the project would be eligible for deduction even if, the project contained commercial portion and the approval is obtained before 1.4.2005. Thus, when the assessees complied with the above conditions, the deduction has to be given on the basis of promissory estoppal also. In this regard, he cited following decisions : 1) Motilal Padampat Sugar Mills Co. Ltd. v/s.State of U.P., 118 ITR 326 (SC). 2) Estate of Punjab v/s. Nestle India Ltd., 269 ITR 97 (SC) The Ld A.R. submitted that the new Section 80IB(10) is introduced w.e.f.1.4.2005 but the scheme is the same as in the old Section. There is no indication that the Legislature decided to withdraw the benefits as per the old Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT, 120 ITR 921(SC) 14. He also relied upon the following decisions holding that the law applicable as on 1st April should be applied : 1) CIT v/s. Isthmian Steamship Lines, 20 ITR 572 2) Karimtharuvi Tea Estate Ltd. v/s. State of Kerala, 60 ITR 262 (SC) 3) Reliance Jute Industries Ltd., v/s. CIT, 120 ITR 921 (SC) The Ld. D.R. submitted further that the Special Bench in the case of Brahma Associates (supra) has decided the issue that the amended Section applies from A.Y. 2005-06. The Ld. D.R. submitted further that in the Hiranandani Akruti J.V. case (supra), the decision of the Special Bench in the case of Bramha Associates (supra) has not been considered, hence it should not be followed. He submitted that the amended provisions refer to all projects approved before 31.3.2007 and does not differentiate between Housing Project approved before 2004 or 2003. He referred clause (a) to sub-section (10) to Sction 80IB of the Act and submitted that had the Legislature wanted to make a distinction between projects commenced prior to 1.4.2005 and completed after the amendment by introducing clause (d) to Sec. 80IB(10) then the Legislature would have said so in clear terms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers v. Ragubir Son, 178 ITR 548 (SC) and of Hon ble Bombay High Court decision in the case of CIT v/s. Goodlass Nerolac Paints Ltd., 188 ITR 1 (Bom) that decision in the case of Hiranandani Akruti J.V. must be followed. The Ld. A.R. also submitted that deduction allowed u/s. 80 IB(10) is an incentive provision and hence it has to be interpreted liberally as held by the Hon ble Supreme Court in the case of Bajaj Tempo Ltd. v/s. CIT, 196 ITR 188 (SC). 17. Considering the above submissions, we find that there is no dispute on facts. The only issue for our adjudication is as to whether amended provisions of Section 80IB (10) came w.e.f. 1.4.2005 is also applicable on the project already approved and started in earlier years as per the then prevailing law.. The case of the assessee remained that the project in the case of D.S. Kulkarni Associates started in April 2001 and completed in November 2003. Similarly, the project in the case of Opel Shelters commenced on 23.2.2001 and was completed by 21.6.2002. The submission of Ld. A.R. also remained that the issue raised in the present appeals is fully covered by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Ak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject. Let us assume that the Assessee complies with all the conditions for allowing relief u/s. 80-IB(10) i.e. it is approved as a housing project by the local authority but the area of commercial space as approved by the local authority is more than 2000 sq.ft. The Assessee commences the project but is able to complete only in the previous year relevant to AY 05-06. As per the change in law from AY 05-06 with regard to the area of commercial space in a housing project the Assessee would loose his eligibility to claim deduction. In such cases there is definitely grave hardship to the Assessee. The interpretation sought to be canvassed by the learned D.R will also lead to absurd situation. Let us assume an Assessee obtains approval of a housing project prior to 1-4-2005 say in previous year relevant to AY 02-03. He builds commercial space in excess of 2000 Sq.ft. in the housing project. He follows percentage completon method of accounting and offers profits in AY 02-03 to 04-05, claims exemption u/s. 80-IB(10) and is allowed exemption. On the same project in AY 05-06, the Assessee would not get the benefit of Sec. 80-IB(10). We therefore find no grounds to take a view different fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s. 80-IB(10) of the Act has to pass the test laid down by the special Bench as above. We therefore set aside the order the CIT(A) and remand the issue to the AO for the limited purpose of satisfying himself as to whether the Assessee would be entitled to deduction on the profits derived on developing and building housing projects as per the ratio laid down by the Special Bench referred to above, while computing total income and if so to what extent. For statistical puroses, the appeal is treated as allowed. 18. The Hon ble Bombay High Court has been pleased to approve the aforesaid decision of Special Bench in the case of Brahma Associates vide order dated 22.2.2011 in ITA No. 1194 of 2010. The concluding para no. 30 of the decision of the Hon ble High Court is being reproduced hereunder : 30. In the result, the questions raised in the appeal are answered thus :- a) Upto 31/3/2005 (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 DC Rules / Regulations framed by the respective local authority. b) In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, we also find strength from this plea of the Ld. A.R. which was also raised before in the case of Hiranandani Akruti J.V. that if the assessee had followed WIP (Work-in-progress) method, the income from the project would have been taxable in the earlier years as the project was completed earlier to the amendment and in that case, as per the old provision the assessee would have been eligible for the deduction. But, just because the assessee has followed the Project Completion method, in these cases, the deduction is being denied because it falls in A.Y. 2005-06. In our view the newly inserted clause (d) to Section 80IB(10) will not apply on the projects approved upto 31.3.05 since in those projects assessees are required to construct what has been approved. The only fissible compliance is required to be met as per the harmonious interpretation of Section 80IB(10) as amended is to complete such projects (approved before 1.4.2004) on or before 31.3.2008. In the cases before us the projects have been completed well before this date. Putting of such condition of time limit is well understood. Since the legislature intended the completion of projects within a time frame to avoid incon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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