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Deputy Commissioner of Income Tax Versus M/s Bengal Green Field Housing Development Co. Ltd.

2016 (4) TMI 205 - ITAT KOLKATA

Eligibility of deduction u/s 80IB - whether CIT(A) is justified in treating WBIHDCO as Local Authority for allowing deduction u/s 80IB although it does not fall under the categories as defined in Section 10(20) of the I.T.Act? - Held that:- The order of the CIT(A) does not call for any interference. The only reason assigned by the AO for not allowing deduction u/s.80-IB(10) of the Act was since the housing project in question was approved by WBHIDCO and since income of WBHIDCO is not covered by .....

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s of Sec.80-IB(10) of the Act. WBHIDCO has been appointed as a Planning authority in respect of the Planning area of Rajarhat pursuant to notification issued under the WB Town and Country (Planning & Development) Act, 1979. For the purpose of Sec.80-IB(10) of the Act it is natural that the authority in charge of planned developed in an area should be the proper authority to sanction plans for housing project keeping in view the need for planned and organized development. We are of the view that .....

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Per N V Vasudevan, JM This is an appeal by the Revenue directed against the order dated 15.07.2011 of CIT(A)-XII, Kolkata relating to A.Y.2006-07. 2. The grounds of appeal raised by the revenue read as follows :- "1. Whether, on the facts and in the circumstances of the case, ld. CIT(A) is justified in treating WBIHDCO as Local Authority for allowing deduction u/s 80IB although it does not fall under the categories as defined in Section 10(20) of the I.T.Act." 3. The Assessee is a com .....

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its income from construction of a housing project at New Town, Rajarhat,Kolkata was eligible for 100% deduction u/s.80IB(10) of the Income Tax Act, 1961 (Act). The relevant provisions of Sec.80-IB(10) of the Act applicable for AY 2006-07 read as follows: "(10) The amount of deduction in the case of an undertaking developing and building housing projects approved by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from su .....

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om the end of the financial year in which the housing project is approved by the local authority. Explanation. For the purposes of this clause, (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date .....

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is on the size of a plot of land which has a minimum area of one acre: (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city 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; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cen .....

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her sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area. Explanation to Sec.10(20) of the Act defines "Local Authority" for the purpose of Sec.10(20) of the Act as follows: 'Explanation.-For the purposes of this clause, the expression "local authority .....

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WBHIDCO and since income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and the housing project of the Assessee cannot be said to be approved by local authority and therefore the deduction u/s.80-IB(10) of the Act is not admissible. 7. The submission of the Assessee before the AO was that the assessee has fulfilled all the conditions to claim deduction u/s.80-IB(10) of the Act, viz.,: 1. The housing project had commenced during April, 2004. 2. The sanction date of appr .....

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as that the income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and therefore it is not a local authority as envisaged in section 80lB(10) of the Act. 9. In response to the above stand of the AO, the Assessee submitted that in the year 1993, the Kolkata Municipal Development Authority prepared a concept plan that drew the proposal for the New Town. A layout plan was then prepared on the basis of a plane table survey of the acquired land and in accordance with the norm .....

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amp; Country (Planning and Development) Act, 1979 which reads as under: "The State Government may, by notification, for such period and on such terms and conditions as may be specified, empower a Planning Authority or a development Authority or any other authority to regulate building operation within the Planning Area, and to impose fees for such purpose, and in such manner, as may be prescribed." Thus, the state Government may, by notification, declare any area in West Bengal to be a .....

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eal of the Hon'ble Governor vide order dated 14.9. 1999. Relevant portion of the notification was as follows: 'In exercise of the power conferred by. sub-section (4) of section 11 of the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal XIII of 1979), the Governor is pleased to appoint the West Bengal Housing Infrastructure Development Corporation Ltd. (HIDCO) as the Planning Authority in respect of the Planning Area declared as such under Notification No 142 .....

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district Name of Police Station J.L. Nos North 24 Parganas Rajarhat 11,12,13,14,15,16,19, 20,21,22,23,24,25,33, 34,35,36 & 55 South 24 Parganas Bhangar 2,3,8,9 and 10 10. The Assessee pointed out that from the above, it would be clear that WBHIDCO had been notified as the local housing authority and any Housing Project would require approval from the said authority for its development in the specified area mentioned in the notification. The Assessee submitted that it has taken due approval f .....

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ecific definition or meaning has been assigned to the expression 'Local authority' in section 80lB(10) of the Act. It was submitted that the expression 'local authority' has nowhere been defined in the Act for the purpose of Sec.10(20) of the Act. A bare perusal of the provisions of section 801B(10) of the Act would make it clear that no reference to explanation to section 10(20) has been made in the section. The situation being so, the reference made by the A O. to section 10(20 .....

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s submitted that meaning of an expression should be assigned with reference to the purpose for which it had been laid down and the same should not be stretched further to defeat the said purpose. It was submitted that it was a well settled rule of construction that in construing the provisions of beneficial legislation the court should adopt the construction which advances, fulfils and furthers the object of the Act rather than one which would defeat and render the benefit illusory. A beneficial .....

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o avail of the tax exemption with regard to the housing project, the assessee has to fulfill all the conditions laid down under the beneficial provision of section 80-IB(10) of the Act and it would be sufficent if approval for the development of the housing project is taken from WBHIDCO because WBHIDCO has been appointed as the local housing authority capable of granting the same, as per notification mentioned supra. 14. It was also submitted that the term 'local authority' in common par .....

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development of housing projects in Rajarhat area. There is no other local authority except WBHIDCO which is capable of sanctioning the development of the housing projects in the New Town, Rajarhat. WBHIDCO is the sole authority without the approval of which development' of housing projects in the Rajarhat area cannot take place. In other words, in the assessee's case, for the purpose of section 80IB(10), WBHIDCO is the 'local authority' and approval from the some would be suffic .....

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e explanation to section 10(20), does not arise at all. 15. The CIT(A) agreed with the contentions raised on behalf of the Assessee and he held as follows: "After careful consideration of the above submission and assessment order it is noticed that Sec.10(20) defines local authority which is for the specific purpose of that clause which is very evident from plain reading of Sec.10(20) of I.T.Act, 1961. The Govt. of West Bengal appointed the West Bengal Housing Infrastructure Development Cor .....

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y within the meaning of Sec.80-IB(10) of I.T.Act, 1961 and A.O is directed to allow deduction u/s.80-IB as claimed by the assessee. therefore, the ground Nos. 1 to 3 are allowed." 16. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. The grounds of appeal raised by the Revenue before the Tribunal reads thus: "1) Whether, on the facts and in the circumstances of the case, Ld.CIT(A) is justified in treating WBHIDCO as Local Authority .....

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h in the case of Sreevatsa Real Estates P.Ltd. vs ITO (2011) 9 ITR (Trib.) 808 wherein on identical facts the Tribunal held that the Village Administrative Officer was competent authority for approval of plans for the purpose of Sec.80-IB(10) of the Act. He also relied on the submissions made before the CIT(A) and the order of the CIT(A). 19. We have given a careful consideration to the submissions made on behalf of the Assessee and perused the orders of the AO and CIT(A) and other relevant mate .....

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