TMI Blog2016 (6) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... e in present case since this amendment is prospective and has come into effect from 01.04.2005, this condition would not apply to those housing projects which had been sanctioned and started earlier even if they finished after 01.04.2005 as that of assessee. Also see Veena Developers [2015 (5) TMI 193 - SUPREME COURT ] - Decided in favour of assessee. - ITA Nos. 1343 & 1344/Kol/2012, C.O Nos. 95 & 96/Kol/2012 - - - Dated:- 11-5-2016 - Shri N.V. Vasudevan, Judicial Member, and Shri M. Balaganesh, Accountant Member For the Appellant : none appeared For the Respondent : Shri K.K Chaparia, FCA, ld.AR ORDER Shri M. Balaganesh, AM These appeals of the revenue and cross objections of the assessee arise out of the separate orders of the Learned CIT(A), VIII, Kolkata in Appeal No. 287/CIT(A)- VIII/Kol/11-12 dated 20.6.2012 for Asst Year 2004-05 and Appeal No. 286/CIT(A)- VIII/Kol/11-12 dated 20.6.2012 for Asst Year 2005-06 against the orders of assessment framed u/s 147 / 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). As the issues involved are identical in nature in both the asst years, the same are taken up together and disposed off by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of revenue recognition was accepted. 3.1. It was stated that for claiming the deduction u/s 80IB(10) in AY 2004-05, assessee was required to fulfill only following conditions: a. The undertaking commenced development and construction of the housing project on or after 01-10-1998. b. The project was on size of plot having minimum area on Acre c. The residential unit had maximum built up area of 1500 sq. ft. The assessee stated that it had fulfilled all the three conditions as prescribed in section 80IB(10) as applicable for AY 2004-05. The assessee brought the attention of the Learned AO the amendment brought in by the Finance (No.2) Act 2004 in section 80IB(l0) which was effective from AY 2005-06. As per the amended provisions of the Act, the housing project could not include commercial-area exceeding 2000 sq. ft. It was argued that the company's housing project in which commercial area was included was completed in FY 2003-04 relevant to AY 2004-05. It was also stated that in respect of profit derived from sale of commercial area, the assessee did not claim any deduction u/s 80IB(10) of the Act. The assessee s claim of deduction was restricted only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 29-09-2003. 4.1 The Assessing Officer has not disputed the above facts which is also evident from reasons for issue of notice u/s 148, which is reproduced below: The assessment of M/s RD Estate Resources Ltd for the AY 2004-05 was completed after scrutiny in December 2006 after allowing a deductions of ₹ 3.50 crore u/s 80IB(10) of the Act. It is seen that the project on which deduction u/s 80IB was claimed was commercial cum residential in nature and had commercial units measuring 14088 square feet which is more than the maximum permissible limit of 2000 square feet. Thus the housing project was ineligible for deduction and the allowance of deduction was wrongly claimed by the assessee and allowed by the AO. Thus, I have reason to believe that income chargeable to tax has escaped assessment. Notice u/s 148 of Income Tax Act, 1961 is issued 4.2. The Learned CITA observed that from the above, it is clear that the only reason for disallowance of deduction u/s 80IB(l0) was because of changes bought into section 80IB(l0) w.e.f 01-04-2005 which required that the built-up area of the shops and other commercial establishments included in the housing project do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed any deduction u/s.80IB( 10) of the Act on the income from commercial portion of the housing project. 4.4. With regard to Asst Year 2005-06, the learned CITA observed that the assessee had obtained the approval of the housing project from Kolkata Municipal Corportion on 17.7.2000. The said project consisted of 5 multistoried buildings namely Block A, Block B, Block C, Block D and Block E. The entire project was completed in two phases and the first stage consisted of Block A, Block B and Block C which was completed in Asst Year 2004-05 , whereas the second phase consisted of Block D and Block E was completed in Asst year 2005-06. In Asst Year 2005-06, the construction of Block D and Block E wsa completed on 31.3.2005. These two blocks consisted of 176 flats and individual flat size was less than 1500 square feet of built up area. The total constructed area of these two buildings were 217850 square feet on land measuring 158.54 cottahs equivalent to 2.62 acres. 4.5. The Learned CITA in view of the aforesaid findings and observations and placing reliance on various judicial pronouncements held that that the assessee is eligible for deduction u/s. 80lB( 10) in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IB(10) regarding the built-up area to be used for commercial purpose in the said housing project. As would be noticed later, the extent to which such commercial area could be constructed was as per the local laws under which local authority gave the sanction to the housing project. However, vide clause (d), which was inserted by the aforesaid amendment and made effective from 1-4-2005, it was stipulated that the built-up area of the shops and other commercial establishments in the housing projects would not exceed 5 per cent of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less. Certain other disputes which had arisen between the revenue and the assessees/developers of the housing projects concerning interpretation of sub-section (10) of section 80-IB primarily related to the meaning that is to be assigned to 'housing projects' prior to 1-4-2005 because of the reason that there was no clause (d) earlier and there is no express provision in this sub-section dealing with the consequence of having a commercial establishment within a housing project. One of the requirements contained in sub-section (10) is that in order to be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he local authority in a housing project, it was still treated as housing project and further that while granting 100 per cent deductions, the area covered by shops and commercial establishments was also includible. This position has changed with the insertion of clause (d) to sub-section (10). As per the amendment carried out and made effective from 1-4-2005, even if the local authority had sanctioned larger area for shops and commercial establishment, the benefit of section 80-IB(10) would not be admissible to these asses sees/developers in case the area utilised for shops and commercial establishment exceeded 5 per cent of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less. [Para 6] As already pointed out, the parties are ad idem that the amendment is prospective in nature and, therefore, it operates from 1-4-2005. It has also been mentioned that in the instant appeals, all these assessees had got the housing projects sanctioned prior to 1-4-2005 and the construction of the said housing project also started before 1-4-2005. All other conditions mentioned namely the date by which approval was to be given and the dates by which the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcluded. With effect from 1-4-2001, section 80-IB(10) stipulated that any housing project approved by the local authority before 31-3-2001 was entitled to a deduction of 100 per cent of the profits derived in any previous year relevant to any assessment year from such housing project, provided - (i) the construction/development of the said housing project commenced on or after 1-10-1998 and was completed before 31-3-2003; (ii) the housing project was on a size of a plot of land which had a minimum area of one acre; and (iii) each individual residential unit had a maximum built-up area of 1000 sq.ft., where such housing project was situated within the cities of Delhi or Mumbai or within 25 kms. from the municipal limits of these cities, and a maximum built-up area of 1500 sq.ft. at any other place. Therefore, for the first time, a stipulation was added with reference to the date of approval, namely, that approval had to be accorded to the housing project by the local authority before 31-3- 2001. Before this amendment there was no date prescribed for the approval being granted by the local authority to the housing project. Prior to this amendment, as long as the development/construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From this provisions of section 80-IB(10), it is clear that the housing project contemplated under sub-section (10) of section 80-IB includes commercial establishments or shops also. Now, by way of an amendment in the form of clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 1-4-2005 and completed by the stipulated date, though such stipulated date is after 1-4-2005. [Para 20] These aspects are dealt with by various High Courts elaborately and convincingly in their judgments. This very aspect is answered in the judgment dated 25-7-2014 of the Bombay High Court in IT Appeal Nos. 201 and 308 of2012, wherein, it has been held that section 80-IB(10) is prospective in nature and can have no application to a housing project that is approved before 31-3-2005. As the deduction sought to be claimed under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'housing project' or 'residential plus commercial'. (c) In the absence of any provisions under the Income-tax Act, the Tribunal was not justified in holding that upto 31-3-2005 deduction under section 80-IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user up to 10 per cent of the total built-up area of the plot. (d) Since deduction under section 80-IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting section 80- IB(10) deduction only to a part of the project. However, in the present case, since the assessee had accepted the decision of the Tribunal in allowing section 80-IB(10) deduction to a part of the project, the Court would not disturb the findings of the Tribunal in that behalf. (e) Clause (d) inserted to section 80-IB(10) with effect from 1-4-2005 is prospective and not retrospective and hence cannot be applied for the period prior to 1-4-2005. Held that the Court is in agreement with the aforesaid answers given by the High Court to the various issues. It is only clarified that insofar as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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