TMI Blog2017 (4) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... or the reason, that applicability of statutory provision has to be examined in the light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. Thus questions (i) and (ii) are answered in favour of Assessee for the reason that specifications of flats have been considered by Tribunal in the light of rules of local bodies which approved plan. There was no otherwise restriction available in Section 80-IB(10) in respect of projects approved before 01.04.2005. - Decided in favour of Assessee Built up area of shops and other commercial establishment - Held that:- As considered applicability of amended provisions of Section 80-IB in the context whether subsequent amendment proposed to alter condition of Developer may cause a serious detriment in the process of construction and development activities. For example, if as per extent rules of local body, shops and commercial activities construction was permitted upto 10% and project was also sanctioned to Assessee allowing 10% area for commercial purposes, by applying amended provision which came into force on 01.04.2005, can it be said that Assessee has now to demolish extra coverage, mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined by Tribunal in the light of other questions answered above by this Court. - Income Tax Appeal No. 9 of 2014, Income Tax Appeal No. 16 of 2014, Income Tax Appeal No. 13 of 2017 - - - Dated:- 7-4-2017 - Hon'ble Sudhir Agarwal And Hon'ble Ravindra Nath Mishra-II, JJ. For the Appellant : Ghan Shyam Chaudhary For the Respondent : Dhruv Mathur JUDGMENT ( Delivered by Hon'ble Sudhir Agarwal, J. ) 1. Heard Sri Alok Mathur, Sri Ghan Shyam Chaudhary and Sri Manish Misra, learned counsel for appellant and Sri J.N. Mathur, Senior Advocate assisted by Sri Dhurv Mathur, learned counsel for respondent. 2. All these appeals have come up at the instance of Commissioner of Income Tax/Principal Commissioner of Income Tax (hereinafter referred to as CIT/Pr. CIT ). 3. Income Tax Appeals No. 9 and 16 of 2014 were heard and judgment was reserved on 03.03.2017. Income Tax Appeal No. 13 of 2017 was heard on 06.03.2017. Since substantial questions of law raised therein were similar as involved in other two appeals and judgment was already reserved, hence learned counsel for parties adopted earlier arguments, and judgment was reserved on 06.03.2017. 4. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law:- (i) Whether on the facts and circumstances of the case ITAT has erred in holding that Assessee is eligible for claim of deduction u/s 80-IB(10) of the Income Tax Act, while relying on its earlier order passed in the A.Y. 2007-08. (ii) Whether ITAT while allowing claim of deduction u/s 80-IB(10) to Assessee, has failed to appreciate that Assessee has failed to meet out requirement of provisions of section 80-IB(10) inasmuch as the built up area exceeds 1500 sq. ft., the housing project has not been completed by due date 31.03.2008, the built up area of commercial establishment exceed 5% of built up area or 2000 sq. ft., whichever is less, and the accounting for computing income exempt u/s 80-IB was not correct. (iii) Whether cryptic order passed by ITAT by simply relying on its earlier order for the A.Y. 2007-08 and not discussing and deciding the facts of the year in question, is not bad and against the settled tenets of law. 8. In third appeal, i.e., Income Tax Appeal No. 13 of 2017, substantial questions of law raised though are substantially covered by questions already raised in aforesaid two appeals but since differently worded, hence to put rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceeds 1500 sq. ft. which is in contravention of Section 80-IB(10)(c). It further held that Assessee must have satisfied requirement of Section 80-IB(10)(a)(i) of Act, 1961, which it did not. It also held that Assessee does not fulfill requirement of Section 80-IB(10)(d) and in this backdrop, claim of deduction under Section 80-IB of ₹ 1,02,39,639/- was rejected. Assessment order was finalized on 14.12.2009 for a total income of ₹ 1,81,79,090/-. 11. Assessee preferred appeal before Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT(A) ) which was allowed by CIT(A) vide order dated 25.02.2013 and deduction under Section 80-IB(10) claimed by Assessee was affirmed. Thereagainst, Revenue preferred appeal before Tribunal. It has been dismissed vide judgment and order dated 29.11.2013 which is under appeal. Income Tax Appeal No. 16 of 2014 12. Return of income was filed on 27.11.2006 declaring total income of ₹ 56,77,029/-. Assessee claimed exemption under Section 80-IB of Act, 1961 for ₹ 1,60,10,118/-. Assessment was completed under Section 143(3) for income of ₹ 2,21,07,330/- vide order dated 26.12.2008. Assessee disallowed dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 31.03.2006 i.e. within Financial Year 2005-06 (Assessment Year 2006-07). He further urged that any subsequent approval would not extend period of completion of Project. Built-up area would have to be examined in the light of sale deeds executed by Assessee with purchasers of residential units. Assessee had sold total built-up area including extended area of terrace as a complete flat and such built-up area sold (including terrace) exceeded 1500 sq. ft. Tribunal erred in law by looking into bye-laws of LDA stating that only 50% of open area/balcony would be considered for built-up area. When Assessee has sold entire built-up area including extended area of terrace, it should have been considered as unit area sold by Assessee. 17. Sri Mathur also contended that no evidence was filed by Assessee to show that commercial area was not in excess to 5% of total built-up area. In this regard, even bye-laws of LDA were not brought on record. 18. Sri Mathur stressed his point urging that project was not completed within the time prescribed. Completion certificate was also not submitted. Hence deduction under Section 80-IB(10) was not admissible. It is contended that even till 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Finance Act, 1999 into Sections 80-IA and 80-IB w.e.f. 01.04.2000. Sub-section 10 of 80-IB, as it was brought on statute book w.e.f. 01.04.2000, reads as under:- (10) The amount of profits in case of an undertaking developing and building housing projects approved 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 and completes the same before the 31st day of March, 2001; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (c) the residential unit has a maximum 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 five hundred square feet at any other place. (emphasis added) 24. Vide Finance Act, 2000 w.e.f. 01.04.2001, a minor amendment was made but instead of simply mentioning amendment, we find it appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s added) 27. Again Board's circular no. 7/2003 dated 05.09.2003 was issued and reason for omission of time-limit for completion of project was explained that it was done to rationalize the provision and this amendment has been made effective retrospectively w.e.f. 01.04.2002 so as to make applicable to Assessment Year 2002-03 and subsequent years. 28. Sub-section 10 was substituted by Finance Act, 2004 w.e.f. 01.04.2005. It reads as under:- 80-IB(10) : The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the 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 and completes such construction,- (i) in a case where a housing project has been, approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) such undertaking commenced or commences development and construction of housing project on or after 01.10.1998; (c) size of plot of land must be minimum 1 acre, for Project; (d) residential unit must have maximum built-up area of 1000 sq. ft. if Project is in Delhi or Mumbai or within 25 kms. from municipal limits of these cities, and in other places 1500 sq. ft. 31. The provisions as amended w.e.f. 01.04.2005, made certain drastic changes, i.e.:- (a) The requirement of date of approval was extended to 31.03.2007 instead of 31.03.2005. (b) A condition with regard to completion of project was reintroduced. It provides, if project was approved before 01.04.2004, it must have completed on or before 31.03.2008. If approved on or after 01.04.2004, it must complete within four years. (c) The explanation provides that completion of construction means the date on which completion certificate is issued by local authority. (d) If more than one approval has been granted, it is the first approval which will be relevant. (e) The built-up area of shops and commercial establishment including housing project does not exceed 5% of the aggregate built-up area or 2000 sq. ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified date by which undertaking must commence developing and construction work, as also providing for minimum area of plot of land on which such project would be put up as well as maximum built up area of each residential unit to be located thereon. Section 80-IB nowhere contemplates that only those developers would receive deduction who own the land. Court said that Section 80-IB(10) does not requires that ownership must vest in 'Developer' so as to qualify for deduction. 35. Secondly the term 'Developer' has been understood in common parlance as well as in legal sense carrying a wider connotation. When a developer proceeds to make construction and sell residential unit, it is not a mere Contractor. 36. In Commissioner of Income Tax Vs. Moon Star Developers [2014] 367 ITR 621 (Gujarat) and Commissioner of Income Tax Vs. Sahajanand Associates [2014] 367 ITR 645 (Gujarat), issue of ownership of land by Developer was considered and reiterated holding that it is not one of requirements of Section 80-IB(10), hence irrelevant for the purpose of considering whether Developer is entitled for deduction or not. 37. When we consider facts of our case in the backdrop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment. This measurement as per Valuation Cell made in relation to Assessment Year 2009-10 is as under:- S. No. Type of Flats Built up area in Square meter Built up area in Square feet 1 A1 142.93 1537.93 2 A2 141.26 1519.96 3 B 137.99 1484.77 4 C1 132.44 1425.05 5 C2 128.18 1379.22 6 D 89.62 964.31 42. Aforesaid measurement included open area of balcony also. Assessee claimed that before 01.04.2005, open area of balcony, i.e., terrace was not included in the built up area of residential units. It also pointed out that as per rules of LDA who sanctioned project, only 50% area of open balconies is included in built up area . Approved plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s added) 46. Similar view was taken in another judgment of Karnataka High Court in CIT Vs. G.R. Developers in ITA No. 355 of 2009; Bombay High Court in CIT Vs. Brahma Associates 2011 (333) ITR 289 (Bombay); Tribunal's Pune Bench in CIT Vs. Tushar Developers in ITA No. 165/PN/2007, decided on 31.05.2011; and; Mumbai Bench of Tribunal in Haware Construction Pvt. Ltd. Vs. ITO (2011) 64 DTR 251 (Mumbai). 47. The applicability of Section 80-IB(14) in respect of projects which were approved before 01.04.2005, has been considered specifically in Commissioner of Income Tax-19, Mumbai Vs. Sarkar Builders, 2015 (7) SCC 579 and Court said that its application retroactively would result in absurdity which cannot be accepted or applied. Para 24, 25 and 26.2 are reproduced as under:- 24. Prior to insertion of Section 80-IB(14)(a), in many of the rules and regulations of the local authority approving the housing project built-up area did not include projections and balconies. Probably, taking advantage of this fact, builders provided large balconies and projections making the residential units far bigger than as stipulated in Section 80-IB(10), and yet claimed the deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Section 80-IB(10)(d). In Commissioner of Income Tax-19, Mumbai Vs. Sarkar Builders (supra), similar question of law came to be considered before Supreme Court, quoted in para 3 of judgment, reads as under:- Whether Section 80-IB(10)(d) of Act, 1961 applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005? 51. Supreme Court referred to a decision of Bombay High Court in CIT Vs. Brahma Associates (supra) wherein Court answered this question and para 30 of High Court's judgment has been quoted in para 5 of Supreme Court's judgment and reads as under:- 5. On the basis of this discussion, after modifying some of the directions given by ITAT, the conclusions which are arrived at by the High Court are as follows: 30. In the result, the questions raised in the appeal are answered thus:- a) Upto 31.03.2005 (subject to fulfilling other conditions), deduction under Section 80-IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under DC Rules/Regulations framed by the respective local authority. b) In such a case, where the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from 01.04.2005, and this legal position is not disputed by the Revenue before us. What follows from the above is that prior to 01.04.2005, these developers/assessees who had got their projects sanctioned from the local authorities as housing projects , even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100% deduction of their income from such projects under Section 80-IB of the Act. Their projects were sanctioned much before 01.04.2005. As per the permissible commercial user on which the project was sanctioned, they started the projects and the date of commencing such projects is also before 01.04.2005. All these assessees were made known of the provision by which these projects are to be completed as those dates have been specified from time to time by successive Finance Act in the same provision Section 80-IB. In these cases, completion dates were after 01.04.2005. Once they arrange their affairs in this manner, the Revenue cannot deny the benefit of this section applying the principle of retroactivity even when the provision has no retrospectivity. (emphasis added) 54. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, with the amendment of Section 80-IB(10) by Finance Act, 2003, not only Assessee got included within beneficial ambit of Section 80-IB(10) but even condition of completion of project disappeared. This condition came to be reintroduced w.e.f. 01.04.2005. 60. Thus, it is not a new condition. It cannot be said that it was inserted for the first time by Finance Act, 2004. In fact, this condition was there altogether but for a small period from 01.04.2002 to 31.03.2005, it remained out of statute book. Otherwise, it was consistently there and governed deduction under Section 80-IB(10). It is not a condition which made things impossible but gives sufficient time to Assessee to complete project, i.e., upto 31.03.2008. 61. This aspect has been considered in detail by Madhya Pradesh High Court (Jabalpur) in Income Tax Appeal No. 40 of 2012, The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality and other connected appeals, decided on 21.08.2015. It has been held that no Developer can claim vested right to complete housing project in indefinite period. Right arising from Section 80-IB(10) is coupled with the obligation or duty to complete project in specified time frame. If a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facto certificate or such certificate issued by the Local Authority after the cut off date, would not only result in rewriting of the express provision and run contrary to the unambiguous position pronounced in the Section, but also doing violence to the legislative intent. For, Explanation (ii) will then have to be read as date of completion of construction of the housing project shall be taken to be the date as certified by the Local Authority in that behalf , irrespective of the date of issuance of such certificate by the Local Authority. Indeed, in a given case if the assessee is able to substantiate that the completion certificate was in fact issued by the Local Authority before the cut off date, but could not be produced by him within time due to reasons beyond his control, the argument of substantial compliance of the provision can be tested. Any other interpretation would result not only in uncertainty (in finalization of assessment proceedings due to non-issuance or delayed issuance of such certificate by the Local Authority and prone to manipulations at the end of the Local Authority); but also have to yield to the subjective satisfaction of the Assessing Authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question was completed by Assessee within specified time, cannot be examined at this stage since Tribunal has not looked into this aspect of the matter and this is a question of fact, hence, in our view, this aspect would now have to be examined by Tribunal. 67. Now we take up questions (i) and (iii) in Income Tax Appeal No. 16 of 2014 and questions (i), (ii) and (vi) in Income Tax Appeal No. 13 of 2017. In this regard, contention of learned Counsel for Revenue is that judgments of earlier Assessment Years which were also subject to appeal in this Court, ought not have been followed blindly by Tribunal. Instead it should have looked into relevant aspects independently. We find it difficult to accept the submission. If in resepct of certain questions between same parties, a particular view has been taken by Tribunal in one Assessment Year, in the absence of any relevant circumstances otherwise, it is not appropriate for Tribunal to re-examine the matter. Instead, it must follow its view already taken. In Director of Income Tax (International Taxation) Vs. Credit Agricole Indosuez [2015] 377 ITR 102 (Bombay), Court said that in matters of tax, justice requires that there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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