TMI Blog2017 (6) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... Yadav- DR ORDER Per Joginder Singh (Judicial Member) The assessee as well as Revenue is in cross appeal against the impugned order dated 07/05/2012 of the Ld. First Appellate Authority, Thane. 2. First, we shall take up the appeal of the assessee in ITA No.4489/Mum/2012, wherein, ground no. 2 pertains to reopening the assessment u/s 147/148 of the Act. During hearing, the ld. Counsel for the assessee, Shri Bhupendra Shah, did not press this ground. Shri Rajesh Kumar Yadav, ld. DR, had no objection to the request of the assessee, therefore, this ground of the assessee is dismissed as not pressed. 3. The only ground remained for consideration is with respect to disallowing the deduction of ₹ 46,59,510/- u/s 80IB(10) of the Income Tax Act, 1961 (hereinafter the Act). The crux of the argument advanced on behalf of the assessee is that the project of the assessee was approved on 17/07/2003 and the assessee applied for completion certificate on 06/07/2005. Our attention was invited to page-84 of the paper book. Reliance was placed upon the decision from Hon'ble jurisdictional High Court in the case of CIT vs Hindustan Samuh Awas Ltd. (2015) 62 taxman.c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to the deduction under Section 80IB(10) of the Act. We may also point out at this stage itself that though Section 80IB has been on the statute book for quite some time, a new Section 80IB had been introduced by the Finance Act, 1999 w.e.f. 01.04.2000. All these cases are covered by the said Section, as introduced. However, insofar as sub-section (10) is concerned, with which we are directly concerned, there have been amendments in that provision from time to time. We are concerned with the amendment to the said subsection carried out by Finance No.2 Act, 2004 w.e.f. 01.04.2005. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01.04.2005 when amended provision has come into operation. It is also not in dispute that the amendment is prospective in nature. Interestingly, when the housing project was approved by a local authority, which is the requirement under sub-section (10) of Section 80IB, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 01.04.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid stipulation contained in clause (d) also has to be satisfied. All the High Courts have held that 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. 4. As there is a commonality of issue and the judgments of the various High Courts have spoken in one voice which are questioned on identical grounds by the appellant Revenue, all these appeals were heard analogously and by this judgment, we propose to answer the question of law involved and as formulated above in order to give quietus to this surging debate. 5. Before we come to the grip of the aforesaid central issue, it would be of some relevance to mention 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 80IB. That dispute primarily related to the meaning that is to be assigned to 'housing projects' prior to 01.04.2005 because of the reason that there was no clause (d) earlier and there is no express provision in this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitions were filed by the Revenue in this Court. All these SLPs have been disposed of by this Court vide order dated 29.04.2015, we would like to reproduce the said order in entirety hereunder: 'All these special leave petitions are filed by the Revenue/Department of Income tax against the judgments rendered by various High Courts deciding identical issue which pertains to the deduction under Section 80IB(10) of the Income Tax Act, as applicable prior to 01.04.2005. We may mention at the outset that all the High Courts have taken identical view in all these cases holding that the deduction under the aforesaid provision would be admissible to a housing project . All the assessees had undertaken construction projects which were approved by the municipal authorities/local authorities as housing projects. On that basis, they claimed deduction under Section 80IB(10) of the Act. This provision as it stood at that time, i.e., prior to 01.04.2005 reads as under: - Section 80IB(10) [as it stood prior to 01.04.2005] (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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respective local authority. (b) In such a case, where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules/Regulation, the deduction under Section 80IB(10) upto 31/3/2005 would be allowable irrespective of the fact that the project is approved as '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 80IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user upto 10% of the total built-up area of the plot. (d) Since deductions under Section 80IB(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 80IB(10) deduction only to a part of the project. However, in the present case, since the assessee has accepted the decision of the Tribunal in allowing Section 80IB(10) deduction to a part of the project, we do not disturb the findings of the Tribunal in that behalf. (e) Clause (d) inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of Section 80IB(10) would not be admissible to these assessees/developers in case the area utilised for shops and commercial establishment exceeded 5% of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less. 7. In the aforesaid scenario, we revert back to the question that is to be answered. We have already pointed out that the parties are ad idem that the amendment is prospective in nature and, therefore, it operates from 01.04.2005. We have also mentioned that in the instant appeals, all these assessees had got the housing projects sanctioned prior to 01.04.2005 and the construction of the said housing project also started before 01.04.2005. All other conditions mentioned namely the date by which approval was to be given and the dates by which the projects were to be completed as on the date when the project was sanctioned, are also met by the assessees. Notwithstanding this position, the argument of Mr. S. Gurukrishna Kumar, learned senior counsel appearing for the Revenue is that amendment w.e.f. 01.04.2005 is retroactive even if not retrospective. He has, thus, endeavoured to draw a fine distinction between the retroactive n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been sanctioned and commenced prior to 01.04.2005. He further argued that vested rights had accrued in favour of such persons which could not be taken away by the amendment. He also advanced various reasons, as would be noted later, necessitating the approach as to why the principle of tax law that the law in force in the Assessment Year is to be applied, insisting that it was a case where departure was needed and such a departure is recognised in certain circumstances, by the courts. He relied upon the judgments of this Court in CIT v. Shah Sadiq Sons [1987] 166 ITR 102/31 Taxman 498 and CIT v. Vatika Township (P.) Ltd. [2014] 367 ITR 466/227 Taxman 121/49 taxmann.com 249 (SC) Senior counsel who appeared for other assessees argued on the same lines drawing our attention to the reasons which are given by the High Courts in the impugned judgments and supporting those reasons. 10. We have given our due consideration to the respective submissions. 11. As pointed out above, the judgment pronounced by the Bombay High Court in Brahma Associates case (supra) has already been upheld by this Court on the interpretation given to the expression 'housing project' occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; in Section 80IB(10) is applicable to projects having only residential units. 23. Once it is held that the local authorities could approve a project to be housing project without or with the commercial user to the extent permitted under the DC Rules, then the project approved with the permissible commercial user would be eligible for Section 80IB(10) deduction irrespective of the fact that the project is approved as 'housing project' or approved as 'residential plus commercial'. In other words, where a project fulfils the criteria for being approved as a housing project, then deduction cannot be denied under Section 80IB(10) merely because the project is approved as 'residential plus commercial'. 24. The fact that the deduction under Section 80IB(10) prior to 1.4.2005 was allowable on the profits derived from the housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under Section 80IB(10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with effect from 1.4.2005, and therefore, that clause cannot be applied for the period prior to 1.4.2005. Secondly, clause (d) seeks to deny Section 80IB(10) deduction to projects having commercial user beyond the limit prescribed under clause (d), even though such commercial user is approved by the local authority. Therefore, the restriction imposed under the Act for the first time with effect from 1.4.2005 cannot be applied retrospectively. Thirdly, it is not open to the revenue to contend on the one hand that Section 80IB(10) as stood prior to 1.4.2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from 1.4.2005 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 80IB(10) with effect from 1.4.2005 is prospective and not retrospective and hence cannot be applied to the period prior to 1.4.2005. 12. The issues dealt with from paras 21 to 25 by the High Court already stands approved by this Court. In para 29, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay. It is ludicrous on the part of the Revenue authorities to expect the assessees to do something which is almost impossible 13. In Reliance Jute Industries Ltd. v. CIT [1980] 1 SCC 139, this Court had, no doubt, pointed out the cardinal principle of tax law that the law to be applied has to be the law in force in the assessment year. However, this is qualified by the exception when it is provided otherwise expressly or by necessary implication, as is clear from the following observations: 6. The assessee claims a vested right under Section 24(2)(iii), as it stood before its amendment in 1957, to have the unabsorbed loss of 1950-51 carried forward from year to year until the loss is completely absorbed. The claim is based on a misconception of the fundamental basis underlying every income tax assessment. It is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication... 14. In the same paragraph, the Court also remarked that 'a right claimed by an assessee under the law in force in a particular assessment year is ordinarily available only in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Everything else remained untouched. Thereafter, by Finance Act, 2003, further amendments were made to Section 80IB(10), which read 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 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. 16. As can be seen from the aforesaid provision, now the only changes that were brought about were that with effect from 1.4.2002: (i) the housing project had to be approved before 31.03.2005; and (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e when the housing project was approved. We, thus, find that the only way to resolve the issue would be to hold that clause (d) is to be treated as inextricably linked with the approval and construction of the housing project and an assessee cannot be called upon to comply with the said condition when it was not in contemplation either of the assessee or even the Legislature, when the housing project was accorded approval by the local authorities. 20. Having regard to the above, let us take note of the special features which appear in these cases: (a) In the present case, the approval of the housing project, its scope, definition and conditions, all are decided and dependent by the provisions of the relevant DC Rules. In contrast, the judgment in Reliance Jute Industries Ltd. (supra) was concerned with income tax only. (b) The position of law and the rights accrued prior to enactment of Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible. (c) The provisions of Section 80IB(10) mention not only a particular date before which such a housing project is to be approved by the local authority, even a date by which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempt 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 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005. 21. These aspects are dealt with by various High Courts elaborately and convincingly in their judgments. It is not necessary to go into the detailed reasoning given by these High Courts. However, we would like to extract the following discussion from the judgment dated 25.07.2014 of the Bombay High Court in ITA Nos. 201 and 308 of 2012, where this very aspect is answered in the following manner: 36. There is yet another reason for coming to the aforesaid conclusion. Take a scenario where an Assessee, following the project completion method of accounting, has completed the housing project approved by the local authority complying with all the conditions as set out in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax by the Assessee. We have come to this conclusion only because we find that clause (d) of section 80-IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/construction of the same, and has nothing to do with the profits derived therefrom. We may hasten to add that if a particular condition is not inseparably linked to the date of approval of the housing project, different considerations would arise. However, we are not called upon to decide any such condition and hence we are not laying down any general proposition of law, save and except that clause (d) of section 80-IB(10), being a condition linked to the date of the approval of the housing project, would not apply to any housing project that was approved prior to 31st March, 2005 irrespective of the fact that the profits of the said housing project are brought to tax after the said provision was brought into force. 22. At this juncture, we would like to quote the following passage from Shah Sadiq sons (supra): 14. Under the Income Tax Act of 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the amended provision could not be applied to those projects which were sanctioned and commenced prior to 01/04/2005 and completed within the stipulated date. The competent authority (CIDCO), in the present appeal approved plan no. CIDCO/VVSR/CC/ BP-3145/W/886 on 17/07/2003. As per the certificate of the architect dated 03/01/2006, the structural work was executed in accordance with the approval. The Hon'ble jurisdictional High Court in Brahma Associated (2011) 333 ITR 289 (Bom.) decided the issue, which has been followed by the Ld. Commissioner of Income Tax (Appeals). The Hon'ble High Court in Brahma Associates held as under:- The expression housing project is not defined under the Act. However, s. 80-IB(10) refers to the housing projects which are approved by the local authorities. Therefore, for the purposes of s. 80-IB(10) which project should be treated as a housing project is left to the local authorities. The expression housing project is not defined even under the DC Rules/Regulations framed by the local authorities. Therefore, which project would qualify to be called as a housing project has to be gathered from the rules/regulations framed by the local a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts having residential units only, because, restriction on the size of the residential unit is with a view to make available large number of affordable houses to the common man and not with a view to deny commercial user in residential buildings. Therefore, the argument of the Revenue that the restriction on the size of the residential unit in s. 80-IB(10) as it stood prior to 1st April, 2005 is suggestive of the fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted. The above conclusion is further fortified by cl. (d) to s. 80- IB(10) inserted w.e.f. 1st April, 2005. Clause (d) to s. 80-IB(10) inserted w.e.f. 1st April, 2005 provides that even though shops and commercial establishments are included in the housing project, deduction under s. 80-IB(10) w.e.f. 1st April, 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, cl. (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-up area of the housing project or five tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plot area would alone be entitled to deduction under s. 80-IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing cl. (d) to s. 80- IB(10) w.e.f. 1st April, 2005. Therefore, it was not open to the Tribunal to hold that prior to 1st April, 2005, projects having commercial user upto 10 per cent of the plot area alone would be eligible for s. 80-IB(10) deduction. (Paras 26 27) In the present case, though the commercial user is more than 10 per cent of the plot area, the Tribunal has allowed s. 80-IB(10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on standalone basis. That would not be proper, because, s. 80-IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in s. 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the project is approved as housing project or residential plus commercial ; Tribunal was not justified in holding that upto 31st March, 2005, deduction under s. 80-IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user upto 10 per cent of the total built-up area of the plot; cl. (d) inserted in s. 80-IB(10) w.e.f. 1st April, 2005 is prospective and not retrospective. The project of the present assessee commenced on 17/07/2003. The assessee applied for completion certificate on 06/07/2005 as is evident from claim of the assessee mentioned in para-2.3 of the impugned order. As per the Revenue, the completion certificate was not issued to the assessee. There is no allegation by the Revenue that the project was not completed, as claimed by the assessee, but merely says that occupancy certificate was not issued to the assessee. Before us, the Ld. Counsel for the assessee invited our attention to the occupation certificate dated 22/12/2009 (page-84 to 86 of the paper book), wherein, there is mention of the grant of occupancy certificate. In such a situation, one fact is oozing out that the project was comple ..... X X X X Extracts X X X X X X X X Extracts X X X X
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