TMI Blog2013 (8) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 is squarely applicable to the facts of this case as the approval from statutory authorities have been received during 2003 i.e., before 1st April 2004 and construction done in F.Y. 2004-05,exactly fits into the provisions of 80IB(10)(a)(i). 2.2 The Id. CIT(A) failed to note that the said amendment explicitly mentioned in the provision that such undertaking has commenced or commences development and construction of the housing project on or after 1 st day of Oct. 1998 and completes such construction - in a case where a housing project has been approved by the local authority before the 1 st day of April 2004, on or before 31st day of March 2008 . 2.3 It is submitted that the CIT(A) 's order relied upon its own decision in the assessee's own case for the Asst. Year 2006-07 in ITA No. 381/2011-12 dated 07-09-2012 has not become final and further appeal to the ITAT have been preferred. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Commissioner of Income Tax (Appeals) may be set aside and that of Assessing Officer restored. 3. The brief facts of the case are that the Assessing Officer disallowed cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allowed appellant's appeal on the issue of claim under section 801B. The relevant extract by order dated 07.09.2012 in appellant's own case for assessment year 2006-07 in ITA No. 381/2011-12 is reproduced as under: .. The issue for consideration on merits that been raised by the appellant is regarding the statutory amendment that took place u/s 801B (10) by inserting subsection(d) u/s 80IB(10)(d) w.e.f. 01.04.2005 from the AY 2005-06 has to be only prospective and it cannot be retrospective. In this regard it has been submitted that the appellant took approval from the statutory authorities for the project vide approval of Town Panchayat dated 19.12.2003 which is much before the amendment to section 80IB(10) with regard to the limit of commercial came into effect. The Assessing Officer's contention that the amendment is w.e.f 01.04.2005 which only provided for certain area of construction of commercial portion and there were no scope to have commercial portion prior to the amendment. The appellant has relied on the following decisions : (i) Brahma Associates v. Joint Commissioner of Income- tax- 122 TTJ 433 as approved by Bombay High Court in 333 ITR 289. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (d) providing that the maximum permissible limit for commercial area was only 2000 sq ft, therefore, the assessee was not entitled to deduction u/s 80IB(10). The contention of the assessee was that the amendment to section 80IB(10) brought by insertion of clause(d) was by the Finance Act, 2005 with effect from 1.4.2005 and was applicable from assessment year 2005-06 in respect of projects approved after 1.4.2005. Since the assessee s project was approved by Town Panchayat vide approval dated 19.12.2003, the amendment made to section 80IB(10) was not applicable in the case of the assesse and therefore, the assessee was entitled to deduction u/s 80IB(10) of the Act. 8. The CIT(A) accepted the contention of the assessee and allowed relief to the assessee on the ground that the Hon'ble Bombay High Court in the case of CIT vs Brahma Associates, 333 ITR 289, has held that the amendment made to section 80IB(10) was prospective and hence applicable from assessment year 2005-06. 9. We find that on the issue whether the amendment made to section 80IB(10) by insertion of clause(d) with effect from 1.4.2005 was applicable in respect of the housing projects which have been approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T reported in 119 ITD 255(PUNE) (SB). Revenue appealed against the said order of CIT(Appeals) where heavy reliance was placed on the judgment of Bombay High Court rendered in the case of Brahma Associates vs. JCIT reported in[2011] 333 ITR 289(Bom.) on the count that such amendment can not be not respected in absence of explicit provision and should be held to have effect retrospectively as were argued before the Tribunal for and on behalf of the assessee that neither the Bombay High Court nor the Special Bench has held that clause (d) of Section 80IB( 10) is applicable to those projects, which were approved on or before 31st March, 2005. Both the decisions have held that amendment of Section 80IB(10) is applicable prospectively. The Tribunal, after discussing the case laws on the subject, concluded that the assessee is not eligible for deduction under Section 80IB (10) because it did not comply with the requirement of Clause (d) of Section 80IB(10), which is applicable from 1.4.2005 regardless of date of approval. It was further stated that this would be applicable to all those projects, which were approved by the competent authority. In respect of even those housing projects a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (d) with effect from 1.4.2005. On the basis of approval obtained from 1.4.2005 the assessee is entitled to complete the housing project by 3 1.3.2008 as per Section 80IB(10)(a)(1). Hence on approval, the assessee would acquire the vested statutory right to claim deduction under section 80IB(10) since deductionis in respect of profits derived in any previous year relevant to any assessment year from such housing project on fulfillment of conditions since projects had commenced prior to 1.4.2005. It is also urged that deduction under Section 80IB(10) of the Act is inseparably linked to the approval and not to the assessment year in which the deduction is claimed. He further urged that the post amendment from 1.4.2005 word approved before 31st day of March, 2007 can only mean approval from 1st April, 2005 to 31st March, 2007 when compared to pre-amended provision of Section 80IB(10) of the Act. It is also urged that the assessee gets time to complete housing project by 3 1.3.2008 in consonance with the approval before 1st day of April, 2004, therefore, conditions of approval prior to 1.4.2005 would remain intact till 31.3.2008, the cut off date for completion. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-Tax vs. Brahma Associates (supra), irregardless of the fact that the Bombay High Court was concerned with assessment year 2003-04. He urged this Court to set aside the order of Tribunal and answer the question in favour of assessee. 9. Learned Senior Counsel Mr.M.M.Bhatt appearing for the Revenue has heavily relied upon the decision of the Bombay High Court and strenuously urged that the conditions as prevalent on the date when the assessment was carried out shall need to be fulfilled by the assessee. He also further urged that there may be onerous conditions but it is not for the assessee to say that these are onerous conditions and, therefore, they need not apply. According to him, there are two stages. The first is of approval of plan to construct where the interest of assessee would begin. Second terminal is the completion of construction. He also further urged that the income which aggregate before the completion of the project shall have to be recorded and all conditions be cumulatively considered. He sought to rely upon following judgments to substantiate his submissions: 1. Commissioner of Income-Tax vs. Gold Coin Health Food P. Ltd. reported in 304 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction 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 minimum area of one acre; and (c) the residential unit has a minimum 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 fiver hundred square feet at any other place. Section 80IB(10) in the post-amendment period :- (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 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 proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. 14. It needs to be noted, at this stage that Section 80IB provides for the deduction in respect of profits and gains from certain industrial undertaking other than the infrastructure development undertakings. This Section applies to the industrial undertakings, permitting them to compute the total income after deduction from such profit and gain of an amount equal to such percentage and if such number of assessment years as specified in Section provided fulfillment of certain conditions. 15. The provision as that stood prior to the amendment permitted 100% of the profits if the industrial undertaking develops and builds housing project approved before 31st day of March, 2005, the profit to be derived in any previous year relating to any assessment year from such housing project subject to certain conditions. Assessee needs to commence the development in construction on or after 1st day of October, 1998 with the project on the size of a plot of land, which has a minimum of 1 acre of land and the residential unit has a maximum built up area of 1500 sq.feet, if not situated at Delhi, Mumbai or within 25 kms. from the Municipal limit of these areas. It was essentiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been defined in the amended provision. However, in respect of the housing projects, which have been approved and commenced prior to 1.4.2005, the issue of applicability of this provision is a question that requires to be answered by the Court. 16. As mentioned hereinabove there are two projects of the present appellant, namely, Krishna Park and Prashiddhi Project, in respect of which the assessee has claimed deduction under Section 80IB(10) of the profits earned from these projects. As also noted hereinabove, the Assessing Officer disallowed such deduction and CIT(Appeals) allowed the same. The Tribunal concurred with the Assessing Officer following the decision of the Bombay High Court in Brahma Associates (supra) and denied such benefit to the appellant. The project of Krishna Park comprises of tenements constructed in six lanes with independent raw-houses. First lane comprises of Units No. 80 to 99. Four units were found to be bigger in size as compared to other units. Accordingly the Assessing Officer was of the opinion that Krishna Park did not fulfill the basic requirement and condition of limitation of maintaining built up area of 1500 sq.feet per unit as laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tenement) Total Built up Area in Sq.ft Area of Plot in Sq.mts. 1 99 Units 89,966 11,197 2 8+4 Shops 4,607 428 TOTAL 94,573 11,625 % of Built-up Area for shops to total Built up Area 4607/94573* 100=5.12% 428/11625* 100=3.68% As far as Prashiddhi project is concerned, it has been developed on an area, which is more than 1 acre. The plan has been approved on 18.1.2003 and BUC has been obtained on 29.12.2004. For tower A1, A2 and B1 and for B2, the BUC was obtained on 30.6.2007. Vide an application dated 20.7.2005. This housing project was approved by the local authority as is apparent form the certificate of the Surat Municipal Corporation and the ratio worked out of commercial offices to the total built up area for residential project is 3.5%. As can be seen from the chart given hereinbelow:- Sr.No. Residential Unit-Flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions raised before the Bombay High Court was whether clause (d) of Section 80 11B(10) of the Act was applicable for assessment year 2005-2006 or whether it applied retrospectively and it noted thus:- Under these facts, it was held by Hon ble Bombay High Court that with effect from 01-04-2005, deduction u/s. 8011B(10) would be subject to the restriction set out in clause-(d) of Section 8011B(10). The relevant para of this judgment of Hon ble Bombay High Court i.e. para-25 is reproduced as under:- 25. The above conclusion is further fortified by Clause(d) to Section 8011B(10) inserted with effect from 1/4/2005. Clause (d) to Section 8011B(10) inserted w.e.f. 1/4/2005 provides that even though shops and commercial establishments are included in the housing project, deduction under section 8011B(10) with effect from 1/4/2005 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, clause (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-area of the housing project or fiver thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that by insertion of clause(d) of Section 80IB(10) of the Act, Legislature made it clear that though the housing project approved by local authority with commercial user to the extent permissible under the rules and regulations were entitled to Section 80IB(10) deduction, such deduction would be subject to the restriction set out in clause (d) of section 80IB(10) from 1.4.2005. In our opinion, Tribunal has quoted the judgment out of context to deny the said benefit to the appellant erroneously. 21. Neither the assessee nor local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and/or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act being 3% of the total built up area or 5000 sq.feet which ever is higher (now in post 2010 period)or 5% of the aggregate built up area or 2000 sq.feet whichever is less. Revenue is also in error to suggest that even if such conditions are onerous, they are required to be fulfilled. The entire object of such deduction is to facilitate the construction of residential housing project and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed under the Act for the first time with effect from April 1, 2005 cannot be applied retrospectively. Thirdly, it is not open to the Revenue to contend on the one hand that section 80- IB(10) as it stood prior to April 1, 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 April 1, 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 80-IB(10) with effect from April 1, 2005 is prospective and not retrospective and hence cannot be applied to the period prior to April 1, 2005. 24. Karnataka High Court in the case of Commissioner of Income-Tax, Central Circle vs. Anriya Project Management Services (P.) Ltd. reported in [2012] 21 taxmann.com140 (Karnataka) was also examining this provision where the question was whether the definition of built-up area inserted by Finance (No.2) Act, which became effective from 1.4.2005 is prospective or retrospective in nature and it held that the same to be prospective in natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o claim deduction on work-in-progress basis, they would be entitled to such deduction. However, it necessitated strict compliance of the provisions and completion of the same within the stipulated time period. 27. The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissible ratio for construction is 5% of the total built up area, reduction of this ratio to 3% of the total built up area has to be necessarily on prospective basis. 28. It would be apt to consider ratio of retrospectivity at this stage. In the case of Commissioner of Income-Tax vs. Gold Coin Health Food P. Ltd. reported in 304 ITR 308, the Hon ble Supreme Court of India has held as under : In Zile Singh v. State of Haryana [2004] 8 SCC 1, it was observed as follows: 13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (iv) what it was the Legislature contemplated (page 388). The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right (page 392). 29. In the case of Commissioner of Income-Tax vs. TVS Lean Logistics Ltd. reported in[2007]293 ITR 432(Mad), the Hon ble Madras High Court has held as under : In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner only because of harsh consequences arising therefrom. The court cannot enlarge the scope of legislation or intention when the language of the provision is plain and unambiguous, cannot add or subtract words to a statute or read something into it which is not there and cannot rewrite or recast legislation. The language employed in a statute is the determination factor of the legislature event and even assuming there is a defect or any omission in the words used in the legislation, the court cannot correct or make up the deficiency, especially when a literal reading thereof produces an intelligible result and any interpretation which is not permissible and which would be destruction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harsh and unreasonable when it comes to implementation. 31. Again, as held in case of CIT vs. J.H. Gotla(supra) by the Apex Court such strict construction of the statute if leads to absurd interpretation the same may not subserve the intent and object of legislation. 32. Again, as held in the case of Mysore Minerals Ltd. vs. Commission of Income Tax reported in 239 ITR 775, Apex Court with two possibilities of interpretation of a taxing statute, one which is favourable to the assessee should be always preferred. 33. As also laid down in the case of Bajaj Tempo Ltd. vs. Commissioner of Income Tax reported in 196 ITR 188 (SC), taxing statute granting incentives for promoting economic growth and development should be liberally construed to facilitate and advance the objectives of the provision. 34. Above discussion cumulatively when examined with the objectives and intent it sought to achieve in bringing about the said provision of Section 80IB(10), this amended taxing statute requires to be interpreted in favour of the asses see rather than insisting upon strict compliance leading to absurdity. 35. It can be also held that this being a substantive amendment and not a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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