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2018 (4) TMI 703

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..... iews on this issue and hence there can be no question of change of opinion by the AO. Any view adopted by the AO which is contrary to the provisions of law will give rise to an occasion for Revenue to reopen the concluded assessment within rigors of Section 147/148 as the income had escaped assessment due to perverse view contrary to law adopted by the AO in original assessment. Hence reopening of the concluded assessment u/s 147 in the instant case before us is considered to be valid as also on merits, the assessee claim for deduction u/s 80IB(10) deserves to be rejected and the appeal of the Revenue stood allowed. In view of the major error which crept in the orders for AY 2009-10 and AY 2010-11 wherein the learned CIT(A) and tribunal proceeded on the belief that the project was approved by SRA on 04-06-2004 which was a wrong belief instead of correct date of approval of the project by SRA on 07-11-2002 and the said error goes to the root of the matter to decide this controversy because CBDT vide its notification no. 67 dated 31-08-2010 which was later clarified vide notification no. 2 of 2011 had mandated grant of benefit u/s 80IB(10) to slum rehabilitation / redevelopment pr .....

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..... e for deduction u1s 80IB(10) as per the notification of CBDT no.67 dated 03.08.2010 read with corrigendum vide notification no.2 of 2011. 4. The appellant prays that the order of CIT CA) on the above ground be set aside and that of the Assessing Officer be restored. 5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. The brief facts of the case are that the assessee was in the business of building and developing and also trading in shares and securities. During the course of assessment proceedings for the assessment year 2009-10 carried out by AO u/s. 143(3) r.w.s 143(2), the AO observed that the assessee has claimed deduction u/s. 80IB(10) amounting to ₹ 1,03,79,815/- for AY 2009-10 in respect of profits derived from development of residential building at Parel, Mumbai, in the name and style of Kingston Tower . The project was approved by Slum Rehabilitation Authority(SRA) of the Maharashtra State. On perusal of auditors report, the AO observed that the assessee has completed 67% of the project at Parel as on 31.03.2009. It was observed by the AO that as per Clause (a) to section 80IB(10), where a ho .....

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..... ment certificate was issued on 31.03.2003. Thus, the AO observed that the project was approved prior to 1st day of April of 2004, and hence the project did not fall within the notification of the CBDT no. 67 dated 31.08.2010 read with Corrigendum vide notification no. 2 of 2011 by CBDT. The assessee claimed that the project was initially approved by Slum Rehabilitation Authority(SRA) on 07.10.2002 but final approval for the amended plan was granted on 04.06.2004 i.e. after 01.04.2004. It was observed by the AO that revised approval obtained by the assessee from SRA is of no consequence as the first approval was obtained on 07.10.2002 which is prior to 01.04.2004. The AO also observed that the commencement certificate for the project was granted by SRA on 31.03.2003 which is also prior to 01.04.2004 and hence it was observed by the AO that the claim of the assessee for deduction u/s. 80IB(10) is not allowable and is liable to be withdrawn. The AO observed that the assessee has admitted that the project was completed 64% as on 31-03-2007 and upto 67% as on 31-03-2008. The AO observed that the CBDT notification dated 03.08.2010(paragraph 2) states that it shall come into force w.e.f. .....

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..... deration to the facts of the case and the contentions of the appellant. It is noted that the instant case has its origin in the assessment order u/s 143(3) for A.Y. 2009-10 wherein the AO had disallowed appellant's claim u/s 80lB (10) for the first time. The instant assessment year 2007-08 had already been assessed u/s. 143(3) of the Income Tax Act,1961 was passed by the Assessing Officer on 15.05.2009 accepting the returned income as Assessed income. It was only due to the assessment proceedings for A.Y. 2009-10 that this case has been reopened u/s.143(3) of the Income Tax Act,1961 was passed by the Assessing Officer on 15.05.2009 accepting the returned income as Assessed income. 5.2 Ground 1 5.2.1 This ground challenges the validity of reopening of the assessment u/s 147 of the Act, it is noted that in his order u/s 143(3) rws 147 of the Act dt. 07.03.2014, the AO has himself stated in para 4 that the assessment is being reopened based on the decision of the AO in AY 2009-10 that-the appellant was not entitled to deduction u/s 801B. He has not mentioned anything about any new tangible material that came to his knowledge that would lead him to have reasons to belie .....

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..... ening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. 5.2.6 In the Kelvinator's judgment the true meaning of the phrase 'Reason to Believe' was also explained. 'Change of opinion' rebuts the formation of 'Reason to believe' which is the crux. If there is Change of opinion it is essentially a Review which cannot be done as it is a separate statutory process. 5.2.7 The Bombay High Court in the .....

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..... Bombay, this ground of appeal is allowed. ALLOWED 5.3 Ground 2 3 5.3.1 These grounds pertain to the substantive issue of appellant's claim of deduction u/s 80IB of the Income Tax Act, 1961. As stated above, the instant reassessment has its genesis in the order u/s 143(3) for AY 2009-10. I find that the claim has been examined and adjudicated upon by my Ld. Predecessor in his appellate order CIT -(A)-4/IT -57/ITO 3(2}(4)/2011-12 dt. 30.11.2012. After examining the facts and considering the contentions of the appellant, my Ld. Predecessor has concluded in para 6.2 of his order: Therefore, respectfully following the decision of Hon'ble ITAT, Mumbai in the case of Asha Kashiprasad Ringshia, the assessee is allowed deduction u/s 80IB(10) of Income-tax Act because the provisions of clause (a) and (b) of sub-section 80/B(10) regarding start and completion of project are not applicable to the case of the assessee, in view of proviso below clause (b) to sub-section 80IB(10), because the claim relates to a Slum Rehabilitation Project. In result, the grounds of appeal ere allowed. 5.3.2 Since the facts of AY 2009-10 are identical to those for the cur .....

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..... e development undertakings. **** **** [(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 on or after the 1st day of April, 2004, within four years from 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 .....

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..... his behalf. The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010. This notification was further clarified by the CBDT in Notification no.2 of 2011 dated 5th January 2011, wherein it was provided that:- In the notification of the Govt. of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number S.O. 1898(E), dated the 3rd August, 2010 (2010) 233 CTR (ST.) 56 2010) 43 DTR (St.) 8] published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), dated the 3rd August, 2010, in paragraph 2 for This notification shall come into force with effect from the date of its publication , read This notification shall be deemed to apply to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards. Thus, on careful perusal of the above notifications it would reveal that alt .....

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..... opment by local authority on or after 01-04-2004, but before 31-03-2008 which came by way of CBDT notifications and it was very much mandated in the statute itself by way of proviso after clause (b) to Section 80IB(10) that the project has to comply with said notification issued by CBDT to get out of rigors of clause(a) and (b) to Section 80IB(10). There is no equity in tax laws and provisions of taxing statute are to be strictly construed and if the subject falls within the four corners of the taxing-statute, he must be taxed howsoever the harsh consequences might be. The exemption provisions are to be firstly strictly construed to see the eligibility of the tax-payer to get the exemption/deduction, but once the assessee establishes its eligibility to the exemption/deduction within the framework of the statute, then the exemption /deduction provisions are to be construed liberally to give effect to the intended benefit of the provision as mandated by legislature. In the instant case, the intended benefit is to grant deduction of profits of approved housing projects from the taxability to encourage development of housing for which Revenue/taxes are slated to be foregone by the Gove .....

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..... ernment or with any person authorized by it; (b) business should relate to prospecting for, extracting or producing mineral oils, petroleum or natural gas; (c) there has to be an agreement in writing between the Central Government and the assessees in this behalf; (d) it is also a requirement that such an agreement has been laid on the Table of each House of Parliament; (e) the allowances which are claimed are to be necessarily specified in the agreement entered into between the two contracting parties; and (f) allowances are to be computed and made in the manner specified in the agreement. 38) From the nature of allowances specified in this provision, it is clear that such allowances are otherwise inadmissible on general principles, for e.g. allowances relating to diminution or exhaustion of wasting capital assets or allowances in respect of expenditure which would be regarded as on capital account on the ground that it brings an asset of enduring benefit into existence or constitutes initial expenditure incurred in setting up the profit earning machinery in motion. It is for this reason this Section itself clarifies that the provisions of this .....

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..... the appellant was not entitled to any such deductions under the PSCs. Thus, when in law no such deduction was permissible as per the PSCs in the present form, even if such deduction was given wrongly in the earlier years that would not amount to a wrong act on the part of the Income Tax Authorities and, therefore, would not enure to the benefit of the appellant in the Assessment Year in question as well. The appellant cannot say that merely because this benefit is extended in the previous years; albeit wrongly, this wrong act should continue to perpetuate. There is no estoppel against law. We have taken note of the judgment of this Court in Enron Expat Service Inc. (Supra) where the assessee had offered to pay tax under Section 44(BB) of the Act in the earlier years wrongly and the Court held that it would not operate as an estoppel to claim the benefit of DTAA for the Assessment Year in question when it was found that the assessee was otherwise entitled to it. Same principle applies, though it is a converse situation where assessee has not offered to pay tax wrongly [which was the situation in Enron Expat Service Inc. (Supra)] and instead the tax authorities have extended the bene .....

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..... ated deliberated and discussed this issue in details as under:- 2.6 Before coming to any conclusion we are reproducing hereunder the relevant portion from the provision of section 80IB(10) of the Act for ready reference and analysis:- 80IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings:- (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. ** ** ** (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 auth .....

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..... cial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher; (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explanation .-For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 2.7 It is noticed that section 80IB(10)(a)(i) of the Act lays dow .....

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..... ct to the projects approved by the SRA, of course, subject to fulfillment of other conditions. The project of the assessee was completed before 31/03/2008. The Budget Speech of the Hon'ble Finance Minister on the floor of the house while introducing Finance Bill 2004 on introduction of relaxation of condition of minimum one acre of plot size for slum rehabilitation and redevelopment is reproduced below: 110. A small problem has plagued the reconstruction and development of existing buildings under approved plans in the city of Mumbai. Perhaps the problem is there in some other cities too. I, therefore, propose to relax the condition of minimum plot size of one acre in the case of housing projects, as long as the projects are implemented in accordance with a scheme for reconstruction or development approved by the Central or State Government. such housing project is issued by the local authority. 2.10 Notes on Clauses on the Finance Bill 2004 are reproduced hereunder:- Under the existing provisions contained in sub-section (10), hundred per cent, deduction of the profits of an undertaking developing and building housing projects is allowed if the housing pro .....

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..... val shall be the date on which the building plan of the said project is first approved by the local authority in case where the approval in respect of the same is obtained more than once and also to provide that the date of completion of construction shall be the date on which the completion certificate is issued by the local authority. The conjoint reading of the Section and the notes on clauses along with Speech of Hon'ble Finance Minister on the floor of the house makes the intention of the legislature clear that relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre shall also apply to the existing approved projects provided other conditions as mandated by Section 80IB(10) of the Act are fulfilled. Thus, the said relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre is curative in nature and is intended to remove unintended hardship caused to the approved projects in the city of Mumbai/Delhi where there is shortage of land and the approved project sizes are less than one acre and suc .....

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..... Government and the same is notified by the Board. The notification issued by the Board dated 5th January 2011 clearly stipulates that the benefit of Section 80IB(10) shall be available to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards. There is no equity in tax legislation and the exemption provisions are to be strictly construed at the first stage to establish the eligibility of the tax-payer for the benefit of exemption and once the tax-payer establishes its entitlement to the exemption, then exemption provisions are to be liberally construed to give the full intended benefit to the tax-payer so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. 2.13 The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt J. in his classic statement in .....

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..... a passage from ROWLATT, J. expressing the principle in the following words: In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (Ref: Cape Brandy Syndicate (supra); referred to in Canadian Eagle Oil Co. Ltd. v. R. (1945) 2 All ER 499; Gursahai v. CIT AIR 1963 SC 1062; Banarsi Debi v. ITO AIR 1964 SC 1742, CCE v. ACER India Ltd. [2004] 8 SCC 173, CIT v. Firm Muar AIR 1965 SC 1216, CIT v. Shahzadanand Sons AIR 1966 SC 1342; Janapada Sabha v. Central Provinces Syndicate AIR 1971 SC 57; Owen Thomas Mangin v. IRC [1971] 2 WLR 39, Controller of Estate Dutyv. Kantilal Trikamlal AIR 1976 SC 1935; Tarulata Syam v. CIT AIR 1977 SC 1802; Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution (supra); Aphali Pharmaceuticals Ltd. v. State of MaharashtraAIR 1989 SC 2227; Goodyear India Ltd. v. State of Haryana AIR 1990 SC 781; Sutlej Cotton Mills Ltd. v. CIT AIR 1991 SC 218; Saraswati Sugar Mills (supra); Oswal Agro Mills Ltd. v. Collector of Ce .....

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..... discretion' for 'the golden and straight metwand of the law'. (Ref: IRC v. Duke of Westminster, supra, referred to in Pott's Executors v. IRC, supra, p. 80 (LORD NORMAND); CIT, Gujarat v. B.M. Kharwar, AIR 1969 SC 812 : (1969) 1 SCR 651; J.K. Steel Ltd. v. Union of India, supra, p. 1192; CIT, Calcutta v. G. Arbuthnot Co., AIR 1973 SC 989, p. 995 : (1973) 5 SCC Tax 359 : (1973) 3 SCC 845; Commrs. of Customs v. Top Ten Promotions, (1969) 3 All ER 39, p. 90 (HL); Ransom (Inspector of Taxes) v. Higgs, (1974) 3 All ER 949, p. 970 (HL). See further Hansraj and Sons v. State of Jammu Kashmir, AIR 2002 SC 2692, pp. 2698, 2699 : (2002) 6 SCC 227; Commissioner of Central Excise Pondicherry v. ACER India Ltd., (2004) 8 SCC 173, p. 184 : (2004) 8 JT 53). In the same case LORD WRIGHT pointed out that the true nature of the legal obligation arising out of a genuine transaction and nothing else is the substance . Duke of Westminster, (supra). The above principle which is known as Duke of Westminster principle is subject to the new approach of the courts towards tax evasion schemes consisting of a series of transactions or a composite transaction. In interpret .....

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..... ruing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. (Ref: Ormond Investment Co. v. Betts [1928] AC 143 : Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. (Ref: Mapp v. Oram [1969] 3 All ER 215, pp. 222, 223 (HL); State Bank of Travancore v. CIT[1986] 2 SCC 11. It has also been said that if taxing provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect. (Ref: IRC v. Ross and Coulter [1948] 1 All ER 616; referred to in Gursahai Saigal v. CIT AIR 1963 SC 1062. The Supreme Court has enunciated in similar words the principle of interpretation of taxing laws. BHAGWATI, J. stated the principle as follows: In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the reve .....

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..... nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder. 72. Having considered the matter in the aforesaid prospective, we come to the irresistible conclusion that the appellant is not entitled to the relief claimed. Though it may be somewhat harsh on the appellant when it availed the benefit of Section 42 for few years and acted on the understanding that such a benefit would be given to it, but we have no option but to hold that PSCs did not provide for this benefit to be given to the appellant and the contract can be amended only if both the parties agree to do so, and not otherwise. Therefore, we are constrained to dismiss the appeal for the reasons given above. 2.14 Thus as discussed in details in preceding para's of this order, the rigours of Section 80IB(10) were relaxed by the introduction of proviso by Finance Act, 2004 wherein conditions as stipulated in clause (a) and (b) shall not be applicable provided the slum rehab .....

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..... appeals the assessee has contended that date of approval of the project by SRA is 04-06-2004 which is the basis on which learned CIT(A) as well tribunal proceeded, while fact of the matter is that the date of first approval of the project by SRA is 07-10-2002 and it is only the final approval by SRA to the amended project which was granted on 04-06-2004, and as per explanation(i) to clause (a) to Section 80IB(10), it is the date of first approval by authorities of the project which is relevant and not the subsequent amended date. CBDT vide its notification no. 67 dated 31-08-2010 which was later clarified vide notification no. 2 of 2011 had mandated grant of benefit u/s 80IB(10) to slum rehabilitation / redevelopment project which were approved on or after 01-04-2004 but by local authority, and before 31st March 2008. The said explanation is reproduced is hereunder: 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; .....

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..... sha Kashirprasad Ringshia in ITA no. 229/2014 wherein the Revenue did not challenge the appellate order of the tribunal in ITA no. 2901/Mum/2011 dated 12.09.2012 for AY 2007-08, while the Revenue came in appeal against the order passed by tribunal dated 10-05-2013 in Miscellaneous application (MA) in MA no. 750/Mum/2012 arising out of ITA no. 2901/Mum/2011 for AY 2007-08, wherein the Hon ble Bombay High Court has held as under:- 3. Undisputedly, the period to file an appeal from the order dated 12th September, 2012 expired long before the Tribunal disposed of the respondent assessee s rectification application by an order dated 10th May, 2013. As the appellant has no grievance with regard to the order dated 10th May, 2013, it cannot use the same to challenge the order dated 12th September, 2012 which it had originally accepted. The plea of the assessee is that once the order of the tribunal in the case of Asha Kashirprasad Ringshia (supra) in ITA no. 2901/Mum/2011 dated 12.09.2012 has attained finality as Revenue did not challenge the main order rather went in appeal against MA order which stood dismissed by Hon ble Bombay High Court as the Revenue never challenged the .....

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