TMI Blog2015 (7) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... s were approved by the local authority prior to 31.3.2004 then the newly inserted definition of Built up Area in section 80(1B)(14a) shall not be applicable to such housing projects. An assessee cannot be asked to comply with the conditions which were not a part of the statute when the housing project was approved and more so when such conditions are inextricably linked with the approval granted to the housing project by the local authority under its own rules and regulations. If the condition of sub-section (14)(a) of section 80IB is held applicable to the projects approved prior to 1.4.2005 then the assessee has to necessarily seek for a modified plan otherwise the assessee will not be eligible for exemption u/s 80IB(10) and when the assessee obtained valid approval and constructed the building in all respect prior to Ist April, 2005, then also if the provisions are applied retrospectively, the assessee would not be entitled to benefit of tax exemption. We would like to mention that such beneficial provisions in the Act have been brought into to bring in investment and to encourage infra-structure development of middle income housing projects. If these amended provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5018 2960/L.P113/29 Not desired because the area was already approved by TNCP Date of TNCP Approval 31.10.2000 16.12.2004 BMC approved 1165-02091-0700 1163-01958-0305 1053-1737-1203 Date of BMC Approval 05.07.2000 15.03.2005 22.12.2003 Number of units 208 28 29 Commencing year of the project F.Y. 2000-01 2005-06 2003-04 Completion Year of the Project F.Y. (As per various proof submitted before lower authorities) 2005-06 2006-07 2006-07 Last possession date (as per possession letters submitted before lower authorities 29.09.2007 (Only three completed units were given possession in FY 2006-07 19.02.2007 09.05.2006 Completion Certificate obtained on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after purchasing such land, the assessee has developed the housing project on the said land. In fact, after purchase of land all work relating to planning of the housing project, initial infrastructure development, construction of the dwelling units, booking of such residential units were carried out by the appellant. Therefore, it cannot be said that the assessee has simply acted asa contractor or that no new residential property is being constructed and no registry for construction work was made. The observations of the A.O. are in fact factually not correct. As regards the observation that no investment was made the same is also found to be incorrect as all necessary investments for such projects has been made by the partners by way of capital contribution and in A.Y. 2006-07 investment to the extent of ₹ 221.19 lacs was made out of total investment of ₹ 309.04 lacs. The findings of the A.O. that project is not approved as a whole by Municipal Corporation is also factually incorrect in as much as the layout plan of housing project was approved by the Municipal Corporation as a whole and no individual permission has been given. In view of these facts, the objections m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2004 and the said amendment is applicable for the assessment year 2005-06 and thereafter. The learned CIT(A) erred and not justified in his findings that the said amendment is retrospective and be applicable in the case of appellant and therefore the findings of the learned CIT(A) be quashed. 5. That on the facts and in the circumstances of the case and in law, the appellant submits that the various proofs submitted showing the completion of the project within the specified date. The learned CIT(A) erred and not justified not accepting all these proofs and also not accepting the deemed completion under the provisions of section 301 of M.P. Nagar Palika Adhiniyam 1956 and only relying on the completion certificate as mentioned in the explanation to the section 80IB(10) and therefore the findings of the learned CIT(A) be quashed. 6. That on the facts and in the circumstances of the case and in law, the levy of interest u/s 234B is unlawful and hence be cancelled. 5. Ground nos. 1 and 7 are general in nature and do not require any adjudication. 6. Ground no. 6 is regarding levy of interest u/s 234B. In this regard we hold that the levy of interest u/s 234B is man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained within the stipulated period i.e. 31.3.2009. Sagar Parisar project was complete in 2006 itself. He further submitted that the amended provisions of section 80IB(10) of the Act came into existence w.e.f. 1.4.2005. These provisions cannot be applied retrospectively for the projects which were sanctioned prior to 1.4.2004. In the assessee s case where the project maps were sanctioned prior to 1.4.2004, such conditions shall not be applied. He also pleaded that the disallowance in the assessment year 2004-05 was also made on account of exceeding the area of prescribed limit. Hon'ble ITAT considered the application of the amended provisions and on the basis of earlier provisions, allowed the appeal of the assessee with the remark that the assessee has satisfied all the conditions prescribed u/s 80IB(10) of the Act prior to amendment in the Act. He further submitted that the assessee has been given the completion certificate by local authority in the case of Sagar Estates belately. However, assessee was not at fault as the project was complete and the assessee has submitted an application for issuing the completion certificate in time. Issuing the certificate was not in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me entitled to occupy the building and it is a deemed completion certificate issued by the Commissioner. 11. On the other hand, the learned Sr. DR relied upon the orders of the authorities below and submitted that no completion certificate was issued to the assessee in prescribed time. The Assessing Officer received the information by issuing notice u/s 133(6) of the Act from the local authority where the local body has certified that they have not issued any completion certificate. Further, the built up area was found exceeding 1500 sq. ft. in case of two units during the assessment proceedings for assessment year 2004-05. Once there is violation in respect of any one unit then assessee shall not be entitled for deduction u/s 80IB(10) of the Act. He relied on the decisions of the lower authorities. 12. We have heard both the sides. We have also considered the various case laws relied upon by both sides. One of the grounds on which the assessee has been denied deduction u/s 80IB is with regard to measurement of two units taken during the assessment proceedings for the assessment year 2004-05 wherein the definition of built up area by the Departmental Valuer has been taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cities and 1500 sq. ft. at any other place. Only these conditions were required to be complied with. An assessee cannot be asked to comply with the conditions which were not a part of the statute when the housing project was approved and more so when such conditions are inextricably linked with the approval granted to the housing project by the local authority under its own rules and regulations. If the condition of sub-section (14)(a) of section 80IB is held applicable to the projects approved prior to 1.4.2005 then the assessee has to necessarily seek for a modified plan otherwise the assessee will not be eligible for exemption u/s 80IB(10) and when the assessee obtained valid approval and constructed the building in all respect prior to Ist April, 2005, then also if the provisions are applied retrospectively, the assessee would not be entitled to benefit of tax exemption. Such an interpretation not only would be absurd but also lead to disastrous consequences. Therefore, it cannot be the intention of the legislature while bringing the definition of built up area in the statute. We would like to mention that such beneficial provisions in the Act have been brought into to brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which are approved subsequent to April 1, 2005. The housing project contemplated under sub-section (10) of section 80IB includes commercial establishments or shops also. Now, by way of an amendment, an attempt is made to restrict the size of the shops or commercial establishments. Therefore, necessarily the 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 retrospective. Held, dismissing the appeal, (i) that the assessee obtained approval for building housing project on June 14, 2002 and had built 84 flats in an area which was in excess of one acre of land. The construction was completed within the period stipulated. According to the assessee, 84 flats were within 1500 sq. ft. The material on record disclosed that a head room was constructed. The head room was not included in the sale deed. The local authority after construction of the building, inspected the building and granted the occupancy certificate. Therefore, the construction put up by the assessee prima facie could be said to be in accordance with the sanctioned p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial external alteration in or addition to any existing building : or (iii) Constructs or re-constructs any projecting portion of a building which the Commissioner is empowered is empowered under section 305 require to be set bask or is empowered to give permission to construct or re-construct. shall within one month of the completion of the work deliver to the Commissioner at his office a notice in writing of such completion and shall give to the Commissioner all necessary facilities for the inspection of such work. (2) Within seven days after the receipt of the said notice the Commissioner shall depute an officer to commence the inspection of such work. (3) Within seven days from the date of commencement of such inspection the Commissioner shall (a) give permission for the occupation of the building erected or for the use of the part of the building re-erected; or (b) refuse such permission in case such erection, construction or re-construction is in contravention of any provision of this Act or any rule or byelaw made thereunder or any other enactment for the time being in force. (4) No person shall occupy or permit to be occupied any such building or use or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking developing and building housing projects approved before March 31, 2005, by a local authority. By the Finance (No. 2) Act, 2004, with effect from April 1, 2005, the conditions for grant of deduction were that in a case where a housing project is approved by the local authority between April 1, 2004 and March 31, 2005 the project should be completed within four years from the end of the financial year in which it is approved by the local authority. The assessee a real estate developer, obtained approval for a housing project on March 16, 2005 from the Development Authority. It completed the project in 2008 and by letter dated November 5, 2008 applied to the competent authority for the issue of the completion certificate. For the assessment year 2007-08 its claim to deduction under section 80IB(10) of the Income Tax Act, 1961 was denied inter alia on the ground that the assessee had violated the conditions stipulated under section 80IB(10) inasmuch as it had not obtained the completion certificate for the project from the competent authority within four years as stipulated in Explanation (ii). The Commissioner (Appeals) upheld the assessment order. The Tribunal held that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a plot of land which had a minimum area of one acre and (iii) the residential unit had a maximum area of 1,000 sq.ft. where such residential unit was situated within the cities of Delhi or Mumbai or within 25 Kms from the municipal limits of these cities, and 1,500 sq.ft. at any other place. Before 1st April 2005, there was no condition and/or restriction on the quantum of the commercial area that could be included in a housing project. That had to be determined on the basis of the rules and regulations of the local authority approving the said housing project. However, the provisions of section 80-IB(10) were substantially amended by way of Finance (No.2) Act, 2004 w.e.f. 1st April, 2005. As can be noted from the amended provisions, there were several conditions that were imposed in the newly substituted section 80- IB(10) that were absent in the said section prior to its amendment. One such condition inserted w.e.f. 1 st April, 2005 was clause (d) that put a restriction on the quantum of commercial area that could be included in a housing project in order to entitle the assessee to claim the deduction as set out in the said section. It cannot be said that the legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Securities Exchange Board of India vs. Ajay Agarwal AIR 2010 sc 3466 distinguished. 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 80-IB(10) as it stood prior to 1st April, 2005. If we were to accept the argument of the Revenue, then in that event, despite having completed the entire construction prior to 1st April, 2005 and complying with all the conditions of section 80-IB(10) as it stood then, the assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-06. In contrast, if the same assessee had followed the work-in-progress method of accounting, he would have been entitled to the deduction under section 80-IB(10) upto the A.Y. 2004-05, and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction under section 80-IB(10) available to a particular assessee would be determined on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee by holding as under :- Decision The submission of Ld. AR was forwarded to the A.O. for verification and report u/s 250(4) on 24.09.2011. The A.O. was reminded many a times for the required report but it was not received till the date of order. In the mean time the case has been transferred to the DCIT(Central Circle) Bhopal and, therefore, after discussion with the A.O. on the issue involved, the grounds of appeal are being disposed off as per the lines indicated below. (i) Initially, section 80 IA(4F) r.w.s. 80IA(5)(vi) allowed 100% deduction on profits and gains derived by an undertaking engaged in developing and building housing projects approved by a local authority subject to conditions set out therein. The object of granting 100% deduction was to promote house building activity so as to provide affordable dwelling units to a common man. By Finance Act, 1999, the entire section 80 IA was substituted by newly introduced section 80IA and 80IB which were on the lines of existing section 80IA but with certain modification. The relevant provisions of law as they stood read as under:- (10) The amount of profit in case of an undertaking developing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the local authority; (b) the project is on the size of a plot of land which has a minimum area of 1 acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf (c) the residential unit has a maximum built- up area of 1,000 sq feet where such residential unit is situated within the cities of Delhi or Mumbai or within 25 kms from the municipal limits of these cities and 1,500 sq feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed 5% of the aggregate built-up area of the housing project or 2,000 sq feet, whichever is higher. The percentage of commercial establishment and shops should not exceed 3% of the aggregate built up area of the housing project or 5000 sq.ft, whichever is higher, as per the amendment made by the Finance Act, 2010 w.e.f. 01-04-2010. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under clause (d), even through the commercial user is approved by the Local Authority is prospective and therefore, cannot be applied for period prior to 01-04-2005. The Hon ble High Court Gujarat in the case of Manan Corporation Vs. ACIT reported in 214 Taxman 373 and Hon ble High Court of Karnataka in the case of Anriya Project Management Services Pvt. Ltd. reported in 209 Taxman 1 have also held the similar view that the amendment inserted by the Finance (No. 2) Act, 2004 being a substantive amendment and not a clarificatory amendment, the amendment of this nature cannot have retrospective effect. (iv) In view of the amended provisions w.e.f. 01- 04-2005, an assessee is required to furnish completion certificate for grant of deduction u/s 80IB(10) from Asstt. Yr. 2005-06 and onward, but not with respect to the assessment year falling prior to it. In this regard, I derive support from the decision of Hon ble Jurisdictional Tribunal in the case of Priyadarshani Construction, ITA No. 509 510/IND/2010 dated 30-11-2011 and order in the case of Surbhi Homes Pvt. Ltd. Vs. ACIT for assessment year 2004-05, Asstt. Yr. 2005-06, Asstt. Yr. 2006-07 and Asstt. Yr. 2007-08 ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the claim of deduction u/s 80IB(10) to the assessee for the Asstt. Yr. 05-06 was confirmed. Similarly, since the completion certificate for Asstt. Yr. 2006-07 and Asstt. Yr. 2007-08 was not issued till date, the Hon ble Jurisdictional Tribunal held that there is no reason to restore the matter back to the file of AO and the assessee is not eligible for claim of deduction u/s 80IB(10) of the Act and the lower authorities were justified in declining the claim of deduction u/s 80IB(10). In the result, both the appeals of the assessee were dismissed. In the present case in hand, the housing project Sagar Kunj was developed on a land area of 1.22 acre after getting the approval of the projects from Bhopal Municipal Corporation on 09.08.1999. The project was completed in the F.Y. 2001-02 and all the units were sold by that year. The conditions laid down in the section applicable for the Asstt. Yr 2002-03 was fulfilled and claim of deduction made for the Ist time in that year allowed by the A.O. in his order u/s 143(3) of the Act. The project Sagar Garden was developed on a land area of 1.22 acres after getting the approval from Bhopal Municipal Corporation on 28.03.2001. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of the housing projects or it has not taken any risk of constructing the projects as held in the case of Aayojan Developers Vs. ITO reported in 335 ITR 234; CIT Vs. Sanghvi and Doshi Enterprises reported in 255 CTR 156; Sita World Travel (India) Ltd. V. CIT 140 Taxman 381 (Delhi) and CIT v. Kelvinator of India Ltd. (2010) 34 DTR (SC) 49. (vi) Relating to admissibility of deduction u/s 80IB(10) for violation of criteria of built-up area of residential units, there are different opinion held by Hon ble Tribunals like the Hon ble ITAT Bench-A, Chennai in the case of ACIT, Central Circle Vs. Chitra Construction Pvt. Ltd. Chennai in ITA No. 343/NDS/07 for Asstt. Yr. 2003-04 and ITA No. 1291/NDS/07 for Asstt. Yr. 2004- 05 dated 28-03-2008; Hon ble ITAT Bench-B, Chennai in the case of ACIT Vs. Viswas Promoters Pvt. Ltd., Madurai in ITA No. 1912 (Mds) 2007 for Asstt. Yr. 2004-05 in order dated 13-10-2008 have held that when the mandate of Section 80IB(10) is that the exemption in this regard is to be provided to the project in which the residential unit has a maximum built-up area of 1500 sq.ft., then if there is violation of the condition in any of the residential units, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es sold on subsequent year. 20. Ld. DR relied upon the decisions of the ITAT in the cases of Sky Builders Developers vs. ITO; 14 Taxmann.com 78 (Indore); Veena Developers; (2015) 277 CTR 297 and of the Hon'ble M.P. High Court in the case of Navratan Techbuild Private Ltd.; AIT-2014-91-HC. 21. On the other hand, the learned counsel for the assessee relied upon the order of the learned CIT(A). 22. We would like to mention here that in this case the learned CIT(A) in the assessment years 2005-06 and 2006- 07 has accepted the assessee as a builder and developer and the Department did not prefer any appeal to the ITAT. Further, on the issue of registry of the constructed portion, this issue has already been accepted by the department in earlier years. Further in the assessment year 2004-05 where two units were found to be in excess of the area as mentioned in the amended Act w.e.f. 1.4.2005, it is held by Hon'ble ITAT coordinate Bench that the units were well within the limits. Moreover, we have already decided this issue that the newly inserted provision for definition of Built up Area in section 80IB(14)(a) was prospective and not retrospective. With regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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