$~6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 22nd January, 2014
+ ITA 298/2013
COMMISSIONER INCOME TAX-I ..... Appellant
Through: Mr. Rohit Madan with Mr. P. Roy
Chaudhuri, Advocates
versus
CHD DEVELOPERS LTD. .....Respondent
Through: Mr. S. Krishnan, Advocate.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V.EASWAR
MR. JUSTICE S. RAVINDRA BHAT: (OPEN COURT)
The substantial question of law urged in this appeal by the revenue
pertains to Section 80IB (10), particularly Section 80-IB (10)(a)(ii) read
with the Explanation.
2. It is urged that the Income Tax Appellate Tribunal (ITAT) fell into
error in granting the benefit of Section 80IB (10), having regard to the
fact that the project completion certification had not been issued, in the
facts of this case, by the authority prescribed by Explanation (ii).
ITA 298/2013 Page 1 of 21
3. The assessment year is 2007-08. The assessee, a real estate
developer, launched a project known as "Krishna Lok" in Vrindavan. It
obtained the approval of the project on 16.03.2005 from the Mathura
Vrindavan Development Authority. At the relevant time i.e. on
16.03.2005 when the approval was granted the provision of Section 80IB
read as follows: -
"Section 80-IB(10) prior to the amendment of 1.4.2005:
Sub s. by Finance (No.2) Act, 2004 (23 of 2004), sec.
18(d), for sub-section (10) w.e.f. 1-4-2005). Earlier sub-
section (10) was amended by the Finance Act, 2000 (10 of
2001), sec. 39(e)(i) and (ii) (w.e.f. 1.4.2001), by Finance
Act, 2003 (32 of 2003), Sec (c)(i) and (ii) (w.e.f. 1.4.2002).
Sub-section (10), before substitution by Finance (No.2) Act,
2004, stood 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
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
ITA 298/2013 Page 2 of 21
limits of these cities and one thousand and five
hundred square feet at any other place."
4. Soon after the Finance (No.2) Act of 2004; this was brought into
force w. e. f. 01.04.2005. The effect of this amended provision read as
follows: -
"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 project has been, or,
is approved by the local authority on or after the 1 st
day of April, 2004 but not later than the 31 st day of
March, 2005, within four years from the end of the
financial year in which the housing project is
approved by the local authority.
(iii) In a case where a housing project has been
approved by the local authority on or after the 1 st day
of April, 2005, within five 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,-
ITA 298/2013 Page 3 of 21
(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;
(ii) the date of completion of construction of the
housing project shall be taken to be the date on which
the completion certificate in respect of such housing
project is issued by the local authority;
(b) the project is on the size of a plot of land which has a
minimum area of one 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
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;
(d) the built-up area of the shops and other commercial
establishments included in the housing project does not
exceed three per cent. of the aggregate built-up area of the
housing project of five thousand square feet, whichever is
higher."
5. The Income Tax Officer for the assessment year 2007-08 sought to
disallow the benefit claimed by the assessee on the reasoning that the
ITA 298/2013 Page 4 of 21
completion certificate in terms of Explanation (ii), had not been granted
so as to enable it to avail the benefit, provided by Section 80IB (10). The
assessee had then relied upon the letter appearing for the issue of the
completion certificate written on 05.11.2008. The CIT (A) rejected the
assessee's appeal. The assessee accordingly approached the Tribunal
which after due consideration of the arguments, granted the benefit
claimed by it.
6. Counsel for the revenue urges that the Tribunal fell into error in not
giving effect to the Explanation (ii) which mandates that the completion
envisioned by Section 80IB (10)(a)(ii) is that the completion certificate
should be issued before the end of the relevant period i.e. 4 years from the
end of the financial year in which the housing project is approved by the
local authority. Elaborating on this, counsel submitted that since the
approval was granted on 16.03.2005 in this case, the period by which the
completion certificate ought to have been issued by the local authority
was 31.03.2009. That the assessee claimed completion certificate on
05.11.2008 was of no avail to it because of the terms of Explanation (ii).
Counsel submitted that having regard to these circumstances the Tribunal
fell into error in granting the benefit instead of upholding the order of
CIT (A).
ITA 298/2013 Page 5 of 21
7. The ITAT in the impugned order took note of the facts and
analysed them as follows: -
"8. Now we shall take up the appeal of the assessee (ITA
no.4694/Del/10 for A.Y. 2007-08). Though the assessee has
raised as many as seven grounds for appeal, but if all the
grounds are summarized, the only ground remains which
pertains to the disallowance of deduction u/s 80-IB(10).
Learned counsel for the assessee also fairly explained that
the issue pertains to only 80-IB(10) and the remaining
grounds are only argumentative.
8.1. The crux of argument on behalf of the assessee is that
the vide letter dated 5-11-2008 the assessee had applied for
completion certificate but the completion certificate was not
issued to the assessee which is beyond the control and
power of the assessee. Our attention was also invited to
page 22 of the paper book containing a certificate signed by
the Architect of the assessee i.e. Candid Design Consortium
Pvt. Ltd., in which the total area of the Type-A flat has been
mentioned at 1492.43 sq. Ft. Ld. Counsel submitted that for
A.Y. 2006-07 deduction was allowed to the assessee and it is
the same sanction plan which could not be denied for the
next year. It was emphatically argued that the total built up
area is below the prescribed limit of 1500 sq. Ft. And there
is no violation of the Act. It was also pleaded that the
project was approved on 16-3-2005 which is well before 1-
4-2005 and the assessee was to complete the project on or
before 31-3-2009. The ld. counsel also relied on the
decisions of Visakhapatnam & Delhi Benches of the ITAT as
also the decision of Honble Gujarat High Court, which we
will discuss while coming to a particular conclusion. The
crux of the argument is that requirement of completion
certificate was merely directory and not mandatory.
Reliance was placed upon the decision dated 29-2-2012 of
Honble Karnataka High Court (ITA no.138 of 2010) to the
effect that it is prospective in nature.
8.2. On the other hand, ld. Sr. DR took us to various pages
ITA 298/2013 Page 6 of 21
of the assessment order by submitting that the case laws
relied upon by the assessee are not applicable to the facts of
the present appeal and even no such certificate was issued
to the assessee till date, therefore, deduction was rightly
denied to the assessee.
8.3. In reply, the learned counsel for the assessee
contended that for .AY. 2006-07 on identical facts deduction
was granted to the assessee on some of the flats, therefore,
for the sake of consistency no "U turn" is permissible for
the next year, specially when the facts are same.
8.4. We have considered the rival submissions and
perused the material available on record. The facts in brief
are that the assessee declared taxable income of
Rs.5,97,15,620/- in its return filed on 31-10-2007. The case
of the assessee was selected for scrutiny. The assessee
claimed deduction of Rs.5,19,92,472/- u/s 80-IB(10). The
Assessing Officer asked the assessee to give justification for
claiming such deduction. Ld. Assessing Officer denied the
claim on two counts firstly, the built up area of the unit is
above prescribed limit of 1500 sq. Ft. And secondly for
earlier assessment order identical deduction was claimed by
the assessee and the assessee violated the conditions
stipulated u/s 80-IB(10) in Type A flats. Ultimately, the ld.
Assessing Officer denied such deduction to the assessee.
The assessee filed various documents before the Assessing
Officer and the same were examined by her. Finally the ld.
Assessing Officer concluded that the conditions laid down
u/s 80-IB(10) were not satisfied, therefore, the claim of
deduction could not be allowed to the assessee.
8.5. On appeal before the ld. CIT(A) the claim of the
assessee was examined and ultimately the assessment order
was upheld. The aggrieved assessee is in appeal before this
Tribunal.
8.6. If the totality of facts available on record and the
assertion made by the ld. respective counsels are kept in
juxtaposition, broadly the ld. CIT(A) is influenced by the
sale transactions with Rajasthan Global Securities Ltd., it
ITA 298/2013 Page 7 of 21
was confirmed that the amount of Rs.5,36,89,920/- was paid
to the assessee as advance for purchase of 37 flats in
Krishnalok project. However, what it may the moot issue to
be adjudicated by us pertains to sec. 80-IB(10). We further
find that as contained in para 1.2 (page 5) of the impugned
order, the ld. CIT (A) has examined the submissions of the
assessee and the reason of denial of deduction to the
assessee by the ld. Assessing Officer. The relevant portion
from the impugned order is reproduced hereunder:
"It was further submitted that Addl. CIT wrongly tries
to prove that sale with M/s. Rajasthan Global Securities Ltd.
9RGSL) are not accounted for properly and undue profit has
arisen on account of 80-IB whereas these are normal
business transactions undertaken by assessee company with
M/s. Rajasthan Global Securities Ltd. having no mutual
relation whatsoever. The Assessing Officer has objected to
the issue of preferential shares and its valuation. The
assessee company has issued preferential shares to various
persons as per SEBI guidelines and approval of Bombay
Stock Exchange. The assessee company is a listed company
and does not ah any discretion about the issue price and
require to issue shares through preferential allotment only
at the rate as per SEBI guidelines and approved by stock
exchange. During the year the assessee company has
calculated average market price as per general metting,
certification by statutory auditor etc., has submitted to
Bombay Stock Exchange and has issued the preferential
share after getting approval from Bombay Stock Exchange.
These are normal business transactions because these are
issued as per SEBI and Stock Exchange guidelines. These
shares are issued to a number of companies and individuals
and not only to RGSL. Valuation of these shares are done
as per SEBI and Stock Exchange guidelines which were as
per average market rats and approved by Board of
Directors and General Meeting of CHD, statutory auditor
and Bombay Stock exchange approval. There is no close or
remote nexus between CHD and RGSL. There is no
common relation among the directors or major share
holders. Since CHD is listed company it has no control over
market rate or guidelines of SEBI and Stock Exchange. It is
ITA 298/2013 Page 8 of 21
immaterial for CHD what its shareholder does not with their
investments. As regard Assessing Officers observation that
the assessee has booked substantial sales with respect to non
80-IB project, it was submitted that there are normal
business transactions which CHD has undertaken during
this year for earning profits in 80-IB project as well as non
80-IB projects."
8.7. If the aforesaid is analyzed, we find that the grievance
of the revenue is that the sales made to M/s. Rajasthan
Global Securities Ltd. are not properly accounted for and
undue profit has arisen on account of sec. 80-IB, whereas
the claim of the assessee is that it is a normal business
transaction and the assessee has no mutual relation what-
so-ever with M/s. Rajasthan Global Securities Ltd. So far as
the built up area is concerned, as has been alleged by the
revenue that it is beyond the prescribed limit of 1500 sq. Ft.,
we have perused the sanction plan, submissions before the
Assessing Officer as well as before the ld. CIT(A) and the
break up dimensions adduced by the assessee. Such break
up even has been reproduced at pages 7 & 8 of the
impugned order, as per which the total area has been
claimed by the assessee at 1492.43 sq. Ft.
8.8. Another point mentioned in the assessment order for
denying deduction by the Assessing Officer is that the
assessee did not file the bifurcation. However, we find that
such bifurcation was duly filed by the assessee that too
room-wise of all the units. Still the deduction was denied on
the presumption that the basis of arriving at such figure was
not adduced by the assessee. We are not in agreement with
the finding of the Assessing Officer on two counts- firstly,
the approval was granted by the Competent Authority; and
secondly such bifurcation is as per sanctioned plan which
was filed before the Assessing Officer. Uncontrovertedly
such bifurcation was filed during assessment stage, first
appellate stage and even before us. It is also not in dispute
that the approval was granted by the Competent Authority to
the assessee on 16-3-2005 meaning thereby the project was
approved before the amendment inserted/ substituted by
Finance (No.2) Act of 2004, w.e.f. 1-4-2005. Prior to its
ITA 298/2013 Page 9 of 21
substitution, sub-section (10), as amended by the Finance
Act, 2000, w.e.f. 1-4-2001 and Finance Act 2003 with
retrospective effect from 1-4-2002, 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 1 st 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."
8.9. If the aforesaid position of law existing at the time
when the plan was sanctioned/ approval was granted to the
assessee is analyzed, there was no condition like production
of complete certificate. This is a settled legal proposition of
law that the law existing at the particular point of time will
be applicable unless and until it is specifically made
retrospective by the legislature. The substitution so made, is
therefore, applicable prospectively and not retrospectively.
There is an uncontroverted fact that approval was granted
to the assessee on 16-3-2005, consequently the assessee was
expected to complete the project on or before 31-3-2009.
Now the question arises whether the project was completed
ITA 298/2013 Page 10 of 21
by the assessee within time. As is evident from the letter of
the assessee dated 5-11-2008 addressed to the Vice
Chairman Mathura Vrindavan Development Authority, on
which the seal and signature of the concerned authority is
affixed (page 28 of the paper book), it has been specifically
requested that the construction has been completed and
further request has been made for grant of completion
certificate of Phase-I, meaning thereby, if not earlier, the
project was presumed to be complete as on 5-11-2008
because the concerned development authority has neither
said that the project was not complete nor completion
certificate was issued to the assessee. In the absence of any
variation or allegation if such certificate is not issued to the
assessee, whether the assessee can be penalized for the act
of an authority on which it has no control, the obvious reply
is that for the fault of others anybody should not be
penalized, more specifically when the project was approved
on 16-3-2005. Therefore, the law applicable as on date will
be applicable to the assessee. It is not expected that the
assessee will demolish the construction work which is
already in progress and again comply with the direction of
the law which was inserted on a later date which is
prospective in nature. If the intention of the legislature
would have been to make it effective from retrospective
effect, nothing prevents the legislature to do so.
8.10. If the issue is analyzed in the light of case laws cited
before us, we find that the Honble Karnataka High Court
vide judgment dated 29th February 2012 in the case of CIT
& another Vs. M/s. Anriya Project Management Services
Pvt. Ltd. (ITA no. 138 of 2010), considered the decision like
CIT & ors. Vs. G.R. Developers (ITA no. 355/2009) and held
that definition of built up area was inserted by Finance
(No.2) Act of 2004, which came into effect from 1-4-2005, is
prospective in nature and has no application to the housing
projects which were approved by local authority prior to
that date, strongly supports the case of the assessee. It was
held by the Honble High Court that the assessee was
entitled to hundred per cent benefit of sec. 80-IB(10).
8.11. Another case cited was from Visakhapatname Bench
ITA 298/2013 Page 11 of 21
of the ITAT in the case of M/s. Vishnu Builders Vs. ACIT
(ITA nos. 178, 179 & 180/Vizag/2011), order dated 27 th July
2011. In that case also, completion certificate was not filed
before the Assessing Officer and the proof of municipal tax
assessment of various flat owners establishing that the
housing project was completed before September 2008 was
filed. Since there was no practice of issuing the project
completion certificate, therefore, it was held that it was not
a condition precedent of filing the completion certificate for
allowing deduction u/s 80-IB(10) of the Act.
8.12. In the case of CIT Vs. Tarnetar Corporation (Tax
appeal no. 1241 of 2011), the Honble Gujarat High Court
vide judgment dated 12-9-2012, observed that the
confirmation issued by municipal authorities was filed on
15-2-2006 and was rejected on 1-7-2006. The assessee also
paid penalty for regularization of the units. Since
st
construction was completed well before 31 March 2008,
the outer limit for such construction and the permission was
not granted by they municipal authority, it was held that
fulfilling of every condition is not mandatory and if there is
a substantial compliance, the minor deviation thereof would
not vitiate the very purpose of deduction.
8.13. The ITAT Delhi Bench ,,G in the case of ACIT Vs.
Surendra Developers etc. (ITA nos.2743 to 2745 & ITA nos.
3056 to 3058/Del/2010) vide order dated 1-8-2012, held that
wherein the assessee applied for completion certificate
before the lower authorities in time and such certificate was
not issued by the local authority, such non-issuance was
beyond the control of the assessee. While coming to this
conclusion the Bench also considered another case of M/s.
Girija Colonizers (ITA nos. 2417 to 2422/Del/11 order
dated 9-12-2011).
8.14. The ld. Sr. D.R. also placed reliance upon the
decision of the Tribunal of Chennai Bench in ACIT Vs.
Viswas Promoters P. Ltd. (2010) 005 ITR (Trib) 0449 on the
issue of built up area not exceeding 1500 sq. ft. It was held
that if this condition is not fulfilled, the assessee is not
eligible for deduction. However, we find that in the present
ITA 298/2013 Page 12 of 21
appeal, the built up area is below the prescribed limit of
1500 sq. ft. Therefore, this decision may not help the
revenue being distinguishable on facts.
8.15. If this issue is analyzed with the view point of rule of
consistency, we are of the considered opinion that though
the principle of res-judicata is not applicable to the income-
tax proceedings, yet for the sake of consistency and for the
purposes of finality in all litigations, including litigation
arising out of fiscal statutes, earlier decisions on the same
question should not be reopened unless some fresh facts are
brought on record in subsequent assessment year. For A.Y.
2006-07, even the ld. CIT (A) decided the issue in favour of
the assessee, which was confirmed by the Tribunal (supra),
therefore, unless and until any new material facts are
brought on record, the revenue is not permitted to take a "U
turn", while denying the claimed deduction to the assessee,
that too on same facts and circumstances. Our view is
fortified by the decision of Honble Jurisdictional High
Court in the case of CIT v. A.R.J. Security Printers 264 ITR
276 (Del.); and the ratio laid down in CIT Vs. Neo Poly
Pack (P) Ltd. 245 ITR 492 (Del.); Berger Paints India Ltd.
Vs. CIT 266 ITR 99 (SC); CIT Vs. Lagan Kala Upvan 259
ITR 489 (Del.); and Union of India & others Vs. Kaumudini
Narayan Dalal & another 249 ITR 219 (SC). From this
angle also, the assessee is having a strong case in its favour.
8.16. Leave apart, we are of the considered opinion that the
assessee is expected to complete the project as per the
approved plan at a particular point of time and the assessee
is not expected to do or to fulfil the conditions which are not
in existence at the relevant point of time or made
compulsory after making some amendment in the Act from
the future date. Since the assessee was to complete the
project on or before 31-3-2009 and request was duly made
with the Competent Authority on 5-11-2008 mentioning that
the project has been completed and completion certificate
may be issued and if the same is not issued by the Competent
Authority the assessee should not be penalized for the same
unless and until some contrary facts are brought on record
evidencing that the assessee contravened the conditions
ITA 298/2013 Page 13 of 21
contained in the approval granted by such Competent
Authority. As per sub-section (10) of Sec. 80-IB, the housing
project which were approved before 31st day of March,
2008, the benefit will be hundred per cent subject to
fulfilment of certain conditions. However, this condition
was substituted by the Finance (No.2) Act of 2009 with effect
from 1-4-2009, which has been further explained by sub-
clause (ii) to the Explanation regarding completion
certificate. However, since the approval was granted to the
assessee on 1-4-2005, therefore, the assessee is not expected
to fulfil the conditions which were not on the statute when
such approval was granted to the assessee. Therefore, the
appeal of the assessee deserves to be allowed.
9. Finally, the appeal of the revenue is allowed in part
and that of the assessee is allowed."
8. The impugned order relies upon several rulings such as one by the
Karnataka High Court in CIT vs. Anriya Project Management Services
Pvt. Ltd. and various Benches of the Tribunal itself and thereafter held as
follows: -
"8.6. If the totality of facts available on record and the
assertion made by the ld. respective counsels are kept in
juxtaposition, broadly the ld. CIT(A) is influenced by the
sale transactions with Rajasthan Global Securities Ltd., it
was confirmed that the amount of Rs.5,36,89,920/- was paid
to the assessee as advance for purchase of 37 flats in
Krishnalok project. However, what it may the moot issue to
be adjudicated by us pertains to sec. 80-IB(10). We further
find that as contained in para 1.2 (page 5) of the impugned
order, the ld. CIT (A) has examined the submissions of the
assessee and the reason of denial of deduction to the
assessee by the ld. Assessing Officer. The relevant portion
from the impugned order is reproduced hereunder:
"It was further submitted that Addl. CIT
ITA 298/2013 Page 14 of 21
wrongly tries to prove that sale with M/s.
Rajasthan Global Securities Ltd. 9RGSL) are
not accounted for properly and undue profit
has arisen on account of 80-IB whereas these
are normal business transactions undertaken
by assessee company with M/s. Rajasthan
Global Securities Ltd. having no mutual
relation whatsoever. The Assessing Officer
has objected to the issue of preferential
shares and its valuation. The assessee
company has issued preferential shares to
various persons as per SEBI guidelines and
approval of Bombay Stock Exchange. The
assessee company is a listed company and
does not ah any discretion about the issue
price and require to issue shares through
preferential allotment only at the rate as per
SEBI guidelines and approved by stock
exchange. During the year the assessee
company has calculated average market
price as per general metting, certification by
statutory auditor etc., has submitted to
Bombay Stock Exchange and has issued the
preferential share after getting approval
from Bombay Stock Exchange. These are
normal business transactions because these
are issued as per SEBI and Stock Exchange
guidelines. These shares are issued to a
number of companies and individuals and
not only to RGSL. Valuation of these shares
are done as per SEBI and Stock Exchange
guidelines which were as per average market
rats and approved by Board of Directors and
General Meeting of CHD, statutory auditor
and Bombay Stock exchange approval.
There is no close or remote nexus between
CHD and RGSL. There is no common
relation among the directors or major share
holders. Since CHD is listed company it has
no control over market rate or guidelines of
SEBI and Stock Exchange. It is immaterial
ITA 298/2013 Page 15 of 21
for CHD what its shareholder does not with
their investments. As regard Assessing
Officers observation that the assessee has
booked substantial sales with respect to non
80-IB project, it was submitted that there are
normal business transactions which CHD
has undertaken during this year for earning
profits in 80-IB project as well as non 80-IB
projects."
9. This Court has considered the submissions. The Court notices that
besides Anriya Project Management Services (P.) Ltd. (supra) there are
other decisions of other High Courts such as CIT-II vs. Brahma
Associates, (2011) 197 Taxman 459 (Bom.); Manan Corporation vs.
Assistant Commissioner of Income Tax, (2013) 29 Taxman 15 (Guj.). In
the last decision referred to above, Gujarat High Court considered the
effect of the law as it stood prior to the amendment i.e. 01.04.2005 and
after the amendment and held as follows: -
"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 while
approving such project when initially there was no such
ITA 298/2013 Page 16 of 21
restriction in taxing statute and the permissible ratio for
commercial user made 5% to the total built up area by way
of amendment and reduction of which by further amendment
to 3% of the total built up area, has to be necessarily
construed on prospective basis.
22. As is very apparent from the record, there was no
criteria for making commercial construction prior to the
amended Section and the plans are approved as housing
projects by the local authority for both the projects of the
appellant. Permission for construction of shops has been
allowed by the local authority in accordance with rules and
regulations, keeping in mind presumably the requirement of
large townships. However, the projects essentially remained
residential housing projects and that is also quite apparent
from the certificates issued by the local authority and,
therefore neither on the ground of absence of such provision
of commercial shops nor on account of such commercial
construction having exceeded the area contemplated in the
prospective amendment can be made applicable to the
appellant assessee whose plans are sanctioned as per the
prevalent rules and regulations by the local authority for
denying the benefit of deduction of profit derived in the
previous year relevant to the assessment year as made
available otherwise under the statute.
23. It would be worthwhile to note at this stage that even
though the facts before the Bombay High Court were
different than those emerging from the present case,
Revenues submissions before the Bombay High Court that
the amendment of Section 80IB(10) and the insertion of
clause (d) with effect from 1.4.2005 should be applied
retrospectively was held to be without any merit in following
words, in paragraph 32 of the Bombay High Court, which is
reproduced as under:
"Lastly, the argument of the Revenue that
section 80-IB(10) as amended by inserting
clause (d) with effect from April 1, 2005 should
be applied retrospectively is also without any
merit, because, firstly, clause (d) is specifically
ITA 298/2013 Page 17 of 21
inserted with effect from April 1, 2005 and,
therefore, that clause (d) seeks to deny section
80-IB(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 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 CIT v. Anriya
Project Management Services (P.) Ltd. [2012]
21taxmann.com 140/ 209 Taxman 1 (Kar.) 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 nature. It held that amendment provision
would have no application to housing projects, which were
approved by the local authority prior to 1.4.2005 in
calculating 1500 sq. feet of residential unit and it further
held that once such housing project of assessee is approved
by local authority prior to 1.4.2005, it would be entitled to
100% benefit of Section 80IB(10). While so holding, it
relied on the judgment of the Karnataka High Court in the
case of CIT v. G.R. Developers [IT Appeal No.355 of 2009].
ITA 298/2013 Page 18 of 21
25. Corollary to this is one more aspect that requires
reference here. The Government of India Ministry of
Finance, Department of Revenue to all Chief Commissioners
of Income-Tax and all Director Generals of Income-Tax
issued Instruction No.4 of 200 dated 30.6.2009 in respect of
Section 80IB (10) of the Act would be available on year to
year basis where the assessee is showing profit on partial
completion or the same would be available on the year of
completion of the project, which is clarified as under: -
"3. The above issue has been considered by
the Board and it is clarified as under: -
(a) The deduction can be claimed on a year
to year basis where the assessee is showing
profit from partial completion of the project in
every year.
(b) In a case it is late, found that the
condition of completing the project within the
specified time limit of 4 years as started in
section 80-IB(10) has not been satisfied, the
deduction granted to the assessee in the earlier
years should be withdrawn."
26. From the reading of the above instruction, it can be
also said that the Government being aware of both the
accounting methods has expected either of them to be
followed in cases of individual assessee. However, in post
amendment period, strict adherence to completion period of
four years is insisted upon where project completion method
is followed. This limitation of period did not exist prior to
the amendment, what is vital to draw from this is that the
amendment cannot discriminate those following project
completion method if in the interregnum period, amendment
is brought in the statute. The say of the assessee therefore
gets further fortified when it says that only because it chose
to follow the method of accounting of project completion
basis, whose completion date falls after 1.4.2005, they can
ITA 298/2013 Page 19 of 21
be denied the deduction on profits derived and those
assessee who 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."
10. In the present case concededly the approval for the project was
given by the Mathura Vrindavan Development Authority on 16.03.2005.
Clearly the approval related to the period prior to 2005, i.e. before the
amendment, which insisted on issuance of the completion certificate by
the end of the 4 year period was brought into force. We are in full
agreement with the Gujarat High Court that the application of such
stringent conditions, which are left to an independent body such as the
local authority who is to issue the completion certificate, would have led
to not only hardship but absurdity. As a consequence, we are of the
opinion that the reasoning and conclusions of the Karnataka High Court
and the Gujarat High Court are fully applicable to the facts of this case.
The Tribunal was not, therefore, in error of law while holding in favour
of the assessee.
ITA 298/2013 Page 20 of 21
11. In view of the above no substantial question of law arises for
consideration. The appeal is accordingly dismissed.
S. RAVINDRA BHAT
(JUDGE)
R.V. EASWAR
(JUDGE)
JANUARY 22, 2014
hs
ITA 298/2013 Page 21 of 21
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