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COMMISSIONER INCOME TAX-I Vs. CHD DEVELOPERS LTD
February, 17th 2014
$~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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