COMMISSIONER OF INCOME TAX GHAZIABAD V. M/S SHIPRA ESTATE LTD.

IAPL/284/2010

AI Insights

The case involves three connected appeals by the Commissioner of Income Tax, Ghaziabad against M/S Shipra Estate Ltd., concerning the eligibility for tax deductions under specific sections of the Income Tax Act, 1961. The primary legal question was whether the Income Tax Appellate Tribunal was correct in allowing deductions when the construction of the projects commenced before the stipulated date of 1st October 1998. The respondent had claimed deductions for several projects under construction, arguing that the formal construction activities began after the cutoff date, despite some preliminary work being done earlier. The Tribunal had accepted the respondent's claims, which the Commissioner contested in the appeals.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 727940 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 02-01-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SWAPNIL KUMAR; TRAPTI GUPTA
• Assessee Lawyers: PRAVEEN KUMAR; PRAVEEN KUMAR; S C MANU GHILDYAL
• Keywords: Construction projects; Deduction; Housing project; Income tax appeal; Legal interpretation
• Section: 80-IA(5); 80 I B (10); 80 IA (4F)

Judgement Text

"1 A F R [RESERVED] Case :- INCOME TAX APPEAL No. - 284 of 2010 Appellant :- Commissioner Of Income Tax, Ghaziabad Respondent :- M/S Shipra Estate Ltd. Counsel for Appellant :- Praveen Kumar,Manu Ghildyal Counsel for Respondent :- Swapnil Kumar,Trapti Gupta And Case :- INCOME TAX APPEAL No. - 270 of 2010 Appellant :- Commissioner Of Income Tax,Ghaziabad Respondent :- M/S Shipra Estate Ltd. Counsel for Appellant :- Praveen Kumar,C.S.C. I.T. Counsel for Respondent :- Swapnil Kumar,Trapti Gupta And Case :- INCOME TAX APPEAL No. - 274 of 2010 Appellant :- Commissioner Of Income Tax,Ghaziabad Respondent :- M/S Shipra Estate Ltd. Counsel for Appellant :- S.C.,Manu Ghildyal Counsel for Respondent :- Praveen Kumar,Swapnil Kumar,Trapti Gupta Hon.Pankaj Mithal,J. Hon. Vinod Kumar Misra, J. Heard Sri Manu Ghildyal, learned counsel for the revenue and Sri Swapnil Kumar assisted by Ms. Tripti Gupta for the assessee respondent. These are three connected appeals preferred by the Commissioner of Income Tax, Ghaziabad against the common order dated 30th October 2009 passed by the Income Tax Appellate Tribunal, New Delhi. The moot question of law arising in this appeal is:- “Whether on the facts and circumstances of the case, the ITAT was legally correct in allowing deduction (s) under Section 80 I A (5) and 80 I B (10) of the Income Tax Act, 1961 when it was clearly established that the constructions of the projects started before 1.10.1998.” The respondent assessee is a company engaged in building and construction activities. It undertook construction of two major complexes namely M/S Shipra Rivera and M/S Shipra Sun City at Indirapuram. Each of the above complexes were sub-divided into small projects. The Shipra Rivera complex was divided into the following six projects:- 1) Bhagirathi Project; 2 2) Alaknanda Project; 3) Brahmaputra Project; 4) Caveri Project; 5) Amravati Project; and 6) Damodar Project. Similarly, Shipra Sun City Complex was also sub-divided into five projects namely:- 1) Nilgiri Project; 2) Shivalik Project; 3) Sadpura Project; 4) Kanchenjunga Project; and 5) Aravali Project. The respondent assessee claimed deduction under Section 80 IA(4F) read with Section 80 IA(5) and Section 80 IB (10) of the Act in respect of the following four projects of the Shipra Riviera Complex :- 1) Amrawati Project ; 2) Brahmaputra Project; 3) Damodar Project; and 4) Caveri Project. It is contended that it had entered into an agreement with Ghaziabad Development Authority (in short GDA) on 12.12.1996 for constructions of various flats in the said projects. The GDA approved the projects on 28.2.1998. The foundation was laid on 4.10.1998 and the construction of the projects started in October 1998. The claim was disallowed by the Assessing Authority inter alia on one of the grounds that the development and construction work had commenced prior to 1.10.1998. However, the tribunal by the impugned order has accepted the claim. Therefore, the revenue has preferred these appeals. The provision of Section 80 IA (4F) read with Section 80 IA(5) and 80 IB (10) of the Act clearly demonstrates that exemption in respect of profit derived from the housing project is admissible subject to fulfilment of the following three conditions:- 1) Required land area under which project is more than one acer; 2) Built up area of housing is not more than 1000 sq. feet; and 3 3) The development and construction of the housing project commences on or after 1.10.1998 and is completed before 1.4.2004. In the case at hand there is no dispute with regard to satisfaction of the first two conditions rather the dispute is only with regard to commencement of the development and construction of the project prior to 1.10.1998. The tribunal in allowing the claim of the assessee has held that as in all the four projects work orders were issued subsequent to 1.10.1998, there is no reason to assume that the development and construction of the projects started prior to 1.10.1998 so as to deny the claim of deduction under Section 80 IA (4 F)/80 IB (10) of the Act. Section 80 IA (4F) of the Act which stood during the relevant assessment year reads as under :- “ 80IA(4F) This section applies to an undertaking, engaged in developing and building housing projects approved by a local authority subject to the condition that the size of the plot of land has a minimum area of one acre, and the residential unit has a built up area not exceeding one thousand square feet: Provided that the undertaking commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before the 31st day of March, 2001.” The aforesaid provision in its proviso uses the expression “Commences Development and Construction of the Housing Project” on or after first day of October 1998. A plain and simple reading of the aforesaid provision reveals that the benefit under the aforesaid provision would be available if the undertaking Commences Development and Construction of the Housing Project on or before 1st October 1998. The use of the words “Commences Development and Construction” are material and relevant. The development of the project precedes constructions of the project. The development and the construction of a project can not be dissected and divided. Thus, where the assessee undertakes levelling work so as to develop the land to facilitate the construction of a building over it, the development and construction of the housing project commences with such levelling of the earth. Therefore when the expression used is “Commences Development and Construction of the Housing Project” the intention of the legislature is clear that the development of the project and the construction which follows such development must start on or before the date specified even if either the development or the construction starts before the specified date, the benefit 4 under the aforesaid provisions would not be admissible. The evidence on record may prove that the foundation laying ceremony of the projects may have been performed on 30.9.1998 and actual construction may have started later on but the levelling of the earth in the project had started much earlier. Thus, with the levelling of the earth, the development and construction of the project had commenced which was prior to 1st October 1998. In view of the fact that the development and construction of the housing project are integral to each other and as the filling or levelling of the earth of the projects which is part of development had commenced prior to 1.10.1998, it would be deemed that the development and construction had commenced prior to 1.10.1998. Thus, the respondent assessee failed to satisfy the third condition for grant of benefit under Section 80 IA (4F) read with Section 80 IA (5) and 80 IB (10) of the Act. Accordingly, the tribunal was not justified in granting the benefit of Section 80 IA (4F) read with Section 80 IA (5) and 80 IB (10) of the Act. The question is answered in favour of the revenue and against the assessee. The appeals are allowed. SKS 2.1.2018 "