ACIT, CHENNAI V. Sterling Estates & Properties Ltd, CHENNAI

ITA 316/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68617 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI JT
• Assessee Lawyers: J PRABHAKAR
• Keywords: Retrospective amendment; Competent authority
• Section: 80IB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER] I.T.A.NOS.316 & 336/MDS/2013 ASSESSMENT YEARS : 2005-06 AND 2004-05 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE VI(4) CHENNAI VS M/S STERLING ESTATES & PROPERTIES LTD 124, STERLING POINT G.N.CHETTY ROAD T. NAGAR CHENNAI 600 017 [PAN AAFCS 3024 E] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETGIRI, JT.CIT RESPONDENT BY : SHRI J. PRABHAKAR, FCA DATE OF HEARING : 06-08-2013 DATE OF PRONOUNCEMENT : 14-08-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LD. CIT(A) V, CHENNAI, BOTH DATED 23.11.2012, FOR ASSESSMENT YEARS 2005-06 AND 2004-05. 2. IN ITS APPEALS, THE REVENUE HAS TAKEN THE FOLLOWING COMMON GROUNDS: I.T.A.NOS.316 & 336/13 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE 2. THE ID. CIT(A) ERRED IN DIRECTING THE ASSESSING OF FICER TO ALLOW DEDUCTION U/S 80IB(10) OF THE IT ACT WHEN THERE IS VIOLATION OF THE COMMERCIAL AREA OF THE PROJECT EXCEEDING 2000 SQ.FT . RELYING UPON ITS OWN DECISION IN THE ASSESSEE'S OWN CASE FOR THE ASS T. YEAR 2006-07 IN ITA NO. 381/2011-12 DATED 07-09-2012 2.1 THE ID.CIT(A) OUGHT TO HAVE NOTED THAT THE A MENDED PROVISION AS PER SEC. 80IB(10)(D) WITH EFFECT FROM 01-04-2005 IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE AS THE APPROVA L FROM STATUTORY AUTHORITIES HAVE BEEN RECEIVED DURING 2003 I.E., BE FORE 1 ST APRIL 2004 AND CONSTRUCTION DONE IN F.Y. 2004-05,EXACTLY FITS INTO THE PROVISIONS OF 80IB(10)(A)(I). 2.2 THE ID. CIT(A) FAILED TO NOTE THAT THE SAID AMENDMENT EXPLICITLY MENTIONED IN THE PROVISION THAT SUCH UNDERTAKING HA S COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSI NG PROJECT ON OR AFTER 1 ST DAY OF OCT. 1998 AND COMPLETES SUCH CONSTRUCTION - IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1 ST DAY OF APRIL 2004, ON OR BEFORE 31 ST DAY OF MARCH 2008 '. 2.3 IT IS SUBMITTED THAT THE CIT(A) 'S ORDER REL IED UPON ITS OWN DECISION IN THE ASSESSEE'S OWN CASE FOR THE ASST. Y EAR 2006-07 IN ITA NO. 381/2011-12 DATED 07-09-2012 HAS NOT BECOME FIN AL AND FURTHER APPEAL TO THE ITAT HAVE BEEN PREFERRED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF ASSESSING OF FICER RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED CLAIM FOR DEDUCTION U/S 80IB(10) OF ` 1,52,82,990/- IN ASSESSMENT YEAR 2005-06 AND OF ` 79,60,759/- IN ASSESSMENT YEAR 2004-05 ON THE GROUND THAT ONE OF THE CONDITIONS PR ESCRIBED FOR ALLOWING DEDUCTION TO THE ASSESSEE U/S 80IB(10) OF THE ACT WAS THAT THE TOTAL COMMERCIAL AREA IN THE PROJECT DID NOT EX CEED 2000 SQ FT I.T.A.NOS.316 & 336/13 :- 3 -: WHICH HAS TO BE SUPPORTED BY THE ASSESSEE WITH A DU LY SIGNED AUDIT REPORT AND FORM 10CCB. THE ASSESSING OFFICER OBSER VED THAT FROM THE DETAILS FILED WITH THE RETURN OF INCOME IN FORM 10C CB IT WAS OBSERVED THAT THE COMMERCIAL AREA WAS 5706 SQ FT WHICH WAS I N EXCESS OF THE PROVISIONS LAID DOWN BY THE ACT IN SECTION 80IB(10) . HE, THEREFORE, HELD THAT DEDUCTION U/S 80IB(10) WAS NOT APPLICABLE TO THE HOUSING PROJECT OF THE ASSESSEE-COMPANY AND THE CLAIM OF DE DUCTION U/S 80IB(10) WAS NOT ALLOWED TO THE ASSESSEE. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND MADE SIMILAR SUBMISSIONS FOR BOTH THE YEARS WHICH ARE AS FOLLOWS: IN THIS CONNECTION IT HAS BEEN SUBMITTED ON BEHALF OF THE APPELLANT THAT THE AO DENIED THE BENEFIT UNDER SECTION 8IB QUOTING VIOLATION OF SUBSECTION 10 THEREOF THAT COMMERCIAL AREA OF THE PROJECT EXCEEDED 2000 FT.2. IT HAS BEEN CONTENDED BY THE APPELLANT THAT THE RESTRICTION ON BUILT-UP COMMERCIAL SPACE EXCEEDING 2000 SQ FT. OR 5% OF AGGREGATE BUILT-UP AREA, WHICHEVER IS LOWER, THOUGH ENTERED IN THE STATUTE BOOK BY FINANCE (NO.2) ACT, 2004 W.E.F. 01.04.2005 (I.E. ASSESSMENT YEAR 2005-06), NEVERTHELESS WILL BE APPLICABLE FOR PROJECTS APPROV ED ONLY IN RESPECT OF HOUSING PROJECTS ON OR AFTER 01.04.20 04. THE PROJECT OF THE APPELLANT, IT HAS BEEN SUBMITTED, WA S APPROVED ON 25.11.2003 AND THE TIME LIMIT FOR FULFI LLING THE CONDITIONS IN SECTION 80IB WAS FULFILLED BY COMPLET ING THE PROJECT WITHIN FOUR YEARS FROM NOVEMBER 2003. IT HA S FURTHER BEEN SUBMITTED THAT THE SAME ISSUE ON THE M ERITS OF CLAIM UNDER SECTION 80IB HAD COME UP IN APPEAL BEFO RE CLT (A) IN APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2006- 07 AND THE APPEAL OF THE APPELLANT WAS ALLOWED IN I TA NO. 381/2011-12 VIDE ORDER DATED 07.09.2012. I.T.A.NOS.316 & 336/13 :- 4 -: 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, HAS GIVEN SIMILAR FINDINGS IN BOTH THE YE ARS AS UNDER: 6.1 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND HAVE ALSO GONE THROUGH THE APPELLATE ORDER IN APPEL LANT'S OWN CASE IN ITA NO.381/2011-12 FOR ASSESSMENT YEAR 2006-07 VIDE WHICH I HAD ALLOWED APPELLANT'S APPEAL ON THE ISSUE OF CLAIM UNDER SECTION 801B. THE RELEVANT EXT RACT BY ORDER DATED 07.09.2012 IN APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2006-07 IN ITA NO. 381/2011-12 IS REPRODUCED AS UNDER: ' .. THE ISSUE FOR CONSIDERATION ON MERITS THAT BEE N RAISED BY THE APPELLANT IS REGARDING THE STATUTORY AMENDMENT THAT TOOK PLACE U/S 801B (10) BY INSERTING SUBSECTION(D) U/S 80IB(10)(D) W.E.F. 01.04.2005 FROM THE AY 2005-06 HAS TO BE ONLY PROSPECTIVE AND IT CANNOT BE RETROSPECTIVE. IN THIS REGARD IT HAS BEEN SUBMITTED THAT THE APPELLANT TOOK APPROVAL FROM THE STATUTORY AUTHORITIES FOR THE PROJECT VIDE APPROVAL OF TOWN PANCHAYAT DATED 19.12.2003 WHICH IS MUCH BEFORE THE AMENDMENT TO SECTION 80IB(10) WITH REGARD TO THE LIMIT OF COMMERCIAL CAME INTO EFFECT. THE ASSESSING OFFICER'S CONTENTION THAT THE AMENDMENT IS W.E.F 01.04.2005 WHICH ONLY PROVIDED FOR CERTAIN AREA OF CONSTRUCTION OF COMMERCIAL PORTION AND THERE WERE NO SCOPE TO HAVE COMMERCIAL PORTION PRIOR TO THE AMENDMENT. THE APPELLANT HAS RELIED ON THE FOLLOWING DECISIONS : (I) BRAHMA ASSOCIATES V. JOINT COMMISSIONER OF INCOME- TAX- 122 TTJ 433 AS APPROVED BY BOMBAY HIGH COURT IN 333 ITR 289. (II) K. M. SHARMA VS ITO 254 ITR 772 (II) SHAH BUILDERS AND DEVELOPERS LTD., MUMBAI J BENCH IN ITA NO. 3195 AND 3196/2010 IN SUPPORT OF ITS CONTENTION THE APPELLANT RELIED & FURNISHED COPIES OF THE ORDERS I.T.A.NOS.316 & 336/13 :- 5 -: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT IN THE LIGHT OF THE AFORESAID DECISIONS. IN THE ABOVE CASES LEGAL POSITION HAS BEEN CLEARLY SPELT OUT THAT THE AMENDMENT REGARDING THE COMMERCIAL PORTION IN THE PROJECT U/S 80IB(10)(D) IS WITH EFFECT FROM 01.04.2005 FROM THE AY 2005-06 AND ANY APPROVAL FOR THE PROJECTS TAKEN PRIOR TO THIS DATE WILL BE OUTSIDE THE PURVIE W OF THE RESTRICTION IMPOSED BY THE NEW AMENDMENT. THE PROFIT CLAIMED AS EXEMPTED U/S 80IB(10)THOUGH PERTAIN TO THE ASSESSMENT YEAR 2006-07 BUT THESE PERTAIN TO THE PROJECT FOR WHICH AN APPROVAL WAS TAKEN IN 19.12.2003. IN VIEW OF THESE FACTS I AM OF THE CONSIDERED VIEW THAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S 80IB (10) ON THIS COUNT .. ' SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AS COMPARED TO THE FACTS OF THE APPELLANT'S CASE FOR THE ASSESSMENT YEAR 2006-07 AN D REASONS FOR THE AO DISALLOWING THE CLAIM OF THE APP ELLANT UNDER SECTION 80IB(10) ARE ALSO THE SAME, AND IN MY OWN ORDER IN APPELLANT'S CASE FOR ASSESSMENT YEAR 2006- 07 (SUPRA), I.E. HOLD THAT THE APPELLANT IS ENTITLED T O DEDUCTION UNDER SECTION 80IB(10). IN VIEW OF THE ABOVE DISCUS SION, THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE APPELL ANT U/S 80IB(10) THAT HAS INCORRECTLY BEEN DISALLOWED. THE GROUNDS OF APPEAL RELATING TO THIS ISSUE ARE ALLOWE D. 6. BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE ST ANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO. 2146/MDS/2012 FOR ASSESSMENT YEAR 2006-07, ORDER DATED 22.2.2013. WE FIND THAT THE T RIBUNAL, IN ASSESSMENT YEAR 2006-07, HAS HELD AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE CIT/DR AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MAT ERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE I.T.A.NOS.316 & 336/13 :- 6 -: CLAIMED DEDUCTION OF ` 3,25,38,309/- U/S 80IB(10) FOR THE URAPAKKAM PROJECT FOR THE ASSESSMENT YEAR 2006-07 WHICH WAS D ISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE COMMERCIA L AREA OF THE PROJECT WAS 5702 SQ FT AND THAT ACCORDING TO THE AM ENDMENT MADE IN SECTION 80IB(10) BY INSERTION OF CLAUSE (D) PROVIDI NG THAT THE MAXIMUM PERMISSIBLE LIMIT FOR COMMERCIAL AREA WAS ONLY 2000 SQ FT, THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80 IB(10). THE CONTENTION OF THE ASSESSEE WAS THAT THE AMENDMENT TO SECTION 80IB(10) BROUGHT BY INSERTION OF CLAUSE(D) WAS BY T HE FINANCE ACT, 2005 WITH EFFECT FROM 1.4.2005 AND WAS APPLICABLE F ROM ASSESSMENT YEAR 2005-06 IN RESPECT OF PROJECTS APPROVED AFTER 1.4.2005. SINCE THE ASSESSEES PROJECT WAS APPROVED BY TOWN PANCHA YAT VIDE APPROVAL DATED 19.12.2003, THE AMENDMENT MADE TO SE CTION 80IB(10) WAS NOT APPLICABLE IN THE CASE OF THE ASSESSE AND THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT. 8. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND ALLOWED RELIEF TO THE ASSESSEE ON THE GROUND THAT THE HON' BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BRAHMA ASSOCIATES, 333 ITR 289, HAS HELD THAT THE AMENDMENT MADE TO SECTION 80IB(10) WAS PRO SPECTIVE AND HENCE APPLICABLE FROM ASSESSMENT YEAR 2005-06. 9. WE FIND THAT ON THE ISSUE WHETHER THE AMENDMENT MADE TO SECTION 80IB(10) BY INSERTION OF CLAUSE(D) WITH EFF ECT FROM 1.4.2005 WAS APPLICABLE IN RESPECT OF THE HOUSING PROJECTS W HICH HAVE BEEN APPROVED AND COMMENCED PRIOR TO 1.4.2005 HAS BEEN D ECIDED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF MANAN COR PORATION VS ACIT IN TAX APPEAL NO.1053 OF 2011, ORDER DATED 3.09.201 2, BY OBSERVING AS UNDER: 1. PRESENT APPEAL OF THE ASSESSMENT YEAR 2006-07 A RISES FROM THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL PASSED O N 13.5.2011 RAISING CERTAIN QUESTIONS OF LAW FOR DETERMINATION. CONSIDE RING THAT SUCH QUESTIONS ARE LIKELY TO BE REPETITIVE, AT THE REQUEST OF THE COUNSEL, THE APPEAL IS ADMITTED AND TAKEN UP FOR HEARING. FOLLOWING FACTUAL DETAILS WOULD BE NECESSARY FOR TH E PURPOSE OF APPRECIATING THE LAW POINT INVOLVED IN THIS APPEAL. 1.1 ASSESSING OFFICER WHILE ASSESSING THE RETURN OF THE INCOME OF THE APPELLANT HEREIN NOTED THE CLAIM OF DEDUCTION UNDER SECTION 80IB (10) OF THE ACT FOR TWO PROJECTS, NAMELY, KRISHNA PARK AND PRAS HIDDHI PROJECT, RESPECTIVELY FOR THE SUM OF RS.1,80,25,587/- AND RS .5,2,28,874/- TOTALLING THE SUM OF RS.6,84,44,461/-. ON TWO COUNTS, NAMELY, THA T THE ASSESSEE FAILED TO CARRY OUT ITS OBLIGATION NECESSARY FOR CLAIMING SUC H DEDUCTION SO ALSO ON THE GROUND THAT THE ASSESSEE VIOLATED THE CONDITION LAI D DOWN UNDER THE SAID PROVISION, SUCH CLAIM WAS REJECTED. THE PRINCIPAL O BJECTION IS OF NON- I.T.A.NOS.316 & 336/13 :- 7 -: FULFILLMENT OF THE CONDITION OF LIMITATION FOR BUIL T UP AREA BEING MORE THAN 1500 SQ.FEET AND ITS RATIO TO COMMERCIAL SHOPS BEING MOR E THAN 5% OF THE CREATED BUILT UP AREA OF HOUSING PROJECT OR 2000 SQ FEET WH ICHEVER IS LESS, ACCORDING TO THE ASSESSING OFFICER, SUCH ASSESSEE WOULD NOT B E ELIGIBLE FOR THE DEDUCTION. 2. IT IS THE SAY OF THE ASSESSEE APPELLANT THAT CON DITION OF LIMITING THE COMMERCIAL ESTABLISHMENT/ SHOP TO 2000 SQ.FEET CAME IN FORCE WITH EFFECT FROM 1.4.2005 AND, THEREFORE, THE SAME WOULD BE APP LICABLE FOR THE PROJECTS APPROVED ON OR AFTER 1.4.2005 AND AS T HE APPROVAL OF BOTH THESE PROJECTS WAS PRIOR TO 31.3.2005 I.E. 28.12.20 04 FOR KRISHNA PARK PROJECT AND 18.1.2003 FOR PRASHIDDHI PROJECT, THE A MENDED PROVISION WOULD HAVE NO APPLICATION FOR THESE PROJECTS. SUCH CONTEN TIONS WAS NOT ACCEPTED AND AFTER COMPLETING THE ASSESSMENT, CLAIM OF APPEL LANT REGARDING THE DEDUCTION UNDER SECTION 80IB(10) WAS DISALLOWED . 3. WHEN QUESTIONED BEFORE CIT(APPEALS), THE CIT(APP EALS) FAVOURED THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENC H OF TRIBUNAL AND ALLOWED THE DEDUCTION IN CASE OF BRAHMA ASSOCIATES VS. JCIT REPORTED IN 119 ITD 255(PUNE) (SB). REVENUE APPEALED AGAINST THE SAID ORDER OF CIT(APPEALS) WHERE HEAVY RELIANCE WAS PLACED ON THE JUDGMENT OF BOMBAY HIGH COURT RENDERED IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT REPORTED IN [2011] 333 ITR 289(BOM.) ON THE COUNT THAT SUCH AMENDMENT CAN NOT BE NOT RESPECTED IN ABSENCE OF EX PLICIT PROVISION AND SHOULD BE HELD TO HAVE EFFECT RETROSPECTIVELY AS WE RE ARGUED BEFORE THE TRIBUNAL FOR AND ON BEHALF OF THE ASSESSEE THAT NEI THER THE BOMBAY HIGH COURT NOR THE SPECIAL BENCH HAS HELD THAT CLAUSE (D ) OF SECTION 80IB( 10) IS APPLICABLE TO THOSE PROJECTS, WHICH WERE APPROVED O N OR BEFORE 31 ST MARCH, 2005. BOTH THE DECISIONS HAVE HELD THAT AMENDMENT O F SECTION 80IB(10) IS APPLICABLE PROSPECTIVELY. THE TRIBUNAL, AFTER DISCUSSING THE CASE LAWS ON THE SUBJECT, CONCLUDED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IB (10) BECAUSE IT DID NOT COMPLY WITH THE REQUIREMENT OF CLAUSE (D) O F SECTION 80IB(10), WHICH IS APPLICABLE FROM 1.4.2005 REGARDLESS OF DATE OF A PPROVAL. IT WAS FURTHER STATED THAT THIS WOULD BE APPLICABLE TO ALL THOSE P ROJECTS, WHICH WERE APPROVED BY THE COMPETENT AUTHORITY. IN RESPEC T OF EVEN THOSE HOUSING PROJECTS APPROVED BEFORE 3 1.3.2005, AS NO EXPLANATION HAS BEEN CARVED OUT BY SPECIFYING THAT THE AMENDED PROVISION S ARE APPLICABLE IN RESPECT OF THOSE PROJECTS WHICH ARE APPROVED ON OR AFTER 1.4.2005 BUT BEFORE 3 1.3.2008. IT DENIED SUCH BENEFIT TO THE APPLICANT BY FURTHER HOLDING THAT THE LEGISLATURE IF WANTED TO EXEMPT OLD PROJECTS FROM T HE OPERATION OF CLAUSE(D) THEN, IT COULD HAVE BEEN SPECIFIED BY MAKING A SPEC IFIC PROVISION OR NEW PROVISION BEING APPLICABLE TO ONLY THOSE HOUSING PR OJECTS, WHICH ARE APPROVED ON OR AFTER 3 1.3.2005 BUT BEFORE 3 1. 3.2008 AND SINCE THAT WAS NOT THE CASE, THE SAME WAS DENIED. I.T.A.NOS.316 & 336/13 :- 8 -: 4. AGGRIEVED BY SUCH DECISION, THE PRESENT APPEAL I S PREFERRED RAISING VARIOUS AVERMENTS AND CONTENTIONS AND FURTHER SUBST ANTIATED THE SAME WITH THE AUTHORITIES ON THE SUBJECT. 5. LEARNED ADVOCATE MR. R.K. PATEL APPEARING FOR TH E APPELLANT ASSESSEE HAS FERVENTLY SUBMITTED THE THE DECISION OF THE APP ELLATE AUTHORITY IS CONTRARY TO THE SPIRIT OF THE VERY PROVISION. HE URGED THAT WHEN THESE PROJECTS WERE APPROVED BY THE COMPETENT AUTHO RITY, CLAUSE(D) OF SECTION 80IB(10) WAS NOT ON THE STATUTE BOOK AND ON LY REQUIREMENT EXPECTED FROM THE ASSESSEE WAS THE COMPLIANCE OF CLAUSE(A),( B) AND (C) OF SECTION 80IB(10) AND, THEREFORE, CLAUSE (D) INSERTED BY FIN ANCE (NO.2) BILL, 2004 CANNOT BE MADE APPLICABLE FOR THE PROJECTS APPROVED PRIOR TO 3 1.3.2005. 6. HE FURTHER SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN CASE OF SAROJ SALES ORGANIZATION VS. ITO REPORTED IN (2008) 115 TTJ 485 (MUM) AND ALSO BY A DECISION OF CO-ORDINATE TRIBUNAL REND ERED IN CASE OF HIRANANDANI AKRUTI JV VS. DCIT REPORTED IN (2010) 39 SOT 498(MUM). HE FURTHER URGED THAT BEFORE THE BOMBAY HIGH COURT, ONE OF THE QUESTIONS RAISED WAS WHETHER CLAUSE (D) OF S ECTION 80IB(10) IS APPLICABLE FOR ASSESSMENT YEAR 2005-06 OR WHETHER T HE SAME NEEDED TO BE APPLIED RETROSPECTIVELY. THE PROJECT IN THAT CASE WAS APPROVED BY THE COMPETENT AUTHORITY BEFORE 31.3.2005 AND THE ASSESSMENT YEAR BEFORE THE BOMBAY HIGH COURT WAS 2003 -2004 AND IN SUCH CIRCUMSTANCES, THE BOMBAY HIGH COURT HELD THAT WITH EFFECT FROM 1.4.2005, DEDUCTION UNDER SECTION 80IB(10) WOULD BE SUBJECT TO THE RESTRICTIONS SET OUT IN CLAUSE (D) OF SECTION 80IB( 10). 7. IT IS ALSO FURTHER SUBMITTED THAT THE TRIBUNALS INTERPRETATION IS CONTRARY TO THE NOTES ON CLAUSE TO MEMORANDUM EXPLA INING THE SUBSTITUTED PROVISION OF SECTION 80IB(10) WITH NEW CLAUSE (D) WITH EFFECT FROM 1.4.2005. ON THE BASIS OF APPROVAL OBTA INED FROM 1.4.2005 THE ASSESSEE IS ENTITLED TO COMPLETE THE HOUSING PR OJECT BY 3 1.3.2008 AS PER SECTION 80IB(10)(A)(1). HENCE ON APPROVAL, T HE ASSESSEE WOULD ACQUIRE THE VESTED STATUTORY RIGHT TO CLAIM D EDUCTION UNDER SECTION 80IB(10) SINCE DEDUCTIONIS IN RESPECT OF P ROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT ON FULFILLMENT OF CONDITIONS SINCE PROJECT S HAD COMMENCED PRIOR TO 1.4.2005. IT IS ALSO URGED THAT DEDUCTION UNDER SECTION 80IB( 10) OF THE ACT IS INSEPARABLY LINKED TO THE APPROVAL AND NOT TO THE A SSESSMENT YEAR IN WHICH THE DEDUCTION IS CLAIMED. HE FURTHER URGED TH AT THE POST AMENDMENT FROM 1.4.2005 WORD APPROVED BEFORE 31 ST DAY OF MARCH, 2007 CAN ONLY MEAN APPROVAL FROM 1 ST APRIL, 2005 TO 31 ST MARCH, 2007 WHEN COMPARED TO PRE-AMENDED PROVISION OF SECTION 8 0IB(10) OF THE ACT. IT IS ALSO URGED THAT THE ASSESSEE GETS TIME T O COMPLETE HOUSING I.T.A.NOS.316 & 336/13 :- 9 -: PROJECT BY 3 1.3.2008 IN CONSONANCE WITH THE APPROV AL BEFORE 1 ST DAY OF APRIL, 2004, THEREFORE, CONDITIONS OF APPROVAL P RIOR TO 1.4.2005 WOULD REMAIN INTACT TILL 31.3.2008, THE CUT OFF DAT E FOR COMPLETION. IT IS ALSO THE SAY OF THE LEARNED ADVOCATE THAT IF TRIBUN ALS VIEW OF INTERPRETATION OF SECTION 80IB( 10) IS ACCEPTED, TH EN THE ASSESSEE CLAIMING DEDUCTION FOLLOWING THE METHOD OF PROJECT COMPLETION BASIS, WHOSE COMPLETION DATE FALLS AFTER 1.4.2005 WILL NOT GET THE DEDUCTION AND THOSE ASSESSEE, WHO CLAIM DEDUCTI ON ON WORK-IN- PROGRESS BASIS OR PERCENTAGE COMPLETION BASIS, ON S IMILAR PROVISIONS WOULD GET THE DEDUCTION WHICH COULD NEVER BE THE IN TENTION OF THE LEGISLATURE. HE FURTHER URGED THAT THE METHOD OF AC COUNTING CAN NEVER DICTATE THE POSITION OF LAW AND WITH SUCH KIND OF I NTERPRETATION OF TRIBUNAL, THE ASSESSEE FOLLOWING PROJECT COMPLETION METHOD, WOULD BE REQUIRED TO PERFORM HUMANLY IMPOSSIBLE TASK. HE FURTHER URGED THAT THE ASSESSEE EARNED PROFIT AN D WAS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) FROM YEAR TO YEAR BUT HE DID NOT CLAIM THE SAME AS HE FIRSTLY WANTED TO FULFILL THE PRE-CONDITIONS OF ENTITLEMENT OF DEDUCTION BEYOND ANY DOUBT BY FOLLOW ING PROJECT COMPLETION METHOD IN PREFERENCE TO THE WORK-IN-PROG RESS METHOD. HE, THEREFORE, URGED FURTHER THAT IF THE ASSESSEE WOULD HAVE FOLLOWED THE PERCENTAGE COMPLETION BASIS/WORK-IN-PROGRESS METHOD , HE COULD HAVE WALKED AWAY WITH DEDUCTION FROM PROFIT BY PRECEDING YEARS. SUCH UNJUST DISCRIMINATION BETWEEN THE SAME CLASS OF ASS ESSEE COULD HAVE NEVER BEEN CONTEMPLATED, AS URGED BY THE LEARNED CO UNSEL. IT IS THE SAY OF THE LEARNED ADVOCATE THAT WHEN APP LICATION WAS MADE BY THE ASSESSEE AND APPROVED PRIOR TO 1.4.2005 BY T HE LOCAL AUTHORITY, NEITHER THE ASSESSEE NOR THE LOCAL AUTHORITY COULD HAVE ASSUMED THAT THE LEGISLATIVE AMENDMENT WOULD STRUCTURALLY CHANGE THE PROVISION OF SECTION 80IB(10) OF THE ACT AND IT WOULD BE SUBSTIT UTED AT A LATER DATE SO AS TO DISENTITLE THE ASSESSEE OF ITS LEGITIMATE CLAIM, DURING THE VALIDITY OF THE PERIOD OF APPROVAL FOR COMPLETION O F WORK UPTO 3 1.3.2008 AS PER SECTION 80IB(10) (A)(1) OF THE ACT. RELIANCE IS ALSO PLACED ON THE DECISION OF THE APEX COURT REPORTED IN C IT VS. J.H.GOTLA REPORTEDIN (1985)156 ITR 323, WHEREIN IT IS HELD THAT THE INTERPRETATION SHOULD BE SUCH THAT IT DOES NOT RESULT INTO ABSURD RESULT. THE COURT NEEDS TO MODIFY THE LANGUA GE USED BY THE LEGISLATURE SO AS TO ACHIEVE THE INTENTION FOR BRIN GING ABOUT THE RATIONAL RESULT. 8. HE ALSO URGED THIS COURT THAT THE ASSESSEES CLA IM FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IS SUPPORTED BY R ATIO OF COMMISSIONER OF INCOME-TAX VS. BRAHMA ASSOCIATES (SUPRA), IRREGARDLESS OF THE FACT THAT THE BOMBAY HIGH COURT WAS CONCERNED I.T.A.NOS.316 & 336/13 :- 10 -: WITH ASSESSMENT YEAR 2003-04. HE URGED THIS COURT T O SET ASIDE THE ORDER OF TRIBUNAL AND ANSWER THE QUESTION IN FAVOUR OF ASSESSEE. 9. LEARNED SENIOR COUNSEL MR.M.M.BHATT APPEARING FO R THE REVENUE HAS HEAVILY RELIED UPON THE DECISION OF THE BOMBAY HIGH COURT AND STRENUOUSLY URGED THAT THE CONDITIONS AS PREVALENT ON THE DATE WHEN THE ASSESSMENT WAS CARRIED OUT SHALL NEED TO BE FUL FILLED BY THE ASSESSEE. HE ALSO FURTHER URGED THAT THERE MAY BE O NEROUS CONDITIONS BUT IT IS NOT FOR THE ASSESSEE TO SAY THAT THESE AR E ONEROUS CONDITIONS AND, THEREFORE, THEY NEED NOT APPLY. ACCORDING TO H IM, THERE ARE TWO STAGES. THE FIRST IS OF APPROVAL OF PLAN TO CONSTRU CT WHERE THE INTEREST OF ASSESSEE WOULD BEGIN. SECOND TERMINAL IS THE COM PLETION OF CONSTRUCTION. HE ALSO FURTHER URGED THAT THE INCOME WHICH AGGREGATE BEFORE THE COMPLETION OF THE PROJECT SHALL HAVE TO BE RECORDED AND ALL CONDITIONS BE CUMULATIVELY CONSIDERED. HE SOUGHT TO RELY UPON FOLLOWING JUDGMENTS TO SUBSTANTIATE HIS SUBMISSIONS : 1. COMMISSIONER OF INCOME-TAX VS. GOLD COIN HEALTH FOOD P. LTD. REPORTED IN 304 ITR 308 2. UDAIPUR SAHKARI UPBHOKTA THOK BHANDAR LTD. VS. COMMISSIONER OF INCOMETAX REPORTED IN [2009]315 ITR 21(SC) 3. COMMISSIONER OF INCOME-TAX VS. TVS LEAN LOGISTIC S LTD. REPORTED IN [2007]293 ITR 432(MAD) 4. NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FED ERATION OF INDIA LTD. AND ANOTHER, VS. UNION OF INDIA AND OTHE RS REPORTED IN AIR 2003 SC 1329 5. RELIANCE JUTE AND INDUSTRIES LTD. VS. COMMISSIONER OF INCOME- TAX, WEST BENGAL REPORTED IN [1979] 120 ITR 921(S.C) 10. UPON CONSIDERING THE ELABORATE SUBMISSIONS OF B OTH THE SIDES AND ON EXAMINATION OF MATERIAL ON RECORD CLOSELY, FOLLO WING SUBSTANTIAL QUESTIONS OF LAW ARE FRAMED FOR THE PURPOSE OF OUR DECISIONS: (1) WHETHER ON FACTS, CIRCUMSTANCES AND EVIDENCE O N RECORD THE TRIBUNAL IS RIGHT IN LAW IN INTERPRETING SECTIO N 80IB( 10) OF THE INCOME-TAX ACT, 1961 FOR CONFIRMING THE DISALLO WANCE OF RS.6,84,44,461/- MADE BY THE ASSESSING OFFICER? (2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE TRIBUNAL HAS ERRED IN LAW IN APPLYING THE AMENDMENT MADE IN THE PROVISION OF SECTION 80IB(10) (D) OF THE ACT WI TH EFFECT FROM 1.4.2005 RETROSPECTIVELY BY IMPLICATION? 11. ALTHOUGH THERE ARE TWO QUESTIONS FRAMED, ESSENT IALLY THE CENTRAL QUESTION IS ONE, NAMELY WHETHER THE AMENDMENT IN TH E PROVISION OF SECTION 80IB(10)(D) OF THE ACT HAVING BEEN MADE EFF ECTIVE FROM I.T.A.NOS.316 & 336/13 :- 11 -: 1.4.2005 IS TO BE HELD RETROSPECTIVE OR PROSPECTIVE FOR THE PURPOSE OF DEDUCTION CLAIMED BY THE ASSESSEE. 12. REPRODUCTION OF SECTION 80IB(10) PRIOR TO THE A MENDMENT OF 1.4.2005 AND IN POST-AMENDMENT PERIOD IS TO BE MADE PROFITABLY AT THIS STAGE:- SECTION 80IB(10) PRIOR TO THE AMENDMENT OF 1.4.2005 :- SUBS.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 (I I) (W.E.F.1.402001), BY FINANCE ACT, 2003 (32 OF 2003), SEC(C)(I) AND (II) (W.E.F. 10402002). SUB- SECTION(10), BEFORE SUBSTITUTION BY FINANCE (NO.2) ACT, 2004, STOOD AS UNDER: (10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31 ST 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 MINIMUM AREA OF ONE ACRE; AND (C) THE RESIDENTIAL UNIT HAS A MINIMUM BUILT-UP ARE A 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 MU NICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVER HUNDRED SQUARE FE ET AT ANY OTHER PLACE. SECTION 80IB(10) IN THE POST-AMENDMENT PERIOD :- (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31 ST DAY OF MARCH, 2008 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT. OF THE P ROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF,- (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1 ST 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 1 ST DAY OF APRIL, 2004, ON OR BEFORE THE 31 ST 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 APRI, 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 AP PROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1 ST DAY OF APRIL, 2005, WITHIN FIVE YEARS FROM THE END I.T.A.NOS.316 & 336/13 :- 12 -: OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. EXPLANATION-FOR THE PURPOSES OF THIS CLAUSE,- (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF TH E HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLA N 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 CERTIF ICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE(A) OR CLA USE(B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SC HEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONS TRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLAR ED 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 ARE A 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 MU NICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEE T AT ANY OTHER PLACE; (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMER CIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED THR EE PER CENT. OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OF F IVE THOUSAND SQUARE FEET, WHICHEVER IS HIGHER. 13. SECTION 80IB(10) ORIGINALLY INDICATED 100% DEDU CTION ON THE PROFITS DERIVED FROM HOUSING PROJECTS APPROVED BY LOCAL AUT HORITY SUBJECT TO CERTAIN CONDITIONS SET OUT IN THE PROVISION. BY VIRTUE OF T HE AMENDMENT HAVING COME INTO EFFECT FROM 1.4.2005, DEDUCTION IS PERMISSIBLE TO HOUSING PROJECT HAVING RESIDENTIAL UNITS WITH COMMERCIAL UNITS TO THE EXTE NT PERMITTED THEREIN. 14. IT NEEDS TO BE NOTED, AT THIS STAGE THAT SECTIO N 80IB PROVIDES FOR THE DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERT AIN INDUSTRIAL UNDERTAKING OTHER THAN THE INFRASTRUCTURE DEVELOPMENT UNDERTAKI NGS. THIS SECTION APPLIES TO THE INDUSTRIAL UNDERTAKINGS, PERMITTING THEM TO COMPUTE THE TOTAL INCOME AFTER DEDUCTION FROM SUCH PROFIT AND GAIN OF AN AMO UNT EQUAL TO SUCH PERCENTAGE AND IF SUCH NUMBER OF ASSESSMENT YEARS A S SPECIFIED IN SECTION PROVIDED FULFILLMENT OF CERTAIN CONDITIONS. 15. THE PROVISION AS THAT STOOD PRIOR TO THE AMENDM ENT PERMITTED 100% OF THE PROFITS IF THE INDUSTRIAL UNDERTAKING DEVELOPS AND BUILDS HOUSING PROJECT APPROVED BEFORE 31 ST DAY OF MARCH, 2005, THE PROFIT TO BE DERIVED IN AN Y I.T.A.NOS.316 & 336/13 :- 13 -: PREVIOUS YEAR RELATING TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT SUBJECT TO CERTAIN CONDITIONS. ASSESSEE NEEDS TO CO MMENCE THE DEVELOPMENT IN CONSTRUCTION ON OR AFTER 1 ST DAY OF OCTOBER, 1998 WITH THE PROJECT ON THE SIZE OF A PLOT OF LAND, WHICH HAS A MINIMUM OF 1 ACRE OF LAND AND THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP ARE A OF 1500 SQ.FEET, IF NOT SITUATED AT DELHI, MUMBAI OR WITHIN 25 KMS. FROM TH E MUNICIPAL LIMIT OF THESE AREAS. IT WAS ESSENTIALLY TO PROVIDE INCENTIVE TO THE UNDE RTAKINGS IN DEVELOPING AND BUILDING HOUSING PROJECTS. HOWEVER, THIS PROVISION WAS AMENDED BY WAY OF FINANCE (NO.2) ACT, 2004 WITH EFFECT FROM 1.4.2005. AS CAN BE NOTED FROM THE AMENDMENT PROVISION, CLAUSE(A) IS FURTHER QUALI FIED NECESSITATING THE COMPLETION OF CONSTRUCTION WITHIN STIPULATED PERIOD WHERE SECTION 80IB(10), CLAUSE-(1) PROVIDES FOR COMPLETION OF SUCH HOUSING PROJECT WITHIN 4 YEARS. IN OTHER WORDS, IF APPROVED BY LOCAL AUTHORITY BEFORE 1ST DAY OF APRIL, 2004, THE COMPLETION HAS TO BE ON OR BEFORE 31 ST DAY OF MARCH, 2008. CLAUSE (2) PROVIDES FOR COMPLETION OF SUCH PROJECT IF APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 1 ST DAY OF APRIL, 2004 BUT NOT LATER THAN 31 ST DAY OF MARCH, 2005 WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. CLAUSE (D) HAS BEE N INTRODUCED, WHICH PROVIDES FOR THE BUILT UP AREA OF THE SHOPS AND OTH ER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT, WHI CH SHOULD NOT EXCEED 3% ( WITH EFFECT FROM 1.4.2005) OF THE AGGREGATE BUILT UP AREA OF HOUSING PROJECT OR 5000 SQ.FEET, WHICH EVER IS HIGHER ( 2000 SQ.FEE T) WHICH EVER IS LESS FROM 1.4.2010. IN OTHER WORDS, IT CAN BE CAPSULIZED THAT SECTION 8 0IB(10) PROVIDES FOR DEDUCTION OF 100% OF THE PROFIT DERIVED BY AN UNDER TAKING DEVELOPING AND BUILDING HOUSING PROJECTS, SUBJECT TO CERTAIN CONDI TIONS. IT CAN BE ALSO NOTED THAT AMENDED PROVISION PROVIDES FOR TIME LIMIT FOR COMPLETION OF THE PROJECT, WHICH WAS NOT THERE IN THE EARLIER SECTION. THE DAT E OF SUCH COMPLETION CERTIFICATE ALSO APPEARS TO BE RELEVANT FOR THE SAI D PURPOSE IN THE AMENDED PROVISION. IT WILL BE APT TO MENTION THAT THE ISSUE REGARDING CONSTRUCTION OF SHOPPING IN THE HOUSING PROJECT IN ACCORDANCE WITH THE PERMISSION OF THE MUNICIPAL LAWS WAS REQUESTED TO BE CONSIDERED ADEQU ATE FOR THE PURPOSE OF SECTION 80IB(10). IT ALSO FURTHER CAN BE DEDUCED TH AT THE DEDUCTION WHICH WAS AVAILABLE IF THE PROJECT IS ON A PLOT LAND OF M INIMUM AREA OF 1 ACRE HAS BEEN IN THE AMENDED PROVISION LIBERALIZED IN ACCORD ANCE WITH THE SCHEME FRAMED BY THE CENTRAL OR THE STATE GOVERNMENT. AGAI N, THE DEDUCTION WAS AVAILABLE IF THE BUILT UP AREA FOR THE RESIDENTIAL UNIT DOES NOT EXCEED 1000 FEET IN THE CITY OF DELHI, MUMBAI OR WITHIN 25 KMS FROM MUNICIPAL LIMIT OF THESE CITIES AND 1500 SQ.FEET AT ANY OTHER PLACE. T HIS BUILT UP AREA APPEARS TO HAVE BEEN DEFINED IN THE AMENDED PROVISION. HOWEVER, IN RESPECT OF THE HOUSING PROJECTS, WHICH HAVE BEEN APPROVED AND COMMENCED PRIOR TO 1.4.2005, THE ISSUE OF APPLICABI LITY OF THIS PROVISION IS A QUESTION THAT REQUIRES TO BE ANSWERED BY THE COURT. I.T.A.NOS.316 & 336/13 :- 14 -: 16. AS MENTIONED HEREINABOVE THERE ARE TWO PROJECT S OF THE PRESENT APPELLANT, NAMELY, KRISHNA PARK AND PRASHIDDHI PROJ ECT, IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80 IB(10) OF THE PROFITS EARNED FROM THESE PROJECTS. AS ALSO NOTED HEREINABO VE, THE ASSESSING OFFICER DISALLOWED SUCH DEDUCTION AND CIT(APPEALS) ALLOWED THE SAME. THE TRIBUNAL CONCURRED WITH THE ASSESSING OFFICER FOLLO WING THE DECISION OF THE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES (SUPRA) AND DENIED SUCH BENEFIT TO THE APPELLANT. THE PROJECT OF KRISHNA PARK COMPR ISES OF TENEMENTS CONSTRUCTED IN SIX LANES WITH INDEPENDENT RAW-HOUSE S. FIRST LANE COMPRISES OF UNITS NO. 80 TO 99. FOUR UNITS WERE FOUND TO BE BIGGER IN SIZE AS COMPARED TO OTHER UNITS. ACCORDINGLY THE ASSESSING OFFICER WAS OF THE OPINION THAT KRISHNA PARK DID NOT FULFILL THE BASIC REQUIREMENT AND CONDITION OF LIMITATION OF MAINTAINING BUILT UP AREA OF 1500 SQ. FEET PER UNIT AS LAID DOWN UNDER THE STATUTE. MOREOVER, ACCORDINGTO HIM, ANOTH ER CONDITION OF THE TOTAL AREA OF COMMERCIAL SHOPS ALSO VIOLATED AS THE TOTAL BUILT UP AREA OF THE SHOPS WAS FOUND TO BE EXCEEDING MAXIMUM LIMIT OF 2000 SQ. FEET. AS FAR AS PROJECT PRASHIDDHI IS CONCERNED, THE TOTA L BUILT UP AREA OF THE SHOPS AND THE COMMERCIAL ESTABLISHMENT COULD NOT EXCEED 5 % OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FEE T, WHICH EVER IS LESS AND, THEREFORE, IN THE OPINION OF THE ASSESSING OFFICER THIS WAS IN VIOLATION OF THE PROVISIONS. THERE IS NOT DISPUTE TO THE FACT THAT T HE APPELLANT HAS GOT BOTH THE PROJECTS APPROVED BY THE LOCAL AUTHORITIES. THE FAC T IS ALSO NOT IN DISPUTE THAT AS PER THE SANCTIONED PLAN OF THE LOCAL AUTHORITIES THAT THE ENTIRE PROJECT HAS BEEN CARRIED OUT. BUILDING COMPLETION PERMISSION AL SO HAS BEEN OBTAINED. FURTHERMORE, FACT IS ALSO NOT IN DISPUTE THAT THE A PPELLANT HAS BEEN FOLLOWING THE PROJECT COMPLETION METHOD FOR CLAIMING THE PROF IT ADMITTEDLY PRIOR TO 31.3.2005. AS FAR AS KRISHNA PARK PROJECT IS CONCER NED, THE BUILDING HAS BEEN COMPLETELY CONSTRUCTED AND BUC IN THE ENTIRE P ROJECT WAS ALSO OBTAINED PRIOR TO 3 1.3.2005. AS NOTED ABOVE, PROVI SION OF SECTION 80IB(10) (A) REQUIRES SUCH UNDERTAKING TO DEVELOP AND BUILD HOUSING PROJECT AS APPROVED BY THE LOCAL AUTHORITY AND SUCH PROJECT HA S BEEN APPROVED BY THE LOCAL AUTHORITY. CERTIFICATE TO THAT EFFECT ALSO HA S BEEN OBTAINED FROM SURAT MUNICIPAL CORPORATION. THE WHOLE PROJECT WAS APPROV ED AND COMPLETED PRIOR TO THE INSERTION OF AMENDED PROVISION OF SECTION 80 IB(10) OF THE ACT WITH EFFECT FROM 1.4.2005. 17. IT CAN ALSO FURTHER BE NOTED THAT AS PER THE CR ITERIA LAID DOWN BY THE MUNICIPAL CORPORATION, THE PERMISSIBLE COMMON OPEN PLOT ( COP FOR SHORT) FOR THE RESIDENTIAL PROJECT IS MINIMUM 10% O F THE TOTAL ARE OF LAND, WHICH IS TO BE UTILIZED FOR THE PROJECT. WHILE FOR COMMERCIAL PROJECT, THE MINIMUM 15% OF THE TOTAL AREA OF LAND REQUIRES TO B E KEPT AS COP. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS KEPT 10% OF COP FOR I TS RESIDENTIAL PROJECT AS REQUIRED UNDER THE RULES AND REGULATIONS OF THE LOC AL AUTHORITY AND THE AREA WORKED OUT OF COMMERCIAL OFFICES IS 5.12% OF THE TO TAL BUILT UP AREA OF THE PROJECT. THIS BIFURCATION IS INDICATED IN A TABULAR FORM IN THE ORDER OF ASSESSMENT, WHICH IS AS FOLLOWS: PROJECT KRISHNA PARK I.T.A.NOS.316 & 336/13 :- 15 -: SR.NO. RESIDENTIAL UNIT (TENEMENT) TOTAL BUILT UP AREA IN SQ.FT AREA OF PLOT IN SQ.MTS. 1 99 UNITS 89,966 11,197 2 8+4 SHOPS 4,607 428 TOTAL 94,573 11,625 % OF BUILT-UP AREA FOR SHOPS TO TOTAL BUILT UP AREA 4607/94573* 100=5.12% 428/11625* 100=3.68% AS FAR AS PRASHIDDHI PROJECT IS CONCERNED, IT HAS B EEN DEVELOPED ON AN AREA, WHICH IS MORE THAN 1 ACRE. THE PLAN HAS BEEN APPROV ED ON 18.1.2003 AND BUC HAS BEEN OBTAINED ON 29.12.2004. FOR TOWER A1, A2 AND B1 AND FOR B2, THE BUC WAS OBTAINED ON 30.6.2007. VIDE AN APPLICAT ION DATED 20.7.2005. THIS HOUSING PROJECT WAS APPROVED BY THE LOCAL AUTH ORITY AS IS APPARENT FORM THE CERTIFICATE OF THE SURAT MUNICIPAL CORPORATION AND THE RATIO WORKED OUT OF COMMERCIAL OFFICES TO THE TOTAL BUILT UP AREA FOR R ESIDENTIAL PROJECT IS 3.5%. AS CAN BE SEEN FROM THE CHART GIVEN HEREINBELOW:- SR.NO. RESIDENTIAL UNIT-FLATS TOTAL BUILT UP AREA IN SQ.FT. 1 BUILDING A1 23,672 2 BUILDING A2 23,927 3 BUILDING B1 27,904 4 BUILDING B2 27,904 TOTAL 1,03,407 5 SHOPS 3,778 GRAND TOTAL 1,07,185 % OF BUILT UP AREA FOR COMMERCIAL SHOPS TO TOTAL BUILT UP AREA. 3778/107185*100=3.5% I.T.A.NOS.316 & 336/13 :- 16 -: 18. RELIANCE IS PLACED ON THE JUDGMENT OF BRAHMA ASSOCIATES (SUPRA) OF THE SPECIAL BENCH BY THE ASSESSEE AND IT IS INSISTE D THAT THE ISSUE RAISED IN THIS CASE IS DIRECTLY COVERED IN FAVOUR OF THE ASSE SSEE IN THIS DECISION OF THE SPECIAL BENCH, WHEREIN, IT HAS BEEN HELD THAT CONDI TION OF THE BUILT UP AREA OF SHOPS NOT EXCEEDING 5% OF THE TOTAL BUILT UP AREA O R 2000 SQ.FEET, WHICHEVER IS LESS IS HELD TO BE PROSPECTIVE IN NATURE AND WOU LD NOT BE APPLICABLE TO THE PROJECTS APPROVED PRIOR TO 1.4.2005. AS CAN BE NOTE D FROM THE ABOVE DETAILS, THE APPELLANT GOT THE PLANS APPROVED OF BOTH THE PR OJECTS RESPECTIVELY ON 30.12.2002 AND 18.1.2003, WHICH IS PRIOR TO THE AME NDED PROVISION MADE APPLICABLE FROM 1.4.2005. ADMITTEDLY IN BOTH THE PROJECTS AS IS CULLING OUT F ROM THE RECORD, THE BUILT UP AREA OF COMMERCIAL USER IN TERMS OF THE SHOP IS BEL OW 6%. 11N KRISHNA PARK AS NOTED FROM THE TABULAR CHART 5.12% AND IN PRASHI DDHI IT IS 3.5%, WHICH IS BELOW 10% OF THE TOTAL BUILT UP AREA. THE VITAL QUE STION, HOWEVER, IS WHETHER THIS AMENDMENT WOULD HAVE A BEARING ON THE CLAIM OF ASSESSEE WHOSE PROJECT IS APPROVED PRIOR TO THE AMENDMENT WHICH BE CAME EFFECTIVE FROM 1.4.2005. 19. BEFORE THE BOMBAY HIGH COURT THE HOUSING PROJEC T WAS APPROVED BY THE COMPETENT AUTHORITY BEFORE 31.3.2005 AND THE ASSESS MENT YEAR CONCERNED WAS 2003-2004. IN THE INSTANT CASE, HEAVY RELIANCE IS AGAIN PLACED ON THE JUDGMENT BRAHMA ASSOCIATES (SUPRA)BY THE TRIBUNAL AND RELYING UPON THE SAID DE CISION, IT CHOSE NOT TO AVAIL THE BENEFIT OF DEDUCTION OF THE PROFIT TO THE APPELLANT ASSESSEE. AS FAR AS QUESTION OF VIOLATION OF CLAUSE (D) OF SECTION 8011B(10) OF THE ACT IS CONCERNED, IT NOTED THAT ONE OF THE Q UESTIONS RAISED BEFORE THE BOMBAY HIGH COURT WAS WHETHER CLAUSE (D) OF SECTION 80 11B(10) OF THE ACT WAS APPLICABLE FOR ASSESSMENT YEAR 2005-2006 OR WHE THER IT APPLIED RETROSPECTIVELY AND IT NOTED THUS:- UNDER THESE FACTS, IT WAS HELD BY HONBLE BOMBAY H IGH COURT THAT WITH EFFECT FROM 01-04-2005, DEDUCTION U/S. 8011B(10) WO ULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE-(D) OF SECTION 8011B( 10). THE RELEVANT PARA OF THIS JUDGMENT OF HONBLE BOMBAY HIGH COURT I.E. PARA-25 IS REPRODUCED AS UNDER:- 25. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY C LAUSE(D) TO SECTION 8011B(10) INSERTED WITH EFFECT FROM 1/4/2005. CLAUS E (D) TO SECTION 8011B(10) INSERTED W.E.F. 1/4/2005 PROVIDES THAT EV EN THOUGH SHOPS AND COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE H OUSING PROJECT, DEDUCTION UNDER SECTION 8011B(10) WITH EFFECT FROM 1/4/2005 WOULD BE ALLOWABLE WHERE SUCH COMMERCIAL USER DOES NOT EX CEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LOWER. BY FINANCE ACT, 2010, CLAUSE (D) IS AMENDED TO THE EFFECT THAT THE COMMER CIAL USER SHOULD I.T.A.NOS.316 & 336/13 :- 17 -: NOT EXCEED THREE PER CENT OF THE AGGREGATE BUILT-AR EA OF THE HOUSING PROJECT OR FIVER THOUSAND SQUARE FEET WHICHEVER IS HIGHER. THE EXPRESSION INCLUDED IN CLAUSE (D) MAKES IT AMPLY CLEAR THAT COMMERCIAL USER IS AN INTEGRAL PART OF A HOUSING PR OJECT. THUS, BY INSERTING CLAUSE (D) TO SECTION 80IB(10), THE LEGIS LATURE HAS MADE IT CLEAR THAT THOUGH THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITIES WITH COMMERCIAL USER TO THE EXTENT PERM ISSIBLE UNDER THE DC RULES/ REGULATION WERE ENTITLED TO SECTION 80IB( 10) DEDUCTION, WITH EFFECT FROM 1/4/2005 SUCH DEDUCTION WOULD BE S UBJECT TO THE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 80IB( 10). THEREFORE, THE ARGUMENT OF THE REVENUE THAT WITH EFFECT FROM 1/4/2 005 THE LEGISLATURE FOR THE FIRST TIME ALLOWED SECTION 80IB(10) DEDUCTI ON TO HOUSING PROJECTS HAVING COMMERCIAL USER CANNOT BE ACCEPTED. 12. FROM THE ABOVE PARA OF JUDGMENT OF HONBLE BOMB AY HIGH COURT, IT IS SEEN THAT IT IS NOT HELD BY HONBLE BOMBAY HI GH COURT THAT CLAUSE (D) OF SECTION 80IB(10) IS APPLICABLE TO THOSE PROJ ECTS WHICH ARE APPROVED ON OR AFTER 01-04-2005. BUT IT IS HELD THA T FROM 01-04-2005, DEDUCTION U/S. 80IB( 10) WOULD BE SUBJECT TO THE RE STRICTION SET OUT IN CLAUSE-(D) OF SECTION 80IB(10). IN OUR HUMBLE UNDER STANDING, THIS JUDGMENT OF HONBLE BOMBAY HIGH COURT COVERS THIS I SSUE AGAINST THE ASSESSEE AND THEREFORE, THE VARIOUS DECISIONS O F COORDINATE BENCH OF THIS TRIBUNAL CITED BY LD. COUNSEL FOR THE ASSESSEE ARE OF NO USE IN THE LIGHT OF THIS JUDGMENT OF HONBLE BOM BAY HIGH COURT. WE RESPECTFULLY FOLLOW THIS JUDGMENT OF HONBLE BOM BAY HIGH COURT IN PREFERENCE TO VARIOUS DECISIONS OF CO-ORDINATE B ENCH OF THIS TRIBUNAL. 20. IN OUR OPINION, THE TRIBUNAL HAS MISDIRECTED IT SELF IN INTERPRETING PARAGRAPH 25 OF THE SAID JUDGMENT AND THEREBY DENYI NG THE BENEFIT OF SECTION 80IB(10) TO THE APPELLANT HEREIN IN AS MUCH AS BEFORE THE BOMBAY HIGH COURT IT WAS REVENUES CASE THAT RESIDENTIAL P ROJECT HAVING COMMERCIAL CONSTRUCTION CANNOT BE HELD ENTITLED TO THE BENEFIT UNDER SECTION 80IB(10) OF THE ACT AND FOR SUPPORTING ITS VERSION, RELIANCE WA S PLACED ON INCLUSION OF CLAUSE (D) OF SECTION 80IB(10) FROM 1.4.2005, WHICH RESTRICTS AREA OF COMMERCIAL CONSTRUCTION IN RESIDENTIAL PROJECT. IT WAS A PROJECT OF RESIDENTIAL HOUSING WITH COMMERCIAL USER FOR ASSESSMENT YEAR 20 03-2004 AS NOTED ABOVE. IN THIS BACKDROP, THE COURT REJECTED/ REFUTED SUCH VERSION AND FOR FORTIFYING ITS DENIAL, IT MENTIONED INCLUSION OF CLAUSE(D) FROM 1. 4.2005 BY HOLDING THAT BY INSERTION OF CLAUSE(D) OF SECTION 80IB(10) OF THE A CT, LEGISLATURE MADE IT CLEAR THAT THOUGH THE HOUSING PROJECT APPROVED BY L OCAL AUTHORITY WITH COMMERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE RULES AND REGULATIONS WERE ENTITLED TO SECTION 80IB(10) DEDUCTION, SUCH D EDUCTION WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 80IB(10) FROM 1.4.2005. IN OUR OPINION, TRIBUNAL HAS QUOTED THE J UDGMENT OUT OF CONTEXT TO DENY THE SAID BENEFIT TO THE APPELLANT ERRONEOUSLY. I.T.A.NOS.316 & 336/13 :- 18 -: 21. NEITHER THE ASSESSEE NOR LOCAL AUTHORITY RESPON SIBLE TO APPROVE THE CONSTRUCTION PROJECTS ARE EXPECTED TO CONTEMPLATE F UTURE 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 AGG REGATE 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 T O BE FULFILLED. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILITATE THE CONST RUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUCH PROJECT WHEN INITI ALLY THERE WAS NO SUCH RESTRICTION IN TAXING STATUTE AND THE PERMISSIBLE R ATIO FOR COMMERCIAL USER MADE 5% TO THE TOTAL BUILT UP AREA BY WAY OF AMENDM ENT 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 FORM THE RECORD, THERE WAS NO CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIOR TO THE AMENDED SECTIO N 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 REGULA TIONS, KEEPING IN MIND PRESUMABLY THE REQUIREMENT OF LARGE TOWNSHIPS. HOWE VER, THE PROJECTS ESSENTIALLY REMAINED RESIDENTIAL HOUSING PROJECTS A ND 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 E XCEEDED THE AREA CONTEMPLATED IN THE PROSPECTIVE AMENDMENT CAN BE MA DE APPLICABLE TO THE APPELLANT ASSESSEE WHOSE PLANS ARE SANCTIONED AS PE R 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 STATUE. 23. IT WOULD BE WORTHWHILE TO NOTE AT THIS STAGE TH AT EVEN THOUGH THE FACTS BEFORE THE BOMBAY HIGH COURT WERE DIFFERENT THAN TH OSE EMERGING FROM THE PRESENT CASE, REVENUES SUBMISSIONS BEFORE THE BOMB AY HIGH COURT THAT THE AMENDMENT OF SECTION 80IB(10) AND THE INSERTION OF CLAUSE (D) WITH EFFECT FROM 1.4.2005 SHOULD BE APPLIED RETROSPECTIV ELY WAS HELD TO BE WITHOUT ANY MERIT IN FOLLOWING WORDS, IN PARAGRAPH 32 OF TH E BOMBAY HIGH COURT, WHICH IS REPRODUCED AS UNDER:- LASTLY, THE ARGUMENT OF THE REVENUE THAT SECTION 8 0-IB(10) AS AMENDED BY INSERTING CLAUSE (D) WITH EFFECT FROM AP RIL 1, 2005 SHOULD BE APPLIED RETROSPECTIVELY IS ALSO WITHOUT ANY MERI T, BECAUSE, FIRSTLY, CLAUSE (D) IS SPECIFICALLY INSERTED WITH EFFECT FRO M 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 APP ROVED BY THE LOCAL AUTHORITY. THEREFORE, THE RESTRICTION IMPOSED UNDER THE ACT FOR I.T.A.NOS.316 & 336/13 :- 19 -: THE FIRST TIME WITH EFFECT FROM APRIL 1, 2005 CANNO T BE APPLIED RETROSPECTIVELY. THIRDLY, IT IS NOT OPEN TO THE REV ENUE TO CONTEND ON THE ONE HAND THAT SECTION 80- IB(10) AS IT STOOD PR IOR TO APRIL 1, 2005 DID NOT PERMIT COMMERCIAL USER IN HOUSING PROJECTS AND ON THE OTHER HAND CONTEND THAT THE RESTRICTION ON COMMERCIAL USE R INTRODUCED WITH EFFECT FROM APRIL 1, 2005 SHOULD BE APPLIED RETROSP ECTIVELY. THE ARGUMENT OF THE REVENUE IS MUTUALLY CONTRADICTORY A ND 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 COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE VS. ANRIYA PROJECT MANAGEMENT SERVIC ES (P.) LTD. REPORTED IN [2012] 21 TAXMANN.COM140 (KARNATAKA) WAS ALSO EXAMINING THIS PROVISION WHERE THE QUESTION WAS WHE THER THE DEFINITION OF BUILT-UP AREA INSERTED BY FINANCE (NO.2) ACT, WHI CH 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 PR OVISION WOULD HAVE NO APPLICATION TO HOUSING PROJECTS, WHICH WERE APPROVE D BY THE LOCAL AUTHORITY PRIOR TO 1.4.2005 IN CALCULATING 1500 SQ.FEET OF RE SIDENTIAL 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 T O 100% BENEFIT OF SECTION 80IB(10). WHILE SO HOLDING, IT RELIED ON THE JUDGME NT OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. G.R. DEVELOPERS [IT AP PEAL NO.355 OF 2009]. 25. COROLLARY TO THIS IS ONE MORE ASPECT THAT REQUI RES REFERENCE HERE. THE GOVERNMENT OF INDIA MINISTRY OF FINANCE, DEPARTMENT OF REVENUE TO ALL CHIEF COMMISSIONERS OF INCOME-TAX AND ALL DIRECTOR GENERA LS OF INCOME-TAX ISSUED INSTRUCTION NO.4 OF 2009 DATED 30.6.2009 IN RESPECT OF SECTION 80IB(10) OF THE ACT WOULD BE AVAILABLE ON YEAR TO Y EAR 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 BOAR D AND IT IS CLARIFIED AS UNDER:- (A) THE DEDUCTION CAN BE CLAIMED ON A YEAR TO YE AR BASIS WHERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL COMPLET ION OF THE PROJECT IN EVERY YEAR. (B) IN A CASE IT IS LATE, FOUND THAT THE CONDI TION 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 GR ANTED TO THE ASSESSEE IN THE EARLIER YEARS SHOULD BE WITHDRAWN. 26. FROM THE READING OF THE ABOVE INSTRUCTION, IT C AN BE ALSO SAID THAT THE GOVERNMENT BEING AWARE OF BOTH THE ACCOUNTING METHO DS HAS EXPECTED I.T.A.NOS.316 & 336/13 :- 20 -: EITHER OF THEM TO BE FOLLOWED IN CASES OF INDIVIDUA L ASSESSEE. HOWEVER, IN POST AMENDMENT PERIOD, STRICT ADHERENCE TO COMPLETI ON PERIOD OF FOUR YEARS IS INSISTED UPON WHERE PROJECT COMPLETION METHOD IS FOLLOWED. THIS LIMITATION OF PERIOD DID NOT EXIST PRIOR TO THE AMENDMENT, WHA T IS VITAL TO DRAW FROM THIS IS THAT THE AMENDMENT CANNOT DISCRIMINATE THOSE FOL LOWING PROJECT COMPLETION METHOD IF IN THE INTERREGNUM PERIOD, AME NDMENT IS BROUGHT IN THE STATUTE. THE SAY OF THE ASSESSEE THEREFORE GETS FUR THER 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 BE DENIED THE DEDUCTION ON PROFITS DERIVED AND THOSE A SSESSEE WHO CLAIM DEDUCTION ON WORK-IN-PROGRESS BASIS, THEY WOULD BE ENTITLED TO SUCH DEDUCTION. HOWEVER, IT NECESSITATED STRICT COMPLIAN CE OF THE PROVISIONS AND COMPLETION OF THE SAME WITHIN THE STIPULATED TIME P ERIOD. 27. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACIL ITATE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUC H PROJECT WHEN INITIALLY THERE WAS NO RESTRICTION AND BY AMENDMENT AS STATED PERMISSIBLE RATIO FOR CONSTRUCTION IS 5% OF THE TOTAL BUILT UP AREA, REDU CTION OF THIS RATIO TO 3% OF THE TOTAL BUILT UP AREA HAS TO BE NECESSARILY ON PR OSPECTIVE BASIS. 28. IT WOULD BE APT TO CONSIDER RATIO OF RETROSPECT IVITY AT THIS STAGE. IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. GOLD COIN HEALTH FO OD P. LTD. REPORTED IN 304 ITR 308, THE HONBLE SUPREME COURT OF INDIA HAS HELD AS UNDER : IN ZILE SINGH V. STATE OF HARYANA [2004] 8 SCC 1, I T WAS OBSERVED AS FOLLOWS: 13. IT IS A CARDINAL PRINCIPLE OF CONSTRUCTION THA T EVERY STATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR B Y NECESSARY IMPLICATION MADE TO HAVE A RETROSPECTIVE OPERATION. BUT THE RULE IN GENERAL IS APPLICABLE WHERE THE OBJECT OF THE STATU TE IS TO AFFECT VESTED RIGHTS OR TO IMPOSE NEW BURDENS OR TO IMPAIR EXISTING OBLIGATIONS. UNLESS THERE ARE WORDS IN THE STATUTE SUFFICIENT TO SHOW THE INTENTION OF THE LEGISLATURE TO AFFECT EXISTING RIGHTS, IT IS DEEMED TO BE PROSPECTIVE ONLY NOVA CONSTITUTIO FUTURIS FOR MAN IMPONERE DEBET NON PRAETERITIS A NEW LAW OUGHT TO REGULATE WHAT IS TO FOLLOW, NOT THE PAST. (SEE PRINCIPLES OF STATUTORY INTERPRETATI ON BY JUSTICE G. P. SINGH, 9 TH EDN., 2004 AT PAGE 438.) IT IS NOT NECESSARY THAT A N EXPRESS PROVISION BE MADE TO MAKE A STATUTE RETROSP ECTIVE AND THE PRESUMPTION AGAINST A CASE WHERE THE NEW LAW IS MAD E TO CURE AN ACKNOWLEDGED EVIL FOR THE BENEFIT OF THE COMMUNITY AS A WHOLE. (IBID., PAGE 440). 14. THE PRESUMPTION AGAINST RETROSPECTIVE OPERATION IS NOT APPLICABLE TO DECLARATORY STATUTES IN DETERMINING, THEREFORE, THE NATURE OF THE ACT, REGARD MUST BE HAD TO THE SUBSTANCE RATHER THA N TO THE FORM. IF A I.T.A.NOS.316 & 336/13 :- 21 -: NEW ACT IS TO EXPLAIN AN EARLIER ACT, IT WOULD BE WITHOUT OBJECT UNLESS CONSTRUED RETROSPECTIVELY. AN EXPLANATORY ACT IS GE NERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL-SETTLED THAT IF A S TATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIV E OPERATION IS GENERALLY INTENDED AN AMENDING ACT MAY BE PURELY D ECLARATORY TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT (IBID., PAGES 468-69). 15 . THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED A ND RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY, ACCORDING TO C RAIES (STATUTE LAW, 7 TH EDN.), IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE OPERATION. THIS CAN BE ACHIEVED BY EX PRESS ENACTMENT OR BY NECESSARY IMPLICATION FROM THE LANGUAGE EMPLO YED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED TH AT THE LEGISLATURE INTENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION, THE COURTS WILL GIVE IT SUCH AN OPERATIO N. IN THE ABSENCE OF A RETROSPECTIVE OPERATION HAVING BEEN EXPRESSLY GIV EN, THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND A NSWER THE QUESTION WHETHER THE LEGISLATURE HAD SUFFICIENTLY E XPRESSED THAT INTENTION GIVING THE STATUTE RETROSPECTIVELY. FOUR FACTORS ARE SUGGESTED AS RELEVANT : (I) GENERAL SCOPE AND PURVIEW OF THE STATUTE; (II) THE REMEDY SOUGHT TO BE APPLIED; (III) THE FORMER STATE OF THE LAW; A ND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED (PAGE 388). THE RULE AGAIN ST RETROSPECTIVITY DOES NOT EXTEND TO PROTECT FROM THE EFFECT OF A REP EAL, A PRIVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT (PAGE 392). 29. IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. TVS LEAN LOGISTICS LTD. REPORTED IN [2007]293 ITR 432(MAD), THE HONBLE MADRAS HIGH COURT HAS HELD AS UNDER : IN A CASE WHERE THE STATUTORY PROVISION IS PLAIN A ND UNAMBIGUOUS, THE COURT SHALL NOT INTERPRET THE SAME IN A DIFFERE NT MANNER ONLY BECAUSE OF HARSH CONSEQUENCES ARISING THEREFROM. TH E COURT CANNOT ENLARGE THE SCOPE OF LEGISLATION OR INTENTION WHEN THE LANGUAGE OF THE PROVISION IS PLAIN AND UNAMBIGUOUS, CANNOT ADD OR S UBTRACT WORDS TO A STATUTE OR READ SOMETHING INTO IT WHICH IS NOT TH ERE AND CANNOT REWRITE OR RECAST LEGISLATION. THE LANGUAGE EMPLOYE D IN A STATUTE IS THE DETERMINATION FACTOR OF THE LEGISLATURE EVENT A ND EVEN ASSUMING THERE IS A DEFECT OR ANY OMISSION IN THE WORDS USED IN THE LEGISLATION, THE COURT CANNOT CORRECT OR MAKE UP THE DEFICIENCY, ESPECIALLY WHEN A LITERAL READING THEREOF PRODUCES AN INTELLIGIBLE RE SULT AND ANY INTERPRETATION WHICH IS NOT PERMISSIBLE AND WHICH W OULD BE DESTRUCTION OF JUDICIAL DISCIPLINE. I.T.A.NOS.316 & 336/13 :- 22 -: 30. IN THE CASE OF NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER, VS. UNION OF INDIA AND OTHERS REPORTED IN AIR 2003 SC 1329, THE HONBLE SUPREME COURT HAS HELD IN PARAGRAPHS 15, 16 AND 17 AS UNDER : 15. THE LEGISLATIVE POWER EITHER TO INTRODUCE ENAC TMENTS FOR THE FIRST TIME OR TO AMEND THE ENACTED LAW WITH RETROSPECTIVE EFFECT, IS NOT ONLY SUBJECT TO THE QUESTION OF COMPETENCE BUT IS ALSO S UBJECT TO THE QUESTION OF COMPETENCE BUT IS ALSO SUBJECT TO SEVER AL JUDICIALLY RECOGNIZED LIMITATIONS WITH SOME OF WHICH WE ARE AT PRESENT CONCERNED. THE FIRST IS THE REQUIREMENT THAT THE WO RDS USED MUST EXPRESSLY PROVIDE OR CLEARLY IMPLY RETROSPECTIVE OP ERATION. THE SECOND IS THAT THE RETROSPECTIVITY MUST BE REASONAB LE AND NOT EXCESSIVE OR HARSH, OTHERWISE IT RUNS THE RISK OF B EING STRUCK DOWN AS UNCONSTITUTIONAL. THE THIRD IS APPOSITE WHERE THE L EGISLATION IS INTRODUCED TO OVERCOME A JUDICIAL DECISION. HERE TH E POWER CANNOT BE USED TO SUBVERT THE DECISION WITHOUT REMOVING THE S TATUTORY BASIS OF THE DECISION. 16. THERE IS NO FIXED FORMULA FOR THE EXPRESSION OF LEGISLATIVE INTENT TO GIVE RETROSPECTIVITY TO AN ENACTMENT.SOMETIMES THI S IS DONE BY PROVIDING FOR JURISDICTION WHERE JURISDICTION HAD N OT BEEN PROPERLY INVESTED BEFORE. SOMETIMES THIS IS DONE BY REENACTI NG RETROSPECTIVELY A VALID AND LEGAL TAXING PROVISION AND THEN BY FICTION MAKING THE TAX ALREADY COLLECTED TO STAND UNDER THE REENACTED LAW. SOMETIMES THE LEGISLATURE GIVES ITS OWN MEANING AND INTERPRETATION OF THE LAW UNDER WHICH TAX WAS COLLECTED AND BY LEG ISLATIVE FIAT MAKES THE NEW MEANING BINDING UPON COURTS. THE LEGISLATUR E MAY FOLLOW ANYONE METHOD OR ALL OF THEM. 17 . A VALIDATING CLAUSE COUPLED WITH A SUBSTANTIVE STATUTORY CHANGE IS THEREFORE ONLY ONE OF THE METHODS TO LEAVE ACTIO NS UNSUSTAINABLE UNDER THE UNAMENDED STATUTE, UNDISTURBED. CONSEQUE NTLY, THE ABSENCE OF A VALIDATING CLAUSE WOULD NOT BY ITSELF AFFECT THE RETROSPECTIVE OPERATION OF THE STATUTORY PROVISION, IF SUCH RETROSPECTIVITY IS OTHERWISE APPARENT. AS MENTIONED HEREINABOVE CRITERIAS TO HOLD THIS AME NDMENT RETROSPECTIVE ARE ABSENT AS THERE IS NO AS EXPLICIT AND SPECIFIC WORDING EXPRESSING RETROSPECTIVITY AND EVEN IF IT IS ASSUMED FOR THE S AKE OF ARGUMENTS THAT THE SAME IS TO BE READ BY IMPLICATION THE SAME DOES NOT APPEAR TO BE REASONABLE BUT, IN FACT EMERGES TO BE HARSH AND UNR EASONABLE WHEN IT COMES TO IMPLEMENTATION. I.T.A.NOS.316 & 336/13 :- 23 -: 31. AGAIN, AS HELD IN CASE OF CIT VS. J.H. GOTLA (SUPRA) BY THE APEX COURT SUCH STRICT CONSTRUCTION OF THE STATUTE IF LEADS TO ABSURD INTERPRETATION THE SAME MAY NOT SUBSERVE THE INTENT AND OBJECT OF LEGI SLATION. 32. AGAIN, AS HELD IN THE CASE OF MYSORE MINERALS LTD. VS. COMMISSION OF INCOME TAX REPORTED IN 239 ITR 775, APEX COURT WITH TWO POSSIBILITIES OF INTERPRETATION OF A TAXING STATUTE, ONE WHICH IS FA VOURABLE TO THE ASSESSEE SHOULD BE ALWAYS PREFERRED. 33. AS ALSO LAID DOWN IN THE CASE OF BAJAJ TEMPO LTD. VS. COMMISSIONER OF INCOME TAX REPORTED IN 196 ITR 188 (SC), TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING ECONOMIC GROWTH AND DEVELO PMENT SHOULD BE LIBERALLY CONSTRUED TO FACILITATE AND ADVANCE THE O BJECTIVES OF THE PROVISION. 34. ABOVE DISCUSSION CUMULATIVELY WHEN EXAMINED WIT H THE OBJECTIVES AND INTENT IT SOUGHT TO ACHIEVE IN BRINGING ABOUT THE S AID PROVISION OF SECTION 80IB(10), THIS AMENDED TAXING STATUTE REQUIRES TO B E INTERPRETED IN FAVOUR OF THE ASSES SEE RATHER THAN INSISTING UPON STRICT COM PLIANCE LEADING TO ABSURDITY. 35. IT CAN BE ALSO HELD THAT THIS BEING A SUBSTANTI VE AMENDMENT AND NOT A CLARIFICATORY AMENDMENT, THE AMENDMENT OF THIS NATU RE CANNOT HAVE RETROSPECTIVE EFFECT. 36. RESULTANTLY, WE ANSWER THE QUESTIONS RAISED BEF ORE US IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 37. RESULTANTLY, THE APPEAL IS ALLOWED. IMPUGNED JU DGMENT OF THE TRIBUNAL IS REVERSED TO THE ABOVE EXTENT. 10. THUS, WE FIND THAT THE ORDER OF THE CIT(A) FIN DS SUPPORT FROM THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF MANAN CORPORATION VS ACIT(SUPRA). WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 7. RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2006-07, WE DISMISS THE APPEALS OF THE REVENUE IN THE PRESENT Y EARS UNDER CONSIDERATION. I.T.A.NOS.316 & 336/13 :- 24 -: 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AR E DISMISSED ORDER PRONOUNCED ON WEDNESDAY, THE 14 TH OF AUGUST, 2013, AT CHENNAI. SD/- SD/- (V. DURGA RAO) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 14 TH AUGUST, 2013, RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR