HIRANANDANI AKRUTI JV, MUMBAI V. DCIT, CC 36, MUMBAI

ITA 374/MUM/2014

• Counselvise Citation: 37419914 RSA 2014
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 15-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Rectification of order; Principle of natural justice; Maximum Marginal Rate; Retrospective amendment
• Section: 154; 80IB

Judgement Text

, ,P ,P,P ,P INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. , MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU MK0 ,L VH ,E IKOYU BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & DR. S.T.M . PAVALAN,JUDICIAL MEMBER /. ITA NO.374/MUM/2014, ! ! ! ! / ASSESSMENT YEAR-2006-07 HIRANANDANI AKRUTI JV, AKRUTI TRADE CENTRE, ROAD NO.7, MAROL MIDC, ANDHERI(E) MUMBAI-400093 VS DCIT CC 36 ROOM NO. 11, GROUND FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 PAN:AAAAH1443H ( '# / APPELLANT) ( $%'# / RESPONDENT) &' ( ) / ASSESSEE BY : SHRI VIJAY MEHTA ( ) / REVENUE BY : SHRI K.C.P. PATNAIK ( (( ( '+ '+ '+ '+ / DATE OF HEARING : 16-04-2014 ,-! ( '+ / DATE OF PRONOUNCEMENT : 07-05-2014 , 1961 ( (( ( 254 )1( '.' '.' '.' '.' / / / / ORDER U/S..254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DATED 29.11.2013OF THE CIT(A) -41,MUMBAI,ASSESSEE-AOP HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE CIT(A) HAS PASSED THE IMPUGNED ORDER WITHOUT JURISDICTION IN AS MUCH AS THE APPEAL WAS ARISING OUT OF THE PROCEEDINGS OF ORDER GIVING EFF ECT TO THE ORDER OF THE TRIBUNAL. THE CIT(A)OUGHT T O HAVE APPRECIATED THAT IN THESE PROCEEDINGS THE ASSE SSING OFFICER OR THE CIT(A)CAN NEITHER GO BEYOND THE SCOPE OF DIRECTION GIVEN BY THE HONBLE TRIBUNA L NOR DECIDE AGAINST THE VIEW TAKEN BY THE HONBLE TRIBIMAL. 2.THE CIT(A) HAS PASSED THE IMPUGNED ORDER WITHOUT JURISDICTION IN AS MUCH AS THE APPEAL WAS ARISING OUT OF RECTIFICATION ORDER PASSED BY THE AS SESSING OFFICER U/S. 154 OF THE ACT WHEREIN THE SCO PE OF POWER IS LIMITED TO RECTIFYING MISTAKE APPARENT FROM THE RECORD. 3.THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN ENHA NCING THE INCOME OF THE APPELLANT BY WITHDRAWING DEDUCTION U/S. 80-IB(10) OF THE ACT AMOUNTING TO RS .44,42,20,424/- IN THE IMPUGNED ORDER.THE CIT (A) OUGHT TO HAVE HELD THAT THE APPELLANT IS ELIGIB LE FOR DEDUCTION U/S. 80-IB(10) OF THE ACT AMOUNTIN G TO RS.51,58,84,600/- BEING 100% OF THE PROFIT DERIV ED FROM THE PROJECT. 4.THE CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PASSING THE ORDER U/S. 154 OF THE ACT, THERE BEING NO MISTAKE APPARENT FRO M THE RECORD. 5.THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFI RMING THE ORDER U/S. 154 OF THE ACT WHICH WAS ASSESSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. 6.THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN PASSI NG CORRIGENDUM DATED 29.11.2013 (RECEIVED ON 10.01.2014).THE ACTION OF THE CIT(A)IN PASSING THE CORRIGENDUM AND THEREBY INITIATING THE PENALTY U/S. 271(1)(C) OF THE ACT IS WITHOUT JURISDICTION A ND BAD IN LAW. 7.THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTE R OR DELETE ALL OR ANY. OF THE FOREGOING GROUNDS OF APPEAL. BRIEF HISTORY OF THE CASE: 2. THE ASSESSEE IS AN ASSOCIATION OF PERSONS (AOP) AND IS A JOINT VENTURE (JV) BETWEEN AKRUTI CITY LIMITED AND HIRANANDANI GROUP.IT UNDERTOOK SLUM REH ABILITATION PROJECT ASSIGNED BY NMRDA. 2 ITA NO.374/MUM/2014 HIRANANDANI AKRUTI JV DURING THE YEAR UNDER CONSIDERATION THE SRA PROJECT WAS COMPLETED.IN ITS RETURN OF INCOME,FILED ON 31.10.2005,GROSS TOTAL INCOME WAS DECLARED AT RS 51 ,06,27,772/-OUT OF WHICH DEDUCTION U/S. 80IB(10) OF THE ACT WAS CLAIMED AT RS.51,06,05,521/ -. AO VIDE HIS ORDER DATED 28.11.2009, PASSED U/S.143(3) DISALLOWED ASSESSEES CLAIM OF DEDUCTION OF RS,51,06,05,521/- MADE U/S.80-IB(10) AND FIRST APPELLATE AUTHORITY CONFIRMED IT .VIDE ITS O RDER DATED 30.03.2010, ITAT SET ASIDE THE ORDER OF FAA AND REMANDED THE MATTER BACK TO THE AO FOR T HE LIMITED PURPOSE OF SATISFYING HIMSELF AS TO WHETHER THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S. 80IB(10) AS PER THE RATIO LAID DOWN BY THE ITAT,SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES (BA)-(122TTJ 433) AND TO DECIDE THE ISSUE AS PER THE LAW APPLICABLE IN AY 2004-05 WHEN THE PR OJECT WAS APPROVED. AGGRIEVED BY DIRECTION OF THE TRIBUNAL THAT DEDUCTION IN FULL BE GIVEN TO THE ASSESSEE IF THE AREA OF COMMERCIAL UNITS IN THE PROJECT DID NOT EXCEED 10% OF TOTAL AREA IT FILED A N APPEAL WITH THE HONBLE BOMBAY HIGH COURT.THE APPEAL WAS ADMITTED BY THE HONBLE COURT VIDE ORDER DATED 14.06.2012 AND IS PENDING FOR DISPOSAL.MEANWHILE HONBLE JURISDICTIONAL HIGH COURT HAD DECIDED THE APPEAL FILED IN THE CASE OF BA. TAKING INTO ACCOUNT THE SAID JUDGMENT,ASSESS EE FILED AN MA ARISING OUT OF THE ITATS ORDER DATED 30.03.2010.ADJUDICATING THE APPEAL FILED BY T HE ASSESSEE,TRIBUNAL DIRECTED THE AO TO EXAMINE THE ELIGIBILITY OF THE ASSESSEE TO DEDUCTIO N U/S. 80BI(10) OF THE ACT AS PER THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT INSTEAD OF TH E RATIO LAID DOWN BY THE SPECIAL BENCH.ON 04.11.2011,AO PASSED ORDER GIVING EFFECT TO AFORESA ID ORDER OF ITAT AND ALLOWED 100% DEDUCTION TO THE ASSESSEE U/S. 80IB(10) OF THE ACT.VIDE HIS N OTICE ISSUE U/S.154 OF THE ACT,AO INFORMED THE ASSESSEE THAT WHILE ALLOWING DEDUCTION U/S.801B(10) , DEDUCTION IN RESPECT OF COMMERCIAL COMPONENT OF THE PROJECT WAS NOT DISALLOWED,THAT IT WAS A MISTAKE APPARENT FROM THE RECORD AND HAD TO BE RECTIFIED.IN ITS REPLY,ASSESSEE STATED THAT I TS CASE WAS FULLY COVERED BY THE DECISION OF HONBL E BOMBAY HIGH COURT DELIVERED IN THE CASE OF BA,THAT RECTIFICATION OF ORDER GIVING EFFECT TO ITATS ORDER WAS NOT POSSIBLE SINCE IT HAD BEEN PASSED AFT ER FOLLOWING THE DIRECTIONS OF THE TRIBUNAL.HOWEVER,THE AO VIDE HIS ORDER DATED 31.01. 2012 ALLOWED ITS CLAIM OF DEDUCTION U/S.80IB(10) TO THE EXTENT OF RS.44,42,20,424/- AFT ER EXCLUDING 13% COMMERCIAL COMPONENT OF THE PROJECT.AGGRIEVED BY THE ORDER PASSED U/S.154 OF TH E ACT,ASSESSEE PREFERRED FURTHER APPEAL. IN THE COURSE OF APPELLATE PROCEEDINGS,BEFORE THE F IRST APPELLATE AUTHORITY(FAA),ASSESSEE SUBMITTED THAT THE DECISION OF THE HONBLE BOMBAY H IGH COURT IN THE CASE OF BA ENVISAGED DEDUCTION TO THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY AND NOT TO A PART OF THE PROJECT,THAT IF THE CONDITIONS SET OUT IN SECTION 80-IB(10) WERE SA TISFIED THEN DEDUCTION WAS ALLOWABLE ON THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY,THAT THE AO WAS NOT JUSTIFIED IN RESTRICTING DEDUCTION ONLY TO THE RESIDENTIAL COMPONENT OF THE PROJECT,TH AT THE SRA PROJECT OF THE ASSESSEE WAS APPROVED BEFORE 31.03.2004 AND WAS WITHIN LIMITS AS PRESCRIB ED BY THE DC RULES AND REGULATIONS,THAT CONSIDERING THE DIRECTION OF THE HONBLE HIGH COURT , THE RESTRAINING CLAUSES WITH REGARD TO COMMERCIAL UNITS WERE NOT APPLICABLE TO IT,AS SAME COULD NOT BE APPLIED RETROSPECTIVELY TO PROJECTS APPROVED BEFORE 01.04.2004,THAT IN THE IMPUGNED ORD ER PASSED U/S.154OF THE ACT THE AO HAD SUBSCRIBED HIS OWN INTERPRETATION OF THE BA DECISIO N,THAT BY AGREEING TO GIVE DEDUCTION UP TO 87% OF THE TOTAL CLAIM, THE AO HAD IMPLICITLY AGREED TH AT THE PROJECT MEETS ALL THE CRITERIA AND IS ELIGIB LE FOR THE CLAIM AS PER THE MANDATE OF THE SAID DECISI ON, THAT THE AO HAD COMPLETELY DISREGARDED THE OBSERVATION OF THE HONBLE HIGH COURT THAT DEDUCTIO N BE RESTRICTED AND HAS TO BE GIVEN IN FULL. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ORDER OF THE AO,FAA HELD THAT THE MAIN QUESTION FOR DETERMINATION WAS WHETHER THE IMPUGNED ORDER PASSED BY THE AO GIVING EFFECT TO THE ORDER OF THE ITAT IN MA WAS IN CONFORMITY WITH THE RATIO LAID DOWN BY THE, HONBLE HIGH COURT IN THE CASE OF BA, AS DIRECTED BY THE TRIBUNAL.HE WAS OF THE OPINION THAT FROM PERUSAL OF THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT T HE FOLLOWING SIGNIFICANT PROPOSITIONS EMERGED: I.UP TO 31.03.2005 DEDUCTION U/S.80-IB(10)WAS ALLO WABLE TO HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RESIDENTIAL UNITS WITH COMME RCIAL USE TO THE EXTENT PERMITTED UNDER THE DC RULES/REGULATIONS FRAMED BY THE RESPECTIVE LOCAL AU THORITY. II.WHERE THE COMMERCIAL USE PERMITTED BY THE LOCAL AUTHORITY WAS WITHIN THE LIMITS PRESCRIBED UNDER THE DC RULES/REGULATION,SAID DEDUCTION UP TO 31.03. 2005 WAS ALLOWABLE IRRESPECTIVE OF THE FACT THAT THE PROJECT IS APPROVED AS HOUSING PROJECT OR RESIDENTIAL PLUS COMMERCIAL. 3 ITA NO.374/MUM/2014 HIRANANDANI AKRUTI JV III.DEDUCTION U/S.80-IB(10) WAS AVAILABLE ON THE PR OFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS A WHOLE, IV.CLAUSE (D) INSERTED TO SECTION 80-IB(10) WITH EF FECT FROM 01.04.2005 WAS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE COULD NOT BE APPLIED FOR TH E PERIOD PRIOR TO 01.04.2005. FAA FURTHER OBSERVED THAT THE ASSESSEE HAD OBTAINED APPROVAL FOR DEVELOPMENT OF A SLUM REHABILITATION PROJECT FROM THE MMRDA ON 17.11.2003 ,THAT DURING YEAR UNDER CONSIDERATION,THE ASSESSEE HAD COMPLETED THE SAID RESIDENTIAL-CUM COM MERCIAL PROJECT AND RECEIVED THE OCCUPATION CERTIFICATES IN JULY,2005 AND DECEMBER,2005,THAT IN HIS STATEMENT RECORDED U/S.131 OF THE ACT ON 10.03.2007, ONE OF THE MEMBER OF THE ASSESSEE-AOP C ONFIRMED THAT THE TOTAL BUILT UP AREA OF THE RESIDENTIAL UNITS OF THE SAID PROJECT WAS 81046.65 SQ.MTRS. AND THE TOTAL BUILT UP AREA OF COMMERCIAL UNITS THEREIN WAS 117800 SQ FT APPROXIMATELY,THAT T HE BUILT UP AREA OF RESIDENTIAL UNITS IN COMPARISON TO THE TOTAL AREA WAS 87% WHILE THE COMM ERCIAL COMPONENT ACCOUNTED FOR THE BALANCE 13%,THAT IT HAD BEEN HELD BY THE HONBLE HIGH COURT THAT DEDUCTION U/S.80-IB(10) WAS ALLOWABLE ON THE PROFITS DERIVED FROM THE HOUSING PROJECTS APPRO VED BY THE LOCAL AUTHORITY AS A WHOLE AND NOT TO A PART OF IT,THAT THE AO HAD ALLOWED DEDUCTION TO THE ASSESSEE TO THE EXTENT OF 87% AFTER EXCLUDING 13% COMMERCIAL COMPONENT OF THE PROJECT,THAT THE OR DER OF THE AO WAS NOT IN ACCORDANCE WITH THE RATIO OF THE JUDGMENT OF THE HONBLE HIGH COURT DEL IVERED IN THE CASE OF BA,THAT THE HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE WAS APPROVED BY THE LOCAL AUTHORITY ON 17.11,2003 AND THE PROJECT WAS COMPLETED VIDE OCCUPATION CERTIFICATES ISSUED IN JULY 2005 AND DECEMBER, 2005,THAT THE COMMERCIAL AREA INCLUDED IN THE HOUSING PROJECT OF THE ASSESSEE WAS 1,17,800 SQ.FEET WHICH WAS MUCH HIGHER THAN THE PRESCRIBED LIMIT,THAT THE ASSE SSEE SATISFIED ALL CONDITIONS EXCEPT THE ONE LAID DOWN IN THE CLAUSE (D) OF SECTION 80IB(10),THAT THE TRUE,CLEAR AND DOMINANT OBJECTIVE OF THE INCENTIVE PROVISION OF SECTION 80-IB(10)WAS TO PROV IDE AFFORDABLE DWELLING UNITS FOR LOW AND MIDDLE CLASS,THAT BEFORE INSERTION OF CLAUSE (D) TO SAID SECTION W.E.F. 01.04.2005,IT WAS CLEAR THAT THERE WAS NO RESTRICTION ON THE EXTENT OF COMMERCIA L USER IN A RESIDENTIAL BUILDING,THAT THE TRUE REASON FOR INSERTION OF CLAUSE(D)IN SECTION 80 IB(1 0) WAS TO CURB THE ABUSE OF THE INCENTIVE PROVISION AND TO ENSURE THAT THE BENEFIT OF DEDUCTI ON UNDER THE SAID SECTION EXTENDED ONLY TO THOSE HOUSING PROJECTS WHERE COMMERCIAL AREA WAS WITHIN P ERMISSIBLE LIMITS. FAA WAS OF THE OPINION THAT THE PLEA OF THE ASSESSE E;THAT WHILE DISPOSING OF ITS MA NO.151/MUM/20L1 (ARISING OUT OF ITA/5416/M/2009-AY. 2006-07,DATED 04.05.2011)ITAT HAD UPHELD THE ELIGIBILITY TO THE DEDUCTION BASED ON BO MBAY HIGH COURT DECISION IN CASE OF BA;WAS NOT ONLY FACTUALLY INCORRECT BUT ALSO MISCONCEIVED AND MISLEADING.HE REPRODUCED THE ORDER OF THE TRIBUNAL AND HELD THAT INSTEAD OF UPHOLDING THE E LIGIBILITY OF THE ASSESSEE TO DEDUCTION U/S.80- IB(L0),THE ISSUE WAS RESTORED BACK TO THE FILE OF T HE AO FOR EXAMINATION IN LIGHT OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE BA,THA T WHILE GIVING EFFECT TO THE AFORESAID ORDER OF ITAT THE AO FAILED TO EXAMINE THE QUESTION OF E LIGIBILITY OF THE APPELLANT TO DEDUCTION U/S.80- IB(10) IN LIGHT OF ABOVE FINDINGS/CONCLUSIONS,THAT HE FAILED TO APPRECIATE THAT CLAUSE(D)INSERTED TO THE SAID SECTION HAD BEEN HELD TO PROSPECTIVE,THAT HE DID NOT INVOKE THE AMENDED PROVISIONS IN THE PRESENT CASE FOR THE AY.UNDER APPEAL. HE HELD THAT THE AO OUGHT TO HAVE DISALLOWED THE SA ID DEDUCTION IN FULL BECAUSE THE REQUIREMENT OF CLAUSE (D) OF SECTION 80-LB(10) WAS NOT SATISFIED B Y THE ASSESSEE,THAT AO WAS JUSTIFIED IN PASSING ORDER U/S.154 OF THE ACT,THAT AS PER THE DECISION O F THE HONBLE BOMBAY HIGH COURT IF THE COMMERCIAL USE OF THE PROJECTS WAS BEYOND THE LIMIT PRESCRIBED THEREIN,EVEN THOUGH SUCH USE WAS APPROVED BY THE LOCAL AUTHORITY,THEN THE ASSESSEE W AS NOT ENTITLED TO CLAIM DEDUCTION UNDER THE SAID SECTION.REFERRING TO THE ORDER OF THE DECISION OF T HE ITAT, MURNBAI BENCH IN THE CASE OF EVEREST HOME CONSTRUCTION(INDIA)LTD.(139ITD1),HE HELD THAT WITH THE INSERTION OF CLAUSE (D) W.E.F. 01,04.2005 THERE WAS A CAP ON THE COMMERCIAL AREA I N THE ELIGIBLE PROJECT,THAT AFTER THE AMENDMENT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80 IB(10) OF THE ACT,THAT THE ASSESSEE COULD NOT CLAIM TO HAVE ANY VESTED RIGHT TO THE DEDUCTION UND ER THE SAID SECTION BASED ON THE PRE-AMENDED PROVISIONS AND ITS ELIGIBILITY TO SUCH DEDUCTION HA D TO BE EXAMINED WITH REFERENCE TO THE LEGAL PROVISIONS IN FORCE IN THE AY.UNDER CONSIDERATION. FINALLY,HE HELD THAT WHILE GIVING EFFECT TO THE ORD ER OF THE ITAT IN MA FILED BY THE ASSESSEE THE AO FAILED TO APPLY THE RATIO OF JUDGMENT OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF BA 4 ITA NO.374/MUM/2014 HIRANANDANI AKRUTI JV CORRECTLY TO THE FACTS OF THE PRESENT CASE AND THER EBY WRONGLY ALLOWED DEDUCTION OF RS. 44, 42, 20,424/-TO THE ASSESSEE,WHEREAS HE OUGHT TO HAVE DI SALLOWED THE DEDUCTION IN FULL AS THE APPELLANT HAD NOT SATISFY THE MANDATORY REQUIREMENT OF CLAUSE (D) OF SECTION 80-IB(10) OF THE ACT,THAT THE TOTAL INCOME ASSESSABLE IN HANDS OF THE ASSESSEE FO R THE AY.UNDER CONSIDERATION WOULD REMAIN UNCHANGED AT RS.51,58,84,600/- AS ORIGINALLY ASSESS ED.AS IT RESULTED IN ENHANCEMENT OF INCOME OF THE ASSESSEE OWING TO WRONG ALLOWANCE OF DEDUCTION U/S. 80-IB(10) OF THE ACT,SO HE DIRECTED THE AO TO REVISE THE TOTAL INCOME OF THE ASSESSEE ACCOR DINGLY WHILE GIVING EFFECT TO THIS ORDER. FAA HAD ISSUED A NOTICE U/S.251(2)OF THE ACT TO THE ASSESSE E BEFORE ENHANCING ITS INCOME. 4. BEFORE US,AUTHORISED REPRESENTATIVE ARGUED THAT THE ISSUE ON WHICH ENHANCEMENT HAD BEEN MADE WAS DEBATABLE ISSUE,THAT MISTAKE POINTED OUT BY AO WAS NOT UPHELD BY THE FAA,THAT IN GUISE OF ENHANCEMENT FRESH MISTAKE COULD NOT BE RECTIFIED,TH AT MISTAKE RECTIFIED BY THE AO WAS NOT APPARENT BECAUSE THE FAA HAD ANOTHER VIEW. HE RELIED UPON THE DECISION OF MANAN CORPORATION(35 6ITR44),ANRIYA PROJECT MANAGEMENT SERVICES(P)LTD.(353ITR12),G.R.DEVELOPER(351ITR1)POO NAMGRUHNIRMAN(ITA/6926/MUM/2010- AY.2007-08,DATED12.02.2014),M/S.VELENTINEDEVELOPER( ITA/6901AND8469/MUM/2010-AY.S.20 06-07&2007-08DATED14.03.2014),M/S.MAGNET ENTERPRISE S ITA/5802/MUM/ 2012-AY.2008-09 DATED 27.11.2013).DEPARTMENTAL REPRESENTATIVE SUPPO RTED THE ORDER OF THE FAA AND RELIED UPON THE ORDER OF EVEREST HOME CONSTRUCTION (INDIA)LTD.(SUPR A). 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.IT IS FOUND THAT INITIALLY AO HAD DENIED THE BENEFIT OF DEDUCTION U/S.80IB OF THE ACT,MADE BY THE ASSESSEE FOR A PROJECT DEVELOPED BY THE IT.DECIDING THE APPEAL FILED BY TH E ASSESSEE AGAINST THE ORDER OF THE FAA,ITAT DIRECTED THE AO TO PASS ORDER AS PER THE DECISION O F BA DELIVERED BY THE SPECIAL BENCH.HONBLE BOMBAY HIGH COURT PRONOUNCED ITS DECISION IN THE MA TTER OF BA.ASSESSEE FILED AN APPLICATION BEFORE THE TRIBUNAL TO AMEND ITS ORDER AND DIRECT T HE AO TO FOLLOW THE ORDER OF THE HONBLE HIGH COURT.TRIBUNAL,TAKING COGNIZANCE OF THE DECISION OF THE HONBLE COURT,DIRECTED THE AO TO DECIDE THE ISSUE OF DEDUCTION U/S.80IB IN LIGHT OF THE SAI D ORDER.IN PURSUANCE OF THE ORDER OF THE TRIBUNAL INITIALLY,AO ALLOWED THE ASSESSEE 100% DEDUCTION U/ S.80IB OF THE ACT,BUT LATER ON,HE PARTIALLY WITHDREW IT,WHILE PASSING A RECTIFICATION ORDER U/S .154 OF THE ACT.IN THE APPELLATE PROCEEDINGS,FAA HELD THAT STAND TAKEN BY THE AO WAS NOT AS PER LAW. HE HELD THAT ASSESSEE WAS NOT ENTITLED TO CLAIM ANY DEDUCTION U/S.80IB OF THE ACT.REFERRING TO THE PROVISIONS OF SUB SECTION (D) OF THE SECTION 80IB AND THE ORDER OF THE TRIBUNAL DELIVERED IN THE CASE OF M/S. EVEREST HOME CONSTRUCTION(INDIA) PVT. LTD.(SUPRA),HE ENHANCED THE INCOME OF THE ASSESSEE. WE FIND THAT IN THE CASE OF MANAN CORPORATION (SUPRA)ISSUE OF AVAILABILITY OF DEDUCTION U/S.80IB HAD BEEN RESOLVED AND THE HONBLE GUJARAT HIGH COURT HAD TAKEN A DECISION AFTER CONSIDERING THE BA CKGROUND OF INTRODUCING THE SECTION AND IT HAD HELD THAT THAT AMENDMENT INTRODUCED IN SECTION 80IB (10)(D) WAS NOT APPLICABLE TO A PROJECT WHICH WAS APPROVED PRIOR TO 01.04.2005.IN THE CASE UNDER CONSIDERATION PROJECT WAS APPROVED PRIOR TO 01.04.2005,SO,THUS THE MATTER IS COVERED BY THE PRE AMENDED SECTION.WE ARE OF THE OPINION THAT PRE AMENDED SECTION DID NOT MANDATE THE CEILING OF COMM ERCIAL AREA.WE FIND THAT IN THE CASE OF M/S.MAGNET ENTERPRISES ITA/5802/ MUM/ 2012-AY. 2008 -09 DATED 27.11.2013,TO WHICH ONE OF US WAS THE PARTY,HAS DISCUSSED THE ISSUE OF ALLOWABILI TY OF DEDUCTION U/S.80 IB AS UNDER : 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ISSUE BEFORE US WAS DISCUSSED AND DECIDED BY THE HONBLE HIGH COURT OF GUJARAT CONCLUSIVELY IN THE CASE OF MANAN CORPORATION(SUPRA).HONBLE COURT HAS HELD UNDER : 20.IN OUR OPINION,THE TRIBUNAL HAS MISDIRECTED ITS ELF IN INTERPRETING PARAGRAPH 25 OF THE SAID JUDGME NT AND THEREBY DENYING THE BENEFIT OF SECTION 801B(1 0) TO THE APPELLANT HEREIN IN AS MUCH AS BEFORE THE BOMBAY HIGH COURT IT WAS REVENUES CASE THAT RESIDE NTIAL PROJECT HAVING COMMERCIAL CONSTRUCTION CANNOT BE HELD ENTITLED TO THE BENEFIT UNDER SECTIO N 801B(1 0) OF THE ACT AND FOR SUPPORTING ITS VERSI ON, RELIANCE WAS PLACED ON INCLUSION OF CLAUSE (D) OF S ECTION 801B(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 2003 -2004 AS N OTED ABOVE. IN THIS BACKDROP, THE COURT REJECTED, REFUTED SUCH VERSION AND FOR FORTIFYING ITS DENIAL, IT MENTIONE D 5 ITA NO.374/MUM/2014 HIRANANDANI AKRUTI JV INCLUSION OF CLAUSE(D) FROM 1.4.2005 BY HOLDING THA T BY INSERTION OF CLAUSE(D) OF SECTION 801B(10) OF THE ACT, LEGISLATURE MADE IT CLEAR THAT THOUGH THE HOUSING PROJECT APPROVED BY LOCAL AUTHORITY WITH COMMERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE RULES AND REGULATIONS WERE ENTITLED TO SECTION 801 B( 10) DEDUCTION, SUCH DEDUCTION WOULD BE SUBJECT TO T HE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 801B(10) FROM 1.4.2005. IN OUR OPINION,TRIBUNAL HAS QUOTED THE JUDGMENT OUT OF CONTEXT TO DENY THE SAID BENEFIT TO THE APPELLANT ERRONEOUSLY. 21. NEITHER THE ASSESSEE NOR LOCAL AUTHORITY RESPON SIBLE TO APPROVE THE CONSTRUCTION PROJECTS ARE EXPE CTED TO CONTEMPLATE FUTURE AMENDMENT IN THE STATUTE AND APP ROVE AND/OR CARRY OUT CONSTRUCTIONS MAINTAINING THE RATIO OF RESIDENTIAL HOUSING AND COMMERCIAL CONSTRU CTION AS PROVIDED BY THE AMENDED ACT BEING 3% OF THE TOTAL BUILT UP AREA OR 5000 SQ.FEET WHICHEVER I S HIGHER (NOW IN POST 2010 PERIOD)OR 5% OF THE AGGREGATE BUILT UP AREA OR 2000 SQ.FEET WHICHEVER I S LESS. REVENUE IS ALSO IN ERROR TO SUGGEST THAT EV EN IF SUCH CONDITIONS ARE ONEROUS, THEY ARE REQUIRED TO B E FULFILLED. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILITATE THE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUCH PROJECT WHEN INITI ALLY THERE WAS NO SUCH RESTRICTION IN TAXING STATUTE AND THE PERMISSIBLE RATIO FOR COMMERCIAL USER MADE 5% TO THE TOTAL BUILT UP AREA BY WAY OF AMENDMENT AND RED UCTION OF WHICH BY FURTHER AMENDMENT TO 3% OF THE TOTAL BUILT UP AREA, HAS TO BE NECESSARILY CONSTRUE D ON PROSPECTIVE BASIS. 22. AS IS VERY APPARENT FORM THE RECORD, THERE WAS NO CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIO R TO THE AMENDED SECTION AND THE PLANS ARE APPROVED AS H OUSING PROJECTS BY THE LOCAL AUTHORITY FOR BOTH THE PROJECTS OF THE APPELLANT. PERMISSION FOR CONSTRUCT ION OF SHOPS HAS BEEN ALLOWED BY THE LOCAL AUTHORIT Y IN ACCORDANCE WITH RULES AND REGULATIONS, KEEPING IN M IND PRESUMABLY THE REQUIREMENT OF LARGE TOWNSHIPS. HOWEVER, THE PROJECTS ESSENTIALLY REMAINED RESIDENT IAL HOUSING PROJECTS AND THAT IS ALSO QUITE APPAREN T 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 O F 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 RUL ES AND REGULATIONS BY THE LOCAL AUTHORITY FOR DENYI NG THE BENEFIT OF DEDUCTION OF PROFIT DERIVED IN THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AS MAD E AVAILABLE OTHERWISE UNDER THE STATUE. 24.KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE VS. ANRIY A PROJECT MANAGEMENT SERVICES (P.) LTD. REPORTED IN [2012J 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, 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 APPROVE D 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 ASS ESSEE IS APPROVED BY LOCAL AUTHORITY PRIOR TO 1.4.2005, I T WOULD BE ENTITLED TO 100% BENEFIT OF SECTION 801B(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 APPEAL NO.355 OF 2009]. 27.THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILI TATE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AN D 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 BU ILT UP AREA HAS TO BE NECESSARILY ON PROSPECTIVE BASIS. AS MENTIONED HEREINABOVE CRITERIAS TO HOLD THIS AM ENDMENT RETROSPECTIVE ARE ABSENT AS THERE IS NO AS EXPLICIT AND SPECIFIC WORDING EXPRESSING RETROSPECT IVITY AND EVEN IF IT IS ASSUMED FOR THE SAKE OF ARGUMENTS THAT THE SAME IS TO BE READ BY IMPLICATIO N THE SAME DOES NOT APPEAR TO BE REASONABLE BUT, IN FACT EMERGES TO BE HARSH AND UNREASONABLE WHEN IT C OMES TO IMPLEMENTATION. 34.ABOVE DISCUSSION CUMULATIVELY WHEN EXAMINED WITH THE OBJECTIVES AND INTENT IT SOUGHT TO ACHIEVE IN BRINGING ABOUT THE SAID PROVISION OF SECTION 801B(1 0), THIS AMENDED TAXING STATUTE REQUIRES TO BE INTERPRETED IN FAVOUR OF THE ASSESSEE RATHER THAN I NSISTING UPON STRICT COMPLIANCE LEADING TO ABSURDIT Y. 35.IT CAN BE ALSO HELD THAT THIS BEING A SUBSTANTIV E AMENDMENT AND NOT A CLARIFICATORY AMENDMENT, THE AMENDMENT OF THIS NATURE CANNOT HAVE RETROSPECTIVE EFFECT. WE FIND THAT WHEN THE I BENCH OF MUMBAI TRIBUNAL HA D DECIDED THE ISSUE OF 80IB(10)OF THE ACT, IT DID NOT HAVE THE BENEFIT OF THE JUDGMENT OF HONBLE HIG H COURT OF GUJARAT.WE FURTHER FIND THAT PUNE BENCH OF THE TRIBUNAL HAS CONSIDERED ALL THE DECISIONS,IN CLUDING THE DECISION OF EVEREST HOME CONSTRUCTION(INDIA)(P)LTD.,(SUPRA)WHILE DECIDING TH E ISSUE IN FAVOUR OF THE ASSESSEE.AFTER CONSIDERING THE JUDGMENT OF THE HONBLE HIGH COURTS OF GUJARAT KARNATAKA,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.TH EREFORE,UPHOLDING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. 6 ITA NO.374/MUM/2014 HIRANANDANI AKRUTI JV CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT TH E ORDER OF THE FAA CANNOT BE ENDORSED.HE HAD INTERPRETED THE PROVISIONS OF SECTION 80IB(10)(D)IN A PARTICULAR MANNER AND HAD RELIED UPON ONE OF THE ORDERS OF THE TRIBUNAL.BUT,NOW AFTER THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MANAN CORPORATION THERE IS CLARITY ABOUT THE PRO VISION.THEREFORE,FOLLOWING THE SAID ORDER OF THE HONBLE GUJARAT HIGH COURT WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE.IN OUR OPINION,AO WAS NOT JUSTIFIED IN AMENDING THE OR DER BY PASSING ORDER U/S.154 OF THE ACT,AS HELD BY THE FAA.WE ARE ALSO OPINION THAT ENHANCEMENT MAD E BY THE FAA TO THE INCOME OF THE ASSESSEE- AOP HAS TO BE DELETED.GROUNDS NO.1-5,FILED BY THE A SSESSEE ARE ALLOWED.GROUND NO.6,PERTAINING TO LEVY OF PENALTY U/S.271(1)(C)OF THE ACT IS ALLOWED FOR STATISTICAL PURPOSES,AS THE QUANTUM ADDITION HAS BEEN DELETED. AS A RESULT,APPEAL FI LED BY THE ASSESSEE STANDS ALLOWED. 0'1 &' 2 3 ( . 4 ( ' 56. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MAY,2014 . / ( ,-! 8 9 7 EBZ 201 4 - ( . : SD/- SD/- ( MK MKMK MK0 00 0 ,L VH ,E IKOYU ,L VH ,E IKOYU ,L VH ,E IKOYU ,L VH ,E IKOYU / DR. S.T.M.PAVALAN) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9 /DATE: 07.05.2014. SK / / / / ( (( ( $'; $'; $'; $'; <;!' <;!' <;!' <;!' / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '# 2. RESPONDENT / $%'# 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR H BENCH, ITAT, MUMBAI / ;?. $' ,P ,P,P ,P , . . . 6. GUARD FILE/ . 0 %;' %;' %;' %;' $' $'$' $' //TRUE COPY// / / BY ORDER, @ / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI