HIRANANDANI AKRUTI JV., MUMBAI V. DCIT CEN CIR 36, MUMBAI

ITA 5416/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7212 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: ARVIND SONDE; CHETAN KARIA
• Keywords: Maximum Marginal Rate; Set aside
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E BEFORE SHRI P.M. JAGTAP (AM) & SHRI N.V. VASUDEVAN (JM) I.T.A.NO. 5416/MUM/09 (ASSESSMENT YEAR : 2006-07) HIRANANDANI AKRUTI JV AKRUTI TRADE CENTRE ROAD NO. 7 MAROL, MIDC ANDHERI EAST MUMBAI-400 093. VS. DCIT CENTRAL CIRCLE 36 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT PAN/GIR NO. : AAAAH1443H ASSESSEE BY : SHRI ARVIND SONDE & SHRI CHETAN KARIA DEPARTMENT BY : SHRI HEMANT J. LAL ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 25.8.2009 OF LEARNED CIT(A)-CENTRAL VI, MUMBAI RELA TING TO A.Y. 2006-07. 2. THE ASSESSEE IS AN AOP AND IS A JOINT VENTURE (J V) BETWEEN AKRUTI NIRMAN LIMITED, SHRI NIRANJAN HIRANANDANI AND SHRI SURENDRA HIRANANDANI FOR UNDERTAKING PROJECT ASSIGNED BY MMR DA. THE ASSESSEE HAD ABSOLUTE DEVELOPMENT RIGHTS IN RESPECT OF PROPE RTY ADMEASURING ABOUT 62091.30 SQ.MRTS. IN VILLAGE MANKUHURD, TALUK A KURLA, MUMBAI SUBURBAN DISTRICT (HEREINAFTER REFERRED TO AS THE PROPERTY). THE MUMBAI URBAN INFRASTRUCTURE PROJECT (MUIP) IS EXECUTED BY MMRDA AS A PROJECT IMPLEMENTING AGENCY (PIA) FOR THE AMELIORATION OF T HE CIVIC LIFE IN BRIHAN MUMBAI. THE EXECUTION OF MUIP IS TO BE CARRIED OUT BY MMRDA ON THE LANDS EARMARKED FOR THE PURPOSE IN THE FINAL DEVELO PMENT PLAN OF GREATER MUMBAI IN FORCE UNDER SECTION 31 OF THE MAH ARASHTRA REGIONAL AND TOWN REGIONAL AND TOWN PLANNING ACT 1966. THE LANDS DESIGNATED HIRANANDANI AKRUTI JV 2 OR RESERVED FOR EXECUTION OF MUIP ARE OCCUPIED BY T HE SLUM DWELLERS WHO ARE REQUIRED TO BE EVACUATED AND RE-HOUSED FOR EFFE CTIVE EXECUTION OF MUIP BY PROVIDING ALTERNATE ACCOMMODATION AS PER GO VERNMENT POLICY. TO ACHIEVE THE SAID PUBLIC PURPOSE, MMRDA INTENDED TO ACQUIRE INTERVIVOS LAND ALONGWITH THE CONSTRUCTED TENEMENTS IN CONSIDERATION OF TRANSFERABLE DEVELOPMENT RIGHTS GRANTABLE UNDER THE DEVELOPMENT CONTROL REGULATION NO. 33 OF THE DEVELOPMENT CONTRO L REGULATIONS FOR GREATER BOMBAY 1991. THE ASSESSEE SUBMITTED SLUM RE HABILITATION PROPOSAL PROJECT AFFECTED PERSONS/SLUM DWELLERS UND ER THE MUIP SCHEME ON THE PROPERTY AS SLUM REHABILITATION PROJECT. THE SLUM REHABILITATION PROPOSAL PROVIDED, INTER ALIA, THAT THE ASSESSEE SH ALL CONSTRUCT ABOUT 3840 OR MORE TENEMENTS EACH COMPRISING OF 225 SQ.FT . CARPET AREA FOR REHABILITATION OF THE PROJECT AFFECTED PERSONS/SLUM DWELLERS INCLUDING AMENITIES VIZ., BALWADI, WELFARE CENTRE AND SOCIETY OFFICE ON THE PROPERTY AND IN CONSIDERATION THEREOF, THE MMRDA WHICH IS AL SO THE SLUM REHABILITATION AUTHORITY (SRA) WILL GIVE BENEFIT OF TRANSFER OF DEVELOPMENT RIGHTS (TDR) AND WILL ISSUE OR CAUSED T O BE ISSUED DEVELOPMENT RIGHT CERTIFICATES (DRC) TO THE ASSESSE E UNDER DEVELOPMENT CONTROL REGULATION FOR GRANTING OF TDR CONTAINED IN APPENDIX VII-B OF THE DEVELOPMENT CONTROL REGULATIONS NO. 33(10). IN CONSIDERATION OF MMRDA (THE DEEMED SRA), AGREEING TO RECOMMEND TO GI VE OR CAUSE TO BE GIVEN TRANSFER OF DEVELOPMENT RIGHTS (TDR) AND DEVE LOPER RIGHT CERTIFICATES (DRC) TO THE ASSESSEE AS LAID DOWN IN CLAUSE 3.11 READ WITH 3.5 AND 3.19(II) OF APPENDIX IV OF DC REGULATION NO . 33(10), AS MAY HAVE BEEN MODIFIED FROM TIME TO TIME, THE ASSESSEE AGREE D TO CONSTRUCT AND PROVIDE TENEMENTS TO SLUM DWELLERS IDENTIFIED BY TH E AUTHORITY, COMPRISING OF 225 SQ.FT. (CARPET AREA) IN ACCORDAN CE WITH R&R PROJECT OF MUIP ALONGWITH AMENITIES VIZ. BALWADI, WELFARE CENT RE, SOCIETY OFFICE AND ANY OTHER AMENITIES AS DESIRED BY THE AUTHORITY AND AS PER SRA GUIDELINES UNDER DCR NO 33(10) (HEREINAFTER CALLED REHABILITATION COMPONENT) WITHIN A PERIOD OF 15 CALENDAR MONTHS FR OM THE DATE OF ISSUANCE OF COMMENCEMENT CERTIFICATE. HIRANANDANI AKRUTI JV 3 3. THE ASSESSEE ACCORDINGLY COMPLETED THE PROJECT AS PER THE DETAILS GIVEN BELOW: DATE EVENT 17.11.2003 COMMENCEMENT CERTIFICATE RECEIVED 17.11.2003 WORK COMMENCED 09.12.2003 PLINTH CERTIFICATE RECEIVED 8.7.2005, 21.12.2005 PROJECT COMPLETED 28.12.2005 HOUSES CONSTRUCTED HANDED OVER TO MMRDA 23.1.2006 ALLOTTED BY MMRDA TO RAP IN A PUBLIC FUNC TION 4. THE DETAILS OF THE CONSTRUCTED AREA WERE AS FOL LOWS: MAX BUA PERMISSIBLE (III) NON CRZ AREA (9X10A) (IV) CRZ AREA (8X10B) TOTAL (I + II) 87993.62 4651.49 92645.11 PROP. BUA ON PLOT FOR REHAB INCLUDING STAIRCASE, LIFT, LIFT LOBBY AREA AS PER APPROVED BUILDING PLAN S 92207.72 AREA OF B/W, W/C & S/O & PASSAGES AS PER APPROVED BUILDING PLANS 35035.88 NO. OF REHAB TENEMENTS OF SIZE EQUIVALENT TO 20.90 SQ.M. 3736 NO. OF B/W, W/C. & S/O. 104 5. ACCORDING TO THE ASSESSEE, IT HAD UNDERTAKEN THE SAID PROJECT FOR SOCIAL CAUSE. THE SAID PROJECT WAS UNDERTAKEN AS SO CIAL RESPONSIBILITY AND THERE WAS NO CERTAINTY REGARDING VALUE OF TDR I N THE MARKET. THE ASSESSEE WAS TO GET TDR AT A LATER DATE AND DID NOT KNOW WHAT VALUE IT WOULD REALIZE. IT WAS ONLY LATER ON WHEN TDR WAS RE CEIVED AND SOLD, THE ASSESSEE REALIZED THE AMOUNT OF PROFIT IT HAS MADE. THE ASSESSEE FOLLOWS PROJECT COMPLETION METHOD OF ACCOUNTING. DURING THE F.Y. 2005-06 (A.Y. 2006-07) THE PROJECT WAS COMPLETED AND NET PROFIT O F RS. 51.06 CRORES WAS DECLARED AS INCOME. IN ITS RETURN OF INCOME, GR OSS TOTAL INCOME WAS DETERMINED AT RS. 51,06,27,772/- FROM WHICH DEDUCTI ON U/S. 80IB(10) WAS CLAIMED AMOUNTING TO RS. 51,06,05,521/-, RESULT ING IN TOTAL INCOME OF RS. 22,251/-. THE RETURN OF INCOME WAS FILED ON 31.10.2006. HIRANANDANI AKRUTI JV 4 6. THE STATEMENT OF SRI VYOMESH M. SHAH, MANAGING DIRECTOR OF M/S. AKRUTI NIRMAN LTD., WAS RECORDED ON 16.3.2007 IN TH E CAPACITY OF THE MEMBER IN THE ASSESSEE AOP. IN HIS, STATEMENT, REC ORDED UNDER SECTION 131 OF THE ACT, SHRI VYOMESH SHAH CONFIRMED THAT TH E TOTAL BUILT UP AREA OF THE RESIDENTIAL UNIT IN THE AFOREMENTIONED PROJE CT AT TATA NAGAR, MANKHURD WAS 81,046 SQ.MTS. AND THE TOTAL BUILT UP AREA OF COMMERCIAL UNITS IN THE SAME WAS 11,161.07 SQ.MTS. THUS, THE TOTAL COMMERCIAL SPACE IN THE PROJECT, AS PER THE STATEMENT OF SHRI VYOMESH SHAH, WHEN CONVERTED TO SQUARE FEET WAS 1,17,800 SQ.FT. ACCORD ING TO THE ASSESSING OFFICER, AS THE PROVISIONS OF SECTION 80IB(10)(D) A S APPLICABLE W.E.F. 1-4- 2005, THE LIMIT FOR HAVING COMMERCIAL SPACE IN THE HOUSING PROJECTS IS 5% OF THE TOTAL BUILT UP AREA OR 2000 SQ.FT. WHICHE VER IS LESS. ACCORDINGLY, THE ASSESSEE WAS ASKED TO EXPLAIN WHY DEDUCTION CLA IMED BY IT UNDER SECTION 80IB(10) AMOUNTING TO RS. 51,06,05,521/- SH OULD NOT BE DISALLOWED. 7. IT IS NECESSARY TO NARRATE THE HISTORY OF THE B ENEFIT OF DEDUCTION, ALLOWED UNDER THE ACT, ON PROFITS DERIVED BY AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS, WHILE COMPUTING TOTA L INCOME. SUCH BENEFIT WAS FIRST INTRODUCED BY THE FINANCE ACT, 1 998 W.E.F. 1-4-99 IN THE FORM OF SUB-SECTION (4F) TO SEC.80IA OF THE ACT. TH OSE PROVISIONS READ AS FOLLOWS: THIS SECTION APPLIES TO AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL A UTHORITY SUBJECT TO THE CONDITION THAT THE SIZE OF A PLOT OF LAND HAS A MINIMUM AREA OF ONE ACRE AND THE RESIDENTIAL UNIT H AS A MAXIMUM BUILT-UP AREA NOT EXCEEDING ONE THOUSAND SQ UARE FEET; PROVIDED THAT THE UNDERTAKING SUCH UNDERTAKING CO MMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES THE SAME BEFORE 31 ST DAY OF MARCH, 2001; HIRANANDANI AKRUTI JV 5 8. BY THE FINANCE ACT, 1999 W.E.F. 1-4-2000, THE BE NEFIT OF THE ABOVE DEDUCTION WAS AVAILABLE U/S.80-IB(10): THE SAID PR OVISIONS READ AS FOLLOWS: (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B Y 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 THE SAME BEFORE 31 ST DAY OF MARCH, 2003; ( B ) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHI CH HAS A MINIMUM AREA OF ONE ACRE: ( C ) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; 9. BY THE FINANCE ACT, 2000 W.E.F.1-4-2001 THE WOR DS BEFORE 31 ST DAY OF MARCH, 2001 WERE INSERTED AFTER THE WORDS HOUSING PROJECT APPROVED. THUS ALL CONDITIONS FOR GRANT OF DEDUCTION REMAINED THE SAME EXCEPT THAT THE APPROVAL OF LOCAL AUTHORITY FOR THE DEVELOPMENT HAS TO BE OBTAINED BEFORE 31 ST DAY OF MARCH, 2001. 10. FOR AY 02-03, THE LAW APPLICABLE WAS THAT THE C ONDITION REGARDING COMPLETION OF THE PROJECT BEFORE 31 ST MARCH, 2003 WAS DISPENSED WITH. 11. FOR AY 03-04 AND 04-05, THE LAW APPLICABLE WAS THAT ALL CONDITIONS REMAINED THE SAME EXCEPT THE CONDITION R EGARDING APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY WHICH COULD BE B EFORE 31 ST DAY OF MARCH, 2005. ANOTHER IMPORTANT CHANGE WAS THAT THE PERIOD OF COMPLETION OF THE CONSTRUCTION ON OR BEFORE 31 ST MARCH, 2003 WAS DISPENSED WITH AND THERE WAS NO TIME LIMIT GIVEN FO R COMPLETION OF THE HIRANANDANI AKRUTI JV 6 CONSTRUCTION. THIS WAS THE LAW FOR A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11. 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT. 12. BY THE FINANCE ACT, 2004 W.E.F. 1.4.2005 CLAUSE (D) TO SECTION 80IB(10) WAS INTRODUCED WHICH PROVIDED THAT BUILT U P AREA OF SHOPS OR OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOU SING PROJECT SHOULD NOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FT., WHICHEVER IS LESS. THE PROVISIONS AS THEY READ APPLICABLE FROM AY 05-06 IS AS FOLLOWS: (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B Y 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 DEVELOP MENT 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 APPROVE D 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 1ST DAY OF APRI L, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WH ICH 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 THE HO USING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PR OJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHIC H THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPR OVED BY THE LOCAL AUTHORITY; ( II )THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUS ING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETI ON CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( A ) OR CLAUSE ( B ) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF E XISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR HIRANANDANI AKRUTI JV 7 THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF; ( B ) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHIC H HAS A MINIMUM AREA OF ONE ACRE: ( C ) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; ( D ) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCI AL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS L ESS. AS PER THE AMENDED LAW IN VIEW OF INSERTION OF CLAU SE (D) THE BUILT UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENT IN CLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PERCENT OF T HE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FT., WHICHEV ER IS LESS. 13. WE HAVE ALREADY NOTICED THAT THE BUILT UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PR OJECT WAS MORE THAN 2000 SQ.FT. AND THEREFORE IF THE LAW AS AMENDE D BY THE FINANCE ACT, 2005 W.E.F. 1-4-2005 IS APPLIED THEN THE ASSESSEE W OULD NOT BE ENTITLED TO DEDUCTION. ON THE OTHER HAND IF THE LAW AS IT E XISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM R EHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPM ENT IS APPLIED THEN THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION BE CAUSE THERE WAS NO RESTRICTION REGARDING CONSTRUCTION OF COMMERCIAL AR EA AND THE ONLY CONDITION WAS THAT THE UNDERTAKING SHOULD DEVELOP A ND BUILD HOUSING PROJECT APPROVED BY A LOCAL AUTHORITY. 14. ON THE ISSUE ON WHAT IS A HOUSING PROJECT AND WHETHER COMMERCIAL AREA CAN BE CONSTRUCTED IN A HOUSING PROJECT AND IF SO CONSTRUCTED WHETHER THE ASSESSEE WOULD LOOSE EXEMPTION UNDER TH E LAW AS APPLICABLE HIRANANDANI AKRUTI JV 8 UPTO A.Y.04-05 HAS NOW BEEN SETTLED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF BRAMHA ASSOCIATES 122 TTJ 433 (SB) (PUNE). THE SPECIAL BENCH IN THE AFORESAID DECISION HAS LAID DOWN THE FOLLOWI NG PRINCIPLES IN THIS REGARD. (A) THE DEDUCTION UNDER SECTION 80 IB (10), AS APP LICABLE PRIOR TO 1ST APRIL 2005, SUBJECT TO AND IN THE LIGHT OF T HE OBSERVATIONS MADE IN THE PRECEDING PARAGRAPHS, IS ADMISSIBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOUSING UN ITS AND COMMERCIAL ESTABLISHMENTS. IN CASE THESE PROJECTS A RE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY, SUCH AN APPROVAL AS HOUSING PROJECT IS SUFFICIENT FOR THE PURPOSES OF E LIGIBILITY. IN ANY OTHER CASE, WHERE 90% OR MORE OF THE TOTAL BUILT UP AREA IS USED FOR DWELLING UNITS, IN ACCORDANCE WITH THE SCHEME O F SECTION 80 IB(10), THE BENEFIT OF DEDUCTION UNDER SECTION 80 I B(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT UP ARE A IS MORE THAN 10% BUT THE RESIDENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF SECTION 80 IB(10) ON STANDALONE BAS IS, I.E. (I) THE SIZE OF THE PLOT, EXCLUDING PORTION UNDER COMME RCIAL UNIT, IS MORE THAN MINIMUM AREA OF ONE ACRE, (II) RESIDENTIA L UNITS BUILT ON SUCH AREA MUST SATISFY CONDITION OF CLAUSE (C) O F THE PROVISION, AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED, AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELL ING UNITS CAN BE WORKED OUT ON STANDALONE BASIS, DEDUCTION UN DER SECTION 80 IB (10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDUCTION UNDER SECTION 80IB(10) IS AVAILAB LE IN RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE, AND, AS S UCH, IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJE CT TO THE RIDER THAT IN CASE COMMERCIAL USE OF BUILT UP AREA IN A P ROJECT IS MORE THAN 10% AND, FOR THIS REASON THE PROJECT CAN NOT B E SAID TO BE A PREDOMINANTLY HOUSING PROJECT, BUT, IN TERMS OF OBS ERVATIONS MADE IN PARAGRAPH 115 ABOVE, THE ASSESSEE IS ENTITL ED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNIT SEGMENT OF THE OVERALL PROJECT ON FULFILLMENT OF NECESSARY CONDITIONS, THE ENTITLEMENT OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS TO THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT UP AREA AS PRESCRIBED BY CLAUSE (D) OF SECTION 80 IB (10) HAS NO RETROSPE CTIVE APPLICATION, AND IT APPLIES ONLY W.E.F THE ASSESSME NT YEAR 2005- 06. HIRANANDANI AKRUTI JV 9 15. IN THIS APPEAL IF IT IS HELD THAT THE LAW AS IT EXISTED IN THE A.Y.04- 05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLU M REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPM ENT IS TO BE APPLIED EVEN THEN THE ASSESSEE TO CLAIM DEDUCTION U /S.80-IB(10) OF THE ACT HAS TO PASS THE TEST LAID DOWN BY THE SPECIAL B ENCH AS ABOVE. THE AO HELD THE LAW AS AMENDED BY THE FINANCE ACT, 2005 W.E.F. 1-4-2005 WHEREBY IT WAS LAID DOWN THAT THE BUILT UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PR OJECT SHOULD NOT BE MORE THAN 5% OF THE TOTAL BUILT UP ARE OF THE PROJE CT OR 2000 SQ.FT. WHICHEVER IS LESS WILL APPLY AND THEREFORE HE HAD N O OCCASION TO APPLY THE TEST AS LAID DOWN BY THE SPECIAL BENCH REFERRED TO ABOVE. WE WILL REVERT BACK TO THIS ISSUE LATER, IF NECESSARY, AFTER DECID ING THE MAIN ISSUE. 16. THE CONTENTION OF THE ASSESSEE BEFORE THE AO WA S (I) THAT THE CONDITIONS U/S. 80IB(10) REQUIRES TO BE TESTED AT THE TIME THE PROJECT WAS CONCEPTUALIZED AND IF THE COND ITIONS STOOD FULFILLED AT THE TIME OF COMMENCEMENT OF THE PROJEC T, THE CONDITIONS SHOULD BE TAKEN TO HAVE BEEN COMPLIED WI TH. IT IS WELL ACCEPTED PRINCIPLES OF JURISPRUDENCE THAT EACH LEGISLATION HAS TO BE REGARDED AS PROSPECTIVE IF IT AMENDS SUBS TANTIVE LAW. THE LEGISLATURE SHOULD CLEARLY SPECIFY ITS INTENTIO N TO APPLY THE LAW RETROSPECTIVELY IF IT IS LIKELY TO AFFECT THE V ESTED RIGHTS OF THE CITIZENS CREATED BY EARLIER LAW. THE SUBSTANTIVE LA W WHICH WAS IN FORCE ON THE DATE OF COMMENCEMENT OF THE PROJECT SHOULD CONTINUE TO APPLY MORE SO, WHEN IT IS BEYOND THE CO NTROL OF AN ASSESSEE TO ALTER HIS SITUATION TO SUIT THE NEW LAW . (II) THAT D.C. RULES PERMIT ANCILLARY USE IN PURE R ESIDENTIAL ZONE. FURTHER, CONVENIENCE SHOPPING IN RESIDENTIAL ZONES IS PERMITTED AND APPROVED IN A RESIDENTIAL PROJECT. CO NVENIENCE SHOPPING AREA IN THE HOUSING PROJECT IS ESSENTIAL F OR PROPER PROVISION OF BASIC NECESSITIES WITHIN THE HOUSING P ROJECT. FURTHER, MAHARASHTRA CHAMBER OF HOUSING INDUSTRY DA TED 1.1.2001 REFERRED TO THE HON'BLE FINANCE MINISTER F OR A CLARIFICATION AND THE REPLY OF THE CBDT DATED 4.5.2 001 OF MAHARASHTRA CHAMBER OF HOUSING INDUSTRY IN WHICH TH E CBDT HAS STATED THAT REGARDING THE DEFINITION OF HOUSING PROJECT, IT IS CLARIFIED THAT ANY PROJECT WHICH IS APPROVED BY A L OCAL AUTHORITY AS A HOUSING PROJECT, SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF SECTION 80IB(10). FROM THE ABOVE, IT IS AMPLY CLEARLY THAT THE SHOPS WHICH ARE LOCATED IN HOUSING PROJECT ARE HIRANANDANI AKRUTI JV 10 CONVENIENCE SHOPPING AND NOT COMMERCIAL ESTABLISHME NTS. THE PROVISIONS OF SECTION 80IB(10) WERE INTRODUCED TO PROMOTE HOUSING IN THE COUNTRY. THE HOUSING PROJECT HAS TO PROVIDE IN A PLANNED MANNER FACILITIES NEEDED IN A MODERN DEVELO PING SOCIETY FOR THE CONVENIENCE OF ITS RESIDENTS AND TH ESE HOUSING PROJECTS MAY CONTAIN CONVENIENCE SHOPS ETC. AS ITS INTEGRAL PART. THE INCENTIVE PROVISION OF LAW SHOULD BE GIVE N A LIBERAL INTERPRETATION. 17. THE AO HOWEVER HELD THAT THE LAW AS IT EXISTS I N THE AY 06-07 IN WHICH AY THE DEDUCTION IS CLAIMED BY THE ASSESSEE A ND NOT THE LAW(AS CONTENDED BY THE ASSESSEE) AS IT EXISTED WHEN THE A SSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED I.E., THE LA W AS IT EXISTED DURING AY 04-05. THE AO THEREAFTER SET OUT THE PARAMETERS THAT WERE NEEDED TO BE SATISFIED BY THE ASSESSEE AS PER THE LAW AS IT E XISTED FOR AY 06-07 AND AS TO HOW THE ASSESSEE FAILED TO FULFILL ONE OF THE CONDITIONS IN THE FORM OF A CHART WHICH IS AS FOLLOWS: S. N O. PARAMETERS CONDITIONS AS PER SECTION 80IB(10) FACTS IN THE CASE OF THE ASSESSEE 1 DATE OF APPROVAL SHOULD BE BEFORE 31.3.2007 APPROVED ON 10.9.2003 2 DATE OF COMMENCEMENT SHOULD HAVE COMMENCED AFTER 1.10.1998 COMMENCED IN DECEMBER 2003 3 DATE OF COMPLETION SHOULD BE COMPLETED BY 31.3.2008 OR FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH APPROVAL WAS GIVEN, IF THE SAME WAS GIVEN AFTER 31.3.2004. COMPLETED ON 21.12.2005 4 EVIDENCE OF COMPLETION FULL OCCUPATION CERTIFICATE ISSUED BY LOCAL AUTHORITY FULL OCCUPATION CERTIFICATE RECEIVED BY THE ASSESSEE ON 21.12.2005 5 SIZE OF PLOT 1 ACRE 46,881.01 SQ.MTS. I.E. AROUND 10 ACRES 6 SIZE OF EACH UNIT 1000 SQ.FT. IF LOCATED IN METROS AND 1500 EACH RESIDENTIAL TENEMENT IS OF 225 HIRANANDANI AKRUTI JV 11 SQ.FT. ELSEWHERE SQ.FT. 7 SIZE OF COMMERCIAL SPACE 5% OF THE TOTAL BUILT UP AREA OR 2000 SQ.FT. WHICHEVER IS LESS MORE THAN 1 LAKH SQ.FT. 8 WHETHER NOTIFIED BY BOARD OR NOT SLUM REHABILITATION SCHEMES NOTIFIED BY THE BOARD ARE EXEMPTED OF THE CONDITIONS OF COMPLETION AND SIZE OF PLOT. NOT NOTIFIED BY THE BOARD. 18. ON THE ISSUE THAT CONVENIENCE SHOPPING IS PERMI TTED IN RESIDENTIAL ZONES AS PER THE DEVELOPMENT CONTROL RULES AND THER EFORE ON THAT COUNT THE PROJECT SHOULD NOT BE CONSIDERED AS HAVING COMM ERCIAL SPACE, THE AO HELD THAT PURPOSE OF DEVELOPMENT CONTROL RULES IS F OR PLANNED DEVELOPMENT AND WHEN IT COMES TO ALLOWING DEDUCTION UNDER INCOME TAX ACT, THE PROVISIONS LAID DOWN IN SEC.80-IB(10) ALON E ARE RELEVANT AND THOSE PROVISIONS DO NOT REFER TO COMMERCIAL AREA OT HER THAN CONVENIENCE SHOPPING IN RESIDENTIAL PROJECTS AND THEREFORE THE ARGUMENT OF THE ASSESSEE ON THIS ASPECT WAS REJECTED BY THE AO. ON THE CBDT CIRCULAR REFERRED BY THE ASSESSEE, THE AO HELD THAT CBDT CIR CULAR WAS IN THE CONTEXT OF THE LAW AS IT STOOD PRIOR TO 1-4-05 AND WITH THE INTRODUCTION OF CLAUSE (D) TO SEC.80-IB(10) W.E.F.1-4-05, THE CLARI FICATION BECOMES REDUNDANT BECAUSE THE AMENDMENT CLARIFIES THE POSIT ION ON COMMERCIAL SPACE. 19. THE ASSESSEE HAD RELIED ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF SAROJ SALES ORGANIZATION VS. ITO 115 TTJ 48 5 (MUM) AND THE DECISION OF CHENNAI BENCH IN THE CASE OF ARUN EXCEL LO FOUNDATIONS (P) LTD. VS. ACIT 108 TTJ 71. THE CASE OF SAROJ SALES ORGANIZATION (SUPRA) WAS A CASE OF A BUILDER WHERE THERE WERE TWO PROJEC TS BEING CONSTRUCTED BY NAME NISARG AND BREEZY CORNER. FOR AY 05-06, TH E ASSESSEE CLAIMED DEDUCTION U/S.80-IB(10) OF THE ACT ON THE PROFITS O F NISARG PROJECT. THE AO TREATED BOTH THE PROJECTS AS ONE PROJECT AND FOU ND THAT IN THE PROJECT BREEZY CORNER THE BUILT UP AREA OF SOME OF FLATS WE RE MORE THAN 1000 SQ.FT. AND HE THEREFORE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.80-IB(10) OF THE ACT. THE SECOND REA SON GIVEN BY THE AO WAS THAT SHOPPING AREA OF NISARG PROJECT WAS 7.60% OF THE BUILT UP AREA OF NISARG PROJECT. THE AO RELIED ON THE AMENDMENT TO SEC.80-IB(10) W.E.F. 1-4-05 WHEREBY CLAUSE (D) TO SECTION 80IB(10 ) OF THE ACT WAS HIRANANDANI AKRUTI JV 12 INTRODUCED AND IT WAS LAID DOWN THEREIN THAT THE B UILT UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PERCENT OF THE AGGREGATE BUI LT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FT., WHICHEVER IS LESS AND REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION. THE TRIBUNAL ON THE SECOND ISSUE HELD THAT THE HOUSING PROJECT NISARG WAS APPROVED BEFORE 31 ST MARCH, 2005 AND WHEN APPROVAL WAS OBTAINED THERE WAS NO STIPULA TION AS TO THE SHOPPING COMPLEX AREA(COMMERCIAL SPACE) PERMISSIBLE IN THE PROJECT. THE AMENDMENT WERE SUBSEQUENTLY MADE WHILE EXTENDIN G THE DEDUCTION OF INCOME FROM HOUSING PROJECT APPROVED UPTO 31 ST MARCH, 2007 AND THEREFORE ON THIS GROUND DEDUCTION U/S.80-IB(10) CA NNOT BE DENIED TO THE ASSESSEE. THE CASE OF ARUN EXCELLO(SUPRA) RELATES TO AY 04-05 AND THEREFORE MAY NOT BE MATERIAL FOR THE PRESENT CASE. THE AO HOWEVER HELD THAT THE CASE OF SAROJ SALES ORGANISATION (SUPRA) W AS A CASE WHERE THE DISPUTE WAS WITH REGARD TO WHETHER IT WAS SINGLE PR OJECT OR TWO DIFFERENT PROJECTS AND WAS THEREFORE DISTINGUISHABLE. FOR TH E ABOVE REASONS THE AO DENIED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U /S.80-IB(10) OF THE ACT. THE CIT(A) CONFIRMED THE ORDER OF THE AO HENC E THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. THE CIT(A) ADD ED ONE MORE DIMENSION TO THE CASE OF THE AO BY OBSERVING THAT T HE HONBLE SPECIAL BENCH OF ITAT PUNE IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) HAS HELD THAT THE TAX INCENTIVE PROVISION BY WAY OF DEDUCTIO N U/S.80-IB(10) OF THE ACT IS TO ENABLE AUGMENTING AFFORDABLE DWELLING UNI TS. SINCE THE PROJECT OF THE ASSESSEE WAS FOR REHABILITATION IT COULD IT WOULD INVOLVE REHABILITATION OF PROJECT AFFECTED PERSONS WHO WOUL D ALSO INCLUDE THOSE RUNNING EVEN COMMERCIAL ESTABLISHMENTS. THE CIT(A) THEREFORE HELD THAT THE PROJECT IN QUESTION WAS NOT A HOUSING PROJECT A T ALL. 20. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE AS WAS TAKEN BEFORE THE REVENUE AUTHORITIE S. STRONG RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE ITAT MUMBA I IN THE CASE OF SAROJ SALES ORGANIZATION (SUPRA) AND TWO OTHER DECI SIONS OF MUMBAI HIRANANDANI AKRUTI JV 13 BENCH OF ITAT IN THE CASE OF ITO VS. M/S. PATHARE & ASSOCIATES ITA 993/MUM/2009 ORDER DATED 17/12/2009 FOR AY 05-06 AN D ITO VS. M/S.H.D. ENTERPRISES ITA NO.5712/MUM/2008 ORDER DAT ED 6/8/2009 FOR AY05-06 FOLLOWING THE DECISION IN THE CASE OF S AROJ SALES ORGANIZATION (SUPRA) ON IDENTICAL FACTS. IT WAS SUBMITTED THAT IN THE ALTERNATIVE IF IT IS HELD THAT THE AMENDED PROVISIONS OF SEC.80-IB(10) B Y THE FINANCE ACT, 2004 W.E.F. 1.4.2005 BY WHICH CLAUSE (D) TO SECTION 80IB(10) WAS INTRODUCED EVEN THEN THE ASSESSEE WOULD BE ENTITLED TO PROPORTIONATE DEDUCTION ON THE RESIDENTIAL PORTION OF THE PROJECT ON THE PRINCIPLE LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF BRAHMA ASS OCIATES (SUPRA). HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. SHAH SADIQ AND SONS 166 ITR 102 (SC) FOR THE PROPOSITION THAT ACCRUED RIGHTS ARE SAVED UNLESS THEY ARE EXPRESSLY TAKEN BY A REPEALING STATUTE EITHER EXPRESSLY OR BY IMPLICATION. 21. THE LEARNED D.R. SUBMITTED THAT THE LEGISLATURE IN ITS WISDOM HAD THOUGHT IT FIT TO INTRODUCE A CONDITION FOR ALLOWIN G DEDUCTION U/S.80- IB(10) W.E.F. 1-4-2005 AND THEREFORE THE LAW INCLUD ING CLAUSE (D) OF SEC. 80-IB(10) HAS TO BE APPLIED BY THE AO WHILE MAKING ASSESSMENT FROM A.Y.05-06 TILL THE LAW REMAINS THE SAME. IT WAS HI S ARGUMENT THAT THE AMENDED PROVISIONS REFER TO ALL PROJECTS APPROVED B EFORE 31.3.2007 AND DOES NOT DIFFERENTIATE BETWEEN HOUSING PROJECT APPR OVED BEFORE 2004 OR 2003. HE DREW OUR ATTENTION TO CLAUSE(A) OF SEC.80 -IB(10) AND SUBMITTED THAT THE LEGISLATURE HAS CONSCIOUSLY MADE A DISTINC TION BETWEEN PROJECTS APPROVED UPTO A PARTICULAR DATE AND PRESCRIBED DIFF ERENT TIME LIMITS FOR THEIR COMPLETION. IT WAS HIS SUBMISSION THAT HAD T HE LEGISLATURE WANTED TO MAKE A DISTINCTION BETWEEN PROJECTS COMMENCED PR IOR TO 1-4-2005 AND COMPLETED AFTER THE AMENDMENT BY INTRODUCING CLAUSE (D) TO SEC.80IB(10) THEN THE LEGISLATURE WOULD HAVE SAID SO IN CLEAR TE RMS. ABSENCE OF SUCH CLEAR DISTINCTION IN THE AMENDED PROVISIONS CAN ONL Y LEAD TO AN INFERENCE THAT THE RESTRICTION REGARDING COMMERCIAL AREA IN A HOUSING PROJECT IS APPLICABLE TO ALL PROJECTS IRRESPECTIVE OF THE DATE ON WHICH THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY ON AND FROM 1-4-200 5. HIS FURTHER HIRANANDANI AKRUTI JV 14 SUBMISSION WAS THAT THE PLEA OF HARDSHIP CANNOT BE ACCEPTED IN THE LIGHT OF THE CLEAR LANGUAGE USED IN THE AMENDED PROVISION S. IT HAS TO BE PRESUMED THAT THE LEGISLATURE WAS FULLY CONSCIOUS O F THE POSSIBLE HARDSHIP, SUCH AS THE ONE IN THE CASE OF THE ASSESS EE, AND IN ITS WISDOM HAD THOUGHT IT FIT TO AMEND THE LAW. HIS FURTHER S UBMISSION WAS THAT OMISSION IN A STATUTE CANNOT BE SUPPLEMENTED THROUG H INTERPRETATION. A CAUSUS OMISSUS CANNOT BE SUPPLIED BY THE COURT EXCE PT IN THE CASE OF A CLEAR NECESSITY AND WHEN REASONS FOR DOING SO IS FO UND WITHIN THE FOUR CORNERS OF THE STATUTE ITSELF. HE RELIED ON THE FO LLOWING DECISIONS IN SUPPORT OF THE ABOVE STAND. CIT VS. K.S.VAIDYANATH AN 153 ITR 11 (MAD)(FB) AND CST VS. PARSON TOOLS & PLANTS 35 STC 413 (SC). RELYING ON THE DECISION OF THE KINGS BENCH IN THE CASE OF C APE BRANDY SYNDICATE VS. IRC 1921 1 KB 64, IT WAS SUBMITTED BY HIM THAT IN CONSTRUCTION OF FISCAL STATUTE ONE HAS TO LOOK AT WHAT IS CLEARLY S AID AND THERE IS NO ROOM FOR INTENDMENT. IT WAS ARGUED BY HIM THAT THERE IS NO EQUITY ABOUT A TAX AND NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE R EAD IN, NOTHING IS TO BE IMPLIED. ONE CAN LOOK FAIRLY AT THE LANGUAGE US ED. RELIANCE WAS ALSO PLACED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF ORISSA & RAJASTHAN STATE WAREHOUSING CORPORATION VS. CIT JT. 1992(2) SCC 527 AND KESHAVJI RAVIJI & CO. VS. CIT 82 CTR 123 (SC) F OR THE PROPOSITION THAT EXEMPTION PROVISIONS ARE AN EXCEPTION TO THE G ENERAL RULE AND THEREFORE SHOULD NOT BE READ WITH ANY LATITUDE TO T HE TAXPAYER OR EVEN WITH A WIDER CONNATION. ACCORDING TO HIM THE QUEST ION OF INTERPRETATION WOULD ARISE WHEN THE WORDS OF A STATUTE ARE AMBIGUO US. ACCORDING TO HIM IN THE GARB OF LIBERAL INTERPRETATION NO VIOLEN CE CAN BE DONE TO THE LANGUAGE OF THE PROVISIONS. HIS FURTHER SUBMISSION WAS THAT THERE CANNOT BE ANY PRINCIPLE OF PROMISSORY ESTOPPEL OR H ARDSHIP WHEN THE INTENTION OF THE LEGISLATURE IS VERY CLEAR AND THIS REGARD RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF BOMBAY CONDUCTORS & ELECTRICALS LTD. 145 ITR 272 (DEL) AND GLAXO LAB 18 ITD 226 (SB)(MUM). IT WAS SUBMITTED BY HIM THAT IN ANY CASE THE DECISION OF THE TRIBUNAL MUMBAI IN THE CASE OF SAROJ SALES ORGA NIZATION (SUPRA) REQUIRES RECONSIDERATION BY A SPECIAL BENCH IN VIEW OF THE ABOVE HIRANANDANI AKRUTI JV 15 SUBMISSIONS. IT WAS LASTLY SUBMITTED BY HIM THAT T HE DECISION IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) DEALT WITH THE LA W AS IT EXISTED PRIOR TO 1-4-2005 AND THEREFORE NOT RELEVANT FOR THE PURP OSE OF RENDERING DECISION IN THE PRESENT APPEAL. 22. WE HAVE VERY CAREFULLY CONSIDERED THE RIVAL CON TENTIONS. WE SHALL AT THE OUTSET DISPEL ANY DOUBTS THAT MAY EXIST ON T HE QUESTION WHETHER THE PROJECT UNDERTAKEN BY THE ASSESSEE CAN BE SAID TO BE HOUSING PROJECT. WE HAVE ALREADY NOTICED THAT THE ASSESSEE CARRIED OUT A SLUM REHABILITATION PROPOSAL. IT WAS A PROPOSAL TO CONS TRUCT ABOUT 3840 OR MORE TENEMENTS EACH COMPRISING OF 225 SQ.FT. CARPET AREA TO REHABILITATE PROJECT AFFECTED PERSONS/SLUM DWELLERS BY PROVIDING BESIDES HOUSING, BALWADI, WELFARE CENTRE AND SOCIETY OFFICE. THE PR OVISIONS OF SEC.80- IB(10) DOES NOT DEFINE AS TO WHAT IS A HOUSING PROJ ECT. THE CBDT HAS IN ITS CLARIFICATION DATED 4.5.01 TO THE MAHARASTRA CH AMBER OF HOUSING INDUSTRY HAS CLARIFIED THAT ANY PROJECT WHICH IS AP PROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT, SHOULD BE CONSIDERE D ADEQUATE FOR THE PURPOSE OF SEC.80-IB(10) OF THE ACT. THE FACT THAT THE SLUM REHABILITATION PROPOSAL OF THE ASSESSEE DOES NOT RE FER THAT IT IS A HOUSING PROJECT CANNOT LEAD TO ANY CONCLUSION THAT THE PROJ ECT UNDERTAKEN BY THE ASSESSEE IS NOT A HOUSING PROJECT. THE PROVISIONS OF SEC.80-IB(10) ARE AIMED AT PROMOTING CONSTRUCTION OF HOUSING PROJECTS SO AS TO ADDRESS THE PROBLEM OF SHORTAGE OF DWELLING UNITS. THE PREDOMIN ANT OBJECT BEHIND THESE PROVISIONS ARE TO ENCOURAGE BETTER AVAILABILI TY OF DWELLING UNITS FOR LOW AND MIDDLE CLASS SEGMENTS OF THE SOCIETY. SLUM REHABILITATION SCHEMES AS EXPLAINED EARLIER INVOLVES PROVIDING ALT ERNATE ACCOMMODATION TO SLUM DWELLERS, WHO ARE DISPLACED FROM THEIR EXIS TING PLACE. THIS NECESSARY INVOLVES PROVIDING RESIDENTIAL ACCOMMODAT ION TO THEM. WE HAVE ALSO SEEN THAT THE APPROVAL WAS GRANTED TO REH ABILITATE 3840 FAMILIES. IT CAN BY NO STRETCH OF IMAGINATION BE S AID THAT THE PROJECT UNDERTAKEN BY THE ASSESSEE WAS NOT A HOUSING PROJEC T AT ALL. THE FACT THAT A HOUSING PROJECT HAS COMMERCIAL SPACE IN IT I S NOT SUFFICIENT TO CONCLUDE THAT IT IS NOT A HOUSING PROJECT. THE FAC T THAT THE PROVISIONS OF HIRANANDANI AKRUTI JV 16 SEC.80-IB(10) ITSELF LAYS DOWN THAT THERE CAN BE CO MMERCIAL SPACE UPTO 2000 SQ.FT. IN A HOUSING PROJECT IS SUFFICIENT INDI CATION THAT A HOUSING PROJECT MEANS A PROJECT WHICH PROVIDES A PLACE FOR DWELLING. THE SLUM REHABILITATION SCHEME DEFINITELY PROVIDES DWELLING PLACE FOR SLUM DWELLERS WHO ARE DISPLACED FROM THEIR EXISTING PLAC E OF LIVING. THEREFORE THEY HAVE TO BE TREATED AS HOUSING PROJECT. THE PR OVISIONS OF SEC.80- IB(10) AS APPLICABLE W.E.F. 1-4-2005 RECOGNISES THE FACT THAT SLUM REHABILITATION SCHEMES ARE HOUSING PROJECTS. A PRO VISO BELOW SEC. 80- IB(1)(A) WAS INSERTED BY THE FINANCE ACT, 2004 W.E. F. 1-4-2005 WHICH READS AS FOLLOWS: PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( A ) OR CLAUSE ( B ) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDAN CE 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; 23. IT IS CLEAR FROM THE AFORESAID PROVISO THAT IF A SLUM REHABILITATION IS CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY C ENTRAL OR STATE GOVERNMENT AND IS FURTHER NOTIFIED BY THE BOARD THE N THE CONDITION REGARDING APPROVAL BY THE LOCAL AUTHORITY AS A HOUS ING PROJECT BEFORE A PARTICULAR TIME AND THE AREA OF LAND BEING ABOVE 1 ACRE NEED NOT BE COMPLIED WITH TO GET DEDUCTION U/S.80-IB(10). THUS THE LEGISLATURE HAS RECOGNIZED THAT SLUM REHABILITATION IS ALSO A HOUSI NG PROJECT. 24. NOW WE WILL DEAL WITH MAIN ISSUE IN THIS APPEAL I.E.,WHETHER THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSE E SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED OR THE LAW A S AMENDED BY THE FINANCE ACT, 2005 W.E.F. 1-4-2005 WHEREBY IT WAS LA ID DOWN THAT THE BUILT UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISH MENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT BE MORE THAN 5% OF THE T OTAL BUILT UP ARE OF THE PROJECT OR 2000 SQ.FT.WHICHEVER IS LESS IS TO B E APPLIED? ON THE HIRANANDANI AKRUTI JV 17 ABOVE ISSUE WE HAVE ALREADY NOTICED THAT CO-ORDINAT E BENCHES OF ITAT HAVE ALREADY EXPRESSED OPINION. THE DECISION IN TH E CASE OF SAROJ SALES ORGANIZATION (SUPRA) IS DIRECTLY ON THE ISSUE. JUDI CIAL DISCIPLINE DEMANDS THAT WE SHOULD FOLLOW DECISION OF A CO-ORDINATE BEN CH ON IDENTICAL FACTS. 25. THE PROVISIONS OF SEC.80-IB(10) AS IT STOOD AT DIFF ERENT PERIODS HAVE ALREADY BEEN GIVEN BY US. AN ANALYSIS OF THE SAME SHOWS THE FOLLOWING CONDITIONS WERE REQUIRED TO BE SATISFIED AT VARIOUS POINT OF TIME: A.Y. CONDITIONS 2000-01 A) HOUSING PROJECT TO BE APPROVED BY LOCAL AUTHORITY B) PROJECT TO COMMENCE ON OR AFTER 1-10-98 C) PROJECT WAS TO BE COMPLETED BEFORE 31.3.2001 D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. 2001-02 A) HOUSING PROJECT TO BE APPROVED BY LOCAL AUTHORITY B) PROJECT TO COMMENCE ON OR AFTER 1-10-98 C) PROJECT WAS TO BE COMPLETED BEFORE 31.3.2003 D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY 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; 2002-03 A)HOUSING PROJECT TO BE APPROVED BY LOCAL AUTHORITY B)PROJECT TO BE APPROVED BY LOCAL AUTHORITY BEFORE 31.3.2001 C) PROJECT WAS TO COMMENCE ON OR AFTER 1-10-98 D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN HIRANANDANI AKRUTI JV 18 TWENTY-FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; 2003-04 & 2004-05 A) HOUSING PROJECT TO BE APPROVED BY LOCAL AUTHORITY B) PROJECT TO BE APPROVED BY LOCAL AUTHORITY BEFORE 31.3.2005 C) PROJECT WAS TO COMMENCE ON OR AFTER 1-10-98 D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY 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; 2005-06: A) HOUSING PROJECT TO BE APPROVED BY LOCAL AUTHORITY B) PROJECT TO BE APPROVED BEFORE 31.3.2007 C) PROJECT WAS TO COMMENCE ON OR AFTER 1-10-98 D) THE PROJECT WAS TO BE COMPLETED BEFORE 31.3.2008, IF THE APPROVAL WAS GIVEN BY A LOCAL AUTHORITY BEFORE 1- 4-2004 AND WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE APPROVAL CAME WHERE THE APPROVAL WAS GIVEN ON OR AFTER 1-4-2004. E) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. F) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY 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; G) THE BUILT UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT BE MORE THAN 5% OF THE TOTAL BUILT UP ARE OF THE PROJECT OR 2000 SQ.FT.WHICHEVER IS LESS IT IS NOTICED THAT THE PROVISIONS AS IT STOOD AT DI FFERENT POINT OF TIME UNIFORMLY CONTEMPLATES APPROVAL BY LOCAL AUTHORITY. FROM A.Y. 02-03 HIRANANDANI AKRUTI JV 19 TIME OF APPROVAL BY THE LOCAL AUTHORITY ASSUMED IMP ORTANCE. COMMENCEMENT OF PROJECT IS NOT OF ANY IMPORTANCE BE CAUSE IT DATES BACK TO 1-10-98 THE STARTING POINT WHEN THE INCENTIVE PR OVISION PROVIDING FOR DEDUCTION OF PROFITS FROM HOUSING PROJECTS WERE INT RODUCED. UP TO A.Y.04-05 THE PROVISION DID NOT IMPOSE ANY PERIOD W ITHIN WHICH THE PROJECT HAS TO BE COMPLETED, EXCEPT IN AY 00-01 & 0 1-02. IN AY 01-02 THE CONDITION WAS THAT THE PROJECT SHOULD BE COMPLE TED BEFORE 31.3.2003. FROM AY 05-06 THE TIME WITHIN WHICH THE PROJECT HAS TO BE COMPLETED HAS BEEN GIVEN IMPORTANCE. 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FOR TH ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OB TAINS APPROVAL OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN T HE PREVIOUS YEAR RELEVANT TO AY 02-03. AS PER THE LAW AS IT STOOD I N THE PREVIOUS YEAR RELEVANT TO AY 02-03 UPTO 04-05, THERE WAS NO TIME LIMIT WITHIN WHICH THE CONSTRUCTION HAS TO BE COMPLETED OR ANY RESTRIC TION REGARDING COMMERCIAL AREA THAT CAN BE BUILT IN A HOUSING PROJ ECT. LET US ASSUME THAT THE ASSESSEE COMPLIES WITH ALL THE CONDITIONS FOR ALLOWING RELIEF U/S.80-IB(10) I.E., IT IS APPROVED AS A HOUSING PRO JECT BY THE LOCAL AUTHORITY BUT THE AREA OF COMMERCIAL SPACE AS APPRO VED BY THE LOCAL AUTHORITY IS MORE THAN 2000 SQ.FT. THE ASSESSEE CO MMENCES THE PROJECT BUT IS ABLE TO COMPLETE ONLY IN THE PREVIOUS YEAR R ELEVANT TO AY 05-06. AS PER THE CHANGE IN LAW FROM AY 05-06 WITH REGARD TO THE AREA OF COMMERCIAL SPACE IN A HOUSING PROJECT THE ASSESSEE WOULD LOOSE HIS ELIGIBILITY TO CLAIM DEDUCTION. IN SUCH CASES THER E IS DEFINITELY GRAVE HARDSHIP TO THE ASSESSEE. THE INTERPRETATION SOUGH T TO BE CANVASSED BY THE LEARNED D.R. WILL ALSO LEAD TO ABSURD SITUATION . LET US ASSUME AN ASSESSEE OBTAINS APPROVAL OF A HOUSING PROJECT PRIO R TO 1-4-2005 SAY IN PREVIOUS YEAR RELEVANT TO AY 02-03. HE BUILDS COMM ERCIAL SPACE IN EXCESS OF 2000 SQ.FT. IN THE HOUSING PROJECT. HE F OLLOWS PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND OFFERS PROFITS IN AY 02-03 TO 04-05, CLAIMS EXEMPTION U/S.80-IB(10) AND IS ALLOWED EXEMP TION. ON THE SAME PROJECT IN AY 05-06, THE ASSESSEE WOULD NOT GET THE BENEFIT OF SEC.80- HIRANANDANI AKRUTI JV 20 IB(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIE W DIFFERENT FROM THE ONE TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANIZATION (SUPRA). 27. WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING A NY WORDS TO THE STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EXI STED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM R EHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACC ORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPM ENT IS TO BE APPLIED. THEREFORE THE SUBMISSIONS OF THE LEARNED D.R. IN THIS REGARD CANNOT BE ACCEPTED. WE ARE OF THE VIEW THAT THE LE GISLATURE WOULD NOT HAVE INTENDED TO TAKE AWAY A VESTED RIGHT WITHOUT C LEAR WORDS TO THAT EFFECT IN THE PROVISIONS OF SEC.80-IB(10) AS AMENDE D BY THE FINANCE ACT, 2005, W.E.F. 1-4-2005. WE THEREFORE HOLD FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) THAT THE L AW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMEN CED DEVELOPMENT IS TO BE APPLIED. 28. WE HAVE ALREADY HELD THAT ON THE ISSUE ON WHAT IS A HOUSING PROJECT AND WHETHER COMMERCIAL AREA CAN BE CONSTRUCTED IN A HOUSING PROJECT AND IF SO CONSTRUCTED WHETHER THE ASSESSEE WOULD LO OSE EXEMPTION UNDER THE LAW AS APPLICABLE UPTO A.Y.04-05 HAS BEEN SETTL ED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF BRAMHA ASSOCIATES 122 TTJ 433 (SB) (PUNE). THE AO HELD THE LAW AS AMENDED BY THE FINANCE ACT, 2005 W.E.F. 1-4- 2005 WHEREBY IT WAS LAID DOWN THAT THE BUILT UP ARE A OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PR OJECT SHOULD NOT BE MORE THAN 5% OF THE TOTAL BUILT UP ARE OF THE PROJE CT OR 2000 SQ.FT. WHICHEVER IS LESS WILL APPLY AND THEREFORE HE HAD N O OCCASION TO APPLY THE TEST AS LAID DOWN BY THE SPECIAL BENCH REFERRED TO ABOVE. SINCE WE HAVE HELD THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WH EN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR HIRANANDANI AKRUTI JV 21 CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11. 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED, TH E ASSESSEE TO CLAIM DEDUCTION U/S.80-IB(10) OF THE ACT HAS TO PASS THE TEST LAID DOWN BY THE SPECIAL BENCH AS ABOVE. WE THEREFORE SET ASIDE THE ORDER THE CIT(A) AND REMAND THE ISSUE TO THE AO FOR THE LIMITED PURPOSE OF SATISFYING HIMSELF AS TO WHETHER THE ASSESSEE WOULD BE ENTITLED TO DED UCTION ON THE PROFITS DERIVED ON DEVELOPING AND BUILDING HOUSING PROJECTS AS PER THE RATIO LAID DOWN BY THE SPECIAL BENCH REFERRED TO ABOVE, WHILE COMPUTING TOTAL INCOME AND IF SO TO WHAT EXTENT. FOR STATISTICAL PU RPOSES, THE APPEAL IS TREATED AS ALLOWED. 29. IN THE RESULT, APPEAL BY THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BEEN PRONOUNCED ON 30 TH DAY OF MARCH, 2010. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 30 TH MARCH, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS