ASST CIT CIR 2, THANE V. GIRDHARILAL K. LULLA, ULHASNAGAR

ITA 6996/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75596 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K PANDA
• Assessee Lawyers: SUNIL TALREJA
• Keywords: Retrospective amendment
• Section: 80IB

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - G BENCH. , ! ! ! ! '# '# '# '# , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & AMIT SHUK LA,JUDICIAL MEMBER /. ITA NO.6996/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR-2009-10 ACIT CIR-2, 2 ND FLOOR, MOHAN PLAZA, WAYLE NAGAR, KHADAKPADA, KALYAN (W), DISTRICT- THANE, KALYAN. VS GIRDHARILAL K. LULLA, PROP. M/S. SHREE GANESH BUILDERS & M/S. OSHO DHARA DEVELOPERS, SHOP NO.1, LADSON APARTMENTS, GOL MAIDAN, ULHASNAGAR-400001 PAN: AAJPL760 7D ( &' / APPELLANT) ( ()&' / RESPONDENT) * + / REVENUE BY : SHRI B.P.K.PANDA $,! $,! $,! $,! + + + + / ASSESSEE BY : SHRI SUNIL TALREJA $ $ $ $ * ** * !- !- !- !- / DATE OF HEARING : 30-01-2014 ./% * !- / DATE OF PRONOUNCEMENT : 19-02-2014 $ $ $ $ , 1961 * ** * 254 )1( !0! !0! !0! !0! ' ' ' ' ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM $ $ $ $ : CHALLENGING THE ORDER DT.14.08.2012 OF THE CIT(A)-I I,THANE,ASSESSING OFFICER(AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80IB(10), D ESPITE THE FACT THAT TOTAL BUILT UP AREA OF THE SHO PS IS 11,854 SQ. FT. WHICH EXCEEDS PRESCRIBED LIMIT OF 5% OF TOTAL BUILT UP AREA OR 2000 SQ. FT. WHICHEVER IS LESS AS AMENDED BY FINANCE (NO 2) ACT , 2004.THE CIT(A) ERRED IN RELYING ON THE HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF C IT VS BRAHMA ASSOCIATES, (2011) 333 ITR 289 (BOM) AGAINST WHICH THE DEPARTMENT HAS FILED SLP BE FORE HONBLE SUPREME COURT WHICH IS PENDING FOR DISPOSAL AS ON DATE. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE CIT(A), ERRED IN UPHOLDING THAT SUBSTITUTED PROVISIONS OF SECTION 80IB(10)BY FINANC E ACT(NO.2),2004 ARE APPLICABLE PROSPECTIVELY AND NOT RETROSPECTIVELY. 3.THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A)-II,THANE, BE CANCELLED AND THAT OF THE A.O. BE RESTORED. 4.THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 5.THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE GROUNDS ON OR BEFORE THE FINAL DATE OF HEARING. THOUGH THERE ARE FIVE GROUNDS OF APPEAL BUT EFFECTI VE GROUND IS ONLY ONE,AND IT PERTAINS TO DEDUCTION U/S.80IB(10) OF THE ACT. 2. ASSESSEE,AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF B UILDING CONSTRUCTION AND DEVELOPMENT,FILED HIS RETURN OF INCOME ON 30.09.2009.AO FINALISED THE ASSESSMENT ON 28.12.2011,DETERMINING HIS 2 ITA NO. 6996/MUM/2012 GIRDHARILAL K. LULLA. INCOME AT RS.32,40,800/-.DURING THE ASSESSMENT PROC EEDINGS AO FOUND THAT THE ASSESSEE HAD CONSTRUCTED A HOUSING-CUM-COMMERCIAL PROJECT,CALLED SHREE GANESH PLAZA II(SGP),THAT HE HAD CLAIMED DEDUCTION OF PROFITS AMOUNTING TO RS.12,95, 179/-ULS.80IB(10) OF THE ACT.HE CALLED FOR DETAILS FROM THE ASSESSEE AND AFTER CONSIDERING THE SAME,HE HELD THAT THE ASSESSEE HAD CONSTRUCTED COMMERCIAL AREA MORE THAN 2000 SQ. FEET, WHICH WAS IN EXCESS OF THE PRESCRIBED LIMIT AS PER THE CONDITIONS LAID DOWN IN THE SECTION 80IB(10)(D) OF THE ACT.HE FURTHER HELD THAT THE CLAIM OF THE ASSESEEE FOR COMMERCIAL COMPONENT WAS ALLOWED BY TH E FIRST APPELLATE AUTHORITY FOR THE AYS. 2006-07,2007-08 & 2008-09 WHICH HAD NOT BEEN ACCEPT ED BY THE DEPARTMENT AND THE MATTER WAS UNDER APPEAL BEFORE THE ITAT,THAT THE DECISION IN T HE CASE OF BRAHMA ASSOCIATES WAS CONTESTED BEFORE THE HIGH COURT OF BOMBAY,THAT THE ISSUE INVO LVED WAS THE SAME AND TO KEEP THE MATTER ALIVE,THAT THE DEDUCTION AMOUNTING TO RS.12,95,179/ - MADE U/S.80IB(10)OF THE ACT HAD TO BE DISALLOWED. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION WERE IDENTICAL ON VARIOUS ISSUES TO THE FACTS OF AYS.2006-07,2007-08 AND 2008-09.DURING THE COURSE O F APPELLANT PROCEEDINGS ASSESSEE ALSO PLACED ON RECORD THE ITAT DECISION IN FOR THE A.Y. 2007-08 IN ITS OWN CASE,DECIDING THE ISSUE OF COMMERCIAL COMPONENT IN THE HOUSING PROJECT IN QUES TION,IN FAVOUR OF THE ASSESSEE.FAA REFERRED TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF BRAHMA ASSOCIATES (333 ITR 289)WHEREIN IT WAS HELD THAT THE DEDUCTION U/S. 80I B(10) WAS ADMISSIBLE IN A CASE OF HOUSING PROJECT COMPRISING OF COMMERCIAL AREA AS PERMITTED UNDER THE RULES OF THE LOCAL AUTHORITY.HE HELD THAT THE COMMERCIAL COMPONENT OF THE APPELLANTS HO USING PROJECT(ABOUT 9%) WAS WELL WITHIN THE PARAMETERS LAID DOWN BY THE ABOVE DECISION OF THE H ONBLE BOMBAY HIGH COURT THEREFORE THE DEDUCTION U/S. 80IB(10) CANNOT BE DENIED TO THE APP ELLANT FOR THE YEAR UNDER CONSIDERATION.FOLLO- WING THE DECISIONS OF THE TRIBUNAL AND THE HONBLE JURISDICTIONAL HIGH COURT THE ISSUE OF COMMERCIAL COMPONENT FF THE HOUSING PROJECT WAS DEC IDED IN FAVOUR OF THE ASSESSEE,BY THE FAA,FOR THE YEAR UNDER APPEAL. 2.2. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUBMITTED THAT ISSUE OF 80IB(10)DEDUCTION WAS DECIDED IN FAVOUR OF REVENUE BY THE DECISION OF EVE REST HOME CONSTRUCTION (INDIA)(P)LTD. THAT WAS DELIVERED BY THE I BENCH OF MUMBAI ITAT ON12.09.2 012(ITA.NO.7021/MUM/2008),THAT ASSESSEE- FIRM WAS NOT ENTITLED TO CLAIM U/S.80IB(10)OF THE A CT.THAT THE ASSESSEE HAD NOT FULFILLED THE PRESCRIBED CONDITIONS REGARDING THE COMMERCIAL COMP ONENT OF THE HOUSING PROJECT AS PER THE PROVISIONS OF SECTION 80IB(10)(D) OF THE ACT.AUTHOR ISED REPRESENTATIVE(AR) SUBMITTED THAT MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL DELIVERED IN ASSESSEES OWN CASE FOR THE EARLIER AYS.. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACTS OF THE CASE ARE THAT SGP HAD BEEN APPROVED BY THE LOCAL AU THORITY ASRESIDENTIAL CUM HOUSING PROJECT VIDE APPROVAL DATED 01/12/2003,THAT SGP COMPRISED O F SIX WINGS WITH RESIDENTIAL UNITS AND THE COMMERCIAL SHOPS,THAT DURING THE YEAR UNDER CONSIDE RATION THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.12,95,179/- U/S.801B(10) OF THE ACT,THAT CLAIM M ADE BY THE ASSESSEE WAS NOT ACCEPTED IN AYS. 2006-07, 2007-08 & 2008-09 BY THE AO ON THE GROUND THAT THE BUILT-UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS WAS 11844 SQ.FT. AND THUS THAT THERE WAS VIOLATION OF CONDITIONS PRESCRIBED U/S.80IB(10)(D) OF THE ACT,THAT THE FAA HAD ALLOWED THE APPEALS OF THE ASSESSEE FOR EARLIER AYS. WE FURTHER FIND WHILE DECIDING THE APPEAL FOR THE A Y.2007-08, FILED BY THE ASSESSEE,TRIBUNAL HAS VIDE ITS ORDER DATED 31.10.2011 HAS HELD AS UNDER : 3 ITA NO. 6996/MUM/2012 GIRDHARILAL K. LULLA. 4.AFTER HEARING RIVAL SUBMISSION WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR AT PARA 4, 4.1 & 5 HELD AS FOLLOWS: 4.WE HAVE CONSIDERED THE RIVAL SUBMISSION MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF A.O. AND THE CIT(A) AND THE PAPER BOOK FILED ON BEH ALF OF THE ASSESSEE.WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US.WE FIND THE A.O. DENIED THE BENEFIT OF DEDUCTION U/S 801B(10) OF THE ACT ON THE GROUND THA T THE COMMERCIAL AREAS III THE PROJECT IS 3399 SQ. FT. WHICH IS WELL ABOVE 2000 SQ. FT. OR 5% OF THE PROJECT WHICH IS ONE OF THE PRE- CONDITIONS FOR CLAIMING DEDUCTION U/S 80IB (10.) OF THE ACT. WE FIND THE CONDITION OF 2000 SQ.FT.OR 5% OF THE PROJECT WAS BROUGHT TO THE STATU TE BY THE FINANCE (NO.2) ACT, 2004 W.E.F, 1.4.2005. PRIOR TO THIS INSERTION, THERE WAS NO SUC H CONDITION.WE FIND THE CO-ORDINATE BENCN OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI J V (SUPRA) AT PARA NO. 26 & 27 HAS OBSERVED AS UNDER: 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FOR TH ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OBTAINS APPROVAL OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN THE PREVIOUS YEAR RELEVANT TO AY 02-03. AS PER T HE LAW AS IT STOOD IN 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 RESTRICTION REGARDING COMMER CIAL AREA THAT CAN BE BUILT IN A HOUSING PROJECT. LET US ASSUME THAT THE ASSESSEE COMPLIES W ITH ALI 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 APPROVED BY THE LOCAL AUTHORITY IS MORE THAN 2000 SQ.FT.THE ASSESSEE COMMENCES THE PROJECT BUT IS ABLE TO COMPLETE ONLY IN THE PREVIOUS YEAR RELEVANT TO AY 05- 06.AS PER THE CHANGE IN LAW FROM AY 05-06 WITH REGA RD TO THE AREA OF COMMERCIAL SPACE IN A HOUSING PROJECT THE ASSESSEE WOULD LOOSE HIS ELIG IBILITY TO CLAIM DEDUCTION. IN SUCH CASES THERE IS DEFINITELY GRAVE HARDSHIP TO THE ASSESSEE. THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE LEARNED D.R. WILL ALSO LEAD TO ABSURD SITUAT ION. LET US ASSUME AN ASSESSEE OBTAINS APPROVAL OF A HOUSING PROJECT PRIOR TO 1-4-2005 SAY IN PREVIOUS YEAR RELEVANT TO AY- 02-03. HE BUILDS COMMERCIAL SPACE IN EXCESS OF 2000 SQ.FT. IN THE HOUSING PROJECT. HE FOLLOWS PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND OFFE RS PROFITS IN AY 02-03 TO 04-05, CLAIMS EXEMPTION U/S.80-IB(10) AND IS ALLOWED EXEMPTION. O N THE SAME PROJECT IN AY 05-06, THE ASSESSEE WOULD NOT GET THE BENEFIT OF SEC.80- HIRAN ARIDANI AKRUTI JV 20 IB(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIEW DIFFERENT FROM THE ONE TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SAROJ SALES OR GANIZATION (SUPRA). WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING ANY WO RDS TO THE STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN TH E ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.20(13 AND WHEN THE ASSESSEE COMMENCED DEVELOP MENT IS TO BE APPLIED. THEREFORE THE SUBMISSIONS OF THE LEARNED D.R. IN THIS REGARD CANN OT BE ACCEPTED. WE ARE OF THE VIEW THAT THE LEGISLATURE WOULD NOT HAVE INTENDED TO TAKE AWA Y A VESTED RIGHT WITHOUT CLEAR WORDS TO THAT EFFECT IN THE PROVISIONS OF SEC.80-IB(10) AS A MENDED BY THE FINANCE ACT, 2005, W..F. 1- 4-2005. WE THEREFORE HOLD FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARR YING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVEL OPMENT IS TO BE APPLIED. 4.1.SINCE IN THE INSTANT CASE, THE PROJECT UNDISPUT EDLY WAS APPROVED BEFORE 1.4.2005 THEREFORE THE PROVISIONS OF THE OLD LAW WILL APPLY. THEREFORE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE BEING IN CONSONANCE WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IS UPHELD. SO FAR AS THE ORDER OF THE LD.CIT(A) RESTRI CTING THE DEDUCTION ON ACCOUNT OF COMMERCIAL COMPONENT IS CONCERNED, WE FIND THE ISSU E NOW STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) WHERE THE DECISION OF SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) HAS BEEN UPHELD ACCORDING TO WHICH THE PROJECT HAVING COMMERCIAL AREA UPTO 10% OF THE PROJECT IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. SINCE ADMITTEDLY THE COMMERCIAL AREA IN THE INSTANT CASE IS LESS THAN 10% OF THE BUILT UP 4 ITA NO. 6996/MUM/2012 GIRDHARILAL K. LULLA. AREA, THEREFORE, THE ASSESSEE IS ENTITLED TO THE DE DUCTION U/S 80IB(10) AND THE ID. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION. IN THIS VIEW OF THE MATTER, THE GROUND RAISED BY THE REVENUE IS DISMISSED AND THE GROUND RAISED BY THE A SSESSEE IN THE C.O. IS ALLOWED. 5.IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE C.0.FILED BY THE ASSESSEE IS ALLOWED. 5.1.HIS DECISION IS IN LINE WITH THE JUDGEMENT OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES, 333 ITR 289) (BORN), WHE REIN AT PAGE NO. 303 PARA 32, IT IS HELD THAT CLAUSE (D) TO SECTION 80IB(10) CAN BE APP LIED ONLY PROSPECTIVELY. WE RESPECTFULLY FOLLOW THE SAME AND DISMISS THE APPEAL OF THE REVEN UE. 6.THERE IS A CROSS OBJECTION FILED BY THE ASSESSEE. ISSUES BEING THE SAME,WE FOLLOW THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2006-07 AND ALLOW CROSS OBJECTION. 7.IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION IS ALLOWED. 2.3.A. IN THE CASE OF M/S.MAGNETE ENTERPRISES(ITA.5802/MUM /2012-AY.2009-10,DATE.27.11. 2013)DECISION OF EVEREST HOME CONSTRUCTION(INDIA)(P )LTD.(SUPRA)WAS CONSIDERED.ONE OF US WAS PARTY TO THAT ORDER.WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER : 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUBMITTED THAT ISSUE OF 80IB(10)DEDUCTION WAS DECIDED IN FAVOUR OF REVENUE BY THE DECISION OF I BENCH OF MUMBAI ITAT(ITA.NO.7021/MUM/ 2008) DELIVERED ON12.09.2012 IN THE CASE OF EVEREST HOME CONSTRUCTION(INDIA)(P)LTD.,THAT THE ASSESSEE-FIRM WAS NOT ENTITLED TO CLAIM U/S.80IB(10 )OF THE ACT.AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ISSUE IN QUESTION WAS DECIDED IN FAV OUR OF THE ASSESSEE.HE RELIED UPON THE FOLLOWING DECISIONS: 1. MANAN CORPORATION (APPEAL NO. 1953 OF 2011 DT.03.09 .2012 GUJARAT HIGH COURT). 2. ANRIYA PROJECT MANAGEMENT SERVICES (P) LTD. (21 TAX MANN.COME 140 (KAR). 3. G.R.DEVELOPERS (22 TAXMANN.COM 265 (KAR). 4. RAVIRAJ KOTHARI PUNJABI ASSOCIATES(ITA NO.223/PN/20 11 DT.22.03.2013B BENCH, ITAT, PUNE). 5. SAROJ SALES ORGANISATION (3DTR 494 (2008)(MUM) 6. IDEAL REALTORS (ITA NO.7669/MUM/2011 DAT.14.08.2013 I BENCH, ITAT, MUMBAI). 7. NEEL SIDDHI ENTERPRISES (ITA NO.1761,1762 &1763/MUM /2010 DT. 30.03.2012 B BENCH, ITAT, MUMBAI). 8. CHHEDA CONSTRUCTION CO.(JOINT VENTURE)(ITA NO.2764/ MUM/2009 DT. 27.04.2011 C BENCH, ITAT, MUMBAI). HE FURTHER SUBMITTED THAT B BENCH OF ITAT PUNE HA D CONSIDERED THE DECISION DELIVERED BY ITAT MUMBAI IN THE CASE OF M/S. EVEREST HOME CONSTR UCTION(INDIA) PVT. LTD.(SUPRA), THAT WHILE THE PASSING ORDER PUNE BENCH AS ALSO CONSIDER ED JUDGMENT OF HONBLE GUJARAT HIGH COURT HAD DELIVERED IN THE CASE OF MANAN CORPORATIO N,THAT I BENCH OF MUMBAI TRIBUNAL DID NOT HAVE BENEFIT OF THE JUDGMENTS OF THE GUJARAT HI GH COURT, WHEN IT HAD PASSED THE ORDER, THAT KARNATAKA HIGH COURT IN THE CASE OF G.R. DEVELOPERS (SUPRA) HAD ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE,THAT AMENDMENT INTRODUCED IN SECTION 80IB(10) WAS NOT APPLICABLE TO A PROJECT WHICH WAS APPROVED PRIOR TO 01.04.2005. 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 JUDGMENT 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 REVENUE S CASE THAT RESIDENTIAL PROJECT HAVING 5 ITA NO. 6996/MUM/2012 GIRDHARILAL K. LULLA. COMMERCIAL CONSTRUCTION CANNOT BE HELD ENTITLED TO THE BENEFIT UNDER SECTION 801B(1 0) OF THE ACT AND FOR SUPPORTING ITS VERSION, RELIANCE WAS PL ACED ON INCLUSION OF CLAUSE (D) OF SECTION 801B(10) FROM 1.4.2005, WHICH RESTRICTS AREA OF COM MERCIAL CONSTRUCTION IN RESIDENTIAL PROJECT. IT WAS A PROJECT OF RESIDENTIAL HOUSING WITH COMMER CIAL USER FOR ASSESSMENT YEAR 2003 -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 H OLDING THAT BY INSERTION OF CLAUSE(D) OF SECTION 801B(10) OF THE ACT, LEGISLATURE MADE IT CL EAR 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 801B( 10) DEDU CTION, SUCH DEDUCTION WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 80 1B(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 RESPONS IBLE TO APPROVE THE CONSTRUCTION PROJECTS ARE EXPECTED TO CONTEMPLATE FUTURE AMENDMENT IN THE STA TUTE 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 B UILT UP AREA OR 5000 SQ.FEET WHICHEVER IS HIGHER (NOW IN POST 2010 PERIOD)OR 5% OF THE AGGREG ATE BUILT UP AREA OR 2000 SQ.FEET WHICHEVER IS LESS. REVENUE IS ALSO IN ERROR TO SUGGEST THAT E VEN IF SUCH CONDITIONS ARE ONEROUS, THEY ARE REQUIRED TO BE FULFILLED. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILITATE THE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUC H PROJECT WHEN INITIALLY 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 AMENDMENT AND REDUCTION 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 N O CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIOR TO THE AMENDED SECTION AND THE P LANS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY FOR BOTH THE PROJECTS OF THE AP PELLANT. PERMISSION FOR CONSTRUCTION OF SHOPS HAS BEEN ALLOWED BY THE LOCAL AUTHORITY IN ACCORDAN CE WITH RULES AND REGULATIONS, KEEPING IN MIND PRESUMABLY THE REQUIREMENT OF LARGE TOWNSHIPS. HOWEVER, THE PROJECTS ESSENTIALLY REMAINED RESIDENTIAL HOUSING PROJECTS AND THAT IS A LSO QUITE APPARENT FROM THE CERTIFICATES ISSUED BY THE LOCAL AUTHORITY AND, THEREFORE NEITHER ON TH E GROUND OF ABSENCE OF SUCH PROVISION OF COMMERCIAL SHOPS NOR ON ACCOUNT OF SUCH COMMERCIAL CONSTRUCTION HAVING EXCEEDED THE AREA CONTEMPLATED IN THE PROSPECTIVE AMENDMENT CAN BE MA DE APPLICABLE TO THE APPELLANT ASSESSEE WHOSE PLANS ARE SANCTIONED AS PER THE PREVALENT RUL ES 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 T HE STATUE. 24.KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE VS. ANRIYA PROJECT MANAGEMENT SERVICES (P.) LTD. REPORTED IN [2012J 21 TAXMANN.COM140 (KARNATAKA)WAS ALSO EXAMINING THIS PROVISION WHERE THE QUESTION WAS WHETHER 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 PROVISION WOULD HAVE NO APPLICA TION TO HOUSING PROJECTS, WHICH WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO 1.4.2005 I N CALCULATING 1500 SQ.FEET OF RESIDENTIAL UNIT AND IT FURTHER HELD THAT ONCE SUCH HOUSING PROJECT OF ASSESSEE IS APPROVED BY LOCAL AUTHORITY PRIOR TO 1.4.2005, IT WOULD BE ENTITLED TO 100% BEN EFIT OF SECTION 801B(10). WHILE SO HOLDING, IT RELIED ON THE JUDGMENT OF THE KARNATAKA HIGH COU RT 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 AND WHILE APPROVING SUCH PROJECT WHEN INITIALLY THE RE WAS NO RESTRICTION AND BY AMENDMENT AS STATED PERMISSIBLE RATIO FOR CONSTRUCTION IS 5% OF THE TOTAL BUILT UP AREA, REDUCTION OF THIS RATIO TO 3% OF THE TOTAL BUILT UP AREA HAS TO BE NECESSAR ILY ON PROSPECTIVE BASIS. AS MENTIONED HEREINABOVE CRITERIAS TO HOLD THIS AME NDMENT RETROSPECTIVE ARE ABSENT AS THERE IS NO AS EXPLICIT AND SPECIFIC WORDING EXPRESSING RETR OSPECTIVELY AND EVEN IF IT IS ASSUMED FOR THE SAKE OF ARGUMENTS THAT THE SAME IS TO BE READ BY IM PLICATION THE SAME DOES NOT APPEAR TO BE 6 ITA NO. 6996/MUM/2012 GIRDHARILAL K. LULLA. REASONABLE BUT, IN FACT EMERGES TO BE HARSH AND UNR EASONABLE WHEN IT COMES TO IMPLEMENTATION. 34.ABOVE DISCUSSION CUMULATIVELY WHEN EXAMINED WITH THE OBJECTIVES AND INTENT IT SOUGHT TO ACHIEVE IN BRINGING ABOUT THE SAID PROVISION OF SEC TION 801B(10), THIS AMENDED TAXING STATUTE REQUIRES TO BE INTERPRETED IN FAVOUR OF THE ASSESSE E RATHER THAN INSISTING UPON STRICT COMPLIANCE LEADING TO ABSURDITY. 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 HIGH COURT OF GUJARAT.WE FURTHER FIND THAT PUNE BENCH OF THE TRIBUNAL HAS CONSIDERED ALL THE D ECISIONS,INCLUDING THE DECISION OF HOME CONSTRUCTION (INDIA) (P)LTD.,(SUPRA)WHILE DECIDING THE 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.THEREFORE,UPHOLDING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A O. RESPECTFULLY,FOLLOWING THE ORDERS OF THE TRIBUNAL D ELIVERED FOR THE EARLIER AYS.IN ASSESSEES OWN CASE AND THE JUDGMENTS OF MANAN CORPORATION AND ANR IYA PROJECT MANAGEMENT SERVICES (P.) LTD. DELIVERED BY THE HONBLE HIGH COURTS OF GUJARAT AND KARNATAKA RESPECTIVELY WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APP EAL FILED BY THE AO STANDS DISMISSED. 1!2 $,! - * $ 3 * ! 45. ORDER PRONOUNC ED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014 . ' * ./% 7 8$ 19 QJ QJQJ QJOJH OJHOJH OJH , 201 4 / * 0 9 SD/- SD/- ( ! '# / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8$ /DATE: 19 TH FEBURARY,2014. SK ' ' ' ' * ** * (!: (!: (!: (!: ;:%! ;:%! ;:%! ;:%! / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR G BENCH, ITAT, MUMBAI / :>0 (!$ TH THTH TH , . . . 6. GUARD FILE/ 0 1 ):! ):! ):! ):! (! (!(! (! //TRUE COPY// '$ / BY ORDER, ? / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI