ITO 6(2)(3), MUMBAI V. EVEREST HOME CONSTRUCTION (I) P. LTD, MUMBAI

ITA 7021/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8866 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Keywords: Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.7021/MUM/2008 ASSESSMENT YEAR-2006-07 THE ITO-6(2)(3), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. EVEREST HOME CONSTRUCTION (INDIA) PVT. LTD., 116/118, MANIAR BLDG., P.DMELLO ROAD, CARNAC BUNDER, MUMBAI-400 009 PAN - AABCE 3133C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJIV DUTT RESPONDENT BY: SHRI K. GOPAL DATE OF HEARING :08.08.2012 DATE OF PRONOUNCEMENT: 12.9.2012 O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL REVENUE HAS CHALLENGED THE CORREC TNESS OF THE ORDER OF LD. CIT(A)- VI, MUMBAI DT. 9.10.2008 PERTAINING TO ASSESSMENT YEAR 2006- 07. 2. THE REVENUE HAS QUESTIONED THE SAID ORDER BY RAI SING FOLLOWING EFFECTIVE GROUND OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S. 80IB(10) EVEN THOUGH CONDITION LAID DOWN IN SECTION 80IB(10(D) IS NOT SATISFIED WHICH IS APPLICABLE FROM A.Y. 2005 -06 ONWARDS. 3. FACTS GIVING RISE TO THIS DISPUTE SHOW THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT HAS DEVELOPED PROPERTY AT 12, ARA B LANE, BYCULLA, MUMBAI NAMED AS AMATULLA HAVING 3 SEPARATE BUILDINGS, SH OPS AND COMMERCIAL ITA NO. 7021/M/08 2 ESTABLISHMENTS. THE PROJECT WAS COMMENCED IN THE Y EAR 2003 AFTER GETTING APPROVAL FROM LOCAL AUTHORITY. IT IS COMPLETED DUR ING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS FOLLOWED PROJECT C OMPLETION METHOD OF ACCOUNTING FOR TAXATION PURPOSE. FOR THE YEAR UNDE R CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS. NIL. THE SALE PROCEEDS OF THE PROJECT IS SHOWN AT RS. 21,65,99,3 59/- ON WHICH THE ASSESSEE HAS SHOWN NET PROFIT AT RS. 10,09,42,833/- AND CLAIMED IT AS EXEMPT U/S. 80IB(10) OF THE ACT. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER SOUGHT CLARIFICATION IN RESPECT OF THE CLAI M OF DEDUCTION U/S. 80IB(10) OF THE ACT. THE FOLLOWING FACTS EMERGED OUT OF THE EXPLANATION GIVEN BY THE ASSESSEE. THE AMATULLA PROJECT CONSIST OF 3 BUILDINGS I.E. A, B & C BUILDING. A CONSISTING OF GROUND +11 FLOOR WHEREIN ENTIRE GROUN D FLOOR EXCEPT ENTRANCE LOBBY, STAIRCASE AND LIFT , CONSISTS OF CO MMERCIAL UNITS AND UPPER FLOORS CONSIST OF RESIDENTIAL UNITS TOTALING TO 84 FLATS. BUILDING B CONSISTS OF STILT + 12 FLOORS HAVING 70 RESIDENTIAL UNITS. BUILDING C CONSISTS OF STILT +7 FLOORS HAVING 53 RESIDENTIAL UNITS. APART FROM THIS, THERE ARE 6 SHOPS ON THE FRONT SIDE OF THE PROJECT FOR COMMERCIAL USE. THE TOTAL BUILT UP AREA OF THE PROJECT IS 107039 SQ . FT. 5. IT WAS EXPLAINED THAT THE PROJECT IS CONSTRUCTED ON TENANTED PROPERTY AND SOME TENANTS WERE ALREADY HAVING THEIR COMMERCI AL ESTABLISHMENTS PRIOR TO THE PRESENT CONSTRUCTION. THE SAID PROJECT WAS AWARDED UNDER REHABILITATION PROGRAMME BY WHICH THE ASSESSEE HAD TO PROVIDE ACCOMMODATION TO THE EXISTING TENANT WHO WERE RES IDENTS AND ALSO TO THOSE WHO HAD COMMERCIAL ESTABLISHMENTS. ACCORDINGLY, B UILDING C IS CONSTRUCTED FOR OLD RESIDENTIAL TENANTS AND THE OTHER TWO BUILD ING, I.E. A & B ARE CONSTRUCTED FOR SALE. IT WAS ALSO EXPLAINED THAT TH E SHOPS AND OTHER COMMERCIAL CONSTRUCTION WERE MEANT FOR EXISTING COM MERCIAL TENANT ONLY. ITA NO. 7021/M/08 3 6. THE AO OBSERVED THAT THE ASSESSEES PROJECT CONS ISTS OF COMMERCIAL BUILT UP AREA OF MORE THAN 2000 SQ. FT. THE CLAIM OF THE ASSESSEE U/S. 80IB(10) OF THE ACT WAS EXAMINED UNDER THE LIGHT OF THE AMENDMENT BROUGHT UNDER THE SECTION W.E.F. 1.4.2005 I.E. A.Y. 2005-06. CLAUSE )D) INTRODUCED NEW CONDITION OF CLAIM OF DEDUCTION U/S. 80IB(10) OF THE ACT RESTRICTING MAXIMUM COMMERCIAL BUILT UP AREA OF 200 0 SQ. FT OR 5% OF AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT WH ICHEVER IS LESS. THE AO FURTHER OBSERVED THAT IN ASSESSEES CASE, TOTAL COM MERCIAL BUILT UP AREA IS WORKED OUT AS 6450 SQ. FT. ACCORDING TO THE AO, THE ASSESSEE HAS VIOLATED ONE OF THE CONDITIONS FOR CLAIM OF DEDUCTION U/S. 8 0IB. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY DEDUCTION U/S. 80IB(10) S HOULD NOT BE DISALLOWED SINCE IT HAS CONSTRUCTED SHOPS AND OTHER COMMERCIA L UNITS HAVING TOTAL BUILT UP AREA OF MORE THAN 2000 SQ. FT. THE ASSESSEE SUB MITTED A DETAILED EXPLANATION VIDE ITS LETTER DT. 25.3.2008 WHICH IS REPRODUCED AS UNDER: THE ASSESSEE HAD STARTED THIS PROJECT IN FEB. 2003 UNDER AN APPROVAL FROM THE LOCAL AUTHORITY DT. 11 TH FEB. 2003 FOR CONSTRUCTION OF RESIDENTIAL PROJECT. THE ERSTWHILE PROVISIONS OF S EC. 80IB(10) DID NOT PROVIDED ANY UPPER CAP ON CONSTRUCTION OF THE COMME RCIAL AREA. THE SAID PROVISION CAME INTO BEING ONLY FOR THE A.Y. 20 06-07 BY WHICH TIME OUR PROJECT HAD COMMENCED AND PROGRESSED SUBSTANTIA LLY. FURTHER NOT A SINGLE COMMERCIAL AREA CONSTRUCTED BY THE ASSESSE E HAS BEEN SOLD TO ANYBODY AS THEY WERE MEANT FOR REHABILITATING THE E XISTING COMMERCIAL SITTING TENANTS ON PROPERTY & WITHOUT PROVIDING THE M THE COMMERCIAL AREA AS PERMANENT ALTERNATE ACCOMMODATION THIS PROJ ECT WOULD HAVE BEEN IMPOSSIBLE AND ALSO NO APPROVAL WOULD HAVE BEE N GRANTED BY ANY LOCAL AUTHORITY FOR REDEVELOPMENT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE AGAI N STATE THAT THE ASSESSEE HAS NOT VIOLATED ANY CONDITION LAID DOWN U /S. 80IB(10) AT THE TIME OF COMMENCEMENT OF THE PROJECT. THEREFORE THE ASSESSEE SHOULD BE FULLY GRANTED THE DEDUCTION U/S. 80IB AT 100% & O BLIGE. 7. HOWEVER, THE ASSESSEES SUBMISSION DID NOT FIND FAVOUR FROM THE AO. AS ACCORDING TO THE AO, AFTER THE AMENDMENT TO THE PROVISIONS OF SEC. 80IB(10) W.E.F. 1.4.2005, THOSE HOUSING PROJECT HAV ING COMMERCIAL BUILT UP AREA OF MORE THAN 2000 SQ. FT ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT AS THE ASSESSEE HAS EXCEEDED MAXIMUM PERMIS SIBLE LIMIT PROVIDED IN ITA NO. 7021/M/08 4 THE ACT HENCE ASSESSEES SUBMISSIONS CANNOT BE ACCE PTED THAT PRIOR TO AMENDMENT THERE WAS NO UPPER CAP ON CONSTRUCTION OF COMMERCIAL AREA. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT IT HAS N OT SOLD THE COMMERCIAL AREA BUT THE ENTIRE COMMERCIAL AREA HAS BEEN ALLOTT ED TO REHABILITATING THE EXISTING COMMERCIAL TENANTS. THE AO REJECTED THIS SUBMISSION OF THE ASSESSEE BY STATING THAT THE MAIN MOTIVE OF DEDUCTION U/S. 80IB(10) IS TO PROVIDE AFFORDABLE RESIDENTIAL HOUSES TO THE NEEDY PEOPLE OF THE SOCIETY AND NOT TO EXTEND THE BENEFIT OF EXEMPTED PROFIT TO THE OCCUPA NTS OF COMMERCIAL UNITS. THE ASSESSEE FURTHER FILED A DETAILED EXPLANATION A S UNDER: IN CONTINUATION OF OUR LETTER DT. 25.3.2008, WE FU RTHER SUBMIT THAT AMENDMENT TO SEC. 80IB(10) WITH RESPECT TO THE MAXIMUM CAP ON CONSTRUCTION OF THE COMMERCIAL AREA IS WITH PROSPECTIVE EFFECT FROM THE A.Y. 2005-06 ONLY, WHICH IS CLEARE D FROM THE MEMO. EXPLAINING PROV. IN THE FINANCE (NO. 2) BILL, 2004 REPORTED IN 268 ITR ON PAGE NO. 187/188 (COPY ENCLO SED WHICH IS REPRODUCED AS UNDER: UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-SEC TION (10) OF SEC. 80-IB, A DEDUCTION EQUAL TO ONE HUNDRED PER CE NT OF THE PROFITS OF AN UNDERTAKING DEVELOPING AND BUILDING H OUSING PROJECTS IS ALLOWED IF THE HOUSING PROJECT IS APPRO VED BY A LOCAL AUTHORITY BEFORE 31 ST MARCH, 2005. THE DEDUCTION IS SUBJECT TO THE CONDITIONS THAT THE UNDERTAKING SHOULD HAVE COM MENCED DEVELOPMENT OF THE HOUSING PROJECT AFTER THE 1 ST DAY OF OCTOBER, 1998, THE PROJECT SHOULD BE ON A SIZE OF A PLOT OF LAND WHICH HAS A MAXIMUM BUILT UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED IN DELHI OR MUMBA I AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT OTHER PLAC ES. IT FURTHER STATE THAT THE AMENDMENT TO SEC. 80IB(10) PROPOSED BY THE FINANCE ACT 2004 HAS PROSPECTIVE EFFECT FROM A.Y. 2005- 06. THEREFORE IT IS CLEAR THAT THE ASSESSEE HAS FULLY C OMPLIED WITH THE PROVISION OF SEC. 80IB(10) FOR THE PURPOSE OF CL AIMING 100% DEDUCTION AND THERE IS NO VIOLATION OF ANY PROVISIO N OF SEC. 80IB(10). THEREFORE YOU ARE REQUESTED TO ALLOW THE 100% DEDUCTION U/S. 80IB(10) AS CLAIMED IN THE INCOME TAX RETURN. 8. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE, THE AO CONCLUDED THAT THE ENTIRE EXPLANATION AND SUBMISSIO N OF THE ASSESSEE MAY BE ITA NO. 7021/M/08 5 VALID PRIOR TO THE AMENDED PROVISIONS BUT AFTER THE AMENDMENT, IT CANNOT BE ACCEPTED AND HELD THAT ASSESSEE HAS NOT COMPLIED WI TH THE CONDITIONS LAID DOWN IN SEC. 80IB(10) OF THE ACT AND DISALLOWED THE CLAIM OF THE ASSESSEE AND COMPLETED THE ASSESSMENT AT RS. 10,09,42,830/-. 9. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) AND REITERATED THAT THIS PROJECT WAS STARTED IN 2003 WHEN THERE WA S NO UPPER CAP ON THE COMMERCIAL AREA IN SEC. 80IB(10) OF THE ACT. THE PR OJECT WAS FULLY COMPLETED DURING THE A.Y. 2006-07. WHEN THE ASSESSEE STARTED PROJECT IN A.Y. 2003-04, IT HAD SATISFIED ALL THE CONDITIONS LAID DOWN IN SE C. 80IB(10) OF THE ACT. IT WAS ARGUED BEFORE THE LD. CIT(A) THAT EVEN BEFORE BUDGE T PROPOSALS WERE PRESENTED BY HONBLE FINANCE MINISTER IN LOK SABHA IN JULY, 2004, THE ASSESSEE HAD ALREADY RECEIVED OCCUPATION CERTIFICAT E FOR BUILDING A&C. HENCE THE AMENDMENT IS NOT APPLICABLE TO THE FACTS OF THE CASE. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. L D. CIT(A) RELIED UPON THE DECISION OF ITAT, MUMBAI E BENCH IN THE CASE OF SAROJ SALES ORGANISATION VS ITO (2008) 3 DTR 494 AND ALLOWED TH E APPEAL OF THE ASSESSEE AND DIRECTED THE AO TO ALLOW THE DEDUCTION U/S. 80IB(10) OF THE ACT AS THE HOUSING PROJECT WAS APPROVED FROM THE MUNIC IPAL AUTHORITIES PRIOR TO 31.3.2005. 10. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), TH E REVENUE IS BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPOR TED THE FINDINGS OF THE AO AND SUBMITTED THAT IT IS A WELL ESTABLISHED RULE OF INTERPRETATION THAT ANY AMENDMENT WHICH IS IN FORCE AT THE BEGINNING OF THE RELEVANT ASSESSMENT YEAR MUST GOVERN THE CASE. FOR THIS PROPOSITION, T HE LD. DR RELIED UPON THE DECISION OF GLAXO LABORATORIES (INDIA) LTD. VS ITO 18 ITD 226(SB)(MUM). THE LD. DR FURTHER SUBMITTED THAT W.E.F. 1.4.2005 I .E. A.Y. 2005-06 CLAUSE (D) HAS BEEN INTRODUCED IN SECTION 80IB(10) BY WHICH TH E MAXIMUM COMMERCIAL BUILT UP AREA HAS BEEN PEGGED TO 2000 SQ. FT OR 5% OF AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT WHICHEVER IS LESS. AS THE ASSESSEE HAS VIOLATED CLAUSE (D) OF SEC. 80IB(10) OF THE ACT, THE BENEFIT OF THE SAID SECTION CANNOT BE GIVEN TO THE ASSESSEE. THE LD. DR RELIED UPON T HE OBSERVATIONS MADE BY ITA NO. 7021/M/08 6 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BRAHMA ASSOCIATES 333 ITR 289 WHEREIN THE HONBLE HIGH COURT HAD AN OCCAS ION TO DECIDE WHETHER THE AMENDMENT TO SEC. 80IB(10) HAS RETROSPECTIVE EFF ECT OR NOT TO WHICH THE HONBLE HIGH COURT HAS HELD THAT THE RESTRICTION IM POSED FOR THE FIRST TIME W.E.F. 1 ST APRIL, 2005 CANNOT BE APPLIED RETROSPECTIVELY. TH E LD. DR ALSO RELIED UPON THE DECISION OF ITAT I BENCH MUMBAI IN THE C ASE OF ITO VS M/S. SHREE ABHINAV ASSOCIATES IN ITA NO. 5623/M/2009 WHEREIN T HE TRIBUNAL HAS HELD THAT THE AMENDMENT TO SEC. 80IB(10) HAS NO RETROSPEC TIVE APPLICATION AND IS APPLICABLE FROM A.Y. 2005-06. 11. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT WHEN THE ASSESSEE STARTED ITS PROJECT, THE LAW DID NOT PROVI DE ANY RESTRICTION ON THE COMMERCIAL BUILT UP AREA. THE ASSESSEE HAS FULFILL ED ALL THE CONDITIONS PRESCRIBED FOR MAKING IT ELIGIBLE FOR DEDUCTION U/S . 80IB(10) OF THE ACT. SUBSEQUENT AMENDMENT CANNOT CHANGE THE PROJECT PROF ILE OF THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT SOLD COMMERCIAL AREA TO ANYONE BUT THE ENTIRE COMMERCIAL AREA HAS B EEN GIVEN TO THE EXISTING COMMERCIAL TENANTS AS PART OF THE REHABILITATION PR OGRAMS. AS THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION FOR THE SALE OF COMMERCIAL AREA, THE ASSESSEE CANNOT BE DENIED DEDUCTION U/S. 80IB(10) O F THE ACT ON THE SALE OF ITS RESIDENTIAL UNIT. THE ASSESSEE RELIED UPON THE DECISION OF ITAT MUMBAI IN THE CASE OF SAROJ SALES ORGANISATION VS ITO 115 TT J 85 (MUM). THE LD. COUNSEL ALSO RELIED UPON THE DECISION OF MUMBAI BEN CH E IN THE CASE OF HIRANANDANI AKRUTI JV VS DCIT IN ITA NO. 5416/M/09 AND CIT VS BRAHMA ASSOCIATES (SUPRA) AND CONCLUDED THAT THE PROJECT O F THE ASSESSEE HAS BEEN APPROVED AS HOUSING PROJECT BY THE LOCAL AUTHORI TY THEREFORE DISALLOWANCE OF DEDUCTION CLAIMED U/S. 80IB(10) OF THE ACT IS NO T AT ALL JUSTIFIED. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE CASE LAWS R ELIED UPON BY THE RIVAL PARTIES . THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS COMMERCIAL BUILT UP AREA OF 6415 SQ. FT. THIS HAS BEEN ACCEPTED BY THE ASSESSEE. IT IS ALSO NOT DISPUTED THAT THE PROJECT OF THE ASSESSEE IS ON A P LOT AREA OF MORE THAN ONE ITA NO. 7021/M/08 7 ACRE. THE ONLY POINT OF DISPUTE IS WHETHER AMENDME NT BROUGHT W.E.F. 1.4.2005 I.E. A.Y. 2005-06 CAN BE MADE APPLICABLE T O THE FACTS OF THE CASE. THE CASES RELIED UPON BY THE LD. COUNSEL RELATES TO THE PRE AMENDED PROVISIONS OF SEC. 80IB(10) OF THE ACT. MOREOVER, IN THE CASE OF BRAHMA ASSOCIATES (SUPRA), THE HONBLE BOMBAY HIGH COURT H AS CATEGORICALLY HELD THAT CLAUSE (D) INSERTED TO SEC. 80IB(10) IS PROSPECTIVE AND CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1.4.2005 WHICH IMPLIEDLY MEANS THAT THE AMENDMENT BROUGHT IS APPLICABLE FROM A.Y. 2005-06. THE CONTE NTION OF THE LD. COUNSEL THAT THE PROJECT WAS STARTED KEEPING IN MIND THE PR E AMENDED PROVISIONS OF SEC. 80IB(10) OF THE ACT AND THEREFORE ANY SUBSEQUEN T CHANGES SHOULD NOT CHANGE THE PROJECT PROFILE CANNOT BE ACCEPTED. 13. LET US TAKE AN EXAMPLE. ASSUMING THAT THE LEGIS LATURE COMES UP WITH A TAX INCENTIVE PROVISION PROVIDING THAT WHOSOEVER CO NSTRUCTS GODOWNS FOR THE STORAGE OF FOOD GRAINS WILL BE ALLOWED TO WRITE OFF ENTIRE COST OF THE GODOWN FROM HIS OTHER INCOMES. X STARTS CONSTRUCTING F OUR GODOWNS AT FOUR DIFFERENT PLACES. TWO GODOWNS ARE COMPLETED IN ONE YEAR AND X WRITES OFF THE ENTIRE COST FROM HIS OTHER INCOMES. HOWEVER, IN THE MEANT IME, THE LEGISLATURE BRINGS AN AMENDMENT BY PROVIDING THAT HENCEFORTH TH E ASSESSEE WILL BE ALLOWED 50% DEPRECIATION ON THE COST OF THE GODOWN. 14. CAN THE ASSESSEE CLAIM 100% WRITE OFF AFTER THI S AMENDMENT ?. FURTHER CAN THE ASSESSEE SAY THAT IT STARTED THE PROJECT OF CONSTRUCTION OF GODOWNS BECAUSE OF THE TAX INCENTIVE GIVEN BY THE LEGISLATU RE ? THE LOGICAL ANSWER WOULD BE NO. FOR THE SIMPLE REASON THAT THE ASSESSEE MIGHT HAVE STARTED THE PROJECT KEEPING IN MIND THE BENEFIT BY THE LEGISLAT URE BUT GOVERNMENT, IF IN PUBLIC INTEREST DECIDES TO GRANT EXEMPTION IN ONE M OMENT CAN WITHDRAW IT ANOTHER BECAUSE TAXATION IS AN EXPRESSION OF UNILAT ERAL WILL OF THE LEGISLATURE, IS AN EXACTION BY THE STATE IN THE EXERCISE OF ITS SOVEREIGN POWERS, ESTOPPEL CANNOT BE INVOKED AGAINST GOVERNMENT IN THE EXERCIS E OF ITS LEGISLATIVE POWERS. FOR THESE OBSERVATIONS, WE DRAW SUPPORT FRO M THE DECISION OF BOMBAY CONDUCTORS & ELECTRICALS LTD. & ANR. VS UNDE R SECRETARY TO THE GOVT. ITA NO. 7021/M/08 8 OF INDIA & ORS. THE HONBLE SUPREME COURT IN THE CA SE OF RELIANCE JUTE & INDUSTRIES LTD. VS CIT (1979) 120 ITR 921 HAS LAID D OWN THE FOLLOWING LAW: THE ASSESSMENT FOR ONE ASSESSMENT YEAR CANNOT, IN THE ABSENCE OF A CONTRARY PROVISION, BE AFFECTED BY THE LAW IN FORCE IN ANOTHER YEAR. A RIGHT CLAIMED BY AN ASSESSEE UNDER THE LAW IN FORCE IN A PARTICULAR ASSESSMENT YEAR IS ORDINARILY AVAILABLE ONLY IN REL ATION TO A PROCEEDING PERTAINING TO THAT THAT YEAR. 15. WE FIND THAT IN ALL THE CASES RELIED UPON BY TH E ASSESSEE, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF R ELIANCE JUTE INDUSTRIES (SUPRA) HAS NOT BEEN CONSIDERED. IN OUR HUMBLE OPI NION, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANC E JUTE INDUSTRIES (SUPRA) STATED HEREINABOVE SQUARELY APPLY ON THE FACTS OF T HE CASE AS THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS PRECEDENT PROVIDED U/S. 80IB(10)(D) AS APPLICABLE FROM AY 2005 - 06. THERE IS NO DISPUTE THAT THE ASSESSEE FULFILLS ALL CONDITIONS OF SECTION 80-IB(10) AS IT STOOD PRIOR T O APRIL 1, 2005 , BUT AFTER THE AMENDMENT , THE ASSESSEE IS NOT ELIGIBLE FOR D EDUCTION U/S. 80IB(10) OF THE ACT. IT WOULD NOT BE OUT OF PLACE TO HIGHLIGHT THE OBSERVATIONS MADE BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES [ SUPRA ] WHICH IS AS UNDER : FROM THE FACT THAT THE DEDUCTION UNDER SECTION 80 -IB(10) PRIOR TO APRIL 1, 2005 WAS ALLOWABLE ON THE PROFITS DERIVED FROM HOUSING PROJECTS CONSTRUCTED DURING THE SPECIFIED PERIOD, ON A SPECIFIED SIZE OF THE PLOT WITH RESIDENTIAL UNITS OF THE SPECIFIED S IZE, IT CANNOT BE INFERRED THAT THE DEDUCTION UNDER SECTION 80-IB(10) WAS ALLOWABLE TO HOUSING PROJECTS HAVING RESIDENTIAL UNITS ONLY, BE CAUSE, RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IS WITH A VIEW TO MAKE AVAILABLE A LARGE NUMBER OF AFFORDABLE HOUSES TO THE COMMON MAN AND NOT WITH A VIEW TO DENY COMMERCIAL USER IN RESIDENTIAL BUILDINGS. IN OTHER WORDS, THE RESTRICTION UNDER SECTION 80-IB(10) REGARDING THE S IZE OF THE RESIDENTIAL ITA NO. 7021/M/08 9 UNIT WOULD IN NO WAY CURTAIL THE POWERS OF THE LOC AL AUTHORITY TO APPROVE A PROJECT WITH COMMERCIAL USER TO THE EXTEN T PERMITTED UNDER THE DEVELOPMENT CONTROL RULES/REGULATIONS. THEREFOR E, THE ARGUMENT OF THE REVENUE THAT THE RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IN SECTION 80-IB(10) AS IT STOOD PRIOR TO APRIL 1, 2005 IS SUGGESTIVE OF THE FACT THAT THE DEDUCTION IS RESTRICTED TO HOUSING PR OJECTS APPROVED FOR RESIDENTIAL UNITS ONLY CANNOT BE ACCEPTED. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY CLAUSE (D) OF SECTION 80- IB(10) INSERTED WITH EFFECT FROM APRIL 1, 2005. CLA USE (D) OF SECTION 80-IB(10) INSERTED WITH EFFECT FROM APRIL 1, 2005 P ROVIDES THAT EVEN THOUGH SHOPS AND COMMERCIAL ESTABLISHMENTS ARE INC LUDED IN THE HOUSING PROJECT, DEDUCTION UNDER SECTION 80-IB(10) W ITH EFFECT FROM APRIL 1, 2005 WOULD BE ALLOWABLE WHERE SUCH COMMERC IAL USER DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP ARE A OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS L OWER. BY THE FINANCE ACT, 2010, CLAUSE (D) IS AMENDED TO THE EF FECT THAT THE COMMERCIAL USER SHOULD NOT EXCEED THREE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR FIVE THOUSA ND SQUARE FEET WHICHEVER IS HIGHER. THE EXPRESSION 'INCLUDED' IN C LAUSE (D) MAKES IT AMPLY CLEAR THAT COMMERCIAL USER IS AN INTEGRAL PAR T OF A HOUSING PROJECT. THUS, BY INSERTING CLAUSE (D) TO SECTION 80-IB(10) THE LEGISLATURE HAS MADE IT CLEAR THAT THOUGH HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITIES WITH COMMERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE DEVELOPMENT CONTROL RULES/REGULATION WERE ENTITLED TO SECTION 80-IB(10) DEDUCTION, WITH EFFECT FROM APRIL 1, 2005 SUCH DED UCTION WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLA USE (D) OF SECTION 80-IB(10). THEREFORE, THE ARGUMENT OF THE REVENUE THAT WITH EFFECT FROM APRIL 1, 2005 THE LEGISLATURE FOR THE FIRST TIME ALLOWED SECTION 80-IB(10) DEDUCTION TO HOUSING PROJECTS HAVI NG COMMERCIAL USER CANNOT BE ACCEPTED. ITA NO. 7021/M/08 10 . IT IS FOR THE LEGISLATURE TO IMPOSE RESTRICTIONS O N COMMERCIAL USER IN A PROJECT FOR THE PURPOSES OF AVAILING OF SECTION 8 0-IB(10) DEDUCTION AND THAT HAS BEEN DONE BY INSERTING CLAUSE (D) TO SECTION 80-IB(10) WITH EFFECT FROM APRIL 1, 2005. .. LASTLY, THE ARGUMENT OF THE REVENUE THAT SECTION 80 -IB(10) AS AMENDED BY INSERTING CLAUSE (D) WITH EFFECT FRO M APRIL 1, 2005 SHOULD BE APPLIED RETROSPECTIVELY IS ALSO WIT HOUT ANY MERIT, BECAUSE, FIRSTLY, CLAUSE (D) IS SPECIFICALL Y INSERTED WITH EFFECT FROM APRIL 1, 2005 AND, THEREFORE, THAT CLA USE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO APRIL 1, 2005. SECO NDLY, CLAUSE (D) SEEKS TO DENY SECTION 80-IB(10) DEDUCTION TO PR OJECTS HAVING COMMERCIAL USER BEYOND THE LIMIT PRESCRIBED UNDER CLAUSE (D), EVEN THOUGH SUCH COMMERCIAL USER IS AP PROVED BY THE LOCAL AUTHORITY. THEREFORE, THE RESTRICTION IM POSED UNDER THE ACT FOR THE FIRST TIME WITH EFFECT FROM APRIL 1 , 2005 CANNOT BE APPLIED RESTROSPECTIVELY. THIRDLY, IT IS NOT OPE N TO THE REVENUE TO CONTEND ON THE ONE HAND THAT SECTION 80- IB(10) AS IT STOOD PRIOR TO APRIL 1, 2005 DID NOT PERMIT COM MERCIAL USER IN HOUSING PROJECTS AND ON THE OTHER HAND CONTEND THAT THE RESTRICTION ON COMMERCIAL USER INTRODUCED WITH EFF ECT FROM APRIL 1, 2005 SHOULD BE APPLIED RESTROSPECTIVELY. T HE ARGUMENT OF THE REVENUE IS MUTUALLY CONTRADICTORY AND HENCE LIABLE TO BE REJECTED. THUS, IN OUR OPINION, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT CLAUSE (D) INSERTED TO SECTION 80-IB(1 0) WITH EFFECT FROM APRIL 1, 2005 IS PROSPECTIVE AND NOT R ETROSPECTIVE AND HENCE CANNOT BE APPLIED TO THE PERIOD PRIOR TO APRIL 1, 2005. IN THE RESULT, THE QUESTIONS RAISED IN THE APPEAL AR E ANSWERED THUS : ITA NO. 7021/M/08 11 (A) UP TO MARCH 31, 2005 (SUBJECT TO FULFILLING OTH ER CONDITIONS), DEDUCTION UNDER SECTION 80-IB(10) IS ALLOWABLE TO HO USING PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RESIDENTIAL UNITS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DEVELOPMENT CONTROL RULES/ REGULATIONS FRAMED BY THE RESPECTIVE LOCAL AUTHORITY. (E) CLAUSE (D) INSERTED TO SECTION 80-IB(10) WITH EFFECT FROM APRIL 1, 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO APRIL 1, 2005. { EMPHASIS , BOLD AND UNDER LINES BY US } 16. WE FURTHER FIND THAT IN MOST OF THE CASES RELI ED UPON BY THE ASSESSEE, THE JUDICIAL AUTHORITIES HAVE ALLOWED PROPORTIONATE DEDUCTION TO THE ASSESSEE BECAUSE THERE WAS NO SPECIFIC BAR ON COMMERCIAL ARE A IN THE HOUSING PROJECT PRIOR TO THE AMENDMENT, THEREFORE, THE JUDICIAL AUT HORITIES HAVE ALLOWED PROPORTIONATE DEDUCTION ON THAT PART WHICH WAS USED FOR RESIDENTIAL PURPOSES. HOWEVER, WITH THE INSERTION OF CLAUSE (D) W.E.F. 1. 4.2005 NOW THERE IS A CAP ON A COMMERCIAL AREA IN THE ELIGIBLE PROJECT WHICH CONDITION HAS BEEN VIOLATED BY THE ASSESSEE IN THE INSTANT CASE. IN OUR HUMBLE OPINION, THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE JUTE INDUSTRIES (SUPRA) AND THE OBSERVATIONS MADE BY THE HONBLE HIGH COURT OF BOMB AY IN THE CASE OF BRAMA ASSOCIATES (SUPRA) EXPLAINED THE CORRECT LAW APPLIC ABLE FROM A.Y. 2005-06. THEREFORE, FINDINGS OF THE LD. CIT(A) ARE REVERSED AND THAT OF THE AO ARE RESTORED. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED ON THIS 12 TH DAY OF SEPTEMBER, 2012 SD/- SD/- (VIJAY PAL RAO) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12 TH SEPTEMBER, 2012 RJ ITA NO. 7021/M/08 12 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI FIT FOR PUBLICATION JM A M