Commissioner Of Income Tax-19 Mumbai v. M/S. Sarkar Builders

[2015] 7 S.C.R. 56 COMMISSIONER OF INCOME TAX-19 MUMBAI. \ M/S. SARKAR BUILDERS (Civil Appeal No. 44 76 Of 2015) MAY15,2015 [A. K. SIKRI AND R. F. NARIMAN, JJ.] Income Tax Act, 1961: s.8018(10) (as amended by c Finance No.2 Act, 2004 w.e.f. 1.4.2005- Deduction in case -of undertaking developing and building housing projects By Clause (d) inserted by amendment and made effective from 1.4.2005, it was stipulated that the built up area of shop and other commercial establishments in the housing projects D would not exceed 5% .'lf aggregate built up area of housing project or 2000 sq. feet whichever is less -Whether s.80/B(10)(d) applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005 -Held: This amendment is prospective and has come into effect E from 1. 4. 2005, therefore, the restriction on 4. 2005, therefore, the restriction on 2005, therefore, the restriction on extent of commercial area in housing project imposed w.e.f. 1.4.2005 would not apply to housing projects which had been sanctioned and started earlier even if they finished after 1.4.2005. E from 1. 4. 2005, therefore, the restriction on 4. 2005, therefore, the restriction on 2005, therefore, the restriction on extent of Dismissing the appeals, the Court HELD: 1. Prior to 01.04.2005, the developers/ assessees who had got their projects sanctioned from G the local authorities as 'housing projects', even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100% deduction of their income from such projects under Section 8018 of the Act. Their H projects were sanctioned much before 01.04.2005. As COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. SARKAR BUILDERS per the permissible commercial user on which"tlie project A was sanctioned, they started the projects and the date of commencing such projects is also before 01.04.2005. All these assessees were made known of the provision by which these projects are to be completed as those dates have been specified from time to time by B successive Finance Acts in the same provision Section 8018. In these cases, completion dates were after 01.04.2005. Once they arrange their affairs in this manner, the Revenue cannot deny the benefit of this section applying the principle of retroactivity even when the C provision has no retrospectivity. [Paras 7 and 12] [75-C-F] 2. The basic objective behind Section 8018(10) is to encourage developers to undertake housing projects D for weaker section of the society, inasmuch as to qualify for deduction under this provision, it is an essential condition that the residential unit be constructed on a maximum built up area of 1000 sq.ft. where such residential unit is situated within the cities of Delhi and E Mumbai or within 25 kms. from the municipal limits of these cities and 1500 sq.ft. at any other place: It is the cardinal principle of interpretation that a construction resulting in unreasonably harsh and absurd results must F be avoided. Clause (d) makes it clear that a housing project includes shops and commercial establishments also. But from the day the said provision was inserted, they wanted to limit the built up area of shops and establishments to 5% of the aggregate built up area or G 2000 sq.ft., whichever is less. However, the Legislature itself felt that this much commercial space would not meet the requirements of the residents. Therefore, in the year 2010, the Parliament has further amended this provision by providing that it should not exceed 3% of H ਮਈ 15, 2015 1.4.2005. 56 A the aggregate built up area of the housing project or 5000 sq.ft., whichever is higher. This is a significant modification making complete departure from the earlier yardstick. On the one hand, the permissible built up area of the shops and other commercial shops is increased B from 2000 sq.ft. to 5000 sq.ft. On the other hand, though the aggregate built up area for such shops and establishment is reduced from 5% to 3%, what is significant is that it permits the builders to have 5000 sq.ft. or 3% of the aggregate built up area, 'whichever is C higher'. In contrast, the provision earlier was 5% or 2000 sq.ft., 'whichever is less'. From this provision, therefor, it is clear that the housing project contemplated under sub-section (10) of Section 8018 includes commercial 0 [establishments ][or ][shops also. Now, by way ][of ][an ]amendment in the form of Clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not E retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 01.04.2005 and completed by the stipulated date, F though such stipulated date is after 01.04.2005. The assesees were entitled to the benefit of Section 8018(10). [Paras 20 and 23] [81-8-H; 82-A-E; 85-G] Mis. Reliance Jute and Industries Ltd. v. C.I. T, West Bengal, Calcutta 1980 (1) SCR 906 - Distinguished. Commissioneroflncome Tax, UP v. Mis. Shah Sadiq and Sons 1987 (2) SCR 942 : (1987) 3 SCC 516 -relied on. C.I. Tv. Brahma Associates 333 ITR 289; Commissioner of Income Tax I, Ahmedabad v. Gold Coin Health Food Private Limited 2008 (12) SCR 179: (2008) 9 SCC 622; The Karimtharuvi Tea Estate Ltd. v. The State of.Kera/a AIR 1966 SC 1385: 1966 SCR 93; Commissioner of Income Tax v. Shah Sadiq and Sons (1987) 166 ITR 102 (SC); Commissioner of Income Tax (Central)-/, New Delhi v. Vatika Township Private Limited (2015) 1 sec 1; (1980) 1sec139- referred to. Case Law Reference CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4476 of 2015. From the Judgment and Order dated 22.02.2011 of the High Court of Bombay in ITA No. 872 of 2010. ;>u WITH I .,.a " C.A.Nos.4477,4491,4485,4486,4479,4481,4487, 4490,4483,4482,4489,4492,4478,4484,4493,4488and 14480 of 2015. r S. Guru Krishna Kumar, Kavin Gulati, T. M. Singh, Rekha Pandey, D. L. Chidanand, Sadhana Sandhu, Gargi Khanna, Anil Katiyar, 8. V. Balaram Das, Rupesh Kumar, Arijit Prasad, SubhasAcharya, Kaustugh Shukla, Anita Sahni, SWA H A Qadri for the Appellant. J. D. Mistry, Rakesh Dwivedi, Kiran Suri, Prag Tripathi, Kunal Vajani, Pranaya Goyal, Bindi Girish Dave, Kirti R. Mishra, Dr. Vipin Gupta, Aparva Garg, S. J. Amith, Vikas Jain, B Salil Kapoor, Shubham Rastogi (For Kamal Mohan Gupta), Vinodh Kanna B., S. U. K. Sagar, Bina Madhavan, Praseena Elizabeth Joseph, Akanksha Mehra, Srividya K. Kaimal, Shrinjan Khosla, Swati Vellodi, Laksh Puri (For Lawyer S Knit & Co.), Rajat N., Pradeep Kumar Bakshi, Kushara Pandit, C Syed Shahid Hussain Rizvi for the Respondent. The Judgment of the Court was delivered by A. K. SIKRI, J. 1) Leave granted. 2) No doubt the assessees/respondents in all these Section: ISSUES appeals are different and even assessment years are different. But the question of law which is raised by the Income Tax Authorities (hereinafter referred to as the 'Revenue') is identical. The assessees are subject to the jurisdiction of the E different High Courts, all of whom had claimed the benefit of Section 801B of the Income Tax Act ('Act' for short), namely, deduction in respect of profits and gains on the ground that their cases were covered by sub-section (10) of Section 801B F which provides for deduction of 100% of profits in the case of an undertaking developing and building housing projects when such profits are derived in the previous year relevant to any assessment year from such housing projects, provided the conditions contained in the said sub-section are satisfied. High G Courts have taken the same view holding that these assessees would be entitled to the deduction under Section 801B(10) of the Act. We may also point out at this stage itself that though Section 801B has been on the statute book for quite some time, a new Section 801B had been introduced by the Finance Act, H 1999 w.e.f. 01.04.2000. All these cases are covered by the said Section, as introduced. However, insofar as sub-section A (10) is concerned, with which we are directly concerned, there have been amendments in that provision from time to time. We are concerned with the amendment to the said sub-section carried out by Finance No.2Act, 2004 w.e.f. 01.04.2005. In all these cases, though the housing projects were sanctioned B much before the said amendment but have been completed after 01.04.2005 when amended provision has come into operation. It is also not in dispute that the amendment is prospective in nature. Interestingly, when the housing project was approved by a local authority, which is the requirement C under sub-section (10) of Section 801B, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 0 01.04.2005 is not fulfilled. In this scenario, the question is as to whether the new conditions mentioned in the amended provision have also to be fulfilled only because the housing projects in question, though started before 01.04.2005, were completed after the said date. The question of law, that arises E for discussion that needs to be answered is thus common in all these appeals and can be formulated as under: "Whether Section 801B(1 O)(d) of the Income Tax Act, 1961' applies to a housing project approved before 31. 03 .2005 but completed on or after 01.04.2005?" 3) As pointed out above, sub-section (10) stipulates certain conditions which are to be satisfied in order to avail the benefit of the said provision. Further, it is also clear that the benefit is available fo those undertakings which are G developing and building 'housing projects' approved by a local authority. Thus, this Section is applicable in respect of housing projects and not commercial projects. At the same time, we are conscious of the fact that even in the housing projects, H 62 SUPREME COURT REPORTS [2015] 7 S.C.R. A there would be some area for commercial purposes as certain shc.ps and commercial establishments are needed even in a housing projects. That has been judicially recognised while interpreting the provision that existed before 01.04.2005 and there was no limit fixed in Section 8018(10) regarding the built- 8 up area to be used for commercial purpose in the said housing project. As would be noticed later, the extent to which such commercial area could be constructed was as per the local laws under which local authority gave the sanction to the housing project. However, vide clause (d),which was inserted C by the aforesaid amendment and made effective from 01.04.2005, it was stipulated that the built-up area of the shops and other commercial establishments in the housing projects would not exceed 5% of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less (there is a 0 further amendment whereby 5% is reduced to 3% and instead of the words "2000 sq. feet whichever is less" the words "5000 sq. feet, whichever is higher" have been substituted. However, we are not concerned with this amendment). E The question, thus, that arises for consideration is as to whether in respect of those housing projects which finished on or after 01.04.2005, though sanctioned and started much earlier, the aforesaid stipulation contained in clause (d) also F has to be satisfied. All the High Courts have held that since this amendment is prospective and .has come into effect from 01.~4.2005, this condition would not apply to those housing projects which had been sanctioned and started earlier even if they finished after01.04.2005._ G 4)As there is a commonality of issue and the judgments of the various High Courts have spoken in one voice which are questioned on identical grounds by the appellant Revenue, all these appeals were heard analogously and by this judgment, H we propose to answer the question of law involved and as formulated above in order to give quietus to this surging debate. COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. SARKAR BUILDERS (A. K. SIKRI, J.] 1 3331289