Effective From 01-04-2015?” v. Happy Home

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.968 OF 2016WITH INCOME TAX APPEAL NO.998 OF 2016 Pr. Commissioner of Income Tax-20… Appellant V/s. M/s Khyati Financial Services … Respondent --- Mr.Ashok Kotangle with Ms.Padma Divakar for the Appellant.Mr.Atul Jasani for the Respondent. --- CORAM : AKIL KURESHI AND B.P.COLABAWALLA, JJ. DATE : JANUARY 08, 2019. P.C.:- 1.These appeals are filed by revenue challenge a common judgment of Income Tax Appellate Tribunal and concerns thesame assessee. Following question was argued before us:- “Whether on the fact and in the circumstancesof the case and in law, the Tribunal was justifiedin holding that the Assessee is entitled fordeduction u/s 80IB of Rs.8,42,34,862/- forA.Y.2008-09 even though the commercial Built-up area exceeded 2000 sq.ft. while themaximum permissible commercial built-up areais only 2000 sq. ft., which is clearly applicablein terms of clause (d) of section 80IB(10) Priya Soparkar 28 itxa 968-16 and 30 itxa 998-16-o effective from 01-04-2015?” 2.Short question is whether the restriction of maximumpermissible unit area imposed for an assessee to claim deductionunder Section 80IB(10) of the Income Tax Act, 1961. By virtueof the amendment introduced on 1[st] April, 2005 could be appliedalso to those housing projects where permission fromdevelopment have been obtained long before the date of theamendment. 3.The revenue counsel relied on an order dated 20[th] February,2013 passed in Income tax Appeal No.1987 of 2011 in whichsuch a question has been admitted by the Court. The said appealwas also filed by the revenue to challenge the judgment ofIncome Tax Appellate Tribunal, which had liked in the presentcase, taken a view that such amended provision would not beapplicable to the housing project where the development ofpossession was granted earlier. Counsel for the assessee howeverpointed out that such an issue has been decided by this Court incase of Commissioner of Income Tax Vs. Happy Home Priya Soparkar 38 itxa 968-16 and 30 itxa 998-16-o Enterprises and anr.[1] hold that such modified requirement forclaiming deduction under Section 80IB(10) of the Act cannot beenforced against those assessees where the housing projectgranted development permission prior to such date. Followingportion of the judgment may be noted: “35. However, the provisions of section 80-IB(10) were substantially amended by way ofFinance (No.2) Act, 2004 w.e.f. 1st April, 2005.As can be noted from the amended provisions,there were several conditions that were imposedin the newly substituted section 80-IB(10) thatwere absent in the said section prior to itsamendment. One such condition inserted w.e.f.1st April, 2005 was clause(d) that put arestriction on the quantum of commercial areathat could be included in a housing project inorder to entitle the assessee to claim thededuction as set out in the said section. It ispertinent to note that in the appeals before us, itis an admitted fact that the housing projectswere approved prior to 31st March, 2005. InITXA No.308 of 2012, in fact, the project waseven completed prior to 31st March, 2005 andonly the profits were offered to tax in A.Y. 2005-06. We do not think that the Legislatureintended to give any retrospectivity to clause (d)of section 80-IB(10). This more so because it isclearly a condition that relates to and/or islinked with the approval and construction of thehousing project. At the time when the housingproject is approved by the local authority, itdecides, subject to its own rules and regulations,what quantum of commercial area is to be Priya Soparkar Priya Soparkar included in the said project. It is on this basisthat building plans are approved by the localauthority and construction is commenced andcompleted. It is very difficult, if not impossibleto change the building plans and / or alterconstruction midway, in order to comply withclause (d) of section 80-IB(10). It would behighly unfair to require an Assessee to complywith section 80-IB(10)(d) who has got hishousing project approved by the local authority,before 31st March, 2005 and has eithercompleted the same before the said date or evenshortly thereafter, merely because the Assesseehas offered its profits to tax in A.Y. 2005-2006or thereafter. Requiring the Assessee to complywith the condition set out in clause (d) of sub-section (10) of section 80-IB merely because hehas offered his profits to tax in A.Y. 2005-06 orthereafter, even though his housing project wasapproved before 31st March 2005, would berequiring the Assessee to virtually do a humanlyimpossible task. This, in our opinion, couldnever have been the intention of the Legislature.In fact, to our mind, it would run counter to thevery object for which these provisions wereintroduced, namely to tackle the shortage ofhousing in the country and encourageinvestment therein by private players. It istherefore clear that clause (d) of sub-section(10) of section 80-IB cannot have anyapplication to housing projects that areapproved before 31st March, 2005. The saidclause (d) being inextricably linked to the dateof approval of the housing project, it will haveto be held that the said clause operates onlyprospectively i.e. for housing projects approvedafter 1st April, 2005. This is notwithstanding thefact that the profits were offered to tax by theAssessee for the A.Y. 2005-06 or thereafter. Priya Soparkar 36. There is yet another reason for coming tothe aforesaid conclusion. Take a scenario wherean Assessee following the project completionmethod of accounting, has completed thehousing project approved by the local authoritycomplying with all the conditions as set out insection 80-IB(10) as it stood prior to 1st April,2005. If we were to accept the argument of theRevenue, then in that event, despite havingcompleted the entire construction prior to 1stApril, 2005 and complying with all theconditions of section 80-IB(10) as it stood then,the Assessee would be disentitled to the entirededuction claimed in respect of such housingproject merely because he offered his profits totax in the A.Y. 2005-06. In contrast, if the sameAssessee had followed the work-in-progressmethod of accounting, he would have beenentitled to the deduction under section 80-IB(10) upto the A.Y. 2004-05, and denied thesame from A.Y. 2005-06 and thereafter. It couldnever have been the intention of the Legislaturethat the deduction under section 80-IB(10)available to a particular Assessee would bedetermined on the basis of the accountingmethod followed. This, to our mind and asrightly submitted by Mr Mistry would lead tostartling results. We therefore have nohesitation in holding that section 80-IB(10)(d)is prospective in nature and can have noapplication to a housing project that is approvedbefore 31st March, 2005. As the deductionsought to be claimed under section 80-IB(10) isinseparably linked with the date of approval ofthe housing project, it would make no differenceif the construction of the said project wascompleted on or after 1st April, 2005 or that theprofits were offered to tax after 1st April, 2005i.e. in A.Y. 2005-06 or thereafter. We therefore Priya Soparkar Priya Soparkar find no substance in the argument of theRevenue that notwithstanding the fact that thehousing project was approved prior to 31[st]March 2005, if the construction was completedon or after 1st April, 2005 or if the profits arebrought to tax in the A.Y. 2005-06 or thereafter,the said housing project would have to complywith the provisions of clause (d) of section 80-IB(10). To our mind, we do not think that thecondition/restriction laid down in clause (d) ofsection 80-IB(10) has to be revisited and / orlooked at and complied with in the assessmentyear in which the profits are offered to tax bythe Assessee. When the Assessee claims adeduction under section 80-IB(10), the Assesseeis required to comply with such a condition onlyif it is on the statute-book on the date of theapproval of the housing project and it hasnothing to do with the year in which the profitsare brought to tax by the Assessee. We havecome to this conclusion only because we findthat clause (d) of section 80-IB(10) isinextricably linked to the date of the approval ofthe housing project and the subsequentdevelopment/construction of the same, and hasnothing to do with the profits derivedtherefrom. We may hasten to add that if aparticular condition is not inseperably linked tothe date of approval of the housing project,different considerations would arise. However,we are not called upon to decide any suchcondition and hence we are not laying downany general proposition of law, save and exceptthat clause (d) of section 80- IB(10) being acondition linked to the date of the approval ofthe housing project, would not apply to anyhousing project that was approved prior to 31stMarch, 2005 irrespective of the fact that theprofits of the said housing project are brought to Priya Soparkar tax after the said provision was brought intoforce.” We notice that Gujarat High Court in case of Maran Corporation 1 has also taken a similar view. In any case where issue has now been considered by the Supreme Court in case of Commissionerof Income-Tax Vs. Sarkar Builders[2] . In that view of the matterit would be worthwhile to admit these appeals since no questionof law can be stated to have arisen. Both the appeals aretherefore dismissed. (B.P.COLABAWALLA,J.) (AKIL KURESHI,J.)…. 1356 ITR 44 2(2015)375 ITR 392 (SC)