Iapl/284/2010 Of Commissioner Of Income Tax Ghaziabad v. M/S Shipra Estate Ltd

Case :- INCOME TAX APPEAL No. - 284 of 2010 Appellant :- Commissioner Of Income Tax, GhaziabadRespondent :- M/S Shipra Estate Ltd.Counsel for Appellant :- Praveen Kumar,Manu GhildyalCounsel for Respondent :- Swapnil Kumar,Trapti Gupta And Case :- INCOME TAX APPEAL No. - 270 of 2010 Appellant :- Commissioner Of Income Tax,GhaziabadRespondent :- M/S Shipra Estate Ltd.Counsel for Appellant :- Praveen Kumar,C.S.C. I.T.Counsel for Respondent :- Swapnil Kumar,Trapti Gupta And Case :- INCOME TAX APPEAL No. - 274 of 2010 Appellant :- Commissioner Of Income Tax,GhaziabadRespondent :- M/S Shipra Estate Ltd.Counsel for Appellant :- S.C.,Manu GhildyalCounsel for Respondent :- Praveen Kumar,Swapnil Kumar,Trapti Gupta Hon.Pankaj Mithal,J. Hon. Vinod Kumar Misra, J. Heard Sri Manu Ghildyal, learned counsel for the revenue and Sri SwapnilKumar assisted by Ms. Tripti Gupta for the assessee respondent. These are three connected appeals preferred by the Commissioner ofIncome Tax, Ghaziabad against the common order dated 30[th] October 2009 passedby the Income Tax Appellate Tribunal, New Delhi. The moot question of law arising in this appeal is:- “Whether on the facts and circumstances of the case, theITAT was legally correct in allowing deduction (s) underSection 80 I A (5) and 80 I B (10) of the Income TaxAct, 1961 when it was clearly established that theconstructions of the projects started before 1.10.1998.” The respondent assessee is a company engaged in building andconstruction activities. It undertook construction of two major complexes namelyM/S Shipra Rivera and M/S Shipra Sun City at Indirapuram. Each of the above complexes were sub-divided into small projects. TheShipra Rivera complex was divided into the following six projects:- 1) Bhagirathi Project; 2) Alaknanda Project; 3) Brahmaputra Project; 4) Caveri Project; 5) Amravati Project; and 6) Damodar Project. Similarly, Shipra Sun City Complex was also sub-divided into fiveprojects namely:- 1) Nilgiri Project; 2) Shivalik Project; 3) Sadpura Project; 4) Kanchenjunga Project; and 5) Aravali Project. The respondent assessee claimed deduction under Section 80 IA(4F) readwith Section 80 IA(5) and Section 80 IB (10) of the Act in respect of thefollowing four projects of the Shipra Riviera Complex :- 1) Amrawati Project ; 2) Brahmaputra Project; 3) Damodar Project; and 4) Caveri Project. It is contended that it had entered into an agreement with GhaziabadDevelopment Authority (in short GDA) on 12.12.1996 for constructions ofvarious flats in the said projects. The GDA approved the projects on 28.2.1998.The foundation was laid on 4.10.1998 and the construction of the projects startedin October 1998. The claim was disallowed by the Assessing Authority inter alia on one ofthe grounds that the development and construction work had commenced prior to1.10.1998. However, the tribunal by the impugned order has accepted the claim.Therefore, the revenue has preferred these appeals. The provision of Section 80 IA (4F) read with Section 80 IA(5) and 80 IB(10) of the Act clearly demonstrates that exemption in respect of profit derivedfrom the housing project is admissible subject to fulfilment of the following threeconditions:- 1) Required land area under which project is more than one acer; 2) Built up area of housing is not more than 1000 sq. feet; and 3) The development and construction of the housing projectcommences on or after 1.10.1998 and is completed before1.4.2004. commences on or after 1.10.1998 and is completed before1.4.2004. In the case at hand there is no dispute with regard to satisfaction of thefirst two conditions rather the dispute is only with regard to commencement of thedevelopment and construction of the project prior to 1.10.1998. The provision of Section 80 IA (4F) read with Section 80 IA(5) and 80 IB(10) of the Act clearly demonstrates that exemption in respect of profit derivedfrom the housing project is admissible subject to fulfilment of the following threeconditions:- 1) Required land area under which project is more than one acer; 2) Built up area of housing is not more than 1000 sq. feet; and 3) The development and construction of the housing projectcommences on or after 1.10.1998 and is completed before1.4.2004. commences on or after 1.10.1998 and is completed before1.4.2004. In the case at hand there is no dispute with regard to satisfaction of thefirst two conditions rather the dispute is only with regard to commencement of thedevelopment and construction of the project prior to 1.10.1998. The tribunal in allowing the claim of the assessee has held that as in all thefour projects work orders were issued subsequent to 1.10.1998, there is no reasonto assume that the development and construction of the projects started prior to1.10.1998 so as to deny the claim of deduction under Section 80 IA (4 F)/80 IB(10) of the Act. Section 80 IA (4F) of the Act which stood during the relevant assessmentyear reads as under :- “ 80IA(4F) This section applies to an undertaking, engaged indeveloping and building housing projects approved by a localauthority subject to the condition that the size of the plot of land has aminimum area of one acre, and the residential unit has a built up areanot exceeding one thousand square feet: developing and building housing projects approved by a localauthority subject to the condition that the size of the plot of land has aminimum area of one acre, and the residential unit has a built up areanot exceeding one thousand square feet: Provided that the undertaking commences development andconstruction of the housing project on or after the 1[st] day of October,1998 and completes the same before the 31[st] day of March, 2001.” construction of the housing project on or after the 1[st] day of October,1998 and completes the same before the 31[st] day of March, 2001.” The aforesaid provision in its proviso uses the expression “CommencesDevelopment and Construction of the Housing Project” on or after first day ofOctober 1998. A plain and simple reading of the aforesaid provision reveals that thebenefit under the aforesaid provision would be available if the undertakingCommences Development and Construction of the Housing Project on or before1[st] October 1998. The use of the words “Commences Development andConstruction” are material and relevant. The development of the project precedesconstructions of the project. The development and the construction of a projectcan not be dissected and divided. Thus, where the assessee undertakes levellingwork so as to develop the land to facilitate the construction of a building over it,the development and construction of the housing project commences with suchlevelling of the earth. Therefore when the expression used is “CommencesDevelopment and Construction of the Housing Project” the intention of thelegislature is clear that the development of the project and the construction whichfollows such development must start on or before the date specified even if eitherthe development or the construction starts before the specified date, the benefit under the aforesaid provisions would not be admissible. The evidence on record may prove that the foundation laying ceremony ofthe projects may have been performed on 30.9.1998 and actual construction mayhave started later on but the levelling of the earth in the project had started muchearlier. Thus, with the levelling of the earth, the development and construction ofthe project had commenced which was prior to 1[st] October 1998. under the aforesaid provisions would not be admissible. The evidence on record may prove that the foundation laying ceremony ofthe projects may have been performed on 30.9.1998 and actual construction mayhave started later on but the levelling of the earth in the project had started muchearlier. Thus, with the levelling of the earth, the development and construction ofthe project had commenced which was prior to 1[st] October 1998. In view of the fact that the development and construction of the housingproject are integral to each other and as the filling or levelling of the earth of theprojects which is part of development had commenced prior to 1.10.1998, itwould be deemed that the development and construction had commenced prior to1.10.1998. Thus, the respondent assessee failed to satisfy the third condition forgrant of benefit under Section 80 IA (4F) read with Section 80 IA (5) and 80 IB(10) of the Act. Accordingly, the tribunal was not justified in granting the benefitof Section 80 IA (4F) read with Section 80 IA (5) and 80 IB (10) of the Act. The question is answered in favour of the revenue and against theassessee. The appeals are allowed. SKS 2.1.2018