Ita/13/2013 Of The Commissioner Of Income - Tax v. M/S. Mahaveer Marvel

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2 DAY OF SEPTEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.13/2013 BETWEEN: 1.THE COMMISSIONER OF INCOME-TAXC.R. BUILDING, QUEENS ROADC.R. BUILDING, QUEENS ROAD BANGALORE. 2.THE INCOME-TAX OFFICER,WARD-4(3), C.R. BUILDINGQUEENS ROAD, BANGALORE.WARD-4(3), C.R. BUILDINGQUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI.K.V.ARAVIND, ADV.,) AND: M/S. MAHAVEER MARVEL|NO.1, 24TH MAIN.MAHAVEER TOWERSJ P NAGAR, 6TH PHASEBANGALORE-5600 /8. .. RESPONDENT (BY SRI.A.SHANKAR SR. ADV. A/W_SRI.M.LAVA, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 31.08.2017 PASSED IN [TA|NO.154/BANG/2011 FOR THE ASSESSMENT YEARS 2007-08,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN.(1) ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED31.08.7012.PASSEDBY|THE|LIAT,BANGALOREIN|LIANO.154/BANG/2011 CONFIRMING THE ORDER OF THE APPELLATE|COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE|INCOME TAX OFFICER, WARD-4(3), BANGALORE. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax) Act, 1961 (hereinafter referred to as the Act for short) Nas been preferred by the revenue. Tne subject matterof the appeal pertains to the Assessment year 2007-08.The appeal was admitted by a bench of this Court videorder dated 23.01.2013 on the following substantialquestions of law:| (I)Whether the appellate authorities were|correct in holding that the assessee firmis eligible for deduction under Section|SOIB(10) of the Income-Tax Act despitethe fact that there was large. scaleviolationsand|deviations|to.thesanctioned plan of the local authority by|the assessee firm in carrying out the|“Housing Project” without appreciating| the fundamental! nature of the legis/aturefor providing such relief? (iI)Whether the appellate authorities were|correct in construing that deviations andviolations committed by the assessee.while undertaking tne housing project.and yet to be paid compounding fee for|regularizing the default is fairly enough|to claim the deduction under Section|SOIB(10)withoutappreciatingtheintended structure of the _ legislativprovisions of Section 80IB?_correct in construing that deviations andviolations committed by the assessee.while undertaking tne housing project.and yet to be paid compounding fee for|regularizing the default is fairly enough|to claim the deduction under Section|SOIB(10)withoutappreciatingtheintended structure of the _ legislativprovisions of Section 80IB?_ 2 |Facts leading to filing of this appeal brieflystated are that the assessee is a partnership firm, which had sold 66 flats. The net profit to the firm from theSale proceeds of 66 flats was to the extent ofRs.3,05,61,975/-. The assessee claimed whole of theaforesaid amount of profit of Rs.3,05,61,97/75/- adeduction under Section 80IB(10) of the Act anddeclared the income as ‘NIL’ for Assessment year 200/708. The case was selected for scrutiny and notices under 2 |Facts leading to filing of this appeal brieflystated are that the assessee is a partnership firm, which had sold 66 flats. The net profit to the firm from theSale proceeds of 66 flats was to the extent ofRs.3,05,61,975/-. The assessee claimed whole of theaforesaid amount of profit of Rs.3,05,61,97/75/- adeduction under Section 80IB(10) of the Act anddeclared the income as ‘NIL’ for Assessment year 200/708. The case was selected for scrutiny and notices under Section 143(2) and 143(1) of the Act were issued to theassessee. The Assessing Officer by an order dated29.12.7009 inter alia held that the assessee had notcomplied with the condition incorporated under Section80IB(10)(a) of the Act inasmuch as assessee has soldbuilt up area of 2,60,960./70 square feet, whereas, theproject was approved for 1,53,066 square feet andtherefore, the built up area was not in accordance withthe approved plan and therefore, the project put up bythe assessee was not approved by the local authorityand provisions of Section 80IB(10) of the Act are notapplicable and therefore, the claim of exemption underSection 80IB(10) of the Act was disallowed and theprofits earned from the project in question i.e.,Rs.3,05,61,9/70/- were treated as income and subjectedto levy of tax and interest.3.Being aggrieved, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by an order dated 10.11.2011 #$$Inter alia held that after tconstruction of residential apartments, a modifiedbuilding drawing was’ submitted, which was. dulapproved by Bruhat Bengaluru) Mahanagara Palike(BBMP). It was further found that subsequently theauthorities of BBMP instructed the building for issuanceof occupancy certificate and found that there is adeviation in the construction with reference to modifiedDullding plan, which was in the permissible limits as perrevised master plan and therefore, compounding feewas levied, which was paid by the assessee andpermission was granted to occupy the building forresidential purposes. It was also held that SectionSOIB(10) being beneficial provision should be liberallyconstrued and there was no justification in reducing thededuction claimed by the assessee. It was held that theproject was approved by tne loca! authority as a nousingproject and therefore, in view of Central Board of DirectTaxes (CBDT) Circular dated 04.05.2010, the assessee is entitled to benefit of exemption under Section80IB(10) of the Act. The revenue filed an appeal beforethe Income Tax Appellate Tribunal (hereinafter referredto as ‘the Tribunal’, for short). The Tribunal by an orderdated 31.08.2012 dismissed the appeal preferred by therevenue. In the aforesaid factual background, thisappeal has been filed. 4Learned counsel for the revenue submittedthat the mandatory conditions prescribed under Section80IB(10) of the Act have to be complied with in order toclaim the exemption under the aforesaid provision. It isfurther submitted that admittedly, the housing project inquestion was completed in violation of the sanction planand completion certificate was also not obtained. It isfurther pointed out that the Assessing Officer found thatexcess built up area was /0.50% and therefore, the.Assessing Officer rightly held that since, the constructionwas not put up as per the approved plan, therefore, theproject as built and completed by the assessee does not 4Learned counsel for the revenue submittedthat the mandatory conditions prescribed under Section80IB(10) of the Act have to be complied with in order toclaim the exemption under the aforesaid provision. It isfurther submitted that admittedly, the housing project inquestion was completed in violation of the sanction planand completion certificate was also not obtained. It isfurther pointed out that the Assessing Officer found thatexcess built up area was /0.50% and therefore, the.Assessing Officer rightly held that since, the constructionwas not put up as per the approved plan, therefore, theproject as built and completed by the assessee does not have an approval of the local authority. It is furthersubmitted that Commissioner of Income Tax (Appeals)grossly erred in not recording the findings of fact andproceeded to decide the appeal merely on the basis thatthe benefit of beneficial provision has to be extended. Itis also submitted that the Tribunal has failed to recordany finding whether completion certificate was obtained. —It is also argued that if a housing project is notcompleted as per the sanction plan, it ceases to be aproject under Section 801IB(10) of the Act. It is furtherSubmitted that beneficial provision cannot be interpretedliberally Dut has to be construed strictly. In support ofaforesaid submissions, reference has been made todecisions of Supreme Court in °COMMISSIONER OFINCOME-TAX-19, MUMBAI VS. SARKAR BUILDERS’,(2010) 57 TAXMANN.COM 313 (SC), ‘DEPUTYCOMMISSIONER OF INCOME-TAX VS. ACE MULTIAXES SYSTEMS LTD.’, (2018) 400 ITR 141 (SC)and|‘RAMNATH & CO. VS. COMMISSIONER OF INCOME- TAX’, (2020) 116 TAXMANN.COM 885 (SC)as well.as the form of completion certificate as prescribed underbye law 5.6.1 of the bye laws framed by the BBMP. 5.|On the other hand, learned Senior counsel forthe assessee submitted that the Assessing Officer haspassed an order solely on the ground that since, theassessee has not completed the project as approved bythe local authority, therefore, the project built andcompleted by the assessee does not Nave approval oflocal authority. It is also pointed out that there is nofinding in the order of the assessing authority withregard to issuance of the completion certificate andtherefore, the Commissioner of Income Tax (Appeals)did not have an occasion to consider the tissue ofcompletion certificate. It is further submitted that theform of completion certificate has to be filled in by thearchitect. It is also pointed out that no substantialquestions of law have been framed with regard tocompletion certificate and therefore, the issue with regard to completion of certificate does not arise forconsideration in this appeal. It is also argued that lawcontemplates modification of the building plan and theassessee had got the building plan modified and hadSubsequently paid the compounding fee and had alsoobtained the permission to occupy the building forresidential purposes. It is also pointed out thatOCCUDdaNCycertificateWaSissued|by BBMP|ON|25.04.2009. Learned Senior counsel for the assessee|has submitted that there is no requirement of obtainingcompletion certificate under the Bangalore DevelopmentAuthority (BDA) Act, Karnataka Municipal CorporationAct and under Karnataka Municipalities Act. Therefore,the revenue cannot insist on production of completioncertificate as the revenue cannot insist on assessee todo something, which is impossible in law. In support ofaforesaid submission, reliance has been placed ondivision|bench|decisionofthis.court.In‘COMMISSIONEROF|INCOME-TAX,CENTRAL| CIRCLE, BANGALORE VS. ITTINA PROPERTIES (P.)LTD,(2014)49TAXMANN.COM201(KARNATAKA).It is also urged that if there is any|violation in respect of the building plan, the prescribedauthority i.e., BBMP alone has the authority todeterminetheISSUE|ofviolation and|CO.take|consequentialaction.In|supportofaforesaidsubmission, reference has been made to a decision ofthe Supreme Court in|"MANASA HOUSING CO-OPERATIVE SOCIETY LTD. VS. MARIKELLAITIAH ORS.’, AIR 2006 KARNATAKA 273.It Is also-suDmitted tnat tne ratio laid down in tne case ofRamnath & Co. supra supports the case of the assessee. — 6.|We nave considered the SUDMISSIONS madeby learned counsel on both the sides and have perusedtne record. Before proceeding further, it is apposite totake note of Section 801B(10) of the Act, which reads asunder:| 80-IB. (10) The amount of deduction in the case of|an undertaking developing and building nousing|projects approved before the 31st day of March, 2008 by a local authority shall be hundred per|cent of the profits derived in the previous year|relevant to any assessment year from such)housing project if,—an undertaking developing and building nousing|projects approved before the 31st day of March, 2008 by a local authority shall be hundred per|cent of the profits derived in the previous year|relevant to any assessment year from such)housing project if,— (a)SUCN|undertaking hasCommenced|OF|commences development and construction of thehousing project on or after the ist day ofOctober,L9QS|andcompletesSUC)Nconstruction, —commences development and construction of thehousing project on or after the ist day ofOctober,L9QS|andcompletesSUC)Nconstruction, — (1) in a case where a housing project nas beenapproved by tne local authority before the1st day of April, 2004, on or before the 31st|day of March, 2008; approved by tne local authority before the1st day of April, 2004, on or before the 31st|day of March, 2008; (il) in a case where a housing project nas been,|or, IS approved by tne local authority on orafter the 1st day of April, 2004 but not later|than the 3ist day of March, 2005, withinfour years from the end of tne financial year|in wnicn the nousing project is approved bytne local authority; or, IS approved by tne local authority on orafter the 1st day of April, 2004 but not later|than the 3ist day of March, 2005, withinfour years from the end of tne financial year|in wnicn the nousing project is approved bytne local authority; (ill) in a case wnere a housing project has beenapproved by the local authority on or afterthe 1st day of April, 2005, within five yearsfrom the end of the financial year in whichtne housing project is approved by the localautnority.approved by the local authority on or afterthe 1st day of April, 2005, within five yearsfrom the end of the financial year in whichtne housing project is approved by the localautnority. Explanation.—For the purposes of this clause,—_ (i) In a case where the approval in respect of |tne housing project is obtained more thanonce, such nousing project snail be deemedto nave been approved on the date on whicnthe building plan of such housing project isfirst approved by the local authority; tne housing project is obtained more thanonce, such nousing project snail be deemedto nave been approved on the date on whicnthe building plan of such housing project isfirst approved by the local authority; (il) tne date of completion of construction of|tne housing project snalli be taken to be thedate on which the completion certificate intne housing project snalli be taken to be thedate on which the completion certificate in respect of such housing project is issued bytne local authority; Thus, it is evident that Section 80IB(10)(a) of the|Act not only mentions a particular date before housing (il) tne date of completion of construction of|tne housing project snalli be taken to be thedate on which the completion certificate intne housing project snalli be taken to be thedate on which the completion certificate in respect of such housing project is issued bytne local authority; Thus, it is evident that Section 80IB(10)(a) of the|Act not only mentions a particular date before housing project nas to be approved by the local authority puteven a date by which housing project has to becompleted. These dates have a specific purpose with aview to give time to the developers to arrange theiraffairs in such a manner that the housing project isstarted and finished within the dates stipulated inSection 80IB(10)(a) of the Act. The basic object ofSection 80IB(10) is to encourage developers of housingproject for weaker section of the society and in order toqualify for deduction under the provision the conditionsmentioned therein have to be fulfilled. JAt this stage, we may advert to the wellsettied legal principles with regard to interpretation oftaxing statutes. It is trite law that subject is not to betaxed without clear words for the purpose and also that every Act of Parliament must be read according tonatural construction of its word. The well establishedrule in the familiar words of Lord Wensleydale,reaffirmed by Lord Halsbury and Lord Simonds, is that °ifthe person sought to be taxed comes within the letter ofthe law he must be taxed, however, great the hardshipmay appear to the judicial mind to be. On the otherhand, if the Crown seeking to recover the tax, cannotbring the subject within the letter of the law, the subjectis free, however apparently within the spirit of law thecase might otherwise appear to be. In other words, ifthere be admissible in any statute, what is called aneguitable construction, certainly, such a construction Isnot admissible in a taxing statute where you can simplyadhere to the words of the statute. [See:PRINCIPLESOFSTATUTORYINTERPRETATION, JUSTICEG.P.SINGH, 14[Tr]EDITION, PAGE 8/79|. 8.|It is equally well settled legal proposition thatexemption is available on complying with certainconditions, those conditions have to be strictly compliedwith. [See:‘EAGLE FLASK INDUSTRIES LTD., VS.COMMISSIONER OF CENTRAL EXCISE’, (2004) 7SCC 377 AND ‘STATE OF JHARKHAND VS. ANBAYCEMENTS’, (2005) 1 SCC 368, ‘STATE OF BIHARVS. KALYANPUR CEMENTS LTD.’, (2010) 3 SCC 274ana‘DEPUTY COMMISSIONR OF INCOME TAX,|CIRCLE 11(1), BANGALORE VS. ACE MULTI AXESSYSTEMS LTD.', AIR 2017 SC 5660|. Tne constitutionbencn of the Supreme Court in.COMMISSIONER OF.CUSTOMS (IMPORT), MUMBAI VS. DILIP KUMARAND COMPANY AND ORS,nas nella tnat incentive|provision is subjected to strict interpretation and untilthe stage of finding out the eligibility to claim deduction,the ambit and scope of the provision for the purpose ofits applicability cannot be expanded or widened, butonce, eligibility is decided in favour of a person claiming such deduction, it could be construed liberally withregard to other requirements, which may be formal ordirectory in nature. The aforesaid decision was referredto with approval by the Supreme Court in Ramnath &Co. supra. 9 |In the backdrop of aforesaid well settled legalprinciples, we may advert to the issues arising out of thesubstantial questions of law in the facts of the case inhand. In the instant case, there is no dispute that theassessee has complied with the provisions of clauses (Db)to (f) of Section 80IB(10) of the Act. The only issue,which arises for consideration in this appeal is whetherthe assessee has complied with the requirementcontained in Section 80IB(10)(a) of the Act. InSubstance, the housing project is required to beapproved by the local authority. The Assessing Officerhas held that the construction of the project has beencarried out in violation of the sanction plan. Therefore,the project built and completed by the assessee does not have an approval of the local authority. TheCommissioner of Income Tax (Appeals) has in para 3.2and 3.3 has held as follows: not have an approval of the local authority. TheCommissioner of Income Tax (Appeals) has in para 3.2and 3.3 has held as follows: 537 A.planWassanctionedforconstruction OF|residentia]apartments consisting of stilt plus ground floor and 3upper floors at survey No.1 & others, KathaNo.54 in Kodichikkanahalli Village, BegurHobIii,BangaloreSouth.Talukvide[PNo.274/05-06dated01.08.7005.Subsequently, a modified building drawing>was submitted an the same was approved bythe BBMP._ 3.3 subsequently, the authorities of theBBMP inspected the building for issue of.occupancy certificate and it was observed thatthere was a deviation in construction withreference to the modified building plan, whichISwel]withinthepermissiblelimitofregularization as per tne revised Master Plan2015 with levy of compounding fee. Theappellant has paid the compounding fee andsubsequently, permission was granted to.occupy tne building for residential purposes. 10. The aforesaid finding of fact has beenaffirmed by the Tribunal and it has been held that theassessee has fulfilled the conditions mentioned inSection 80IB(10) of the Act. Thus, the aforesaid findingsof fact are bDased on meticulous appreciation of evidenceon record. The Bangalore Development Authority Act,Karnataka Municipal Corporation Act and KarnatakaMunicipalities Act do not contain any provision to obtaincompletion|certificateandtherefore,|ItWaSnotnecessary for the assessee to obtain any completioncertificate in the absence of any provisions in theaforesaid Acts. Thus, from the findings recorded by theCommissioner of Income Tax (Appeals) as well as theTribunal, it is evident that the project undertaken by theassessee was approved by the local authority andtherefore, it had complied with the conditions mentionedin Section 801B(10)(a) of the Act. In view of preceding analysis, the substantial| questions of law framed by this court are answered against the revenue and in favour of the assessee. In the result, the appeal fails and the same is) hereby dismissed. Sd/-—JUDGE.Sd/-—JUDGE.SS|