Navratan Techbuild Private Ltd v. Commissioner Of Income Tax- 1Indore Mp

HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE BEFORE HON.SHRI JUSTICE SHANTANU KEMKAR &HON'BLE SHIR JUSTICE M.C.GARG.J.J. Review Petition no. 79/2014 Navratan Techbuild Private Ltd. Vs. Commissioner of Income Tax- 1Indore MP. Mr. P.M. Choudhary, learned counsel for the appellant. ____________________________________________________________________ O R D E R( Delivered on 14/03/2014 ) Per M.C. Garg, J. Present Review Petition has been filed by the petitioner who was appellant in I.T.A no. 83/2013 and was aggrieved of the judgment passed by the Income Tax Appellate Tribunal, Indore Bench dismissing their appeal vide order dated 30[th] July, 2013.2It is not disputed that the petitioner is a Private Limited Company engaged in the business of real estate and construction of residential / housing projects. They filed e-return for the assessment year 2008-09 declaring NIL income basically by claiming deduction of Rs. 13,37,31,420/- under section 80IB (10) of the Income Taxt Act 1961 ( in short “ the Act “ ). It is also not disputed that except for creating any infrastructural development in the area in question, residential flats were not constructed by the petitioner and residential plots were sold. 3The Assessing Officer did not agree with the petitioner Page no 2 that they were entitled to deduction as claimed under section 80IB (10) of the Act vide order dated 31[st] December, 2010 on the ground that petitioner was not entitled to claim deduction having not constructed residential flats on the plots in question. It was this order which was assailed before the CIT ( A ) where also, the petitioner did not meet with any success and the appeal filed before the CIT(A) was dismissed vide order dated 01[st] of August, 2012. It is thereafter, the petitioner approached the Income Tax Appellate Tribunal, Indore Bench where also the order of the Assessing officer and the CIT (A) were maintained and the second appeal filed before the Income Tax Appellate Tribunal was dismissed vide order Judgment dated 30[th] of July, 2013 holding that the petitioner was not entitled to claim deduction under section 80IB(10) of the Act. 4It was against that judgment, the petitioner approached this High Court which stands dismissed by this High Court vide judgment dated 27[th] January, 2014. 5The petitioner is seeking review of the aforesaid judgment passed by us primarily by stating that the appeal filed by them raises substantial question of law and this Court without framing substantial question of law involved in the appeal dismissed the appeal. It is submitted that it was necessary for this Court to have first frame the substantial question of law and then answer it. 6Some facts to which reference has been made to this Review Petition are reproduced hereunder for the sake of reference : 4It was against that judgment, the petitioner approached this High Court which stands dismissed by this High Court vide judgment dated 27[th] January, 2014. 5The petitioner is seeking review of the aforesaid judgment passed by us primarily by stating that the appeal filed by them raises substantial question of law and this Court without framing substantial question of law involved in the appeal dismissed the appeal. It is submitted that it was necessary for this Court to have first frame the substantial question of law and then answer it. 6Some facts to which reference has been made to this Review Petition are reproduced hereunder for the sake of reference : “That the petitioner is a Private Limited Company engaged in the business of Real Estate Development and construction of residential / housing projects. The company filed its return of income for AY 2008-09 electronically on 29[th] Sept, 2008 declaring its total income as NIL. While filing the said return, th80IB ( 10) of the Income Tax Act, 1961, in respect of the Income derived by the company from the eligible housing project of Omaxe City Indore at village Mayakhedi, Dist Indore. The assessee had undertaken the development and construction of the housing project at Indore in collaboration with M/s Omaxe Ltd and Shradha Buildcon Pvt ltd. on an area of land admeasuring 36.074 Hectare i.e. 89.14 acre. The housing project undertaken by the petitioner company consisted of development of housing sites as well as development and construction of the residential units. Since the assessee company was following percentage completion method of accounting, revenue was recognized only on sale of housing sites during the impugned assessment year. Since according to petitioner, it satisfied all the conditions of section 80IB (10) of the Act, it was eligible for deduction under that section. The petitioner claimed that the petitioner was eligible for deduction in respect of the profits derived on the activity of development and construction of the housing sites as also on the constructions of the residential units “. Page no 3 7It is not the case of the petitioner that they constructed residential houses which were necessary for claiming deduction under section 80IB (10) of the Act. The said section is reproduced hereunder for the sake of reference : “ Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. ------------ [(10) The amount of deduction in the case of an undertaking developing and building housing 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) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; ------------ [(10) The amount of deduction in the case of an undertaking developing and building housing 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) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, but not later than the 31[st] day of March, 2005 within four years from the end of the financial year in which the housing project is approved by the local authority. (iii) In a case where a housing project has been approved by the local authority on or after the 1[st] day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation.—For the purposes of this clause,— (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher.] (e) not more than one residential unit in the housing project is allotted to any person not being an individual and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons namely - (i)The individual or the spouse or the minor children of such individual (ii)The Hindu divided family in which such individual is the karta. (iii)any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explanation – for the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person ( including the Central or State Government ) .................... (14) For the purposes of this section,—[(a) “built-up area” means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;] Page no 6 (iii)any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explanation – for the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person ( including the Central or State Government ) .................... (14) For the purposes of this section,—[(a) “built-up area” means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;] Page no 6 8The Assessing Officer taking note of the provisions contained under section 80IB (10) of the Act held that the said section confirms 100% tax deduction only in respect to profit derived from the housing project undertaken by the assessee subject to following conditions . “ a)Development and construction of the housing project must commence on or after 01[st]October, 1998 and such construction must be completed as under : (i)In case where the housing project is approved before 01[st] April, 2004, on or before 31[st ]March, 2008. (ii)In case where the housing project is approved between 01[st] of April, 2004 and 31[st ]March, 2005, within 4 years from the end of the financial year in which the project is approved. (iii)In case, where the housing project is approved after 01[st] April, 2005, within 5 years from the end of the relevant financial year in which housing project is approved. (b)The housing project must be on the size of a plot of one acre or more (c)The residential units in the project should have maximum built up area of 1000 sq. ft in respect of projects in Delhi, Mumbai and within 25 kms thereof, and 1500 sq ft at other places. (d)The built up area of shops and other commercial shops included in the housing project should not exceed 3 % of the aggregate built up area of the housing project or 5000 sq ft. whichever is more. Prior to amendment, by the Finance Act, 2010, w.e.f. 1.4.2010, the condition was that the built up area of shops and other commercial establishments should not exceed 5 % of the aggregate built up area or 2000 sq ft whichever is less. 9It is not in dispute that the aforesaid conditions with respect to raising residential flats in terms of the aforesaid section were not complied with by the petitioner. What they did, only Page no 8 raised infrastructural facilities i.e. building of roads etc and not raised residential houses, in as much as, admittedly they sold the residential plots inspite of constructing residential houses. It was in these circumstances, the Assessing Officer held that since the petitioner did not comply with the conditions qualifying them to claim exemption, rejected their plea of exemption. It was this order, which was upheld by CIT(A) as well as by the Income Tax Appellate Tribunal in second appeal. 10The submissions made before us by the petitioner was that since they had carried out infrastructural development, that question ought to have been considered by framing the substantial question of law, that even carrying the infrastructural development could also be a ground for claiming exemption, but this ground is not tenable in law, because bare perusal of section 80IB (10) of the Act on the basis of which exemption was sought, clearly goes to show that what was required, was completion of the residential units, which admittedly has not been done in this case. 11This was consistent view taken not only by the Assessing Officer, but also by CIT(A) and then by the Income Tax Appellate Tribunal. 10The submissions made before us by the petitioner was that since they had carried out infrastructural development, that question ought to have been considered by framing the substantial question of law, that even carrying the infrastructural development could also be a ground for claiming exemption, but this ground is not tenable in law, because bare perusal of section 80IB (10) of the Act on the basis of which exemption was sought, clearly goes to show that what was required, was completion of the residential units, which admittedly has not been done in this case. 11This was consistent view taken not only by the Assessing Officer, but also by CIT(A) and then by the Income Tax Appellate Tribunal. 12In view of the aforesaid findings that no substantial question of law was involved in this case, we dismissed the appeal filed by the appellant. Paras 15 and 16 of our judgment are reproduced hereunder for the sake of reference : 15/In this case, the grant of permission with respect to the aforesaid project which would have made the appellant eligible for exemption, requires not only development of the residential plots, but also construction of the plots which admittedly was not done. Construction of residential plots or construction of some plots later on would not qualify the appellant for exemption. Legal position has been clearly understood and complied by the Appellate Authority in the impugned judgment, in as much as it has been referred that reading of sub-section 1 of section 80IB(10) of the Act is clear that deduction was subject to the condition of undertaking, condition of undertaking development and construction of the residential project, thus, the construction and development of the housing project was sine qua non for claim of deduction under section 80IB(10) of the Act, besides fulfillment of other conditions. The Tribunal has rightly observed that in the instant case, it is undisputed that the assessee has just developed the plots and sold them. No construction activity was undertaken during the relevant year and therefore, it was held that the assessee was not liable for claim of deduction. We have also taken note of the relevant provisions of the statute in para 9 of the judgment. Page no 9 16/Consideringtheaforesaid enactment and the judgment of the Tribunal, we find that in this case, legal issues were clearly understood by the Tribunal and it is not the case where any interpretation of the law is required or needs any clarification at this level. Hence we are of the considered view that in this case, there is no substantial questions of law raised by the appellant which requires admission of the appeal filed by the appellant. Consequently, present appeal filed by the appellant is dismissed. 13 Learned counsel for the petitioner seeking review of the impugned judgment has relied upon the following judgments. a)M. Janardhana Rao Vs. Joint Commissionerof Income Tax( Civil Appeal no. 4232 to 4242 & 5322 of 2003 and 755 to 766 of 2005 dated 28[th] of January, 2005 ) reported in273 ITR 50 (SC )of Income Tax( Civil Appeal no. 4232 to 4242 & 5322 of 2003 and 755 to 766 of 2005 dated 28[th] of January, 2005 ) reported in273 ITR 50 (SC ) b)Commissioner of Income Tax Vs. Ajay VijayTraders( Civil Appeal nos. 872 to 877 of 2001 dated 25[th] of January, 2001 ) 248 ITR 100(SC ) Traders( Civil Appeal nos. 872 to 877 of 2001 dated 25[th] of January, 2001 ) 248 ITR 100(SC ) c)Commissioner of Sales Tax, M.P Vs.Hukumchand Mill, Indorereported in (2004)3 STJ 700 (MP (FB ) 14In the judgment delivered in the case of M.Janardhana Rao( Supra ), the Hon'ble Apex Court discussed the scope and procedure of section 260-A of the Income Tax Act. Observations made in that judgment is as follows : b)Commissioner of Income Tax Vs. Ajay VijayTraders( Civil Appeal nos. 872 to 877 of 2001 dated 25[th] of January, 2001 ) 248 ITR 100(SC ) Traders( Civil Appeal nos. 872 to 877 of 2001 dated 25[th] of January, 2001 ) 248 ITR 100(SC ) c)Commissioner of Sales Tax, M.P Vs.Hukumchand Mill, Indorereported in (2004)3 STJ 700 (MP (FB ) 14In the judgment delivered in the case of M.Janardhana Rao( Supra ), the Hon'ble Apex Court discussed the scope and procedure of section 260-A of the Income Tax Act. Observations made in that judgment is as follows : “ On an appeal under section 260-A, it is essential for the High Court to first formulate the substantial question of law and thereafter proceed in the matter; High Court having not formulated any substantial question of law at the time of admission of the appeal and formulated the question subsequently after conclusion of arguments for the purpose of adjudication the impugned judgment is set aside and the matter is remitted to the High Court to deal with the same afresh keeping in view the prescriptions of section 260-A. 15In the case of Commissioner of Income Tax Vs. Ajay Vijay Traders( supra ), the Hon'ble Apex Court, considering the scope of appeal which requires assessment of trust under section 161(1A) of the Act has held as under : “ After hearing the counsel for the parties, we are of the opinion that the High Court should have admitted the appeals under section 260-A of the IT Act, 1961 and decided the cases on merit. We, accordingly, allow the appeals, set aside the judgments of the High Court and restore the appeals filed by the appellant on the board of the High Court. We make it clear that we are not expressing any opinion on the merits of the these cases “. 16In the case of Commissioner of Sales Tax, M.P Vs.Hukumchand Mill, Indore( supra), Hon'ble Apex Court has held that 9. For the first time this question had cropped up before a Bench consisting of D.M. Chandrashekhar and M. Santosh, JJ. of Mysore High Court, AIR 1972 Mysore 44. After noticing divergent views of various High Courts and following the test laid down by Rajagopala Ayyangar, J. in M/s. Thungabhadra (supra), it was held that Article 141 of the Constitution of India provide that law declared by the Supreme Court is binding on all Courts within the territory of India. Hence where there is a decision of Supreme Court bearing on a point and where a Court has taken a view on that point which is inconsistent with the decision of the Supreme Court, no elaborate arguments are required to point out such an apparent error on the face of the record. Following decision of Federal Court in Jamna Kuer v. Lal Bahadur, AIR 1950 FC 131, it was further held by the Mysore High Court Division Bench, that the question as to how the error apparent on the face of the record occurred is of no relevance for the purpose of review and that it is immaterial whether such error occurred due to Counsel's mistake or had crept in by reason of oversight on the part of the Court. The view taken by the Mysore Division Bench has been accepted by the Full Bench of Himachal Pradesh, AIR 1981 HP 1. The Full Bench formulated two question for the decision. First question was whether any subsequent decision of the Supreme Court or Larger Bench taking a different or contrary view on a point of law is good ground for review. Presently we are not concerned with the first question which was answered in negative but are more concerned with second question. The second question was whether taking a view on a point while pronouncing decision by the Court, contrary to the existing decision of the Supreme Court or High Court is good ground for review. While dealing with second question, the Full Bench in Paragraphs 15 and 16 held as under :-- "15. The second part of the question relates to a situation where a Court has failed to notice an existing contrary decision of the High Court or the Supreme Court on a point covered by its judgment. Now failure to notice a decision on a question of law of the Supreme Court, which is the law of the land under Article 141 of the Constitution, is not the same thing as failure to notice a binding decision of the High Court. So we would divide the question into two parts : (a) failure to notice a decision of the Supreme Court; (b) failure to notice a binding decision of the High Court. 16. Failure to notice an existing decision of the Supreme Court on question of law results in not applying the law which should have been applied. Therefore, a contrary decision would amount to a mistake or error apparent on the face of the record. The error would be obvious and no elaboratereasoningwouldbe necessary to find it." 10. We are in respectful agreement with the views expressed by Mysore and Himachal Pradesh High Court. All Courts in India are bound to follow the decision of the Supreme Court and the law laid down by the Supreme Court is binding on all Courts and Tribunals. When some principle of law has been laid down by the Supreme Court, it is the duty of the High Court or Subordinate Courts to follow the decision of the Supreme Court and to ignore the well settled law by a judicial pronouncement of the Supreme Court and to pass order contrary to it would be gross impropriety. It amounts to 'judicial adventurism' as has been held by the Supreme Court at page 462 in Dwarikesh Sugar Industries Ltd. v.Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450. 17To appreciate the judgment relied upon by the petitioner, we are required to look into the provisions contained under section 260-A of the Act, which reads as under : 260A. Appeal to High Court.- (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [ before the date of establishment of the National Tax Tribunal], if the High Court issatisfied that the case involves asubstantial question of law. (2) The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be— (a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Chief CommissionerorCommissioner; (b) ------- (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period. (3) Where the High Court is satisfiedthat a substantial question of law isinvolved in any case, it shall formulate thatquestion. (4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question : Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which— (a) has not been determined by the Appellate Tribunal; or Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which— (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in thisAct, the provisions of the Code of CivilProcedure, 1908 (5 of 1908), relating toappeals to the High Court shall, as far asmay be, apply in the case of appeals underthis section. Applying the aforesaid principle to the facts of this Page no 14 case, we notice that the controversy raised by the petitioner was to submit that even raising infrastructural development entitled them to deduction under section 80IB(10) of the Act which is not sustainable by bare reading of this section, in as much as the deduction was permissible only subject to compliance of the following conditions. “ a)Development and construction of the housing project must commence on or after 01[st] October, 1998 and such construction must be completed as under : (i)In case where the housing project is approved before 01[st] April, 2004, on or before 31[st ]March, 2008. (ii)In case where the housing project is approved between 01[st] of April, 2004 and 31[st ]March, 2005, within 4 years from the end of the financial year in which the project is approved. (iii)In case, where the housing project is approved after 01[st] April, 2005, within 5 years from the end of the relevant financial year in which housing project is approved. (b)The housing project must be on the size of a plot of one acre or more (c)The residential units in the project should have maximum built up area of 1000 sq. ft in respect of projects in Delhi, Mumbai and within 25 kms thereof, and 1500 sq ft at other places. (d)The built up area of shops and other commercial shops included in the housing project should not exceed 3 % of the aggregate built up area of the housing project or 5000 sq ft. whichever is more. Prior to amendment, by the Finance Act, 2010, w.e.f. 1.4.2010, the condition was that the built up area of shops and other commercial establishments should not exceed 5 % of the aggregate built up area or 2000 sq ft whichever is less. Page no 15 19Admittedly, in this case, petitioner/ appellant having not constructed residential flats and as such barely raising infrastructural facilities would not raise any substantial question of law requiring adjudication by this Court. This is more so because in the facts of this case, the Assessing Officer, the Commissioner of Income Tax as well as the Income Tax Appellate Tribunal took a consistent view that in this case, the petitioner having sold the plots instead of constructing the residential houses which was essential for the purpose of claiming deduction, was not entitled to deduction. 20Bare perusal of section 260-A of the Act as quoted above clearly goes to show that appeal before the High Court is maintainable with respect to any judgment where the High Court is satisfied that the case involves the substantial question of law. Sub-section 3 of the aforesaid provision also emphasizes the aforesaid point because what the aforesaid Sub-section 3 says that only the High Court is satisfied that the substantial question of law was involved in any case, then only the High Court was required to formulate the same and then answer it. 20Bare perusal of section 260-A of the Act as quoted above clearly goes to show that appeal before the High Court is maintainable with respect to any judgment where the High Court is satisfied that the case involves the substantial question of law. Sub-section 3 of the aforesaid provision also emphasizes the aforesaid point because what the aforesaid Sub-section 3 says that only the High Court is satisfied that the substantial question of law was involved in any case, then only the High Court was required to formulate the same and then answer it. 21Perusal of the scheme of aforesaid section of the Income Tax Act leaves no room for doubt that if the appeal before the High Court does not involve any substantial question of law or that High Court is not satisfied that the appeal involves any substantial question of law, then there is no necessity for the High Court to frame substantial question of law and to answer the same thereafter. 22Basic submission of learned counsel for the petitioner is that in this case since the infrastructural development had been done by the petitioner, that also permitted deduction under the provisions contained under section 80IB (10) of the Act, which to our view is not tenable since the entire controversy raised by the petitioner was factual in nature and does not contain any legal issue. We dismissed the appeal because we are of the considered view and are still of the considered view that in this case, appeal filed by the appellant / petitioner did not raise any substantial question of law and consequently, the issue of framing of substantial question of law did not arise. 23In view of the aforesaid observations, we dismiss the present Review Petition with costs of Rs.50,000/-. C c as per rules. ( SHANTANU KEMKAR ) JUDGE ( M.C. GARG ) JUDGE