The Commissioner Of Income Tax-Ii v. M/S M.m. Park

kps IN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABAD INCOME TAX APPEAL NO.18 OF 2012 The Commissioner of Income Tax-II. ..Appellant -Versus- M/s M.M. Park. ..Respondent ........... Mr.D.V.Soman, for the Appellant/ Revenue.Mr.Subodh P. Shah, for the Respondent/ Assessee. ........... CORAM: A.V. NIRGUDE AND V. L. ACHLIYA, JJ. DATE :- 17[th] November, 2014 P.C.: 1This Appeal challenges the concurrent findings recorded by the Income Tax Commissioner (Appeals) and the Income Tax Appellate Tribunal holding that the Respondents/ Assessees are entitled to exemption in income tax in the profits derived from one of the housing project that they have developed at Jalgaon. The Assessment Year in question is 2002-2003. The relevant provision of the Income Tax Act, 1961 is Section 80IB(10) which was prevalent in the year 2001 when the project was completed and the income was derived. Section 80(IB)(10) (as it stood prior to 01.04.2005) reads as under:- “(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31[st] day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if, -- developing and building housing projects approved before the 31[st] day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any 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 development and construction of the housing project on or after the 1[st] day of October, 1998; (b)the project is on the size of a plot of land which has a minimum area of one acre; andminimum area of one acre; and (c)the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place.”thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place.” 2The project in question admittedly has some buildings of commercial nature, the percentage of which is about 5%. The project was approved by the Local Authority as a housing project. All other criteria mentioned in clauses (a), (b) and (c) of Section 80IB(10) of the Income Tax Act, 1961 as stood in the Assessment Year 2002-2003 are fulfilled. 3The Respondent took advantage of tax exemption as per the provision in force at the relevant time. Later on the assessment was reopened and the Income Tax Department questioned the entitlement of exemption obtained under Section 80IB(10) of the Income Tax Act, 1961. It was their case that since there are some shops which are constructed as part of the project, the provision in question will not apply for tax exemption. The Department also asserted that since the shops being constructed in the project, same can not be termed as “housing project” within the meaning of Section 80IB(10). In nut shell it is the contention of the Appellant that as the project of the Respondent comprises of residential construction as well as construction of shops, the Respondent was not entitled to claim exemption under the said provision of law. 4The issue raised in this Appeal that the term “housing project” as referred in Section 80IB(10) of the Income Tax Act, 1961 as it stood prior to amendment, restricts exclusively to “residential project” and it has no applicability to the “housing project” which comprises of residential as 4The issue raised in this Appeal that the term “housing project” as referred in Section 80IB(10) of the Income Tax Act, 1961 as it stood prior to amendment, restricts exclusively to “residential project” and it has no applicability to the “housing project” which comprises of residential as well as partially commercial construction, has been thoroughly considered by the Division Bench of this Court in Commissioner of Income Tax v/s Brahma Associates reported in 2011 Vol.113(2) Bom. L. R. 955. After considering the said provision as it stood prior to the amendment in the year 2005 and subsequent thereto, the Division Bench observed that the term “housing project” has not been defined under the Income Tax Act, 1961. In absence of word being defined under the said Act, the Division Bench has observed that the housing project as referred in the said provision is to be understood as “housing project” approved by the Local Authority. In paragraph 21 of the judgment the Division Bench has observed as under:- “21.Thus, on the date on which the legislature introduced 100 per cent deduction under the Income Tax Act, 1961 on the profits derived from housing projects approved by a Local Authority, it was known that the Local Authorities could approve the projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective Local Authority. In other words, it was known that the Local Authorities could approve a housing project without or with commercial user to the extent permitted under the Development Control Rules. If the legislature intended to restrict the benefit of deduction only to the projects approved exclusively for residential purposes, then it would have stated so. However, the legislature has provided that Section 80IB(10) deduction is available to all the housing projects approved by a Local Authority. Since the Local Authorities could approve a project to be a housing project with or without the commercial user, it is evident that the legislature intended to allow Section 80IB(10) deduction to all the housing projects approved by a Local Authority without or with commercial user to the extent permitted under the DC Rules.”100 per cent deduction under the Income Tax Act, 1961 on the profits derived from housing projects approved by a Local Authority, it was known that the Local Authorities could approve the projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective Local Authority. In other words, it was known that the Local Authorities could approve a housing project without or with commercial user to the extent permitted under the Development Control Rules. If the legislature intended to restrict the benefit of deduction only to the projects approved exclusively for residential purposes, then it would have stated so. However, the legislature has provided that Section 80IB(10) deduction is available to all the housing projects approved by a Local Authority. Since the Local Authorities could approve a project to be a housing project with or without the commercial user, it is evident that the legislature intended to allow Section 80IB(10) deduction to all the housing projects approved by a Local Authority without or with commercial user to the extent permitted under the DC Rules.” 5Although the learned counsel for the Appellant contended that the above referred judgment of Division Bench in Brahma Associate case is challenged before the Honourable Supreme Court, but he has fairly stated that up till now there is no stay granted in the Special Leave Petition. The judgment of the Division Bench reflects the logical conclusion on this issue. The discussion in paragraph 21 of the judgment clearly suggests that if the Building Bye-Laws allow construction of some shops in predominantly residential project, then the exemption should be made available to such projects. 5Although the learned counsel for the Appellant contended that the above referred judgment of Division Bench in Brahma Associate case is challenged before the Honourable Supreme Court, but he has fairly stated that up till now there is no stay granted in the Special Leave Petition. The judgment of the Division Bench reflects the logical conclusion on this issue. The discussion in paragraph 21 of the judgment clearly suggests that if the Building Bye-Laws allow construction of some shops in predominantly residential project, then the exemption should be made available to such projects. 6In view of the discussion made in the foregoing paragraphs we are of the view that the aforesaid decision of the Division Bench of this Court is squarely applicable to the facts of the present case. The issue raised in the present Appeal is concluded by the said decision of Division Bench of this Court. In view of this, no substantial question of law falls for our consideration in this Appeal. We are, therefore, not inclined to admit the Appeal. The Appeal stands dismissed, with no order as to costs. (V.L. ACHLIYA, J.) (A.V. NIRGUDE, J.)