2025 (1) TMI 1127 - HC - Income Tax

Deduction u/s 80IB (10) - only requirement was that the construction of the housing project must be completed on or before 31 March 2008 - CBDT by the impugned notification dated 5 January 2011 which is a purported corrigendum to the notification dated 3 August 2010 restricted the benefit of the proviso to Section 80IB (10) only to projects approved on or after 1 April 2004 and before 31 March 2008. Whether the impugned notification dated 5 January 2011 styled as a corrigendum to the notification dated 3 August 2010 is ultra vires Section 80IB(10)? - HELD THAT - As on a comparison of the present and the earlier provisions in Section 80IB(10) it is apparent that there was no special benefit to housing projects carried out in accordance with the scheme framed by the Central or State Governments for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force where such schemes were to be notified by the CBDT in this behalf. The benefit to such notified schemes for reconstruction or redevelopment of existing buildings in areas declared to be slum areas was introduced only with effect from 1 April 2005 and not earlier. The proviso to clauses (a) and (b) of sub-section (10) of Section 80IB of the IT Act entered force on 1 April 2005. The principal notification however had notified the scheme with which the Petitioners are concerned only with effect from 3 August 2010. Therefore to align the principal notification with the date of coming into force of the proviso the impugned corrigendum dated 5 January 2011 came to be issued. The effect of the principal notification dated 3 August 2010 as corrected by the impugned notification dated 5 January 2011 is only to align the CBDT s notification with the proviso to Section 80IB (10) which was brought into force by legislature prospectively i.e. with effect from 1 April 2005. The provisions of 80IB (10) as they obtained before 1 April 2005 had made no special provisions regarding any slum redevelopment schemes. There is nothing in the Finance Act 2004 or the provisions introduced by the said act to suggest or imply legislative intention to grant any retrospective effect. Therefore the argument that the impugned notification is ultra vires cannot be sustained. In this case the legislature has expressly stated that the substituted Section 80-IB (10) would come into force from 01 April 2005. Because some of the clauses encompass or refer to past events that is not sufficient to hold that the amendment is retrospective. Mere reference to projects approved before 1 March 2004 in sub-clause (a) of Section 80 IB (10) cannot lead to the inference that the amendment is retrospective. We are satisfied that no case is made to declare the impugned notification ultra-vires or strike it down. As impugned notification was valid and that the petitioner was not entitled to the claimed deductions u/s 80IB(10) due to non-compliance with the notification s conditions.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the impugned notification dated 5 January 2011, styled as a corrigendum to the notification dated 3 August 2010, is ultra vires Section 80IB(10) of the Income Tax Act, 1961.
• Whether the Central Board of Direct Taxes (CBDT) exceeded its delegated authority by restricting the applicability of the proviso to Section 80IB(10) only to projects approved between 1 April 2004 and 31 March 2008.
• Whether the impugned notification should be quashed, allowing the petitioner to claim deductions under Section 80IB(10) without the restrictions imposed by the corrigendum.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Ultra Vires Nature of the Impugned Notification

• Relevant Legal Framework and Precedents: The legal framework involves Section 80IB(10) of the Income Tax Act, which provides deductions for profits derived from housing projects. The proviso to this section, effective from 1 April 2005, allows for special provisions concerning slum redevelopment projects. Relevant precedents include cases like Reliance Jute and Industries Limited vs. Commissioner of Income-Tax and CIT Vs Brahma Associates.
• Court's Interpretation and Reasoning: The court analyzed the legislative intent behind Section 80IB(10) and its proviso, noting that the proviso was introduced prospectively from 1 April 2005. The court emphasized that the legislature did not grant retrospective effect to the proviso, and thus, the CBDT's notification aligning with this timeframe was not ultra vires.
• Key Evidence and Findings: The court examined the text of the notifications and the legislative history of Section 80IB(10). It found that the impugned notification merely corrected the effective date of the principal notification to align with the legislative intent.
• Application of Law to Facts: The court applied the principle that statutes are generally prospective unless explicitly stated otherwise. It concluded that the CBDT's notification was consistent with the prospective application of the proviso to Section 80IB(10).
• Treatment of Competing Arguments: The petitioner's argument that the notification was ultra vires was countered by the respondent's position that the notification was a necessary correction. The court sided with the respondents, finding no overreach in the CBDT's actions.
• Conclusions: The court held that the impugned notification was not ultra vires and was a valid exercise of the CBDT's delegated authority.

Issue 2: Claim for Deductions under Section 80IB(10)

• Relevant Legal Framework and Precedents: The legal framework involves the eligibility criteria for claiming deductions under Section 80IB(10) and the conditions specified in the proviso. Precedents include CIT Vs Sarkar Builders, which clarified the prospective nature of amendments to Section 80IB(10).
• Court's Interpretation and Reasoning: The court reasoned that since the proviso was prospective, any claim for deductions must comply with the conditions set forth in the notification, which correctly reflected the legislative intent.
• Key Evidence and Findings: The court found that the petitioner's claim for deductions did not meet the criteria specified in the notification, as the projects were not approved within the stipulated timeframe.
• Application of Law to Facts: The court applied the law by examining the approval dates of the projects in question and confirmed that they fell outside the period specified in the notification.
• Treatment of Competing Arguments: The petitioner's argument for a broader interpretation of the proviso was rejected in favor of the respondent's argument that the notification correctly implemented the legislative changes.
• Conclusions: The court concluded that the petitioner was not entitled to the claimed deductions under Section 80IB(10) due to non-compliance with the notification's conditions.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The effect of the principal notification dated 3 August 2010, as corrected by the impugned notification dated 5 January 2011, is only to align the CBDT's notification with the proviso to Section 80IB (10), which was brought into force by legislature prospectively, i.e. with effect from 1 April 2005."
• Core Principles Established: The judgment reaffirms the principle that statutory provisions are generally prospective unless explicitly stated otherwise. It also clarifies the scope of delegated authority in issuing notifications that align with legislative intent.
• Final Determinations on Each Issue: The court dismissed the petitions, holding that the impugned notification was valid and that the petitioner was not entitled to the claimed deductions under Section 80IB(10) due to non-compliance with the notification's conditions.