2017 (4) TMI 530 - HC - Income Tax

Exemption under Section 80-IB - built, up area - Held that - As decided in Commissioner of Income Tax Vs. Anriya Project Management Services (P.) Ltd. 2012 (5) TMI 196 - KARNATAKA HIGH COURT the definition of built, up area inserted by Finance No. 2 of 2004 which name into of it of from 01.04.2005 is only prospective in nature. It has no application to the housing projects which were approved by the local authority prior to that date. Prior to 01.04.2005, in calculating the 1,500 sq. ft. of a residential unit, the area covered by a balcony was excluded. Therefore, the definition of built-up area which is now inserted has no applicable to constructions which were put up in accordance with the housing projects approved by the local authority prior to that date Submission of Revenue that Assessee sold residential units mentioning in sale deeds total area of flat which included area for balcony also, will have no relevance for question up for consideration, for the reason, that applicability of statutory provision has to be examined in the light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. Thus questions (i) and (ii) are answered in favour of Assessee for the reason that specifications of flats have been considered by Tribunal in the light of rules of local bodies which approved plan. There was no otherwise restriction available in Section 80-IB(10) in respect of projects approved before 01.04.2005. - Decided in favour of Assessee Built up area of shops and other commercial establishment - Held that - As considered applicability of amended provisions of Section 80-IB in the context whether subsequent amendment proposed to alter condition of Developer may cause a serious detriment in the process of construction and development activities. For example, if as per extent rules of local body, shops and commercial activities construction was permitted upto 10% and project was also sanctioned to Assessee allowing 10% area for commercial purposes, by applying amended provision which came into force on 01.04.2005, can it be said that Assessee has now to demolish extra coverage, meant for commercial purpose in order to bring its development activities within prescribed limits of new provision and to avail benefit under Section 80-IB(10), only because of the reason that project was not complete as on 01.04.2005. Court said that answer would have to be given in negative on the principle that planning as per law prevailing prior to 01.04.2005 has been observed and acted upon by Assessee. It has acquired vested right thereof which can not be taken away. Revenue authorities cannot be allowed to ask Assessee to do something which is almost impossible. Similar view was taken in another decision in Commissioner of Income Tax Vs. Veena Developers (2015 (5) TMI 193 - SUPREME COURT ). Thus, question (iv) answered against Revenue and in favour of Assessee. Deduction u/s 80IB (10) (a) - Held that - Looking to objective and purpose of conditions of completion of project and the fact that it is not a provision which came for the first time altogether into existence on 01.04.2005, we are inclined to follow Madhya Pradesh High Court s judgment in The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality (2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT ) and hold that Assessee in question was supposed to comply Section 80-IB(10)(a) as came to exist on amendment by Finance Act, 2004. - Decided in favour of revenue Judgments of earlier Assessment Years ought not have been followed blindly by Tribuna - Held that It is true that earlier judgment of Tribunal did not become final since Revenue preferred appeal in this Court but still applying rule of precedent in support of question of law, we follow the view already taken. We do not find any per se impropriety or lack of jurisdiction. Question, however, as to whether Assessee satisfied all conditions required for deduction under Section 80-IB(10) or not, has not been examined by Tribunal for the reason that it has proceeded with impression that entire amendment made by Finance Act, 2004 w.e.f. 01.04.2005 in Section 80-IB(10) would be prospective and, therefore, whether project of Assessee was complete or has obtained completion certificate and other relevant circumstances, we find, there is no discussion or finding recorded by Tribunal in all these appeals. Therefore, we leave aforesaid questions open at this stage, inasmuch in our view, it is appropriate that on these aspects, matter may be examined by Tribunal in the light of other questions answered above by this Court.

Summary

Issues Involved:
1. Built-up area calculation for Section 80-IB(10) deduction.
2. Completion of the housing project within the stipulated period.
3. Inclusion of commercial establishments within the housing project.
4. Applicability of amendments to Section 80-IB(10) retrospectively or prospectively.

Detailed Analysis:

Issue 1: Built-up Area Calculation for Section 80-IB(10) Deduction
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Questions (i) and (ii)
- Income Tax Appeal No. 16 of 2014: Question (ii)

Summary:
The court examined whether the "built-up area" should include the terrace/balcony for the purpose of Section 80-IB(10) deduction. The definition of "built-up area" was inserted w.e.f. 01.04.2005, which included the projections and balconies. However, for projects approved before this date, the court held that the definition is prospective and should not apply retroactively. The court cited various judgments, including *CIT Vs. Anriya Project Management Services (P.) Ltd.*, *CIT Vs. Brahma Associates*, and *CIT-19, Mumbai Vs. Sarkar Builders*, to support this view. Consequently, the court ruled that for projects approved before 01.04.2005, the built-up area should not include the terrace/balcony.

Conclusion:
Questions (i) and (ii) in Income Tax Appeal No. 9 of 2014 and Question (ii) in Income Tax Appeal No. 16 of 2014 were answered in favor of the Assessee.

Issue 2: Completion of the Housing Project within the Stipulated Period
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Question (iii)
- Income Tax Appeal No. 13 of 2017: Questions (iii), (iv), and (v)

Summary:
The court analyzed whether the Assessee complied with the requirement of completing the housing project within the specified period as per Section 80-IB(10)(a). The provision for completion was reintroduced w.e.f. 01.04.2005, and the court held that this requirement was not new but had been temporarily omitted between 01.04.2002 and 31.03.2005. The court cited the judgment in *The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality*, which emphasized that the completion certificate from the local authority before the cut-off date is mandatory. The court concluded that the Assessee must comply with the completion requirement as per the amended provision.

Conclusion:
Question (iii) in Income Tax Appeal No. 9 of 2014 and Questions (iii), (iv), and (v) in Income Tax Appeal No. 13 of 2017 were answered in favor of Revenue.

Issue 3: Inclusion of Commercial Establishments within the Housing Project
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Question (iv)

Summary:
The court examined whether the built-up area of shops and commercial establishments should be included within the housing project for Section 80-IB(10) deduction. The condition was inserted w.e.f. 01.04.2005, limiting commercial establishments to 5% of the aggregate built-up area or 2000 sq. ft., whichever is less. The court referred to *CIT-19, Mumbai Vs. Sarkar Builders* and *CIT Vs. Veena Developers*, which held that the amendment is prospective and not applicable to projects approved before 01.04.2005.

Conclusion:
Question (iv) in Income Tax Appeal No. 9 of 2014 was answered in favor of the Assessee.

Issue 4: Applicability of Amendments to Section 80-IB(10) Retrospectively or Prospectively
Relevant Questions:
- Income Tax Appeal No. 13 of 2017: Questions (i), (ii), and (vi)
- Income Tax Appeal No. 16 of 2014: Questions (i) and (iii)

Summary:
The court considered whether the amendments to Section 80-IB(10) made w.e.f. 01.04.2005 should apply retrospectively or prospectively. The court held that the amendments are prospective and cannot be applied retroactively to projects approved before the amendment date. The court emphasized the principle of certainty in tax laws and the need to avoid absurd results, as discussed in *CIT-19, Mumbai Vs. Sarkar Builders* and *CIT Vs. Veena Developers*.

Conclusion:
Questions (i), (ii), and (vi) in Income Tax Appeal No. 13 of 2017 and Questions (i) and (iii) in Income Tax Appeal No. 16 of 2014 were left open for the Tribunal to decide on remand.

Final Judgment:
The appeals were partly allowed. The Tribunal's judgments were set aside to the extent questions were answered in favor of Revenue, and the matter was remanded to the Tribunal to consider the compliance of Section 80-IB(10)(a) by the Assessee and determine eligibility for deduction under Section 80-IB(10). Each party was to bear its own costs.