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TMI Blog2007 (2) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... , we decide this issue in favour of the assessee. The provisions of s. 80-IB(10) are very clear. The three conditions laid down in the provisions are-(1) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998; (2) the project is on the size of a plot of land which has a minimum area of one acre; and (3) 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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Here the assessee has complied with all the three conditions as is apparent from the orders of the lower authorities. The assessee has used 9.31 per cent of the total construction area for commercial construction. The ld AR of the assessee has already raised alternative plea in this regard that the deduction u/s 80IB(10) on the residential ,units constructed by the assessee be given on pro rata basis. Here, we agree with the plea taken by the assessee and accordingly we direct the AO to allow the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IB(10) and such restrictions with retrospective effect imposed only by Finance Act, 2004 w.e.f. asst. yr. 2005-06 and allowed the claim of deduction under s. 80-IB of the appellant. (iii) Without prejudice to the above ground, the learned CIT(A) erred in not allowing the deduction under s. 80-IB on pro rata basis ignoring the submissions of the appellant. These grounds are common in both the appeals. 5. The briefly stated facts are that in these two years, the assessee filed return of income claiming deduction under s. 80-IB(10) in respect of project called Raagamalika Phase-I and Raagamalika Phase-II respectively. In this case, a survey operation was carried out under s. 133A of the Act on 26th Sept., 2005 to verify the claim of deduction under s. 80-IB(10) of the Act. During the course of survey, the AO noticed various details. Along with this, a statement was recorded from the managing director of the assessee company, Shri P. Suresh. The AO during the course of assessment proceedings, asked the assessee regarding area constructed in these two projects i.e. the extent of commercial area built as well as the residential units constructed. The AO has gone through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er's wife and one Shri Rajaji and his wife. Though, Shri Rajaji is not related, he is one of the directors of the company. 3. Extent of area exploited for commercial purposes: Even though s. 80-IB was amended w.e.f. the asst. yr. 2005-06 permitting commercial area to the extent that the built-up area of the shops and other commercial establishments does not exceed 2,000 sq. ft. Even for argument sake, if this yardstick is applied to the assessee's case, the claim of deduction needs to be disallowed, since the built-up area far exceeds the permitted area as per the amended provisions by as much as 7,790 sq. ft., that is almost four times. 6. After that, the AO had given an opportunity to the assessee to controvert the same. The assessee pleaded that w.e.f. 1st April, 2005, an amendment has been brought out by the Finance (No. 2) Act, 2004 and the same provided cl. (d) of s. 80-IB(10), where restriction is put regarding the maximum commercial area to be built-up in view of this clause. Before the AO, it was pleaded that this clause was only brought out w.e.f. 1 st April, 2005 and the AO considered this plea of the assessee. The assessee also pleaded that the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee company and his relatives has purchased the said area. Hence, inasmuch as the provision governing the claim of deduction under s. 80-IB does not permit any commercial area, that too exceeding 2,000 sq. ft, the assessee's claim of deduction needs to be disallowed. When the statute gives total exemption from tax of the profits generated through certain ventures and also prescribes certain restrictions for compliance, and if the assessee wanted to take advantage of the same he must abide by the same in strict compliance thereof. Therefore, the assessee did not comply with the provisions of the Act so as to be eligible for the claim of deduction under s. 80-IB. Accordingly, the claim of deduction under s. 80-IB of Rs. l.31,5S,397 in respect of Raagamalika Phase I is disallowed. Aggrieved, the assessee preferred appeal before the CIT(A). 8. Before the CIT(A), the assessee reiterated same submissions. The CIT(A) more or less confirmed the action of the AO in paras 4 and 4.1 of his order which reads as under: 4. I have carefully examined the detailed reasons given by the AO in the assessment orders and various submissions of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be allowed to an assessee who does not fulfil all the conditions prescribed in the said section. Construction of houses for the public at large in accordance with the approved plans is one of the important conditions contained in the said section. Furthermore, construction of 100 per cent residential area in the said projects is an implied condition for availing 100 per cent deduction under s. 80-IA since no flexibility was provided in the said section till asst. yr. 2004-05. I fully agree with the contentions of the learned Authorised Representative that cl. (d) of s. 80-IA(10) is not retrospective in nature. Furthermore, in view of decision of Supreme Court in the case of Varas International, that amendment cannot be applied retrospectively also. In view of this, the CIT(A) confirmed the action of the AO and rejected the plea of the assessee. Aggrieved, the assessee came in appeal before us. 9. In view of the facts of the case and arguments from both the sides as well as the material placed before us, we have come to the conclusion that the following two issues are emerging for our decision: (1) whether the amendment brought out by the Finance (No. 2) Act, 2004 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TION OF HOUSING Liberalisation of tax holiday to approved housing projects-Under s. 80-IA of the IT Act, profits of approved housing projects where the development and construction commences on or after 1st Oct., 1995 and is completed by 31st March, 2001 are fully deductible. The conditions necessary for claiming the benefit are that the approved housing project should be on minimum area of one acre and should have dwelling units with a maximum built-up area of 1,000 sq. ft. It is proposed to modify the existing benefits to provide that in areas other than falling in and within 25 kms. from the municipal limits of Delhi and Mumbai, the built-up area of dwelling units may be up to a maximum limit of 1,500 sq. ft. instead of 1,000 sq. ft. at present to make them entitled for benefit. The built-up area for areas falling in Delhi and Mumbai and within 25 kms. of the municipal limits of both, however, shall remain the same. The proposed amendment will take effect from 1st April, 2000, and will, accordingly, apply in relation to the asst. yr. 2000-01 and subsequent years. 12. In order to be eligible undertaking, developing and building housing projects and for claiming deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Clauses (c) and (d) as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 reads as under: (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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) (w.e.f. 1st April, 2005) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less. 14. Prior to its substitution by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005, sub-s. (10) as amended by the Finance Act, 2000 w.e.f. 1st April, 2001 and Finance Act, 2003 w.e.f. 1st April, 2002 reads as under: (10) The amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st Oct., 1998 and completes the construction within four years, from the end of the financial year in which the housing project is approved by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre except in the case of 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, 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 cities 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 five per cent of the aggregate built-up area of housing project or two thousand square feet, whichever is less. It is further proposed to insert an Explanation in cl. (a) of the proposed sub-s. (10) so as to provide that the date of approval shall be the date on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project or 2,000 sq. ft., whichever is less. With a view to encourage the redevelopment of slum dwellings, it is proposed to relax the condition of minimum plot size of one acre in the case of 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 and notified by the Board in this behalf. It is also proposed to define the expression built-up area to mean 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 not including the common areas shared with other residential units. These amendments will take effect from 1st April, 2005 and will, accordingly, apply in relation to the asst. yr. 2005-06 and subsequent years. 16. Even before us, the learned Authorised Representative for the assessee has contended that cl. (d) of s. 80-IB(10) was brought on the statute book w.e.f. 1st April, 2005 relevant to the asst. yrs. 2005-06 and subsequent years. In view of this, it was argued that cl. (d) of s. 80-IB(10) has been incorporated clearly w.e.f. 1st April, 2005 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IB(10) are very clear. The three conditions laid down in the provisions are-(1) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998; (2) the project is on the size of a plot of land which has a minimum area of one acre; and (3) 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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Here the assessee has complied with all the three conditions as is apparent from the orders of the lower authorities. The assessee has used 9.31 per cent of the total construction area for commercial construction. The learned Authorised Representative of the assessee has already raised alternative plea in this regard that the deduction under s. 80IB(10) on the residential ,units constructed by the assessee be given on pro rata basis. Here, we agree with the plea taken by the assessee and accordingly we direct the AO to allow the claim of the assessee on the residential units constructed on pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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