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TMI Blog2012 (9) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the CIT(A) are reversed and that of the AO are restored - against assessee. - ITA No. 7021/Mum/2008 - - - Dated:- 12-9-2012 - Vijay Pal Rao And N. K. Billaiya , JJ. Appellant by: Sanjiv Dutt Respondent by: K. Gopal ORDER Per N . K. Billaiya , AM: With this appeal Revenue has challenged the correctness of the order of Ld. CIT(A)- VI, Mumbai dt. 9.10.2008 pertaining to assessment year 2006- 07. 2. The Revenue has questioned the said order by raising following effective ground of appeal: On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the AO to allow deduction u/s. 80IB(10) even though condition laid down in section 80IB(10(d) is not satisfied which is applicable from A.Y. 2005-06 onwards. 3. Facts giving rise to this dispute show that the assessee company is engaged in the business of building construction following mercantile system of accounting. It has developed property at 12, Arab Lane, Byculla, Mumbai named as Amatulla having 3 separate buildings, shops and commercial establishments. The project was commenced in the year 2003 after getting appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther observed that in assessee s case, total commercial built up area is worked out as 6450 Sq. ft. According to the AO, the assessee has violated one of the conditions for claim of deduction u/s. 80IB. The assessee was asked to explain as to why deduction u/s. 80IB(10) should not be disallowed since it has constructed shops and other commercial units having total built up area of more than 2000 Sq. ft. The assessee submitted a detailed explanation vide its letter dt. 25.3.2008 which is reproduced as under: The assessee had started this project in Feb. 2003 under an approval from the local authority dt. 11th Feb. 2003 for construction of residential project. The erstwhile provisions of Sec. 80IB(10) did not provided any upper cap on construction of the commercial area. The said provision came into being only for the A.Y. 2006-07 by which time our project had commenced and progressed substantially. Further not a single commercial area constructed by the assessee has been sold to anybody as they were meant for rehabilitating the existing commercial sitting tenants on property without providing them the commercial area as permanent alternate accommodation this project would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in Delhi or Mumbai and one thousand and five hundred square feet at other places. It further state that the amendment to Sec. 80IB(10) proposed by the Finance Act 2004 has prospective effect from A.Y. 2005- 06. Therefore it is clear that the assessee has fully complied with the provision of Sec. 80IB(10) for the purpose of claiming 100% deduction and there is no violation of any provision of Sec. 80IB(10). Therefore you are requested to allow the 100% deduction u/s. 80IB(10) as claimed in the Income Tax Return. 8. After considering the submissions made by the assessee, the AO concluded that the entire explanation and submission of the assessee may be valid prior to the amended provisions but after the amendment, it cannot be accepted and held that assessee has not complied with the conditions laid down in Sec. 80IB(10) of the Act and disallowed the claim of the assessee and completed the assessment at ₹ 10,09,42,830/-. 9. The assessee agitated this matter before the Ld. CIT(A) and reiterated that this project was started in 2003 when there was no upper cap on the commercial area in Sec. 80IB(10) of the Act. The project was fully completed during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see submitted that when the assessee started its project, the law did not provide any restriction on the commercial built up area. The assessee has fulfilled all the conditions prescribed for making it eligible for deduction u/s. 80IB(10) of the Act. Subsequent amendment cannot change the project profile of the assessee. The Ld. Counsel further submitted that the assessee has not sold commercial area to anyone but the entire commercial area has been given to the existing commercial tenants as part of the rehabilitation programs. As the assessee has not received any consideration for the sale of commercial area, the assessee cannot be denied deduction u/s. 80IB(10) of the Act on the sale of its residential unit. The assessee relied upon the decision of ITAT Mumbai in the case of Saroj Sales Organisation Vs ITO 115 TTJ 85 (Mum). The Ld. Counsel also relied upon the decision of Mumbai Bench E in the case of Hiranandani Akruti JV Vs DCIT in ITA No. 5416/M/09 and CIT Vs Brahma Associates (supra) and concluded that the project of the assessee has been approved as Housing Project by the local authority therefore disallowance of deduction claimed u/s. 80IB(10) of the Act is not at all ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the exercise of its legislative powers. For these observations, we draw support from the decision of Bombay Conductors Electricals Ltd. Anr. Vs Under Secretary to the Govt. of India Ors. The Hon ble Supreme Court in the case of Reliance Jute Industries Ltd. VS CIT (1979) 120 ITR 921 has laid down the following law: The assessment for one assessment year cannot, in the absence of a contrary provision, be affected by the law in force in another year. A right claimed by an assessee under the law in force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that that year. 15. We find that in all the cases relied upon by the assessee, the ratio laid down by the Hon ble Supreme Court in the case of Reliance Jute Industries (supra) has not been considered. In our humble opinion, the ratio laid down by the Hon ble Supreme Court in the case of Reliance Jute Industries (supra) stated hereinabove squarely apply on the facts of the case as the assessee has not fulfilled the conditions precedent provided u/s. 80IB(10)(d) as applicable from AY 2005 - 06. There is no dispute that the assessee fulfills all conditions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80-IB(10) the Legislature has made it clear that though housing projects approved by the local authorities with commercial user to the extent permissible under the Development Control Rules/Regulation were entitled to section 80-IB(10) deduction, with effect from April 1, 2005 such deduction would be subject to the restriction set out in clause (d) of section 80-IB(10). Therefore, the argument of the Revenue that with effect from April 1, 2005 the Legislature for the first time allowed section 80-IB(10) deduction to housing projects having commercial user cannot be accepted. . It is for the Legislature to impose restrictions on commercial user in a project for the purposes of availing of section 80-IB(10) deduction and that has been done by inserting clause (d) to section 80-IB(10) with effect from April 1, 2005. .. Lastly, the argument of the Revenue that section 80-IB(10) as amended by inserting clause (d) with effect from April 1, 2005 should be applied retrospectively is also without any merit, because, firstly, clause (d) is specifically inserted with effect from April 1, 2005 and, therefore, that clause cannot be applied for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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