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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 ..... oval from local authority. It is completed during the year under consideration. The assessee has followed project completion method of accounting for taxation purpose. For the year under consideration, the assessee filed return of income declaring total income of Rs. Nil. The sale proceeds of the project is shown at Rs. 21,65,99,359/- on which the assessee has shown net profit at Rs. 10,09,42,833/- and claimed it as exempt u/s. 80IB(10) of the Act. 4. During the course of the assessment proceedings, the Assessing Officer sought clarification in respect of the claim of deduction u/s. 80IB(10) of the Act. The following facts emerged out of the explanation given by the assessee. The 'Amatulla' project consist of 3 buildings i.e. A, B & C building. A consisting of Ground +11 floor wherein entire ground floor except entrance lobby, staircase and lift , consists of commercial units and upper floors consist of residential units totaling to 84 flats. Building B consists of stilt + 12 floors having 70 residential units. Building C consists of stilt +7 floors having 53 residential units. Apart from this, there are 6 shops on the front side of the project for commercial use. The total built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no approval would have been granted by any local authority for redevelopment. In view of the above facts and circumstances we again state that the assessee has not violated any condition laid down u/s. 80IB(10) at the time of commencement of the project. Therefore the assessee should be fully granted the deduction u/s. 80IB at 100% & oblige." 7. However, the assessee's submission did not find favour from the AO. As according to the AO, after the amendment to the provisions of Sec. 80IB(10) w.e.f. 1.4.2005, those housing project having commercial built up area of more than 2000 Sq. ft are not eligible for deduction u/s 80IB(10) of the Act as the assessee has exceeded maximum permissible limit provided in the Act hence assessee's submissions cannot be accepted that prior to amendment there was no upper cap on construction of commercial area. It was further contended by the assessee that it has not sold the commercial area but the entire commercial area has been allotted to rehabilitating the existing commercial tenants. The AO rejected this submission of the assessee by stating that the main motive of deduction u/s. 80IB(10) is to provide affordable residential houses to the need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had satisfied all the conditions laid down in Sec. 80IB(10) of the Act. It was argued before the Ld. CIT(A) that even before budget proposals were presented by Hon'ble Finance Minister in Lok Sabha in July, 2004, the assessee had already received occupation certificate for building A&C. Hence the amendment is not applicable to the facts of the case. The Ld. CIT(A) considered the submissions made by the assessee. Ld. CIT(A) relied upon the decision of ITAT, Mumbai 'E' Bench in the case of Saroj Sales Organisation Vs ITO (2008) 3 DTR 494 and allowed the appeal of the assessee and directed the AO to allow the deduction u/s. 80IB(10) of the Act as the Housing project was approved from the Municipal authorities prior to 31.3.2005. 10. Aggrieved by this finding of the Ld. CIT(A), the Revenue is before us. The Ld. Departmental Representative strongly supported the findings of the AO and submitted that it is a well established rule of interpretation that any amendment which is in force at the beginning of the relevant assessment year must govern the case. For this proposition, the Ld. DR relied upon the decision of Glaxo Laboratories (India) Ltd. Vs ITO 18 ITD 226(SB)(Mum). The Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of the lower authorities and the case laws relied upon by the rival parties . The undisputed fact is that the assessee has commercial built up area of 6415 Sq. ft. This has been accepted by the assessee. It is also not disputed that the project of the assessee is on a plot area of more than one acre. The only point of dispute is whether amendment brought w.e.f. 1.4.2005 i.e. A.Y. 2005-06 can be made applicable to the facts of the case. The cases relied upon by the Ld. Counsel relates to the pre amended provisions of Sec. 80IB(10) of the Act. Moreover, in the case of Brahma Associates (supra), the Hon'ble Bombay High Court has categorically held that clause (d) inserted to Sec. 80IB(10) is prospective and cannot be applied for the period prior to 1.4.2005 which impliedly means that the amendment brought is applicable from A.Y. 2005-06. The contention of the Ld. Counsel that the project was started keeping in mind the pre amended provisions of Sec. 80IB(10) of the Act and therefore any subsequent changes should not change the project profile cannot be accepted. 13. Let us take an example. Assuming that the Legislature comes up with a tax incentive provision providing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for deduction u/s. 80IB(10) of the Act. It would not be out of place to highlight the observations made by the Hon'ble Bombay High Court in the case of Brahma Associates [ Supra ] which is as under : " From the fact that the deduction under section 80-IB(10) prior to April 1, 2005 was allowable on the profits derived from housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under section 80-IB(10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view to make available a large number of affordable houses to the common man and not with a view to deny commercial user in residential buildings. In other words, the restriction under section 80-IB(10) regarding the size of the residential unit would in no way curtail the powers of the local authority to approve a project with commercial user to the extent permitted under the Development Control Rules/Regulations. Therefore, the argument of the Revenue that the restriction on the size of the residential unit in section 80-IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects having commercial user beyond the limit prescribed under clause (d), even though such commercial user is approved by the local authority. Therefore, the restriction imposed under the Act for the first time with effect from April 1, 2005 cannot be applied restrospectively. Thirdly, it is not open to the Revenue to contend on the one hand that section 80-IB(10) as it stood prior to April 1, 2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from April 1, 2005 should be applied restrospectively. The argument of the Revenue is mutually contradictory and hence liable to be rejected. Thus, in our opinion, the Tribunal was justified in holding that clause (d) inserted to section 80-IB(10) with effect from April 1, 2005 is prospective and not retrospective and hence cannot be applied to the period prior to April 1, 2005. In the result, the questions raised in the appeal are answered thus : (a) Up to March 31, 2005 (subject to fulfilling other conditions), deduction under section 80-IB(10) is allowable to housing projects approved by the local authority having residential units with co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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