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TMI Blog2012 (12) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... under the said provision. Given the object of the provisions under Section 80-IB(10) when the deduction to be granted is on the profits and gains of undertaking developing and constructing approved housing projects, in the absence of restrictive covenant under sub- Section (10) of Section 80-IB, no justifiable ground to hold that on the mere fact of some of the units having the built-up area exceeding the condition specified under clause (c), the claim for deduction would stand rejected on the entire project. As pointed out in CIT v. BRAHMA ASSOCIATES [2011 (2) TMI 373 - BOMBAY HIGH COURT] with zones classification permitting commercial establishment in residential flats too, once the local authorities approved the project with or without the commercial use as permitted under the Rules, the project approved is eligible for deduction under Section 80IB(10). When the project fulfills the criteria for being approved as a housing project, then, deductions cannot be denied under Section 80IB(10) merely because the project is approved as residential plus commercial - In the case of mixed projects, the assessee's claim has to be allowed in full, if all the residential units satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajaji 845 S.Rajaji 860 Sukanya Sundar + A.M.Sundar 925 S.Rajaji + Shyamala Rajaji 910 S.Rajaji + Shyamala Rajaji 925 Total --------- 5,215 --------- 3. In the course of the statement recorded, it was further found that the Directors of the Company had also purchased flats. But after purchase, they had merged the flats to have a total built-up area of 1850 sq.ft. The Assessing Officer pointed out that after purchase, the purchasers had converted the flats into commercial establishments. They had merged the flats as commercial units. In Raagamalika Phase I and Phase II, there were no residential units, but three commercial units were built to an extent of 9790 sq.ft. Thus, the Officer held that the assessee had developed three projects Raagamalika I, II and III. Raagamalika Phase I was relevant to the assessment year 2003-04; In Raagamalika, Phase II, since the assessee followed the project completion method of recognising Revenue and does not complete during the previous year relevant to the assessment year 2003-04, no claim was made under Section 80IB(10). As regards Raagamalika Phase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee submitted that disallowance made by the Assessing Officer in toto, hence, is not correct and the same, at best, could be restricted to the area exceeding the limit prescribed under Section 80IB(10)(c) of the Act and the relief on pro-rata basis to the built-up area be granted. 5. The first Appellate Authority pointed out that the assessee had undertaken construction of housing projects for middle class segments of the society. However, considering the introduction of Section 80-IB of the Act and that the benefit being with reference to construction of 100% residential units, deduction under Section 80-IB did not contemplate any flexibility till 2004-2005 for grant of relief to projects, which are partly residential and partly commercial. In the circumstances, there could be no liberal construction of deduction provision even on pro-rata basis. Thus, the appeal filed by the assessee was rejected by the Commissioner of Income Tax (Appeals). Aggrieved by the same, the assessee went on appeal before the Income Tax Appellate Tribunal. 6. A reading of the order of the Tribunal shows that the project undertaken by the assessee was approved by CMDA and Medavakkam Panchayat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. As such, the provisions as it stood during the relevant time could not be interpreted based on the subsequent amendment. Aggrieved by the same, the Revenue has come on appeal before this Court. 9. Learned standing counsel appearing for the Revenue contended that Section 80IB of the Act is clear enough to say that the deduction is only in respect of housing project and the conditions for grant of the deduction, viz., clauses (a), (b) and (c) to sub- clause (10) of Section 80IB of the Act have to be cumulatively satisfied for the purpose of grant of the relief. Learned standing counsel pointed out that the intention in bringing the provisions under Section 80IB of the Act was only for the purpose of promoting the construction of houses to cater to middle income group. Going by the National Housing Policy, as a measure of encouraging housing projects construction for middle income group, the Legislature thought it fit to have the deduction provision under Section 80IB of the Act. Thus, when the law provided that the deduction is in respect of the housing project and the deduction is available subject to certain conditions, the meaning of the expression 'housing project', thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the different zones ear-marked, a residential zone also contemplated commercial buildings too, he submitted that in interpreting Section 80IB, no assistance could be drawn from these Rules, as to what 'housing project' meant. He further pointed out that zone and project being different in their content and meaning, Development Control Rules are not relevant to understand the scope of the expression 'housing project'. The relief contemplated under the Section is for the 'housing project', meaning thereby, the project of residential unit alone and not for anything else. Hence, the question of granting even proportionate relief does not arise in this case. 13. Countering the claim of learned standing counsel appearing for the Revenue, learned senior counsel appearing for the assessee pointed out that there is no definition on the expression 'housing project' under Section 80IB of the Act. The only other Section wherein the definition of 'housing project' is available is the Explanation to Section 80HHBA of the Act. This deduction provision under Chapter VI-A is also one for housing project, but with a difference that it related to projects undertaken on global tender and aided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project or 2000 sq.ft., whichever is less. 16. Referring to the Development Control Rules, learned senior counsel appearing for the assessee further referred to zones divided therein. Even in residential zone, the Development Rules contemplated construction of buildings, which may cater to the infrastructural needs of the residential zone. 17. Replying to the contention of the Revenue that the provisions should receive strict construction, he submitted that there is no quarrel over this proposition. The Section needs only strict construction. Going by this, in the absence of restrictive covenants as regards the project being of only residential character, the Revenue cannot read down the expression 'Housing Project' as referable to projects on construction of housing units only. He submitted that there is nothing in Section 80-IB of the Act to suggest that the housing project is restricted to residential project alone and residence is a matter of use and not of structure. 18. Learned senior counsel further pointed out to the various sub clauses (a), (b) and (c) of Section 80-IB(10) of the Act as it stood during the relevant assessment year and submitted that irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing Policy is concerned, he pointed out that a reading of the said policy shows that the policy is not with reference to construction of the houses alone, but it is more concerned on overall infrastructural development, which means, development of residential units as well as non-residential units, to go side by side, to go for an overall development in all spheres. In the light of the above, the submission of the learned senior counsel for the assessee is that no exception could be taken to the view of the Tribunal. 20. He further pointed out that the reliance placed by the Revenue on the decision of the Apex Court reported in (2011) 1 SCC 236 COMMISSIONER OF CENTRAL EXCISE, NEW DELHI v. HARI CHAND SHRI GOPAL AND OTHERS is not relevant to the case on hand, since the said decision related to the claim of exemption and not to the claim of deduction. In any event, the condition under Section 80IB does not call for cumulative satisfaction of all the conditions, in the sense, 'housing project' as referable to residential projects alone. 21. As regards the objection of the Revenue that the purchaser had converted the residential units as a commercial area, learned senior coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October, 1998; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (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 kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place." 26. Section 80IB(10) of the Act after the amendment under Finance (No.2), 2005 with effect from 01.04.2005, reads as under: 80-IB(10) :- The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007, by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, - (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction; (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d aided by World Bank. Explanation to said Section defines 'housing project', which reads as follows:- Deduction in respect of profits and gains from housing projects in certain cases. Section 80 HHBA (1) ...... (2).... (3)..... (4) Explanation For the purposes of this section,- "(a)"housing project" means a project for - (i) the construction of any building, road, bridge or other structure in any part of India. (ii) the execution of such other work (of whatever nature) as may be prescribed. " 29. Section 80 IA deals with deductions in respect of Profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. It defines 'infrastructure facility' in Explanation to Sub-Section (4), as follows: "(4) This section applies to - ....... Explanation - For the purposes of this clause, "infrastructure facility" means - (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project ; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out by learned senior counsel appearing for the assessee placing reliance on the decision reported in (1976) 4 SCC 177 TATA ENGG. AND LOCOMOTIVE CO., LTD v. GRAM PANCHAYAT, the word 'house' includes building which is used for business. We hold that the benefit of deduction under Section 80-IB(10) of the Act, with reference to housing project has to go in tune with the Explanation given in 80HHBA and building, as understood by the Apex Court in the decision reported in (1976) 4 SCC 177 TATA ENGG. AND LOCOMOTIVE CO., LTD v. GRAM PANCHAYAT. 32. It is no doubt true that the said decision is related to the provisions of the Village Panchayats Act, 1937; yet, the observation therein are apposite to the understanding of the term "building". The Apex Court pointed out that under Village Panchayats Act, 1937, the term 'house' would include a factory building for levy of tax on houses and lands. Holding that 'house' in its ordinary sense would include any building irrespective of the user, the Apex Court held "the word 'house' extends to a building which is used for business and should not be restricted to a mere dwelling house. It pointed out that it is not limited to a structure de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the understanding that we place on the expression 'housing project', in a given case, we do not find such occupation of commercial area in a housing project would negate the claim of the assessee for 100% deduction of the profits and gains from the business of undertaking, development and construction of housing project subject to the assessee complying with the other conditions under Clauses (a), (b) and (c) of Section 80IB(10) of the Act. 37. Leaving that aspect aside, on a reading of the three clauses, it is clear that in a given case, when the housing project, a 100% residential unit, satisfies other clauses (a) and (b) and the built-up area as given under clause (c) of Section 80-IB(10) of the Act, there could be no difficulty for the Revenue to grant the deduction. The question becomes a little complicated when 100% residential housing project has built-up area of mixed nature. While few of the units may satisfy the criteria of the built-up area of less than 1500 sq.ft., there may be units which have built-up area crossing the limit as specified in clause (c) of Section 80-IB(10) of the Act. In such an event, on a reading of the provision, we hold that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt-up area of the housing project or two thousand square feet, whichever is less. 39. Thus, going by Section 80-IB(10) of the Act, as it stood during the assessment year, four things are clear, namely expression 'housing project' cannot receive a restricted meaning, as had been propounded by the Revenue. The meaning of the expression "housing project", as given under Section 80HHBA of the Act, hence, would govern the case herein. Hence, the housing project would include commercial buildings also. Secondly, there is no restriction that the built-up area for the housing project cannot have any commercial units. Thirdly, the provision of law as it stood prior to the amendment in 2005 contained no such ceiling as to the extent of the built-up area of the shops and commercial units included in the housing project. Finally, this is made clear by the insertion of the clause (d) under the Finance Act in Section 80-IB(10) of the Act, which, for the first time spoke about the restriction on the commercial area in the housing project. Hence, the amendment makes clear that the law as it stood till 2005 did not contemplate any restrictions as to the extent that the commercial establishment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atively satisfied in the context of the meaning of a 'housing project' to include residential-cum-commercial complex, we feel, in fairness to the claim of the assessee, the proportionate relief has to be read into the provisions, so that deduction provisions are sustained. 42. In this connection, learned senior counsel appearing for the assessee referred to the decision of the Bombay High Court reported in [2011] 333 ITR 289 CIT v. BRAHMA ASSOCIATES as well as [2012] CIT v. VANDANA PROPERTIES. 43. The issue raised in the decision of the Bombay High Court is almost identical to the case on hand. The assessment year under consideration before the Bombay High Court was 2003-04. A reading of the decision of the Bombay High Court reported in [2011] 333 ITR 289 CIT v. BRAHMA ASSOCIATES shows that the assessee therein had a housing project called "Brahma Estates" at Pune. This consisted of 15 residential buildings and 2 commercial buildings. Thus the extent of commercial area was 20.83% of the total built-up area. On the claim for deduction on the profits derived from the sale of residential units in the project, the Assessing Officer rejected the claim on the ground that the proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 residential units alone on stand alone basis, the Bombay High Court held that the assessee was entitled to deduction on the properties, as had been granted by the Tribunal, solely on the ground that the assessee had not challenged the decision of the Tribunal. 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 DC Rules/Regulations. 46. Referring to Section 80IB(10(d) of the Act, the Bombay High Court held "The expression 'included' in Clause (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting Clause (d) to Section 80IB(10) the legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules/Regulation were entitled to Section 80IB(10) deduction, with effect from 1/4/2005 such deduction would be subject to the restriction set out in Clause (d) of Section 80IB(10). Therefore, the argument of the revenue that with effect from 1/4/2005 the legislature for the first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Tribunal on the proportionate relief granted, yet, this Court may consider the grant of full relief, if it fits within the reasoning of the provisions contemplated 100% relief on the housing project. 49. We do not think that the assessee would be well placed by placing reliance on the decision reported in [2012] 47 VST 209 STATE OF T.N. v. ESSAR SHIPPING LTD, since the question involved therein related to chargeability of the provision. Even though in the decided case, the assessee had not filed any appeal against the decision of the Tribunal by reason of the relief granted by the Tribunal on different aspect, yet, when the liability of the assessee therein rested on the applicability of the charging provisions, in the appeal filed by the Revenue, the assessee raised grounds as by way of cross objection as to the very liability under the Act. This Court considered the entirety of the issue to grant the relief to the assessee. 50. The situation herein is a totally different one. The question is one of deduction and not of chargeability under the provisions of the Act. In the circumstances, we reject the assessee's case in this regard. 51. As regards the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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