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TMI Blog2014 (9) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 2005 - section 80-IB(10)(d) is prospective in nature and can have no application to a housing project that is approved before 31st March, 2005 - clause (d) of section 80-IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/construction of the same, and has nothing to do with the profits derived therefrom - relying upon MANAN CORPORATION Versus ASSTT COMMISSIONER OF INCOME TAX [2012 (9) TMI 700 - Gujarat High Court] – Decided against revenue. - Income Tax Appeal No. 201 of 2012, Income Tax Appeal No. 308 of 2012 - - - Dated:- 19-9-2014 - S. C. Dharmadhikari And B. P. Colabawalla,JJ. For the Appellant Mr Vimal Gupta, Sr. Counsel with Mr Vipul Baypayee. For the Respondent : None JUDGMENT [ Per B. P. Colabawalla J. ] :- 1. Income Tax Appeal No.201 of 2012 is filed by the Revenue under section 260A of the Income Tax Act 1961 (hereinafter referred to as the Act) wherein the following questions of law are projected as substantial and read as under :- (A) Whether on the facts and in the circumstances of the case and in law the Hon'ble Tribunal was right in allowing to the Assessee Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uare feet, whichever is less. What we are called upon to decide is whether this condition/restriction set out in clause (d) of section 80-IB(10) will apply to the two scenarios set out above. 4. The facts in Income Tax Appeal No.308 of 2012 deal with first scenario where the housing project was approved before 31st March, 2005 and completed before 1st April, 2005 but the sale of some of the units in the said project took place after 1st April, 2005 i.e. in the A.Y. 2005-2006. The facts in Income Tax Appeal No.201 of 2012 deal with the second scenario viz. where the housing project was approved before 31st March, 2005 but completed on or after 1st April 2005, but within the time-frame as laid down in section 80-IB(10). Since the facts in these two cases cover both the scenarios above, we shall refer to the facts of these two cases and all the other Appeals will accordingly be disposed off following the ratio of this judgment. FACTS IN INCOME TAX APPEAL NO.308 OF 2012 5. On 19th July 2007, a search under section 132 of the Act was conducted in the Assessee's case (M/s Kanakia Spaces Pvt.Ltd.) and consequent thereto, assessment proceedings were initiated by issuance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 485, by its order dated 30th June, 2011 reversed the order of the CIT (Appeals). The undisputed facts noted by the ITAT were that the construction of the housing project known as the Discovery Project having an aggregate built up area of 1,27,736 sq.ft. got completed in the A.Y. 2004-2005. The Assessing Officer and CIT (Appeals) had denied the benefit of the deduction under section 80-IB(10) on the ground that the commercial area of 7,607 sq.ft. was more than 2,000 sq.ft. as set out in clause (d) of section 80-IB(10) and therefore violated the provisions thereof, which dis-entitled the Assessee to the deduction. After noting these facts, and after relying upon several decisions of its Coordinate Benches, the ITAT held that if housing projects were approved before 31st March 2005, the condition / restriction set out in clause (d) of section 80-IB(10) would not be applicable. Being aggrieved by this order of the ITAT, the Revenue is in Appeal before us. FACTS IN INCOME TAX APPEAL NO.201 OF 2012 8. In this case, the Assessee (Happy Home Enterprises), for the A.Y. 2006-2007 filed a return of income on 31st October 2006 declaring its total income at ₹ 45,781/-. The said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings to trace the history of the provisions that we are called upon to construe in these Appeals. 12. Initially, section 80-IA was inserted in the Income Tax Act, 1961 by Finance (No.2) Act, 1991 w.e.f. 1st April, 1991 and dealt with deductions in respect of profits and gains from industrial undertakings etc. in certain cases. As the Government identified housing as a priority area and to purposefully tackle the country's housing shortage problem, it was decided to give tax incentives for the promotion of housing. With this object in mind and with a view to promote investment in housing, sub-section (4F) was inserted in section 80-IA w.e.f. 1st April, 1999. Section 80-IA(4F) as it stood then, read as under :- (4F) This section applies to an undertaking engaged in developing and building housing projects approved by a local authority subject to the condition that the size of the plot of land has a minimum area of one acre and the residential unit has a built up area not exceeding one thousand square feet; Provided that the undertaking commences development and construction of the housing project on or after the 1st day of October 1998 and completes the same before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , w.e.f. 1st April, 2000 section 80-IA(4F) was substituted with section 80-IB(10) and in substance was basically the same, with one addition. The newly inserted section 80-IB(10) stipulated that if the housing project approved by the local authority was at a distance of 25 Kms or beyond the municipal limits of the cities of Delhi or Mumbai, then the residential unit in the said housing project could have a maximum built area of 1,500 sq.ft. instead of 1,000 sq.ft. All other conditions as set out in section 80-IA(4F) were retained in section 80-IB(10). This was brought about as there were many representations that in towns other than Mumbai and Delhi the land cost was relatively less and for the same capital expenditure, investors could afford to procure dwelling units of slightly larger areas. In light of this, it was represented that the ceiling on the built up areas for dwelling units in approved housing projects be increased from 1,000 sq.ft. to 1,500 sq.ft. at all locations except Mumbai and Delhi. Accepting the said representations, the Legislature inserted clause (c) to sub-section (10) of section 80-IB which stipulated that in a housing project approved by the local authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he local authority to the housing project. Prior to this amendment, as long as the development/ construction commenced on or after 1st October, 1998 and was completed before 31st March 2001, the assessee was entitled to the deduction. Also by this amendment, the date of completion was changed from 31st March, 2001 to 31st March, 2003. Everything else remained untouched. 18. Thereafter, by Finance Act, 2003 further amendments were made to section 80-IB(10) and read as under :- (10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March 2005 by a local authority, shall be hundred per cent of the profits derived in any 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; (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-fiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (a) or clause (b) shall apply to 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 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; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city 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; 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 the housing project or two thousand square feet, whichever is less. (emphasis supplied). 21. Therefore, by Finance (No.2) Act, 2004, with effect from 1st April 2005, the Legislature made substantial changes to sub-section (10) of section 80-IB. There were several new conditions that were incorporated by the newly substituted sub-section. One such condition was clause (d), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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 did not include the common areas shared with other residential units. The reason we are referring to this provision is because it too was brought about for the first time w.e.f. 1st April, 2005 and the Karnataka High Court had the occasion to consider whether it would apply to housing projects approved by the local authority before 31st March, 2005. We have relied upon the reasoning of the judgement of the Karnataka High Court for coming to the findings that we have, in this judgement. 24. Having traced the history of section 80-IB(10), we now proceed to deal with the rival contentions of the parties. On behalf of the Revenue, submissions were made by learned senior counsel Mr Vimal Gupta, and learned counsels, Mr Abhay Ahuja and Mr A. R. Malhotra. Though we have not independently dealt with the facts in Income Tax Appeal No.592 of 2012, in which Mr Abhay Ahuja appears for the Revenue, since he has addressed on the issues raised herein, we are also making a reference to the submissions advanced by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) would have to be revisited and / or looked at and complied with in the assessment year in which the profits are being booked by the assessee. If the assessee's housing project did not meet all the conditions / restrictions as stipulated in the said section during that assessment year, then the assessee would not be entitled to the deduction for that assessment year, was the submission. The Revenue submitted that this is notwithstanding the fact that the project was approved at a time when that particular condition was not on the statute book at all. The assessment for one assessment year, cannot in the absence of a contrary provision, be affected by the law in force in another assessment year. A right claimed by the assessee under the law in force in a particular assessment year is available only in relation to a proceeding pertaining to that assessment year, was the submission. In support of this argument, the learned counsels relied upon two judgments of the Supreme Court in the case of Reliance Jute Industries Ltd. v/s CIT, reported in (1979) 120 ITR 921 and Securities and Exchange Board of India v/s Ajay Agarwal, reported in AIR 2010 SC 3466. 28. Lastly, it was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 because these were the only conditions that were on the statute-book at that time, was the submission of Mr. Mistry. It was his further submission that it is only w.e.f. 1st April, 2005 that section 80-IB(10) was substituted and substantial amendments were made therein and those amendments could not be made applicable to housing projects approved before 31st March, 2005 because the deduction available to the assessee under section 80-IB(10) was inseparably linked to the date of approval of the housing project and not to the assessment year in which the deduction was claimed. 31. The further submission of Mr Mistry was that accepting the argument of the Revenue would lead to absurd results. For example, an assessee following the project completion method of accounting would not be entitled to the deduction under section 80-IB(10) even though the said housing project was approved and completed before 31st March, 2005 but the profits therefrom were offered to tax in A.Y. 2005-06. On the other hand, if the same assessee was following the work-in-progress method of accounting he would be entitled to the deduction under section 80-IB(10) upto A.Y. 2004-05 and would be disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, developing and building a housing project approved by the local authority before 31st March, 2005 was entitled to a deduction of 100 % of the profits derived from such housing project in any previous year relevant to any assessment year, provided (i) the development and construction of the said project had commenced on or after 1st October 1998; (ii) the project was on the size of a plot of land which had a minimum area of one acre and (iii) the residential unit had a maximum area of 1,000 sq.ft. where such residential unit was situated within the cities of Delhi or Mumbai or within 25 Kms from the municipal limits of these cities, and 1,500 sq.ft. at any other place. Before 1st April 2005, there was no condition and / or restriction on the quantum of the commercial area that could be included in a housing project. That had to be determined on the basis of the rules and regulations of the local authority approving the said housing project. 35. However, the provisions of section 80-IB(10) were substantially amended by way of Finance (No.2) Act, 2004 w.e.f. 1st April, 2005. As can be noted from the amended provisions, there were several conditions that were imposed in the newly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) of section 80-IB cannot have any application to housing projects that are approved before 31st March, 2005. The said clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the said clause operates only prospectively i.e. for housing projects approved after 1st April, 2005. This is notwithstanding the fact that the profits were offered to tax by the Assessee for the A.Y. 2005-06 or thereafter. 36. There is yet another reason for coming to the aforesaid conclusion. Take a scenario where an Assessee following the project completion method of accounting, has completed the housing project approved by the local authority complying with all the conditions as set out in section 80-IB(10) as it stood prior to 1st April, 2005. If we were to accept the argument of the Revenue, then in that event, despite having completed the entire construction prior to 1st April, 2005 and complying with all the conditions of section 80-IB(10) as it stood then, the Assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-06. In contrast, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would arise. However, we are not called upon to decide any such condition and hence we are not laying down any general proposition of law, save and except that clause (d) of section 80- IB(10) being a condition linked to the date of the approval of the housing project, would not apply to any housing project that was approved prior to 31st March, 2005 irrespective of the fact that the profits of the said housing project are brought to tax after the said provision was brought into force. 37. On the issue of retrospectivity of clause (d) of section 80-IB(10) we are supported in our view by a judgment of this Court in the case of Brahma Associates (supra). Though the facts in Brahma Associates's case were slightly different, inasmuch as the assessment year in question was A.Y. 2003-04, this Court held as under :- 32. 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 the period prior to April 1, 2005. Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential purposes, then it would have stated so. However, the Legislature has provided that section 80-IB(10) deduction is available to all housing projects approved by a local authority. Since local authorities could approve a project to be a housing project with or without the commercial user, it is evident that the Legislature intended to allow section 80-IB(10) deduction to all housing projects approved by a local authority without or with commercial user to the extent permitted under the Development Control Rules. 25. It is not in dispute that where a project is approved as a housing project without or with commercial user to the extent permitted under the rules / Regulations, then, deduction under section 80-IB(10) would be allowable. In other words, if a project could be approved as a housing project having residential units with permissible commercial user, then it is not open to the income tax authorities to contend that the expression housing project in section 80-IB(10) is applicable to projects having only residential units. 28. The above conclusion is further fortified by clause (d) of section 80- IB(10) inserted with effect from April 1, 2005. Clause (d) of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80-IB(14) defining the words 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 did not include the common areas shared with other residential units. Therefore, w.e.f. 1st April, 2005 notwithstanding the local law governing the construction of a building, for the purpose of getting benefit under section 80-IB(10), the Assessee was required to ensure that the housing project approved by the local authority had residential units not bigger than the amount stipulated therein and which included the builtup area as set out in section 80-IB(14)(a). In construing the said provision, the Karnataka High Court held as under :- 9. In respect of approvals obtained prior to April 1, 2005, if sub-section (14)(a) of section 80-IB is held to be applicable, then, the Assessee has to necessarily seek for a modified plan. Otherwise, if he proceeds with the construction without obtaining the sanction of the modified plan, he would not be eligible for benefit of tax exemption under section 80-IB(10). Similarly, if a valid approval is obtained and the building is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very object and purpose for which section 80-IA(4F) and thereafter section 80-IB(10) were introduced in the first place. In that view of the matter, the condition/restriction imposed by clause (d) of section 80-IB(10) and which came into effect from 1st April 2005, can apply only to such housing projects which are approved on or after 1st April, 2005. It would not be out of place to mention that the said judgment of the Karnataka High Court was challenged before the Supreme Court and the Special Leave Petition against the same was dismissed on 7th January, 2013. 41. We also find that a similar issue as the one raised in these Appeals came up for consideration before the Division Bench of Gujarat High Court in the case of Manan Corporation v/s Assistant Commissioner of Income Tax, reported in (2013) 356 ITR 44 (Guj). In the facts before the Gujarat High Court, one of the grounds on which the Assessee was denied the deduction under section 80-IB(10) was the non-fulfillment of clause (d) thereof. The assessment year in question before the Gujarat High Court was A.Y. 2006-07. It was the case of the Assessee before the Gujarat High Court that a condition of limiting commercial estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of deduction of profit derived in the previous year relevant to the assessment year as made available otherwise under the statute. (emphasis supplied) 42. Therefore, even the Gujarat High Court has taken a view that clause (d) of section 80-IB(10) is prospective in nature and would not apply to housing projects approved prior to 31st March, 2005. We are in respectful agreement with the ratio laid down in the aforesaid judgement of the Gujarat High Court. 43. We also do not find any substance in the submission of the Revenue that the decision of this Court in the case of Brahma Associates (supra) supports the case of the Revenue that w.e.f. 1st April 2005, the Assessee would not be entitled to the deduction under section 80-IB(10) if it did not comply with clause (d) thereof. In this regard, heavy reliance was placed by the Revenue on the following paragraph :- 28. The above conclusion is further fortified by clause (d) of section 80- IB(10) inserted with effect from April 1, 2005. Clause (d) of section 80- IB(10) inserted with effect from April 1, 2005 provides that even though shops and commercial establishments are included in the housing project, deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver arose for consideration in Brahma Associates case (supra) and therefore, the reliance placed by Mr Gupta on the said paragraph is wholly out of context. 45. Having held that clause (d) of section 80-IB(10) is inapplicable to housing projects approved before 31st March, 2005 irrespective of the fact that the construction of the same is completed after 1st April, 2005 or that the profits from such housing project are brought to tax in A.Y. 2005-06 or thereafter, we now deal with the judgments relied upon by the Revenue. The first judgment relied upon by the Revenue is of the Supreme Court in the case of Reliance Jute Industries Ltd. (supra). The provisions of section 24(2)(iii) of the Income Tax Act, 1922 came up for interpretation before the Supreme Court which inter alia dealt with unabsorbed loss being carried forward for more than eight years. The facts before the Supreme Court were that during the A.Y. 1960-61, the Assessee claimed that the unabsorbed loss for A.Y. 1950-51 could be carried forward and set off against the business income for the A.Y. 1960-61. The Assessee contended before the Supreme Court that by virtue of section 24(2)(iii) as it stood before its amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year. Therefore, inasmuch as the provisions of s. 24(2), as amended in 1957, govern the assessment for the assessment year 1960-61, the High Court is right in affirming that the unabsorbed loss of ₹ 15,50,189 of the assessment year 1950-51 cannot be carried forward for more than eight years, and consequently, cannot be set off against the business income of the assessment year 1960-61. (emphasis supplied) 46. We fail to see how this judgment can be of any assistance to the Revenue. Firstly, in the case at hand, no Assessee is claiming any vested right of deduction as was done by the Assessee before the Supreme Court in Reliance Jute Industries Ltd. (supra). The Assessees are aware that for the subject deduction, certain conditions are to be complied with. However, it is their case that the deduction cannot be denied for want of compliance with a condition which has been introduced after their project was approved. Hence, that is not required to be complied with. This judgment is therefore of no assistance to the Revenue. Secondly, the provision being inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with section 11 and section 11-B of the SEBI Act, directed that the Respondent (Ajay Agarwal director) be restrained from associating with any corporate body in accessing the securities market and also be prohibited from buying, selling or dealing in securities for a period of 5 years. The argument before the Supreme Court was that section 11-B was brought on the statute book by way of an amendment w.e.f. 25th January 1995, whereas the public issue in respect of which the impugned order was passed, was of November 1993 and the prospectus in which the alleged misstatements were made was of October 1993. Hence, the question arose whether any direction could be issued under section 11-B for the alleged misconduct committed prior to its introduction. It is in the light of these facts that the Supreme Court referred to the judgement in the case of Reliance Jute Industries Ltd (supra) and stated that it was too well settled that the law to be applied for an assessment is the one which is extant in the assessment year, unless there is an amendment which is made retrospective either expressly or by necessary implication. In the facts of this case, the Supreme Court held that by the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a logical code, whereas every lawyer must acknowledge that the law is not always logical at all. (emphasis supplied) We entirely agree with the above observations. 15. In Ambica Quarry Works v. State of Gujarat [(1987) 1 SCC 213] (vide SCC p. 221, para 18) this Court observed: 18. The ratio of any decision must be understood in the background of the facts of that case. It has been said long time ago that a case is only an authority for what it actually decides, and not what logically follows from it. 16. In Bhavnagar University v. Palitana Sugar Mill (P) Ltd. [(2003) 2 SCC 111] (vide SCC p. 130, para 59) this Court observed: 59. It is also well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision. (emphasis supplied) 17. As held in Bharat Petroleum Corpn. Ltd. v. N.R. Vairamani [(2004) 8 SCC 579 : AIR 2004 SC 4778] a decision cannot be relied on without disclosing the factual situation. In the same judgment this Court also observed: (SCC pp. 584-85, paras 9-12) 9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. *** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. (emphasis supplied) 18. We have referred to the aforesaid decisions and the principles laid down therein, because often decisions are cited for a proposition without reading the entire decision and the reasoning contained therein. In our opinion, the decision of this Court in Sarguja Transport case [(1987) 1 SCC 5 : 1987 SCC (Cri) 19 : AIR 1987 SC 88] cannot be treated as a Euclid's formula. 49. Even applying the aforesaid proposition as laid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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