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TMI Blog2017 (4) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... volved in other two appeals and judgment was already reserved, hence learned counsel for parties adopted earlier arguments, and judgment was reserved on 06.03.2017. 4. Since question basically raised in all these appeals are common and interconnected, hence these Appeals are being decided by this common judgment. 5. Details of appeal numbers, date of orders of Tribunal, Assessment Years and Appeal numbers before Tribunal are being given as under:- Sr. No. Appeal Numbers Date of Orders of Tribunal Assessment Years Appeal numbers before Tribunal 1. 9 of 2014 29.11.2013 2007-08 284/LKW/2013 2. 16 of 2014 30.01.2014 2006-07 60/LKW/2010 3. 13 of 2017 17.10.2016 2011-12 871/LKW/2014 6. Income Tax Appeal No. 9 of 2014 was admitted on 03.08.2015 on the following substantial questions of law:- "(i) Whether ITAT has erred in law in holding that area of open balcony of flat would be considered at 50% of the actual area for the purpose of deduction u/s 80-IB(10) of the Income Tax Act. (ii). Whether ITAT on the facts and circumstances of the case has erred in holding that only 50% of the actual area of open balcony of flats would be considered for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the relevant year A.Y. 2011-12 as project for which deduction u/s 80-IB of Act claimed, had commenced prior to 01.04.2005. (ii) Whether ITAT has erred in law and on facts while relying on case law which apply only to sub-clause (d) of section 80-IB(10), while as per section 80-IB(10), Assessee was required to fulfill all the conditions to avail benefit of deduction u/s 80-IB(10) of the I.T. Act. (iii) Whether under the facts and circumstances, ITAT has failed to appreciate that on the issue of completion of project, Assessee ought to have completed project within 4 years from financial year in which housing project was approved by local authority. (iv) Whether ITAT has failed to consider explanation (i) of sub-section 10(a) of section 80-IB regarding date of approval, ignoring construction plan/building plan's approval date of Assessee. (v) Whether ITAT has failed to consider that as per clause (i) and (ii) of sub-section 10(a) of section 80-IB, benefit can be extended to Assessee only when project is completed within stipulated period not otherwise. (vi) Whether cryptic order passed by ITAT by simply relying on its earlier order for the A.Y. 2012-13 and not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80-IB(10)(d) of Act, 1961. Assessee preferred appeal before CIT(A) which was rejected on 23.11.2009 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 31.01.2014. Income Tax Appeal No. 13 of 2017 13. Return of income was filed on 29.09.2011 declaring total income of Rs. 1,54,88,102/-. Assessee claimed exemption under Section 80-IB(10) of Rs. 92,06,536/-. Rejecting claim of deduction Assessing Officer completed assessment vide order dated 23.12.2013 for a total sum of Rs. 2,46,94,638/-. Appeal preferred before CIT(A) by Assessee was dismissed on 08.09.2014 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 17.10.2016. Common admitted facts:- 14. Since deduction under Section 80-IB(10) has been allowed by Tribunal, hence all these appeals have come up under Section 260-A of Act, 1961. There are some more common facts which are undisputed but would be relevant to decide questions raised in these appeals. 15. Assessee was developing/constructing a housing project with the name and title "Metro City" in Paper Mill Colony, Lucknow. Land on which project sought to be developed is owned by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted on or before 31.03.2008, hence no deduction was admissible. 19. Sri J.N. Mathur, learned Senior Advocate assisted by Sri Dhruv Mathur, learned counsel for Assessee, on the other hand, contended that amendment of Section 80-IB(10) made w.e.f. 01.04.2005 is neither applicable retrospectively nor retroactively. If a housing project was approved before 31.03.2005 and completed after 01.04.2005, Assessee has a vested right of Assessment as per law as it stood prior to 01.04.2005. He further submitted that Assessee has satisfied requirement of Section 80-IB(10). This is a finding of fact recorded by Tribunal, hence questions raised by appellant would have to be answered in favour of Assessee and appeals deserve to be dismissed. 20. Before considering rival submissions in the light of relevant provisions, we may also notice at this stage that Tribunal has passed order dated 30.01.2014 which is subject to appeal in Income Tax Appeal No. 16 of 2014 by simply following its earlier judgment and order dated 29.11.2013, subject to appeal in Income Tax Appeal No. 9 of 2014. Similarly, in Income Tax Appeal No. 13 of 2017, Tribunal has passed order dated 17.10.2016 following earlier order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the same before the 31st day of March, 2003; (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." 25. The scope and effect of Amendment was explained by CDBT vide circular no. 794 dated 09.08.2000. It also provides that amendment will take effect from 01.04.2001 and shall be applicable for Assessment Year 2001-02 and subsequent years. 26. Thereafter by Finance Act, 2003 w.e.f. 01.04.2004, amendment was made in Section 80-IB(10)(a) and requirement of completion of project before 31st day of March, 2003 was omitted with retrospective effect from 01.04.2002. The amended Section 80-IB(10) as stood amended by Finance Act, 2003 w.e.f. 01.04.2002 read as under:- "(10) The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the building plan of such housing project is first approved by the local authority. (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (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 area 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be owner of land. A promoter would qualify for deduction since it runs an undertaking for developing and constructing a housing project and conditions for relief were satisfied. If developer is not the owner, approval of plan also, may not be in its own name, since local bodies usually insist to grant approval to title holder. However, this would neither give any right to owner to claim deduction under Section 80-IB(10) nor forfeit right of developer to claim deduction. 33. In CIT Vs. Radhe Developers, 2012 (341) ITR 403 (Gujarat), question arose, whether developer claiming deduction must be owner of land and whether approval of local authority as well as permission to develop project and permission to commence construction must be in the name of Assessee/Developer. Court held that purpose of enacting Section 80-IB is to give encouragement and fillip to housing projects where acute shortage was felt in urban and semi-urban areas for middle class houses. Section 80-IB(10) provides for deduction of entire amount of profits by undertaking, derived from business of developing and building housing project, which were approved by local authority before specified date. Such deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit under Section 80-IB(10) when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, since date of approval was changed and extended to all housing projects approved before 31.03.2005. However, there was no time-limit prescribed for completion of project under Section 80-IB(10) as it stood amended by Finance Act, 2003 w.e.f. 01.04.2002, since this requirement was omitted. Thus, Assessee got right to be governed by Section 80-IB(10) as amended by Finance Act, 2003 w.e.f. 01.04.2002, due to changes made therein. 38. Question as to whether benefit became available to Assessee for deduction under Section 80-IB(10), when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, can be considered a vested right, is not free from doubt for the reason that Assessee did not commence his project keeping in mind deduction under Section 80-IB(10). Project commenced after 01.10.1998 and approved by LDA on 08.01.2002 and at that time, deduction under Section 80-IB(10) was not available to Assessee due to conditions mentioned therein. 39. It is a contingency which happened at a subsequent date when the amendment was made by Finance Act, 2003 that conditions got altered bringing within its ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) and Tribunal have observed that this definition of "built-up area" is prospective and prior thereto "terrace" was not included in built-up area. If "terrace" is excluded, residential units were not beyond 1500 sq. ft. 45. The question with regard to "built-up area", whether would include balcony/terrace and whether will be applicable to housing projects approved prior to 01.04.2005, has been considered by Karnataka High Court in Commissioner of Income Tax Vs. Anriya Project Management Services (P.) Ltd., (2013) 353 ITR 12 (Karnataka) wherein Court has said:- "the definition of "built, up "area" inserted by Finance No. 2 of 2004 which name into of it of from 01.04.2005 is only prospective in nature. It has no application to the housing projects which were approved by the local authority prior to that date. Prior to 01.04.2005, in calculating the 1,500 sq. ft. of a residential unit, the area covered by a balcony was excluded. Therefore, the definition of built-up area which is now inserted has no applicable to constructions which were put up in accordance with the housing projects approved by the local authority prior to that date." (emphasis added) 46. Similar view was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rights accrued prior to enactment of the Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible." 48. Submission of learned counsel for Revenue that Assessee sold residential units mentioning in sale deeds total area of flat which included area for balcony also, will have no relevance for question up for consideration, for the reason, that applicability of statutory provision has to be examined in the light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. 49. In view of above discussion, questions (i) and (ii) in Income Tax Appeal No. 9 of 2014 are answered in favour of Assessee for the reason that specifications of flats have been considered by Tribunal in the light of rules of local bodies which approved plan. There was no otherwise restriction available in Section 80-IB(10) in respect of projects approved before 01.04.2005. 50. Question (iv) of Income Tax Appeal No.9 of 2014 relates to built up area of shops and other commercial establishment. This condition came to be inserted for the first time w.e.f. 01.04.2005 vide Section 80-IB(10)(d). In Commissioner of Income Tax-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (emphasis added) 52. Supreme Court agreed with Bombay High Court's answer given above but with a minor modification with regard to para 5 and para 6 of judgment which reads as under:- "We are in agreement with the aforesaid answers given by the High Court to the various issues. We may only clarify that insofar as answer at para (a) is concerned, it would mean those projects which are approved by the local authorities as housing projects with commercial element therein." 53. In Commissioner of Income Tax-19, Mumbai Vs. Sarkar Builders (supra), another argument was raised that Section 80-IB(10), as amended w.e.f. 01.04.2005, if not applicable to existing housing projects approved before 01.04.2005, still it would be retroactive and in respect of Assessment Year 2006-07 i.e. Assessment Years post 01.04.2005, same would be applicable. This argument was rejected and in para 17, Court said as under:- "The issues dealt with from para 21 to 25 by the High Court already stands approved by this Court. In para 29, the High Court has held that clause (d) has prospective operation viz. with effect from 01.04.2005, and this legal position is not disputed by the Revenue before us. What ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, question (iv) in Income Tax Appeal No. 9 of 2014 is answered against Revenue and in favour of Assessee. 57. Question (ii) in Income Tax Appeal No. 16 of 2014 is a mixed question, already answered, hence is answered against Revenue and in favour of Assessee. 58. Now we take up question (iii) of Income Tax Appeal No. 9 of 2014, questions (iii), (iv) and (v) of Income Tax Appeal No. 13 of 2017, since all these questions relate to sub-section 10(a) of Act, 1961, i.e., completion of project. Historical backdrop shows that period of completion was contemplated in sub-section 10(a) since date of insertion of Section 80-IB but for a small period, by Finance Act, 2003 when amendment was made with retrospective effect from 01.04.2002, requirement of completion of project was dispensed with and reintroduced w.e.f. 01.04.2005 by Finance Act, 2004. Thus, this requirement was not existing only between 01.04.2002 to 31.03.2005. 59. Assessee got approval of housing project for the first time on 08.01.2002. At that time, it was not within ambit of benefits under Section 80-IB(10). However, with the amendment of Section 80-IB(10) by Finance Act, 2003, not only Assessee got included within bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on the manner in which the proposal is processed by the Local Authority, the provision cannot be construed as a directory requirement. It is a substantive provision mandating issuance or grant of completion certificate by the Local Authority before the cut off date or specified time, as a precondition to get the benefit of tax deduction. Else, it will then be open to the assessee to rely on other circumstances or evidence to plead that the housing project is complete - requiring enquiry into those matters by the Tax Authorities - sans a completion certificate issued by the Local Authority in that behalf. A priori, the argument of substantial compliance is sufficient, would lead to uncertainty about the date of completion of the project which is the hallmark for availing of the benefit of tax deduction. Only with this intent the legislature in its wisdom has predicated that, "the completion of construction" of the housing project is taken to be "the date on which" the completion certificate "is issued" by the Local Authority. To interpret it to include an ex post facto certificate or such certificate issued by the Local Authority after the cut off date, would not only result in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0)(a) in the light of fact that requirement of completion of project within specified time had continued since inception and was inapplicable for a smaller period of three years. 65. Looking to objective and purpose of conditions of completion of project and the fact that it is not a provision which came for the first time altogether into existence on 01.04.2005, we are inclined to follow Madhya Pradesh High Court's judgment in The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality (supra) and hold that Assessee in question was supposed to comply Section 80-IB(10)(a) as came to exist on amendment by Finance Act, 2004. Consequently, question (iii) in Income Tax Appeal No. 9 of 2014 and questions (iii), (iv) and (v) in Income Tax Appeal No. 13 of 2017 are answered in favour of Revenue and against Assessee. 66. We are clarifying that aforesaid questions are answered in favour of Revenue in the manner that requirement of completion of project reintroduced w.e.f. 01.04.2005 by Finance Act, 2004 would be applicable to Assessee but whether project in question was completed by Assessee within specified time, cannot be examined at this stage since Tribunal has not looked into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er relevant circumstances, we find, there is no discussion or finding recorded by Tribunal in all these appeals. Therefore, we leave aforesaid questions open at this stage, inasmuch in our view, it is appropriate that on these aspects, matter may be examined by Tribunal in the light of other questions answered above by this Court. 69. The summary of our answer to various questions raised in all these connected appeals is as under:- Income Tax Appeal No. 9 of 2014:- (A) Questions (i), (ii) and (iv) are answered in favour of Assessee. (B) Question (iii) answered in favour of Revenue. Income Tax Appeal No. 16 of 2014:- (A) Question (ii) answered in favour of Assessee. (B) Questions (i) and (iii) left open so as to be decided by Tribunal on remand. Income Tax Appeal No. 13 of 2017:- (A) Questions (iii), (iv) and (v) are answered in favour of Revenue. (B) Questions (i), (ii) and (vi) are left open so as to be decided by Tribunal on remand. 70. In the result, appeals are partly allowed. Judgments of Tribunal impugned in these appeals to the extent questions have been answered in favour of Revenue are set aside and matter is remanded to Tribunal to consider questions with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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