ACIT, Aurangabad v. M/s Kasliwal DEvelopers, Aurangabad

ITA 1767/PUN/2012 | 2005-2006
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 176724514 RSA 2012
Assessee PAN AAFFK2027G
Bench Pune
Appeal Number ITA 1767/PUN/2012
Duration Of Justice 1 year(s) 21 day(s)
Appellant ACIT, Aurangabad
Respondent M/s Kasliwal DEvelopers, Aurangabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-10-2013
Assessment Year 2005-2006
Appeal Filed On 09-10-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO S . 17 67 & 1768/ PN/201 2 ASSESSMENT YEAR S : 2005 - 06 & 2006 - 07 ACIT CENTRAL CI RCLE AURANGABAD VS. M/S. KASLIWAL DEVELOPERS 215 - 216 1 ST FLOOR BLDG. NO. 3 APNA BAZAR JALNA ROAD AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AA FFK2027G REVENUE BY: SHRI M.M. CHATE ASSESSEE BY: SHRI S.N. PURANIK DATE OF HEARING : 14 - 10 - 201 3 DATE OF PRONOUNCEMENT : 31 - 10 - 2013 ORDER PER R.S . PADVEKAR JM : - THESE TWO APPEALS ARE FILED BY THE R EVENUE CHALLENGING THE RESPECTIVE IMPUGNED ORDER S OF THE LD. CIT(A) AURANGABAD DATED 08 - 06 - 2012 FOR THE A.YS. 2005 - 06 & 2006 - 07 . THE REVENUE HAS TAKEN FOLLOWING GROUNDS WHICH ARE C OMMON IN BOTH THE APPEALS SAVE THE QUANTUM MENTIONED IN GROUND NO. 1: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 69 32 469/ - MADE OF ACCOUNT OF DISALL OWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 801B(10) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PROJECT OF THE ASSESSEE FIRM WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10 ) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE COMMERCIAL AREA OF THE PROJECT EXCEEDED 2000SQ. FIT & THEREFORE THE ASSESSEE WAS NOT ENTITLED FOR THE DEDUCTION UNDER SECTION 80IB(10) FOR ASSESSMENT YEAR 2005 - 06 ONWARDS SINCE THE CONDITIONS LAID DOWN I N THE STATUTE HAVE NOT BEEN FULFILLED. 2 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE PLEA THAT AS PER DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BRAMHA ASSOCIATES [ 333 ITR 289] SUCH DEDUCTION WILL NOT BE AVAILABLE FOR ASSESSMENT YEAR 2005 - 06 ONWARDS AND ALSO ERRED IN RELYING ON THE ANOTHER DECISIONS OF THE ITAT PUNE BENCH WHICH HAS NOT FOLLOWED THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE MENTIONED SUPRA . 4. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN HOLDING THE ASSESSMENT AS 'BAD IN LAW' AS NO INCRIMINATING MATERIAL BELONGED TO THE ASSESSEE WAS SEIZED CONTRARY TO THE PROVISION OF SECTION 153C OF THE ACT AND ALSO WELL SETTLED P OSITION LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF SSP AVIATION LTD. VS. DCIT (WPA NO. 309 OF 2011) DT. 29/03/2012 & IN THE CASE OF C1T VS . ANIL KUMAR BHATIA DT. 07/08/2012. . 2. THE GROUND NOS. 1 2 AND 3 ARE IN RESPECT OF THE DEDUCTION U/S . 80IB(10). THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. A SEARCH AND SEIZURE ACTION U/S. 132 OF THE INCOME - TAX ACT HAS BEEN CONDUCTED IN THE CASES OF TAPADIYA KHINVASARA & PAWAR GROUP ON 19/01/2010. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION VARIOUS REGISTERS DOCUMENTS ETC. WERE SEIZED AND SOME OF THE DOCUMENTS WERE FOUND BELONGING TO THE ASSESSEE THOSE ARE AS UNDER: (A) KG BOX FILE SR. NO. 34 (PAGES 1 TO 307) (B) JAGRUTI REGISTER SR. NO. 35 (PAGES 1 TO 169) (C) MAYUR BOX FILE SR. NO. 63 (PAGES 643 TO 672) 2.1 THE ASSESSING OFFICER ISSUED THE NOTICES U/S. 153C OF THE ACT TO THE ASSESSEE FOR FILING THE RETURNS OF INCOME FOR THE A.YS. 2005 - 06 & 2006 - 07 . THE ASSESSEE ALSO MADE THE COMPLIANCE BY FILING THE RETURNS OF 3 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD INCOME IN RESPONSE TO NOTICE ISSUE U/S. 153C OF THE ACT. THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S. 80IB(10) IN RESPECT OF THE HOUSING PROJECT DEVELOPED BY IT. WHILE COMPLETING THE ASSESS MENT THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE WHICH DETAILS ARE AS UNDER: SL. NO. A.Y. DISALLOWANCE OF DEDUCTION U/S. 80IB(10) 1 2005 - 06 RS. 69 32 469/ - 2 2006 - 07 RS. 11 49 534/ - 3. THE ASSESSING OFFICER HAS NOTED THA T THE ASSESSEES HOUSING PROJECT WAS PERSONALLY INSPECTED BY ADIT/INV AURANGABAD. ON THE BASIS OF DOCUMENTS SEIZED AND PERSONAL INSPECTION AS OBSERVED BY THE ASSESSING OFFICER CERTAIN DISCREPANCIES WERE NOTICE. THE QUESTIONERY WAS ISSUED TO THE ASSESS EE SEEKING THE EXPLANATION AND THE ASSESSEE HAS ALSO FILED THE REPLY. THE MAIN REASON FOR DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80IB(10) AS GIVEN BY THE ASSESSING OFFICER IS THAT THE COMMERCIAL AREA IN THE HOUSING PROJECT WAS TO THE EXTEN T OF 4147 SQ. FT. AND THE SAID AREA IS WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF THE APPROVED PLAN BY THE LOCAL AUTHORITY I.E. AURANGABAD MUNICIPAL CORPORATION WHICH WAS FOUND IN SEARCH ACTION. IN THE OPINION OF THE ASSESSING OFFICER THE COMMER CIAL AREA IN THE ASSESSEES HOUSING PROJECT WAS MORE THAN 2000 SQ. FT. IN VIEW OF THE INSERTION OF CLAUSE (D) TO SEC. 80IB(10) BY THE FINANCE ACT 2004 W.E.F. 01 - 04 - 2005. AS THE COMMERCIAL AREA IN HOUSING PROJECT IS MORE THAN 2000 SQ. FT. WHICH IS THE CEI LING FIXED IN THE AMENDED PROVISION AND HENCE THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S. 80IB(10) FOR THE VIOLATION OF ONE OF THE CONDITIONS FOR AVAILING THE DEDUCTION U/S. 80IB(10). THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEES HOUSING PROJE CT WAS APPROVED PRIOR TO 01 - 04 - 2005 I.E. ON 30 - 03 - 2001 BUT DUE TO THE AMENDED LAW WHICH IS APPLICABLE TO THE A.YS. 2005 - 06 & 2006 - 07 THE ASSESSEE IS NOT ENTITLED 4 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD FOR DEDUCTION U/S. 80IB(10). THE ASSESSING OFFICER THEREFORE WITHDREW/DISALLOWED DEDUCTION CLAIMED U/S. 80IB(10) AND ACCORDINGLY ASSESSED THE INCOME. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND FOUND FAVOUR. THE LD. CIT(A) FOLLOWED THE DECISION OF THE ITAT PUNE IN THE CASES OF OPEL SHELTER PRIVATE LTD. AND D.S. KULKARNI AND ASS OCIATES PUNE. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 5.4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE A.O. HAS DISALLOWED THE DEDUCTION CLAIME D BY THE APPELLANT U/S 80IB(10) OF THE ACT FOR THE YEARS UNDER APPEAL ON THE GROUND THAT THE COMMERCIAL CONSTRUCTION IN THE HOUSING PROJECT OF THE APPELLANT HAS EXCEEDED THE LIMIT OF 2000 SQ. FT. AS PER CLAUSE (D) OF SECTION 80IB(10) WHICH HAS BEEN MADE AP PLICABLE FROM A.YS. 2005 - 06 TO 2009 - 10. THE A.O. HAS FURTHER CLAIMED THAT THE DATE OF APPROVAL OF THE PROJECT IS NOT RELEVANT AND THE PROVISIONS REGARDING THE LIMIT OF COMMERCIAL AREA ARE APPLICABLE FOR A.YS. 2005 - 06 TO 2009 - 10. IN THE REMAND REPORT THE A. O. HAS CLAIMED THAT THE DECISIONS OF HON'BLE ITAT PUNE IN THE CASE OF OPEL SHELTERS PVT. LTD. & D.S. KULKARNI & ASSOCIATES PUNE RELIED ON BY THE APPELLANT HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL IN THE HIGH COURT HAS BEEN FILED. THIS COMMENT OF THE A.O. IS NOT RELEVANT AS WHILE DECIDING APPEALS THE JUDICIAL CONSISTENCY IS TO BE MAINTAINED BY FOLLOWING THE DECISIONS OF HIGHER APPELLATE FORUM. FURTHER IN SUPPORT OF THE CONTENTION THAT AS COMMERCIAL AREA EXCEEDED THE LIMIT OF 2000 SQ. FT. DEDUC TION U/S 80IB(10) IS NOT ALLOWABLE FROM A.Y. 2005 - 06 AND ONWARDS THE A.O. HAS RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAHMA ASSOCIATES REPORTED IN 333 ITR 289. HOWEVER ON PERUSAL OF THE SAID DECISION OF HON'BLE BOMBAY HIGH COURT IT HAS BEEN NOTICED THAT THE SPECIFIC ISSUE AS OT WHETHER THE AMENDED PROVISION PRESCRIBING LIMIT OF COMMERCIAL CONSTRUCTION AT 5% OF THE BUILT - UP AREA OF THE PROJECT FOR 2000 SQ. FT. WHICHEVER IS LEAST WOULD BE APPLICABLE TO THE HOUSING PROJE CTS APPROVED BY THE MUNICIPAL AUTHORITIES PRIOR TO THE SAID AMENDMENT MADE APPLICABLE FROM 01/04/2005? HAS NOT BEEN DECIDED BY THE HON'BLE HIGH COURT. IN FACT THE SAID DECISION OF HON'BLE BOMBAY HIGH COURT HAS BEEN CONSIDERED BY THE HON'BLE ITAT PUNE WH ILE DECIDING THE CASE OF 5 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD OPEL SHELTERS PVT. LTD. VS. ACIT AND D.S. KULKARNI & ASSOCIATES VS. ITO VIDE ORDER DATED 31/05/2009. THE HON'BLE ITAT DECIDED THE IDENTICAL ISSUE INVOLVED IN THE CASE UNDER APPEAL. THE CONCLUDING PARAGRAPHS 19 & 20 OF THE SAID OR DER ARE REPRODUCED BELOW 19. WE THUS FIND THAT THE ISSUES RAISED IN THE PRESENT APPEALS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI J.V. V/S.DCIT (SUPRA). RESPECTFULLY FOLLOW ING THE SAID DECISION IN THE CASE OF HIRANANDANI AKRUTI J.V. V/S DCIT (SUPRA) WE DECIDE THE ISSUES IN FAVOUR OF THE ASSESSEES THAT THE HOUSING PROJECT WILL ALSO CONSIST OF COMMERCIAL AREA TO THE PERMISSIBLE LIMIT AS SETTLED BY THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) (NOW UPHELD BY THE HON'BLE BOMBAY HIGH COURT) AS APPLICABLE UPTO A.Y.2004 - 05. AND SECONDLY THE LAW AS IT EXISTED IN THE ASSESSMENT YEAR WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL OF THE PROJECT AND PERMISSIO N FOR THE SAME WAS ACCORDED TO AND WHEN THE ASSESSEE COMMENCED THE PROJECT IS TO BE APPLIED. IN THE PRESENT CASE UNDISPUTEDLY THE ASSESSEE HAD STARTED THE PROJECT IN THE YEAR 2001 WHEN SUB - CLAUSE (D) TO SECTION 80IB(10) WAS NOT IN EXISTENCE HENCE IT CANN OT BE APPLIED ON SUCH PROJECTS AS HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI J.V. V/S. DCIT (SUPRA). IN THIS REGARD WE ALSO FIND STRENGTH FROM THIS PLEA OF THE LD. A.R. WHICH WAS ALSO RAISED BEFORE IN THE CASE OF HIRANANDAN I AKRUTI J.V. THAT IF THE ASSESSEE HAD FOLLOWED WIP (WORK - IN - PROGRESS) METHOD THE INCOME FROM THE PROJECT WOULD HAVE BEEN TAXABLE IN THE EARLIER YEARS AS THE PROJECT WAS COMPLETED EARLIER TO THE AMENDMENT AND IN THAT CASE AS PER THE OLD PROVISION THE ASS ESSEE WOULD HAVE BEEN ELIGIBLE FOR THE DEDUCTION. BUT JUST BECAUSE THE ASSESSEE HAS FOLLOWED THE PROJECT COMPLETION METHOD IN THESE CASES THE DEDUCTION IS BEING DENIED BECAUSE IT FALLS IN A.Y. 2005 - 06. IN OUR VIEW THE NEWLY INSERTED CLAUSE (D) TO SECTIO N 80IB(10) WILL NOT APPLY ON THE PROJECTS APPROVED UPTO 31.3.05 SINCE IN THOSE PROJECTS ASSESSEES ARE REQUIRED TO CONSTRUCT WHAT HAS BEEN APPROVED. THE ONLY FEASIBLE COMPLIANCE IS REQUIRED TO BE MET AS PER THE HARMONIOUS INTERPRETATION OF SECTION 80IB(10) AS 6 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD AMENDED IS TO COMPLETE SUCH PROJECTS (APPROVED BEFORE 1.4.2004) ON OR BEFORE 31.3.2008. IN THE CASES BEFORE US THE PROJECTS HAVE BEEN COMPLETED WELL BEFORE THIS DATE. PUTTING OF SUCH CONDITION OF TIME LIMIT IS WELL UNDERSTOOD. SINCE THE LEGISLATURE INTENDED THE COMPLETION OF PROJECTS WITHIN A TIME FRAME TO AVOID INCONVENIENCE TO THE BENEFICIARIES I.E. THE BUYERS. IN THIS REGARD THE LEGISLATURE HAS CATEGORIZED THE TIME LIMIT FOR THE PROJECTS APPROVED ON DIFFERENT PERIOD BEFORE 31.3.2007 BUT REQUIREM ENT REMAINED THE SAME THAT PROJECTS WOULD BE APPROVED BY THE LOCAL AUTHORITY. COMPLIANCE OF THE REQUIREMENT PROVIDED IN CLAUSE(D) TO THE SECTION IS POSSIBLE ONLY IN THOSE PROJECTS WHICH HAVE BEEN STARTED ON OR AFTER 1.4.2005 AS BY THEN THOSE ASSESSEES WER E ALL AWARE ABOUT THE PROVISIONS LAID DOWN IN CLAUSE (D). 20. BY APPLYING THE PRINCIPLE OF HARMONIOUS CONSTRUCTION TO INTERPRET THE PROVISIONS UNDER SUB - SECTION (10) TO SECTION 80IB AS AMENDED W.E.F.1.4.2005 WE COME TO THE CONCLUSION THAT THE LEGISLAT URE ALWAYS INTENDED THAT THE PROJECT MUST BE APPROVED BY THE LOCAL AUTHORITY THUS IN THOSE APPROVED PROJECTS WHERE CONSTRUCTION HAS BEEN STARTED MUCH EARLIER THAN 1.4.2005 THE ASSESSEES ARE REQUIRED TO COMPLETE THE PLAN AS IT HAS BEEN APPROVED. AS PUTTI NG SUCH ASSESSEES TO COMPLETE THE PLAN MEETING OUT CONDITION UNDER CLAUSE(D) OF THE SUB - SECTION WOULD LEAD INTO ABSURDITY AND IMPOSSIBILITY FOR THE ASSESSEE AND IN CONTRADICTION TO THE PROVISIONS U/S.80IB(10) AS PREVAILED AT THE TIME OF APPROVAL AND COMMEN CEMENT OF THE CONSTRUCTION OF THE PROJECT WELL BEFORE 1.4.2005. BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI J.V. (SUPRA) HAS DISCUSSED ALL THESE RELEVANT ASPECTS RAISED BY THE DEPARTMENT. IN THE CASE OF HIRANANDANI AKRUTI J.V. V/S. DCI T IT HAS BEEN HELD THAT THE LAW AS EXISTED WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL AND PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED AND WHEN THE ASSESSEE COMMENDED DEVELOPMENT IS TO BE APPLIED. IN THE PRESENT CASES AS PER PAGE NOS. 17 AND 2 0 OF THE PAPER BOOK IN THE CASE OF OPEL SHELTER THE PROJECT WAS COMMENCED ON 23.2.2001 AND EVEN COMPLET3ED ON 14.5.2004 7 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD SIMILARLY AS PER THE CONTENTS OF PAGE NO.2 OF THE ASSESSMENT ORDER AND PAGE NO.41 OF THE PAPER BOOK IN THE CASE OF D.S. KULKARNI AND AS SOCIATES THE PROJECT WAS COMMENCED ON 12.4.2001 AND COMPLETED IN THE MONTH OF NOVEMBER 2003. THUS THE ASSESSEES WERE SUPPOSED TO COMPLETE THE PROJECTS AS PER THE LAW AS EXISTED IN THE A.Y. 2001 - 02 IN THE CASE OF OPEL SHELTERS AND IN THE A.Y. 2002 - 03 IN THE CASE OF D.S. KULKARNI AND ASSOCIATES. WE THUS FOLLOWING THE DECISION IN THE CASE OF HIRANANDANI AKRUTI J.V. V/S. DCIT (SUPRA) HOLD THAT AMENDED PROVISIONS UNDER SECTION 80IB(10) W.E.F.1.4.2005 ARE NOT APPLICABLE IN THE PRESENT CASE HENCE ASSESSEES AR E ELIGIBLE FOR THE CLAIMED DEDUCTION U/S.80IB(10) OF THE ACT. WE ACCORDINGLY DIRECT THE A.O. TO ALLOW THE CLAIMED DEDUCTION TO THE ASSESSEE. THE SIMILAR RATIO HAS BEEN LAID DOWN BY HONBLE ITAT PUNE IN THE FOLLOWING CASES : (I) SHUBHMANGAL CONSTRUCTIONS PUNE VS. ACIT CIRCLE - 3 PUNE DATED 09/11/2011 BEARING ITA NO.1014/PN/2009:AY 2006 - 07. (II) (II) KUMAR BEHARAY RATHI VS. ACIT CIRCLE - 4 SWARGATE PUNE DATED 05 - 08/2011 BEARING ITA NO.1033/PN/2009: AY.2005 - 06. IN THE CASE UNDER APPEAL THE HOUSING PROJECT OF T HE APPELLANT WAS SANCTIONED BY AURANGABAD MUNICIPAL CORPORATION ON 30/03/2001 AND HENCE THE AMENDED PROVISIONS OF CLAUSE (D) TO SECTION 80IB(10) WHICH HAS BEEN MADE APPLICATION W.E.F.01/04/2005 IS NOT APPLICABLE TO THE CASE OF THE APPELLANT. IN VIEW OF TH E ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT PUNE IN THE CASES REFERRED TO ABOVE I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITIONS OF RS.69 32 469/ - & RS.11 49 534/ - FOR A.YS.2005 - 06 & 2006 - 07 RESPECTIVELY ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S.80IB(10) OF THE ACT. THE SAID ADDITIONS ARE THEREFORE DELETED. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NOS. 2 TO 5 ARE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 8 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD 4. WE HAVE HE ARD THE PARTIES AND PERUSED THE RECORD. IN THIS CASE THERE IS NO DISPUTE THAT THE HOUSING PROJECT OF THE ASSESSEE HAS BEEN APPROVED BY THE AURANGABAD MUNICIPAL CORPORATION ON 30 - 03 - 2001 . NOW THE LEGAL ISSUE BEFORE US IS WHETHER CLAUSE (D) TO SECTION 80I B(10) WHICH HAS BEEN BROUGHT ON STATUTE BOOK W.E.F. 01 - 04 - 2005 IS APPLICABLE TO THE HOUSING PROJECTS WHICH HAVE BEEN APPROVED PRIOR TO 01 - 04 - 2005. AS PER THE CLAUSE(D) TO SEC. 80IB(10) THE CEILING ON THE MAXIMUM COMMERCIAL AREA IN THE HOUSING PROJECT IS RESTRICTED TO 2000 SQ. FT.. THE APPLICABILITY OF CLAUSE (D) TO SEC. 80IB(10) HAS COME FOR JUDICIAL SCRUTINY BEFORE THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF MANAN CORPORATION VS. ACIT 255 CTR (GUJ) 415. THE HON'BLE HIGH COURT HAS REFERRED TO THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT 333 ITR 289 (BOM.) AND HAS HELD AS UNDER: 19. BEFORE THE BOMBAY HIGH COURT THE HOUSING PROJECT WAS APPROVED BY THE COMPETENT - AUTHORITY BEFORE 31.3.2005 AND THE A SSESSMENT YEAR CONCERNED WAS 2003 - 2004. IN THE INSTANT CASE HEAVY RELIANCE IS AGAIN PLACED ON THE JUDGMENT BRAHMA ASSOCIATES (SUPRA) BY THE TRIBUNAL AND RELYING UPON THE SAID DECISION IT CHOSE NOT TO AVAIL THE BENEFIT OF DEDUCTION OF THE PROFIT TO THE AP PELLANT ASSESSEE. AS FAR AS QUESTION OF VIOLATION OF CLAUSE (D) OF SECTION 80IB(10) OF THE ACT IS CONCERNED IT NOTED THAT ONE OF THE QUESTIONS RAISED BEFORE THE BOMBAY HIGH COURT WAS WHETHER CLAUSE (D) OF SECTION 80 IB(10) OF THE ACT WAS APPLICABLE FOR AS SESSMENT YEAR 2005 - 2006 OR WHETHER IT APPLIED RETROSPECTIVELY AND IT NOTED THUS: - 'UNDER THESE FACTS IT WAS HELD BY HON'BLE BOMBAY HIGH COURT THAT WITH EFFECT FROM 01 - 04 - 2005 DEDUCTION U/S. 80IB(10) WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE - ( D) OF SECTION 80IB(10). THE RELEVANT PARA OF THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT I.E. PARA - 25 IS REPRODUCED AS UNDER: - '25. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY CLAUSE(D) TO SECTION 80IB(10) INSERTED WITH EFFECT FROM 1/4/2005. CLAUSE (D) TO SECTION 80IB(10) INSERTED W.E.F. 1/4/2005 PROVIDES THAT EVEN THOUGH SHOPS 9 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD AND COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE HOUSING PROJECT DEDUCTION UNDER SECTION 80IB(10) WITH EFFECT FROM 1/4/2005 WOULD BE ALLOWABLE WHERE SUCH COMMERCIAL USER DOES NOT E XCEED FIVE PER CENT OF THE AGGREGATE BUILT - UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LOWER. BY FINANCE ACT 2010 CLAUSE (D) IS AMENDED TO THE EFFECT THAT THE COMMERCIAL USER SHOULD NOT EXCEED THREE PER CENT OF THE AGGREGATE B UILT - AREA OF THE HOUSING PROJECT OR FIVER THOUSAND SQUARE FEET WHICHEVER IS HIGHER. 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 SUC H 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 TIME ALLOWED SECTION 80IB(10) DEDUCTION TO HOUSING PROJECTS HAVIN G COMMERCIAL USER CANNOT BE ACCEPTED.' 12. FROM THE ABOVE PARA OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IT IS SEEN THAT IT IS NOT HELD BY HON'BLE BOMBAY HIGH COURT THAT CLAUSE (D) OF SECTION 80IB(10) IS APPLICABLE TO THOSE PROJECTS WHICH ARE APPROVED ON O R AFTER 01 - 04 - 2005. BUT IT IS HELD THAT FROM 01 - 04 - 2005 DEDUCTION U/S.80IB(10) WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE - (D) OF SECTION 80IB (10). IN OUR HUMBLE UNDERSTANDING THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT COVERS THIS ISSUE AGAINS T THE ASSESSEE AND THEREFORE THE VARIOUS DECISIONS OF COORDINATE BENCH OF THIS TRIBUNAL CITED BY LD. COUNSEL FOR THE ASSESSEE ARE OF NO USE IN THE LIGHT OF THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT. WE RESPECTFULLY FOLLOW THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN PREFERENCE TO VARIOUS DECISIONS OF CO - ORDINATE BENCH OF THIS TRIBUNAL.' 20. IN OUR OPINION THE TRIBUNAL HAS MISDIRECTED ITSELF IN INTERPRETING PARAGRAPH 25 OF THE SAID JUDGMENT AND THEREBY DENYING THE BENEFIT OF SECTION 80IB(10) TO THE APPEL LANT HEREIN IN AS MUCH AS BEFORE THE BOMBAY HIGH COURT IT WAS REVENUE'S CASE THAT RESIDENTIAL PROJECT HAVING COMMERCIAL CONSTRUCTION CANNOT BE HELD ENTITLED TO THE BENEFIT UNDER SECTION 80IB(10) OF THE ACT AND FOR SUPPORTING ITS VERSION RELIANCE WAS PLACE D ON INCLUSION OF CLAUSE (D) OF SECTION 80IB (10) 10 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD FROM 1.4.2005 WHICH RESTRICTS AREA OF COMMERCIAL CONSTRUCTION IN RESIDENTIAL PROJECT. IT WAS A PROJECT OF RESIDENTIAL HOUSING WITH COMMERCIAL USER FOR ASSESSMENT YEAR 2003 - 2004 AS NOTED ABOVE. IN THIS BACK DROP THE COURT REJECTED/ REFUTED SUCH VERSION AND FOR FORTIFYING ITS DENIAL IT MENTIONED INCLUSION OF CLAUSE(D) FROM 1.4.2005 BY HOLDING THAT BY INSERTION OF CLAUSE(D) OF SECTION 80IB(10) OF THE ACT LEGISLATURE MADE IT CLEAR THAT THOUGH THE HOUSING PROJ ECT APPROVED BY LOCAL AUTHORITY WITH COMMERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE RULES AND REGULATIONS WERE ENTITLED TO SECTION 80IB(10) DEDUCTION SUCH DEDUCTION WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAUSE (D) OF SECTION 80IB(10) FROM 1. 4.2005. IN OUR OPINION TRIBUNAL HAS QUOTED THE JUDGMENT OUT OF CONTEXT TO DENY THE SAID BENEFIT TO THE APPELLANT ERRONEOUSLY. 21. NEITHER THE ASSESSEE NOR LOCAL AUTHORITY RESPONSIBLE TO APPROVE THE CONSTRUCTION PROJECTS ARE EXPECTED TO CONTEMPLATE FUTURE AMENDMENT IN THE STATUTE AND APPROVE AND/OR CARRY OUT CONSTRUCTIONS MAINTAINING THE RATIO OF RESIDENTIAL HOUSING AND COMMERCIAL CONSTRUCTION AS PROVIDED BY THE AMENDED ACT BEING 3 PERCENT OF THE TOTAL BUILT UP AREA OR 5000 SQ.FEET WHICH EVER IS HIGHER (NOW IN POST 2010 PERIOD)OR 5 PERCENT OF THE AGGREGATE BUILT UP AREA OR 2000 SQ.FEET WHICHEVER IS LESS. REVENUE IS ALSO IN ERROR TO SUGGEST THAT EVEN IF SUCH CONDITIONS ARE ONEROUS THEY ARE REQUIRED TO BE FULFILLED. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO F ACILITATE THE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUCH PROJECT WHEN INITIALLY THERE WAS NO SUCH RESTRICTION IN TAXING STATUTE AND THE PERMISSIBLE RATIO FOR COMMERCIAL USER MADE 5 PERCENT TO THE TOTAL BUILT UP AREA BY WAY OF AMEN DMENT AND REDUCTION OF WHICH BY FURTHER AMENDMENT TO 3 PERCENT OF THE TOTAL BUILT UP AREA HAS TO BE NECESSARILY CONSTRUED ON PROSPECTIVE BASIS. 22. AS IS VERY APPARENT FORM THE RECORD THERE WAS NO CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIOR TO THE AMENDED SECTION AND THE PLANS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY FOR BOTH THE PROJECTS OF THE APPELLANT. PERMISSION FOR CONSTRUCTION OF SHOPS HAS BEEN ALLOWED BY THE LOCAL AUTHORITY IN ACCORDANCE WITH RULES AND REGULATIONS KEEPING IN MIND PRESUMABLY THE REQUIREMENT OF LARGE TOWNSHIPS. HOWEVER THE PROJECTS ESSENTIALLY REMAINED RESIDENTIAL HOUSING PROJECTS AND THAT IS ALSO QUITE APPARENT FROM THE CERTIFICATES ISSUED BY THE LOCAL AUTHORITY AND THEREFORE NEITHER ON 11 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD THE GROUND OF ABSENCE OF SUCH PROVISION OF COMMERCIAL SHOPS NOR ON ACCOUNT OF SUCH COMMERCIAL CONSTRUCTION HAVING EXCEEDED THE AREA CONTEMPLATED IN THE PROSPECTIVE AMENDMENT CAN BE MADE APPLICABLE TO THE APPELLANT ASSESSEE WHOSE PLANS ARE SANCTIONED AS PER THE PREVALENT RULES A ND REGULATIONS BY THE LOCAL AUTHORITY FOR DENYING THE BENEFIT OF DEDUCTION OF PROFIT DERIVED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AS MADE AVAILABLE OTHERWISE UNDER THE STATUE. 23. IT WOULD BE WORTHWHILE TO NOTE AT THIS STAGE THAT EVEN THOUG H THE FACTS BEFORE THE BOMBAY HIGH COURT WERE DIFFERENT THAN THOSE EMERGING FROM THE PRESENT CASE REVENUE'S SUBMISSIONS BEFORE THE BOMBAY HIGH COURT THAT THE AMENDMENT OF SECTION 80IB(10) AND THE INSERTION OF CLAUSE (D) WITH EFFECT FROM 1.4.2005 SHOULD BE APPLIED RETROSPECTIVELY WAS HELD TO BE WITHOUT ANY MERIT IN FOLLOWING WORDS IN PARAGRAPH 32 OF THE BOMBAY HIGH COURT WHICH IS REPRODUCED AS UNDER: - 'LASTLY THE ARGUMENT OF THE REVENUE THAT SECTION 80 - 16(10) AS AMENDED BY INSERTING CLAUSE (D) WITH EFFEC T 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 (D) SEEKS TO DENY SECTION 80 - 16(10) DEDUCTION TO PROJECTS HAV ING 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 RETR OSPECTIVELY. THIRDLY IT IS NOT OPEN TO THE REVENUE TO CONTEND ON THE ONE HAND THAT SECTION 80 - 16(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 USE R INTRODUCED WITH EFFECT FROM APRIL 1 2005 SHOULD BE APPLIED RETROSPECTIVELY. 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 SE CTION 80 - 16(10) WITH EFFECT FROM APRIL 1 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIEDTO THE PERIOD PRIOR TO APRIL 1 2005.' 24. KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE VS. ANRIYA PROJECT MANA GEMENT SERVICES (P.) LTD. WAS ALSO EXAMINING THIS PROVISION WHERE THE QUESTION WAS 12 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD WHETHER THE DEFINITION OF 'BUILT - UP AREA' INSERTED BY FINANCE (NO.2) ACT WHICH BECAME EFFECTIVE FROM 1.4.2005 IS PROSPECTIVE OR RETROSPECTIVE IN NATURE AND IT HELD THAT THE SAME TO BE PROSPECTIVE IN NATURE. IT HELD THAT AMENDMENT PROVISION WOULD HAVE NO APPLICATION TO HOUSING PROJECTS WHICH WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO 1.4.2005 IN CALCULATING 1500 SQ. FEET OF RESIDENTIAL UNIT AND IT FURTHER HELD THAT ONCE S UCH HOUSING PROJECT OF ASSESSEE IS APPROVED BY LOCAL AUTHORITY PRIOR TO 1.4.2005 IT WOULD BE ENTITLED TO 100 PERCENT BENEFIT OF SECTION 80IB(10). WHILE SO HOLDING IT RELIED ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. G.R. DEVELOPER S [IT APPEAL NO.355 OF 2009]. 25. COROLLARY TO THIS IS ONE MORE ASPECT THAT REQUIRES REFERENCE HERE. THE GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE TO ALL CHIEF COMMISSIONERS OF INCOME - TAX AND ALL DIRECTOR GENERALS OF INCOME - TAX ISSUED INSTRUCTION NO.4 OF 2009 DATED 30.6.2009 IN RESPECT OF SECTION 80IB(10) OF THE ACT WOULD BE AVAILABLE ON YEAR TO YEAR BASIS WHERE THEASSESSEE IS SHOWING PROFIT ON PARTIAL COMPLETION OR THE SAMEWOULD BE AVAILABLE ON THE YEAR OF COMPLETION OF THE PROJECT WH ICH IS CLARIFIED AS UNDER: - '3. THE ABOVE ISSUE HAS BEEN CONSIDERED BY THE BOARD AND IT IS CLARIFIED AS UNDER: - (A) THE DEDUCTION CAN BE CLAIMED ON A YEAR TO YEAR BASIS WHERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL COMPLETION OF THE PROJECT IN EVERY Y EAR. (B) IN A CASE IT IS LATE FOUND THAT THE CONDITION OF COMPLETING THE PROJECT WITHIN THE SPECIFIED TIME LIMIT OF 4 YEARS AS STARTED IN SECTION 80 - 16(10) HAS NOT BEEN SATISFIED THE DEDUCTION GRANTED TO THE ASSESSEE IN THE EARLIER YEARS SHOULD BE WITHDR AWN.' 26. FROM THE READING OF THE ABOVE INSTRUCTION IT CAN BE ALSO SAID THAT THE GOVERNMENT BEING AWARE OF BOTH THE ACCOUNTING METHODS HAS EXPECTED EITHER OF THEM TO BE FOLLOWED IN CASES OF INDIVIDUAL ASSESSEE. HOWEVER IN POST AMENDMENT PERIOD STRICT AD HERENCE TO COMPLETION PERIOD OF FOUR YEARS IS INSISTED UPON WHERE PROJECT COMPLETION METHOD IS FOLLOWED. THIS LIMITATION OF PERIOD DID NOT EXIST PRIOR TO THE AMENDMENT WHAT IS VITAL TO DRAW FROM THIS IS THAT THE AMENDMENT CANNOT DISCRIMINATE THOSE FOLLOWI NG PROJECT COMPLETION METHOD IF IN THE INTERREGNUM PERIOD AMENDMENT IS BROUGHT IN THE STATUTE. THE SAY OF THE ASSESSEE THEREFORE GETS FURTHER FORTIFIED WHEN IT SAYS THAT ONLY BECAUSE IT CHOSE TO FOLLOW THE METHOD OF ACCOUNTING 13 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD OF PROJECT COMPLETION BASIS WHOSE COMPLETION DATE FALLS AFTER 1.4.2005 THEY CAN BE DENIED THE DEDUCTION ON PROFITS DERIVED AND THOSE ASSESSEE WHO CLAIM DEDUCTION ON WORK - IN - PROGRESS BASIS THEY WOULD BE ENTITLED TO SUCH DEDUCTION. HOWEVER IT NECESSITATED STRICT COMPLIANCE OF THE P ROVISIONS AND COMPLETION OF THE SAME WITHIN THE STIPULATED TIME PERIOD. 27. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILITATE CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUCH PROJECT WHEN INITIALLY THERE WAS NO RESTRICTION AND BY AME NDMENT AS STATED PERMISSIBLE RATIO FOR CONSTRUCTION IS 5 PERCENT OF THE TOTAL BUILT UP AREA REDUCTION OF THIS RATIO TO 3 PERCENT OF THE TOTAL BUILT UP AREA HAS TO BE NECESSARILY ON PROSPECTIVE BASIS. 28. IT WOULD BE APT TO CONSIDER RATIO OF RETROSPECTIVIT Y AT THIS STAGE. IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. GOLD COIN HEALTH FOOD P. LTD. REPORTED IN 304 ITR 308 THEHON'BLE SUPREME COURT OF INDIA HAS HELD AS UNDER : IN ZILE SINGH V. STATE OF HARYANA (2004) 8 SCC 1 IT WAS OBSERVED AS FOLLOWS: '13.IT IS A CARDINAL PRINCIPLE OF CONSTRUCTION THAT EVERY STATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE A RETROSPECTIVE OPERATION. BUT THE RULE IN GENERAL IS APPLICABLE WHERE THE OBJECT OF THE STATUTE IS TO AF FECT VESTED RIGHTS OR TO IMPOSE NEW BURDENS OR TO IMPAIR EXISTING OBLIGATIONS. UNLESS THERE ARE WORDS IN THE STATUTE SUFFICIENT TO SHOW THE INTENTION OF THE LEGISLATURE TO AFFECT EXISTING RIGHTS IT IS DEEMED TO BE PROSPECTIVE ONLY - 'NOVA CONSTITUTIO FUTU RIS FORMAN IMPONERE DEBET NON PRAETERITIS' - A NEW LAW OUGHT TO REGULATE WHAT IS TO FOLLOW NOT THE PAST. (SEE PRINCIPLES OF STATUTORY INTERPRETATION BY JUSTICE G. P. SINGH 9TH EDN. 2004 AT PAGE 438.) IT IS NOT NECESSARY THAT AN EXPRESS PROVISION BE MADE TO MAKE A STATUTE RETROSPECTIVE AND THE PRESUMPTION AGAINST A CASE WHERE THE NEW LAW IS MADE TO CURE AN ACKNOWLEDGED EVIL FOR THE BENEFIT OF THE COMMUNITY AS A WHOLE (IBID. PAGE 440). 14. THE PRESUMPTION AGAINST RETROSPECTIVE OPERATION IS NOT APPLICABLE TO DECLARATORY STATUTES... IN DETERMINING THEREFORE THE NATURE OF THE ACT REGARD MUST BE HAD TO THE SUBSTANCE RATHER THAN TO THE FORM. IF A NEW ACT IS 'TO EXPLAIN 1 AN EARLIER ACT IT WOULD BE WITHOUT OBJECT UNLESS CONSTRUED RETROSPECTIVELY. AN EXPLANAT ORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP 14 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL - SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED. .. AN AMENDING ACT MAY BE PURELY DECLARATORY TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT (IBID. PAGES 468 - 69). 15. THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED AND RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY ACCORDING TO CRAIES (STATUTE LAW 7TH EDN.) IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE OPERATION. THIS CAN BE ACHIEVED BY EXPRESS ENACTMENT OR BY NECESSARY IMP LICATION FROM THE LANGUAGE EMPLOYED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED THAT THE LEGISLATURE INTENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION THE COURTS WILL GIVE IT SUCH AN OPERATION. IN THE ABSENCE OF A RETROSPECT IVE OPERATION HAVING BEEN EXPRESSLY GIVEN THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND ANSWER THE QUESTION WHETHER THE LEGISLATURE HAD SUFFICIENTLY EXPRESSED THAT INTENTION GIVING THE STATUTE RETROSPECTIVELY. FOUR FACTORS ARE SUGGESTED AS RELEVANT: (I) GENERAL SCOPE AND PURVIEW OF THE STATUTE; (II) THE REMEDY SOUGHT TO BE APPLIED; (III) THE FORMER STATE OF THE LAW; AND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED (PAGE 388). THE RULE AGAINST RETROSPECTIVITY DOES NOT EXTEND TO PROTECT FROM THE EFFECT OF A REPEAL A PRIVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT (PAGE 392).' 29. IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. TVS LEAN LOGISTICS LTD. REPORTED IN (2007) 293 ITR 432(MAD) THE HON'BLE MADRAS HIGH COURT HAS HELD AS UNDER: 'IN A CAS E WHERE THE STATUTORY PROVISION IS PLAIN AND UNAMBIGUOUS THE COURT SHALL NOT INTERPRET THE SAME IN A DIFFERENT MANNER ONLY BECAUSE OF HARSH CONSEQUENCES ARISING THEREFROM. THE COURT CANNOT ENLARGE THE SCOPE OF LEGISLATION OR INTENTION WHEN THE LANGUAGE OF THE PROVISION IS PLAIN AND UNAMBIGUOUS CANNOT ADD OR SUBTRACT WORDS TO A STATUTE OR READ SOMETHING INTO IT WHICH IS NOT THERE AND CANNOT REWRITE OR RECAST LEGISLATION. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATION FACTOR OF THE LEGISLATURE EVEN T AND EVEN ASSUMING THERE IS A DEFECT OR ANY OMISSION IN THE WORDS USED IN THE LEGISLATION THE COURT CANNOT CORRECT OR MAKE UP THE DEFICIENCY ESPECIALLY WHEN A LITERAL READING THEREOF PRODUCES AN INTELLIGIBLE 15 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD RESULT AND ANY INTERPRETATION WHICH IS NOT PE RMISSIBLE AND WHICH WOULD BE DESTRUCTION OF JUDICIAL DISCIPLINE.' 30. IN THE CASE OF NATIONAL AGRICULTURAL CO - OPERATIVE MARKETING FEDERATION OF INDIA LTD. AND ANOTHER VS. UNION OF INDIA AND OTHERS REPORTED IN AIR 2003 SC 1329 THE HON'BLE SUPREME COURT HA S HELD IN PARAGRAPHS 15 16 AND 17 AS UNDER : '15. THE LEGISLATIVE POWER EITHER TO INTRODUCE ENACTMENTS FOR THE FIRST TIME OR TO AMEND THE ENACTED LAW WITH RETROSPECTIVE EFFECT IS NOT ONLY SUBJECT TO THE QUESTION OF COMPETENCE BUT IS ALSO SUBJECT TO THE Q UESTION OF COMPETENCE BUT IS ALSO SUBJECT TO SEVERAL JUDICIALLY RECOGNIZED LIMITATIONS WITH SOME OF WHICH WE ARE AT PRESENT CONCERNED. THE FIRST IS THE REQUIREMENT THAT THE WORDS USED MUST EXPRESSLY PROVIDE OR CLEARLY IMPLY RETROSPECTIVE OPERATION. THE SEC OND IS THAT THE RETROSPECTIVITY MUST BE REASONABLE AND NOT EXCESSIVE OR HARSH OTHERWISE IT RUNS THE RISK OF BEING STRUCK DOWN AS UNCONSTITUTIONAL. THE THIRD IS APPOSITE WHERE THE LEGISLATION IS INTRODUCED TO OVERCOME A JUDICIAL DECISION. HERE THE POWER CA NNOT BE USED TO SUBVERT THE DECISION WITHOUT REMOVING THE STATUTORY BASIS OF THE DECISION.' 16. THERE IS NO FIXED FORMULA FOR THE EXPRESSION OF LEGISLATIVE INTENT TO GIVE RETROSPECTIVITY TO AN ENACTMENT.'SOMETIMES THIS IS DONE BY PROVIDING FOR JURISDICTION WHERE JURISDICTION HAD NOT BEEN PROPERLY INVESTED BEFORE. SOMETIMES THIS IS DONE BY REENACTING RETROSPECTIVELY A VALID AND LEGAL TAXING PROVISION AND THEN BY FICTION MAKING THE TAX ALREADY COLLECTED TO STAND UNDER THE REENACTED LAW. SOMETIMES THE LEGISLAT URE GIVES ITS OWN MEANING AND INTERPRETATION OF THE LAW UNDER WHICH TAX WAS COLLECTED AND BY LEGISLATIVE FIAT MAKES THE NEW MEANING BINDING UPON COURTS. THE LEGISLATURE MAY FOLLOW ANYONE METHOD OR ALL OF THEM. 17. A VALIDATING CLAUSE COUPLED WITH A SUBSTAN TIVE STATUTORY CHANGE IS THEREFORE ONLY ONE OF THE METHODS TO LEAVEACTIONS UNSUSTAINABLE UNDER THE UNAMENDED STATUTE UNDISTURBED. CONSEQUENTLY THE ABSENCE OF A VALIDATING CLAUSE WOULD NOT BY ITSELF AFFECT THE RETROSPECTIVE OPERATION OF THE STATUTORY PROV ISION IF SUCH RETROSPECTIVITY IS OTHERWISE APPARENT.' AS MENTIONED HEREINABOVE CRITERIAS TO HOLD THIS AMENDMENT RETROSPECTIVE ARE ABSENT AS THERE IS NO AS EXPLICIT AND SPECIFIC WORDING EXPRESSING RETROSPECTIVITY AND EVEN IF IT IS ASSUMED FOR THE SAKE OF A RGUMENTS THAT THE SAME IS TO BE READ BY IMPLICATION THE 16 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD SAME DOES NOT APPEAR TO BE REASONABLE BUT IN FACT EMERGES TO BE HARSH AND UNREASONABLE WHEN IT COMES TO IMPLEMENTATION. 31. AGAIN AS HELD IN CASE OF CIT VS. J.H. GOTLA(SUPRA) BY THE APEX COURT SUCH STRICT CONSTRUCTION OF THE STATUTE IF LEADS TO ABSURD INTERPRETATION THE SAME MAY NOT SUBSERVE THE INTENT AND OBJECT OF LEGISLATION. 32. AGAIN AS HELD IN THE CASE OF MYSORE MINERALS LTD. VS. COMMISSION OF INCOME - TAX REPORTED IN 239 ITR 775 APEX COURT WIT H TWO POSSIBILITIES OF INTERPRETATION OF A TAXING STATUTE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE ALWAYS PREFERRED. 33. AS ALSO LAID DOWN IN THE CASE OF BAJAJ TEMPO LTD. VS. COMMISSIONER OF INCOME - TAX REPORTED IN 196 ITR 188 (SC) TAXING STATUT E GRANTING INCENTIVES FOR PROMOTING ECONOMIC GROWTH AND DEVELOPMENT SHOULD BE LIBERALLY CONSTRUED TO FACILITATE AND ADVANCE THE OBJECTIVES OF THE PROVISION. 34. ABOVE DISCUSSION CUMULATIVELY WHEN EXAMINED WITH THE OBJECTIVES AND INTENT IT SOUGHT TO ACHIEV E IN BRINGING ABOUT THE SAID PROVISION OF SECTION 80IB(10) THIS AMENDED TAXING STATUTE REQUIRES TO BE INTERPRETED IN FAVOUR OF THE ASSESSEE RATHER THAN INSISTING UPON STRICT COMPLIANCE LEADING TO ABSURDITY. 35. IT CAN BE ALSO HELD THAT THIS BEING A SUBST ANTIVE AMENDMENT AND NOT A CLARIFICATORY AMENDMENT THE AMENDMENT OF THIS NATURE CANNOT HAVE RETROSPECTIVE EFFECT. 36. RESULTANTLY WE ANSWER THE QUESTIONS RAISED BEFORE US IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 37. RESULTANTLY THE APPEAL IS ALLOWED. IMPUGNED JUDGMENT OF THE TRIBUNAL IS REVERSED TO THE ABOVE EXTENT. 5. THE APPLICABILITY OF CLAUSE (D) TO SEC. 80IB(10) IS AGAIN CONSIDERED BY THE ITAT MUMBAI IN THE CASE OF HIRANANDANI AKRUTI JV VS. DCIT 39 SOT 498 (MUM). THE TRIBUNAL HAS HELD AS UNDER: 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FORTH ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OBTAINS APPROVAL 17 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN THE PREVIOUS YEAR RELEVANT TO ASST. YR. 2002 - 03. AS PER THE LAW AS IT STOOD IN THE PREVIOUS YEAR RELEVANT TO ASST. YR. 2002 - 03 UP TO 2004 - 05 THERE WAS NO TIME - LIMIT WITHIN WHICH THE CONSTRUCTION HAS TO BE COMPLETED OR ANY RESTRICTION REGARDING COMMERCIAL AREA THAT CAN BE BUILT IN A HOUSING PROJECT. LET US ASS UME THAT THE ASSESSEE COMPLIES WITH ALL THE CONDITIONS FOR ALLOWING RELIEF UNDER S. 80 - 16(10) I.E. IT IS APPROVED AS A HOUSING PROJECT BY THE LOCAL AUTHORITY BUT THE AREA OF COMMERCIAL SPACE AS APPROVED BY THE LOCAL AUTHORITY IS MORE THAN 2 000 SQ. FT. T HE ASSESSEE COMMENCES THE PROJECT BUT IS ABLE TO COMPLETE ONLY IN THE PREVIOUS YEAR RELEVANT TO ASST. YR. 2005 - 06. AS PER THE CHANGE IN LAW FROM ASST. YR. 2005 - 06 WITH REGARD TO THE AREA OF COMMERCIAL SPACE IN A HOUSING PROJECT THE ASSESSEE WOULD LOOSE HIS ELIGIBILITY TO CLAIM DEDUCTION. IN SUCH CASES THERE IS DEFINITELY GRAVE HARDSHIP TO THE ASSESSEE. THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WILL ALSO LEAD TO ABSURD SITUATION. LET US ASSUME AN ASSESSEE OBTAINS A PPROVAL OF A HOUSING PROJECT PRIOR TO 1ST APRIL 2005 SAY IN PREVIOUS YEAR RELEVANT TO ASST. YR. 2002 - 03. HE BUILDS COMMERCIAL SPACE IN EXCESS OF 2 000 SQ. FT. IN THE HOUSING PROJECT. HE FOLLOWS PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND OFFERS PROFITS IN ASST. YRS. 2002 - 03 TO 2004 - 05 CLAIMS EXEMPTION UNDER S. 80 - 16(10) AND IS ALLOWED EXEMPTION. ON THE SAME PROJECT IN ASST. YR. 2005 - 06 THE ASSESSEE WOULD NOT GET THE BENEFIT OF S. 80 - 16(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIEW DIFFERENT FROM THE ONE TAKEN BY THE CO - ORDINATE 6ENCH OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA). 27. WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING ANY WORDS TO THE 'STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EXISTED IN THE ASST. YR. 2004 - 05 WH EN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH NOV. 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED. THEREFORE THE SUBMISSIONS OF THE LEARNED DEPAR TMENTAL REPRESENTATIVE IN THIS REGARD CANNOT BE ACCEPTED. WE ARE OF THE VIEW THAT THE LEGISLATURE WOULD NOT HAVE INTENDED TO TAKE AWAY A VESTED RIGHT WITHOUT CLEAR WORDS TO THAT EFFECT IN THE PROVISIONS OF S. 80 - 16(10) AS AMENDED BY THE FINANCE ACT 2005 W.E.F. 1ST APRIL 2005. WE THEREFORE HOLD 18 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) THAT THE LAW AS IT EXISTED IN THE ASST. YR. 2004 - 05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR C ARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH NOV. 2003 AND WHEN THE ASSESSEE COMMENCED 28. WE HAVE ALREADY HELD THAT ON THE ISSUE ON WHAT IS A HOUSING PROJECT AND WHETHER - COMMERCIAL AREA CAN BE CONSTRUCTED IN A HOUSING PROJECT AND IF SO CONSTRUCTED WHETHER THE ASSESSEE WOULD LOOSE EXEMPTION UNDER THE LAW AS APPLICABLE UP TO ASST. YR. 2004 - 05 HAS BEEN SETTLED BY THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA). THE AO HELD THE LAW AS AMENDED BY THE FINANCE ACT 2005 W.E.F. 1ST A PRIL 2005 WHEREBY IT WAS LAID DOWN THAT THE BUILT - UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT BE MORE THAN 5 PER CENT OF THE TOTAL BUILT - UP ARE OF THE PROJECT OR 2 000 SQ. FT. WHICHEVER IS LESS WILL APPLY A ND THEREFORE HE HAD NO OCCASION TO APPLY THE TEST AS LAID DOWN BY THE SPECIAL BENCH REFERRED TO ABOVE. SINCE WE HAVE HELD THAT THE LAW AS IT EXISTED IN THE ASST. YR. 2004 - 05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISS ION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH NOV. 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED THE ASSESSEE TO CLAIM DEDUCTION UNDER S. 80 - IB(10) OF THE ACT HAS TO PASS THE TEST LAID DOWN BY THE SPECIAL BENCH AS ABOVE. W E THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE ISSUE TO THE AO FOR THE LIMITED PURPOSE OF SATISFYING HIMSELF AS TO WHETHER THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION ON THE PROFITS DERIVED ON DEVELOPING AND BUILDING HOUSING PROJECTS AS PER THE RATIO LAID DOWN BY THE SPECIAL BENCH REFERRED TO ABOVE WHILE COMPUTING TOTAL INCOME AND IF SO TO WHAT EXTENT. FOR STATISTICAL PURPOSES THE APPEAL IS TREATED AS ALLOWED. 6. IN THIS CASE ADMITTEDLY THE ASSESSEES HOUSING PROJECT HAS BEEN APPROVED PR IOR TO 01 - 04 - 2005 AND HENCE CLAUSE (D) TO SEC. 80IB(10) PUTTING THE CEILING ON THE BUILT UP COMMERCIAL AREA WILL NOT APPLY TO THE ASSESSEES HOUSING PROJECT. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS LEGAL ISSUE GIVING RELIE F TO THE ASSESSEE AND WE ACCORDINGLY HOLD THAT CLAUSE (D) TO SEC. 80IB(10) WILL NOT APPLY IF THE 19 ITA NOS. 1767 & 1768/ PN/2012 M/S. KASLIWAL DEVELOPERS AURANGABAD HOUSING PROJECT HAS BEEN SANCTIONED/APPROVED PRIOR TO 01 - 04 - 2005 ACCORDINGLY GROUND NOS. 1 2 & 3 IN ALL THE APPEALS ARE DISMISSED. 7. SO FAR AS GROUND NO. 4 IS CONCERNED THE DEPARTMENT HAS RELIED ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF SSP AVIATION LTD. VS. DCIT 346 ITR 177 (DEL) RAISING THE GRIEVANCE AGAINST THE FINDING OF LD. CIT(A) THAT AS NO INCRIMINATING MATERIAL BELONGED TO THE ASS ESSEE WAS SEIZED HENCE THE ASSESSMENT IS BAD IN LAW. IN OUR OPINION THE SAID GROUND REMAINED ONLY ACADEMIC AS ON MERIT ITSELF THE LAW IS INTERPRETED IN FAVOUR OF THE ASSESSEE MORE PARTICULARLY CLAUSE (D) TO SECTION 80IB(10) WHICH WAS INSERTED W.E.F. 0 1.04.2005. AS THE ASSESSEE HAS SUCCEEDED FOR GETTING THE RELIEF AS PER THE PROVISIONS OF LAW THE GROUND NO.4 IS TAKEN BY THE REVENUE IS MERELY ACADEMIC NOW AND ACCORDINGLY WE DISMISS THE SAME AS ACADEMIC. 8 . IN THE RESULT BOTH THE APPEALS OF THE REVENU E ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 - 10 - 2013 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE DATED : 31 ST OCTOBER 20 1 3 COPY TO 1 ASSESSEE 2 DEPA RTMENT 3 THE CIT(A) AURANGABAD 4 THE CIT AURANGABAD 5 THE DR ITAT B BENCH PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE