M/s. Raj Developers, Baroda v. The Income tax Officer,Ward-3(2),, Baroda

ITA 2200/AHD/2008 | 2004-2005
Pronouncement Date: 27-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 220020514 RSA 2008
Assessee PAN AAFFR0802C
Bench Ahmedabad
Appeal Number ITA 2200/AHD/2008
Duration Of Justice 2 year(s) 2 month(s) 18 day(s)
Appellant M/s. Raj Developers, Baroda
Respondent The Income tax Officer,Ward-3(2),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 27-08-2010
Date Of Final Hearing 14-07-2010
Next Hearing Date 14-07-2010
Assessment Year 2004-2005
Appeal Filed On 09-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI MAHAVIR SINGH JM &SHRI A N PAHUJA AM ITA NOS.2200 & 2633/AHD/2008 (ASSESSMENT YEARS:-2004-05 AND 2005-06) M/S RAJ DEVELOPERS 33 VIHALKRUPA SOCIETY NEAR VIDYADHAM SOCIETY NEW SAMA ROAD BARODA [PAN: AAFFR 0802 C] V/S INCOME-TAX OFFICER WARD- 3(2) AAYAKAR BHAVAN BARODA [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR & SHRI BANDISH SOPARKAR ARS REVENUE BY:- SHRI MAHESH KUMAR DR O R D E R A N PAHUJA: THESE TWO APPEALS BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS DATED 28-03-2008 AND 09-05-2008 OF THE LD. CIT (APPEALS)-II BARODA FOR THE ASSESSMENT YEARS 20 04-05 AND 2005- 06 RESPECTIVELY RAISE THE FOLLOWING COMMON GROUND S:- 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. 2 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE APPELLANT IS DEVELOP ING & BUILDING HOUSING PROJECTS BY FULFILLING MAJORITY OF THE REQUIREMENTS FOR CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT. 3 INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) O F THE ACT IS NOT JUSTIFIED. 4 INITIATION OF LEVY OF INTEREST U/S 234A/B/C OF TH E ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD AMEND AL TER EDIT DELETE MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE HEARING OF THE APPEAL. 2 FACTS OF THE CASE AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.1 25 540/- FILED ON 01-11-20 04 FOR THE AY 2004-05 BY THE ASSESSEE ENGAGED IN BUILDING/CONSTR UCTION ACTIVITIES ITA NO.2200 & 2633/A/2008 2 AFTER BEING PROCESSED ON 26-04-2005 U/S 143(1) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] W AS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 22-03- 2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE ASSESSEE CL AIMED DEDUCTION OF RS.8 92 284/-U/S 80IB(10) OF THE ACT. IN RESPONSE T O A SHOWCAUSE NOTICE DATED 27/11/2006 THE ASSESSEE WHILE REFERRI NG TO PROVISIONS OF THE SEC. 80IB(10) OF THE ACT REPLIED VIDE LETTE R DATED 04/12/2006 THAT THEY FULFILLED THE CONDITIONS STIPULATED IN THE SAID PROVISION. WHILE REFERRING TO DECISIONS IN THE CASE OF SHANKAR CONSTRUCTION COMPANY V/S. CIT 189 ITR 463(KARNATAKA) AND ALIJUNJ U M.A. NAZEER CASHEW INDUSTRIES V/S. CIT 166 ITR 804(KERALA) TH E ASSESSEE CONTENDED THAT A. DEVELOPMENT AGREEMENT HAS BEEN MADE IN THE NAME OF ASSESSEE FIRM; B. PERMISSIONS WERE OBTAINED FROM LOCAL AUTHORITY F OR CONSTRUCTION; C. ARCHITECTS WERE APPOINTED PLANNING FOR CONSTRUC TION OF RESIDENTIAL UNITS AND DEVELOPMENT OF SITE WAS UNDERTAKEN; D. CONTRACTORS FOR EXECUTION OF WORK UNDER THE SUPE RVISION OF PARTNERS WERE MADE; E. THE PARTNERS MADE MARKETING STRATEGY FOR SELLING OF THE UNITS; F. LITERATURE FOR SPECIFICATION OF THE INDIVIDUAL U NITS AS WELL AS COMMON AMENITIES WAS LISTED OUT IN THE BROCHURES ; G. THE PARTNERS MADE BOOKING OF THE UNITS AND COLLE CTION FROM THE MEMBERS; H. ALL REQUIRED MATERIALS WERE PURCHASED BY THE APP ELLANT FIRM; I. ALL INVENTORIES WERE CARRIED BY APPELLANT FIRM O F MATERIAL AND WORK IN PROCESS; J. ALL THE FINANCE WAS ARRANGED FOR MAKING PAYMENT FOR MATERIALS AND LABOUR CHARGES WHENEVER REQUIRED AND K. SUPERVISION FOR CONSTRUCTION AND DEVELOPMENT OF THE PROJECT WAS UNDER THE DIRECT CONTROL OF ALL THE PAR TNERS. ACCORDINGLY THE ASSESSEE PLEADED THAT THE FIRM HAD UNDERTAKEN ALL THE ACTIVITIES IN THE CAPACITY OF A DEVELOPER AND N OT CONTRACTOR AND ITA NO.2200 & 2633/A/2008 3 WAS THEREFORE ENTITLED TO THE DEDUCTION . INTER ALI A THE ASSESSEE REFERRED TO THE DECISIONS IN THE CASE OF STRAWBOAR D MANUFACTURING CO. LTD. 177 ITR 431 (SC) CIT VS. SOUTH ARCOT DIS TRICT C. OP. MARKETING SOCIETY LTD. (1989) 176 ITR 117 (SC) CI T VS. UP CO-OP. FEDERATION LTD. (1989) 176 ITR 435 (SC) CIT VS. S TRAWBOARD MANUFACTURING CO. LTD. (1992) 196 ITR 149 (SC) CI T VS MAHINDRA AND MAHINDRA LTD. (1983) 144 ITR 225 (SC) CIT VS . SOUTH ARCOT DISTRICT CO. OP. LTD. (1989) ITR 117 (SC) CBDT VS. ADITYA BIRLA (1988) 170 ITR 137 (SC) HIND WIRE INDUSTRIES LTD. VS. CIT (1992) 195 ITR 450 (CAL) CIT VS. SKY ROOM PVT.LTD. (1992) 195 ITR 763 (CAL) DR. P.K.P. MOHMAD VS. CBDT (1993) 203 ITR 47 9 (KAR) BAJAJ TEMPO LTD. VS. CIT (1992) 62 TAXMAN 480 (SC) CIT VS. FIRST LEASING CO. OF INDIA LTD. (1995) 216 ITR 455 (MAD) AGS TIBER & CHEMICAL INDUSTRIES P LTD. VS. CIT 233 ITR 207 CI T VS. LUCKY MINERAL P LTD. 226 ITR 245(RAJ) MYSORE MINERALS LI MITED VS. CIT (1999) 239 ITR 775 (SC) AND CIT VS. PODAR CEMENT ( P) LTD. (1997) 226 ITR 625 (SC). HOWEVER THE AO DID NOT ACCEPT T HE SUBMISSIONS OF THE ASSESSEE AND DENIED DEDUCTION U/S 80IB(10) OF THE ACT IN HIS ELABORATE ORDER ON THE GROUND THAT I) THE ASSESSEE WAS NOT OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WA S BUILT UP. II) THE APPROVAL OF THE HOUSING PROJECT ISSUED BY T HE COMPETENT AUTHORITY WAS FOUND IN THE NAME OF OTHER PERSONS I.E SANJEEV DIGMBAR BHARMBHE P.A OF FABHSIN H MANGALSINH DODIA & AARTIBEN FATEHSINH DODIA. III) THE LAND OWNERS HAVE SOLD PIECES OF LAND TO TH E UNIT HOLDERS DIRECTLY AND ASSESSEE HAS ACTED MERELY AS CONFIRMING PARTY. IV) ASSESSEE FIRM ACTED MERELY AS A CONTRACTOR AS I T HAS ENTERED INTO CONSTRUCTION/DEVELOPMENT AGREEMENT AND V) THE ASSESSEE FIRM HAS NEVER SOLD THE HOUSES TO T HE UNIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESP ECT THEREOF. ITA NO.2200 & 2633/A/2008 4 IN NUTSHELL THE AO WAS OF THE OPINION THAT THE A SSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT AS THE APPROVAL O F THE COMPETENT AUTHORITY FOR DEVELOPMENT OF THE HOUSING PROJECT WAS IN THE NAME OF OWNERS OF THE LAND AND COMPLETION CERTIFICATE WAS ALSO GRANTED TO THESE L ANDOWNERS. APPARENTLY THE LAND ON WHICH HOUSING PROJECT WAS CONSTRUCTED WAS N OT OWNED BY THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE COULD NOT BE REGA RDED AS A BUILDER AND DEVELOPER WITHIN THE MEANING OF PROVISIONS OF SEC. 80(IB)(10) OF THE ACT. THE AO ALSO FOUND THAT THAT THE LAND OWNERS HAD SOLD THE P IECES OF LAND DIRECTLY TO UNIT HOLDERS AND THE ASSESSEE NEVER SOLD HOUSES TO THE U NIT HOLDERS. THE AO WAS ALSO OF THE OPINION THAT THE LAND WAS NOT GOT TRANS FERRED IN THE NAME OF THE SO CALLED DEVELOPER IN ORDER TO AVOID STAMP DUTY. ACCO RDING TO THE AO THE ASSESSEE ACTED MERELY AS A CONTRACTOR. MOREOVER PROFIT ON S ALE OF LAND WAS NOT REFLECTED IN THE BOOKS OF THE ASSESSEE THE AO OBSERVED. IN THE LIGHT OF THESE OBSERVATIONS THE AO DISALLOWED THE CLAIM FOR DEDUCTION U/S 80IB( 10) OF THE ACT. 3. ON APPEAL THE LD. CIT(A) WHILE FOLLOWING T HE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF M/S. RADHE DEVELOP ERS & OTHERS IN ITA NO.2482/AHD./2006 DISAGREED WITH THE REASONING O F THE AO FOR DISALLOWING THE CLAIM FOR DEDUCTION U/S80IB(10) ON THE GROUND THAT THE ASSESSEE WAS NOT OWNER OF THE LAND. IT MAY BE MENTIONED THAT THE REVENUE HAVE NOT DISPUTED THESES FINDINGS OF TH E LD. CIT(A) BEFORE US. HOWEVER THE LD. CIT(A) WHILE RELYING ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF LAUKIK DEVELOPERS VS . DCIT (MUM) 108 TTJ 364 UPHELD THE DISALLOWANCE IN THE AY 2004-05 ON THE G ROUND THAT THE ASSESSEE'S PROJECT WAS NOT APPROVED AS HOUSING PROJECT AND INSTEAD WAS APPROVED AS RESIDENTIAL-CUM-COMMERCIAL PROJECT. THE LD. CIT(A) CONCLUDED THE ISSUE IN THE FOLLOWING TERMS: 3.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. THE PROVISIONS OF SECTION 80IB(10) AS IT STO OD PRIOR TO 1.4.2005 ARE MENTIONED BELOW FOR PROPER ANALYSIS OF REQUIREMENTS FOR AN ELIGIBLE UNDERTAKING - ITA NO.2200 & 2633/A/2008 5 '(10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKIN G DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31 ST DAY OF MARCH 2005 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSM ENT YEAR FROM SUCH HOUSING PROJECT IF - (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT 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 WHIC H 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 SIT UATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIES AN D ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLA CE.' FROM THE ABOVE IT IS CLEAR THAT ONLY THOSE UNDERTA KINGS DEVELOPING PROJECTS FULFILLING THE FOLLOWING CONDITIONS ARE EL IGIBLE FOR DEDUCTION U/S.80IB(10): 1. UNDERTAKING SHOULD DEVELOP AND BUILD HOUSING PROJECTS 2. SUCH HOUSING PROJECT SHOULD BE APPROVED BEFORE 31 ST MARCH 2005 3. THE UNDERTAKING HAS COMMENCED DEVELOPMENT AND CO NSTRUCTION OF SUCH HOUSING PROJECT AFTER 1 ST OCTOBER 1998 4. THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WIT H MINIMUM ONE ACRE AREA 5 THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF 1500 SQ. FT. IN CITIES OTHER THAN DELHI AND MUMBAI. ALL THE ABOVE CONDITIONS ARE TO BE CUMULATIVELY SAT ISFIED BEFORE GRANTING DEDUCTION U/S.80IB(10). IN THE CASE OF APPELLANT W HILE CONDITION NO.2 3 AND 4 ARE SATISFIED HOWEVER CONDITION NO.1 READ WI TH 5 ARE NOT SATISFIED IN THE SENSE THAT THE PROJECT APPROVED BY LOCAL AUTHOR ITY IS RESIDENTIAL-CUM- COMMERCIAL PROJECT RATHER THAN HOUSING PROJECT. SIN CE THE PROJECT IS APPROVED AS RESIDENTIAL-CUM-COMMERCIAL PROJECT THE SAME DOES NOT FULFILL THE NECESSARY CONDITION FOR ALLOWING DEDUCT ION U/S.80IB(10). APPELLANT SUBMITTED THAT THE COMMERCIAL CONSTRUCTIO N WAS CARRIED OUT BY IT ONLY TO THE EXTENT OF 549.36 SQ. MT. AND PROFIT ON THE SAME WAS OFFERED FOR TAXATION IN EARLIER YEAR. THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY AS ONE INCLUDING CONSTRUCTION OF SHOPS AND COMMERCI AL AREAS. THE DEVELOPMENT AND CONSTRUCTION APPROVAL WAS TAKEN UP FROM THE MUNICIPAL CORPORATION BY THE UNDERTAKING OF APPELLANT. HOWEVE R THE FACT IS THAT THE PROJECT APPROVED BY THE LOCAL AUTHORITY IS NOT A HO USING PROJECT BUT A PROJECT FOR CONSTRUCTING RESIDENTIAL TENEMENTS AND SHOPS (AS CLEARLY MENTIONED IN THE APPROVAL LETTERS). SINCE THE PROJECT IN RESPECT OF WHICH ITA NO.2200 & 2633/A/2008 6 DEDUCTION U/S.80IB(10) IS CLAIMED BY THE APPELLANT IS APPROVED AS RESIDENTIAL-CUM-COMMERCIAL PROJECT THE BASIC CONDI TION FOR APPELLANT BEING ELIGIBLE TO CLAIM DEDUCTION U/S.80IB(10) IS NOT SAT ISFIED. EVEN THE LAST CONDITIONS TALKS OF MAXIMUM SIZE OF R ESIDENTIAL UNIT. SINCE THE PROJECT APPROVED HAD COMMERCIAL SHOPS ETC. TO THE EXTENT OF MORE THAN 500 SQ. METERS THE PROJECT APPROVED IS N OT ELIGIBLE FOR DEDUCTION U/S.80IB(10). IT IS WRONG ON THE PART OF THE APPELLANT THAT THE PROJECT WAS APPROVED AS HOUSING PROJECT. AS CLEARLY MENTIONED IN THE APPROVAL GIVEN BY THE LOCAL AUTHORITY THE PROJECT IS RESIDENTIAL-CUM- COMMERCIAL PROJECT AND THEREFORE THE SAME IS NOT ELIGIBLE FOR DEDUCTIO N U/S.80IB(10). IT IS NOT MATERIAL WHETHER PART OF TH E COMMERCIAL CONSTRUCTION IS DONE BY THE APPELLANT DURING THE YEAR OR IN EARL IER YEAR. WHAT IS RELEVANT IS WHETHER PROJECT IS APPROVED AS HOUSING PROJECT OR NOT. FROM THE APPROVAL LETTER IT IS CLEAR THE PROJECT IS NOT HOUSING PROJECT BUT THE SAME IS APPROVED AS RESIDENTIAL-CUM-COMMERCIAL PROJECT. THE SIMILAR ISSUE CAME UP BEFORE ITAT MUMBAI C-BE NCH IN THE CASE OF LAUKIK DEVELOPERS VS DCIT REPORTED IN 105 ITD 567. IN THAT CASE ALSO THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY AS RESIDENTIAL-CUM- COMMERCIAL PROJECT. IT WAS HELD THAT THE ASSESSEE'S BUILDING PROJECT APPROVED BY LOCAL AUTHORITY AS 'RESIDENTIAL AS WELL AS COMMERCIAL PROJECT' AND CONTAINING COMMERCIAL SHOPS ALONG WITH RESIDENTIAL UNITS COULD NOT BE SAID TO BE HOUSING PROJECT ELIGI BLE FOR RELIEF U/S.80IB(10). IT WAS ALSO HELD THAT NO PROPORTIONAT E DEDUCTION U/S.80IB COULD BE ALLOWED TO THE EXTENT OF RESIDENTIAL UNITS ALSO IN SUCH A CASE. RELEVANT PORTION OF THE SAID DECISION IS QUOTED BEL OW : ' THE FIRST ISSUE BEFORE US IS WHETHER THE BUILDING P ROJECT OF THE ASSESSEE AT VILLAGE GAJBANDHAN DOMBIVALI IS A 'HOU SING PROJECT' OF THE ASSESSEE FOR THE PURPOSES OF SECTION 80IB(10) OF TH E ACT BOTH THE ASSESSEE AND THE I// REVENUE STATED BEFORE USE THAT THE AMENDMENT BROUGHT BY FINANCE NO.(2) / ACT 2004 WITH EFFECT F ROM 1 ST APRIL 2005 INTRODUCING SUB-CLAUSE (D) IN THE PROVISIONS OF SEC TION 80IB(10) SHALL HAVE NO APPLICATION TO THE CASE OF THE ASSESSEE FOR THE REASON THAT THE AMENDMENT IS NOT RETROSPECTIVE IN NATURE. THE ASSES SEE HAS ADMITTEDLY CONSTRUCTED COMMERCIAL AREA OF 3 143 SQ. FT. IN ITS BUILDING PROJECT. THE WORD 'HOUSING PROJECT' IS NOT DEFINED U/S.80IB(10) OF THE ACT. WE FIND THAT IN EXPLANATION TO SECTION 80HHBA(4) DEFINING ' HOUSING PROJECT' IS IN ENTIRELY DIFFERENT CONTEXT AND THEREFORE HAS NO BEARING ON THE ISSUE BEFORE US. THE LEGISLATURE HAS INTRODUCED THE PROVISION OF SECTION 80IB(10) TO ENCOURAGE RESIDENTIAL HOUSING PROJECTS OF UNITS NOT EXCEEDING SPECIFIED BUILT UP AREA. IN ORDER TO AVAI L THE TAX EXEMPTION WITH REGARD TO THE HOUSING PROJECT THE ASSESSEE HA S TO FULFILL ALL THE CONDITIONS LAID DOWN UNDER THE BENEFICIAL PROVISION OF SECTION 8OIB(1O) OF THE ACT. THE CONSTRUCTION OF SHOPS OR COMMERCIAL PLACE CANNOT BE CONSIDERED A 'HOUSING PROJECT' FOR THE PURPOSE OF ITA NO.2200 & 2633/A/2008 7 APPLICATION OF THE PROVISION OF SECTION 80IB(10) W E FIND THAT IN THIS CASE IT WAS NOT ESTABLISHED BY THE ASSESSEE THAT I TS BUILDING PROJECT IS PRIMARILY A 'HOUSING PROJECT' IN THE FACTS OF THE C ASE OF THE ASSESSEE. THE BUILDING PROJECT OF THE ASSESSEE WAS APPROVED BY TH E LOCAL AUTHORITY NAMED KALYAN DOMBIVALI MUNICIPAL CORPORATION (KDMC) AS RESIDENTIAL AS WELL AS COMMERCIAL PROJECT. THE CIT(A) HAS GIV EN A CLEAR-CUT FINDING ON THIS ISSUE ON THE BASIS OF A COPY OF THE APPROVAL LETTER BY KDMC FILED BY THE ASSESSEE. WE ARE UNABLE TO ACCEPT THE ARGUMENT OF THE COUNSEL FOR THE ASSESSEE THAT SINCE THE CASE PE RTAINS TO PRE- AMENDMENT PERIOD THE DEDUCTION U/S.80IB(10) WILL B E AVAILABLE TO THE ASSESSEE EVEN IF THE SHOPS AND OTHER COMMERCIAL EST ABLISHMENTS ARE INCLUDED IN THE HOUSING PROJECT OF THE ASSESSEE. IF THIS ARGUMENT OF THE ASSESSEE IS ACCEPTED THEN IT SHALL NULLIFY THE VERY OBJECT OF INTRODUCING THE PROVISION OF SECTION 8OIB(10) IN TH E STATUTE BOOK FOR PROMOTION OF HOUSING ACTIVITY IN THE COUNTRY SI NCE THERE SHALL HE NO LIMIT OF THE TOTAL BUILT UP AREA DEVOTED TO THE CONSTRUCTION OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS IN THE HO USING PROJECT OF THE ASSESSEE. THE CLARIFICATION OF CBDT VIDE LETTER DATED 4 TH MAY 2001 TO MAHARASHTRA CHAMBER OF HOUSING INDUSTRY CLE ARLY STATES THAT ANY PROJECT WHICH IS APPROVED BY LOCAL AUTHORITY A S A 'HOUSING PROJECT' SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF SE CTION 10(23G) AND 80IB(10) OF THE ACT. THIS CLARIFICATION BY THE CBDT IS OF NO HELP OF THECASE OF THE ASSESSEE FOR THE REASON THAT THE BUI LDING PROJECT OF THE ASSESSEE WAS NOT APPROVED BY THE LOCAL AUTHORITY AS A 'HOUSING PROJECT' AND WAS IN FACT APPROVED BY LOCAL AUTHORITY AS A 'R ESIDENTIAL AS WELL AS COMMERCIAL PROJECT' BY THEM. ALTHOUGH WE ARE AWARE THAT INCENTIVE PROVISION OF LAW SHOULD BE GIVEN A LIBERAL INTERPRE TATION AS HELD IN NUMBER OF DECISIONS BY THE HON. COURTS BUT THE LIBERAL INTERPRETATION SHALL NOT BE TO THE EXTENT OF DEFEATING THE VERY PU RPOSE OF ENACTING A PARTICULAR INCENTIVE PROVISION OF LAW. WE FIND THAT THE PLEA OF THE ID. COUNSEL FOR THE ASSESSEE THAT WHILE DEALING WITH TH E PROVISIONS OF SECTION 5(L)(IV) OF THE W. T. ACT VARIOUS COURTS H ELD THAT HOUSE USED FOR COMMERCIAL PURPOSE WAS ALSO ELIGIBLE FOR EXEMPTION AND THEREFORE COMMERCIAL PROPERTY SHOULD BE CONSIDERED AS A HOUSI NG PROPERTY IS NOT SUSTAINABLE SINCE THE DECISION RELATING TO THE PROVISIONS OF SECTION 5(L)(IV) OF THE W. T. ACT WERE IN THE CONTEXT OF EX EMPTION OF HOUSING PROPERTY FOR THE PURPOSE OF THE W T ACT AND HAS NO BEARING TO THE PRESENT ISSUE BEFORE US WITH REGARD TO EXEMPTION OF 'HOUSING PROJECT' UNDER THE PROVISION OF THE I T ACT. WE ARE OF THE CONSIDERED VIEW THAT NO PROPORTIONATE DEDUCTION CAN BE ALLOWED TO THE AS SESSEE TO THE EXTENT OF RESIDENTIAL UNITS CONSTRUCTED BY IT IN TH E BUILDING PROJECT FOR THE SIMPLE REASON THAT THE BUILDING PROJECT SHO ULD BE ELIGIBLE FIRST IN ORDER TO CLAIM EXEMPTION UNDER THE PROVISI ONS OF SEC. 80IB(10) OF THE ACT BY FULFILLING THE CONDITIONS PR ECEDENT FOR ITS APPLICATION AND THE NON-FULFILLMENT OF A SINGLE PRE -CONDITION AS ITA NO.2200 & 2633/A/2008 8 DETAILED IN THE PROVISION OF SECTION 80IB(10) OF TH E ACT SHALL DISENTITLE THE ASSESSEE FROM CLAIMING EXEMPTION OF ANY PART OF ITS INCOME WHICH MAY ACCRUE FROM ITS BUILDING PROJECT DURING THE YEAR. THE FACT THAT THE ASSESSEES SITE FALLS UNDER THE RESIDENTIAL ZONE IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE FOR THE RELEVANT YEAR AS THE BUILDING PROJECT OF THE ASSESS EE WAS NOT A 'HOUSING PROJECT' AND ACCORDINGLY DOES NOT QUALIFY FOR DEDUCTION U/S.80IB(10) OF THE ACT. IN VIEW OF OUR FINDING THA T THE BUILDING PROJECT OF THE ASSESSEE WAS NOT A ' HOUSING PROJECT' AND THEREFORE THE ASSESSEE'S CASE DOES NOT QUALIFY FOR DEDUCTION U/S. 80IB(10) OF THE ACT WE HOLD THAT ALL THE CONDITIONS SPECIFIED U/S. 80IB(10) ARE NOT SATISFIED BY THE ASSESSEE AND ACCORDINGLY THE ASSES SEE IS NOT ENTITLED TO ANY DEDUCTION U/S.80IB(10) (EMPHASIS IS ADDED).' IN THE AFORESAID DECISION THE APPELLANT'S ARGUMENT S REGARDING THE RETROSPECTIVE EFFECT OF AMENDMENT TO SECTION 80IB(1 0) IS MET AND THERE IS NO CONFUSION WITH REGARD TO THE SAME AND THEREFORE THE DECISIONS RELIED UPON BY THE APPELLANT THAT THE AMENDMENT CANNOT HAV E RETROSPECTIVE EFFECT ARE NOT DEALT HEREWITH. I AGREE WITH THE APP ELLANT THAT AMENDMENT W. E. F. 1.4.2005 WILL NOT HAVE RETROSPECTIVE EFFECT A ND WILL APPLY ONLY FROM A.Y.2005-06 AND ONWARDS . EVEN IN A SITUATION PRIOR TO THE AMENDMENT THE HON . ITAT BOMBAY HELD THAT CBDT CIRCULAR STATED THAT APPROVAL BY LOCAL AU THORITY AS 'HOUSING PROJECT' SHOULD BE CONSIDERED ADEQUATE FOR THE PURP OSE OF SECTION 80IB(10). IF THE PROJECT IS APPROVED AS RESIDENTIAL -CUM-COMMERCIAL PROJECT' THE SAME CANNOT BE CONSIDERED AS PROJECT ELIGIBLE U /S. 80IB(10). THE APPELLANT'S PLEA OF ALLOWING THE PROPORTIONATE DEDU CTION ON RESIDENTIAL UNITS WAS ALSO REJECTED ON THE GROUND T HAT THE PROJECT SHOULD BE ELIGIBLE FIRST IN ORDER TO CLAIM DEDUCTIO N U/S.80IB(10) BY FULFILLING THE CONDITIONS PRECEDENT FOR ITS APPLICA TION AND NON- FULFILLMENT OF A SINGLE CONDITIONS SHALL DISENTITLE THE ASSESSEE FOR CLAIMING EXEMPTION OF ANY PART OF ITS INCOME WHICH MAY ACCRUE FROM ITS BUILDING PROJECT DURING THE YEAR. APPELLANT'S ARGUMENT THAT THE PROJECT SITE FALLS UNDER THE RESIDENTIAL ZONE WAS ALSO NOT FOUND RELEVANT. THE APPROVAL BY THE LOCAL AUTHORITY AS 'HOUSING PRO JECT' OR NOT WAS CONSIDERED THE SOLE CRITERION IN DECIDING THE ELIGI BILITY OF THE PROJECT. THE FACTS OF THE APPELLANT ARE IDENTICAL TO THE CAS E OF LAUKIK DEVELOPERS DECIDED BY HON. ITAT MUMBAI. IN THE CASE OF APPELL ANT ALSO THE PROJECTS WERE APPROVED BY LOCAL AUTHORITY AS 'RESIDENTIAL-CU M-COMMERCIAL' PROJECT. SUCH PROJECT IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB (10). IT IS NOT RELEVANT WHETHER COMMERCIAL PART IS DEVELOPED IN EARLIER YEA R. FOR CONSIDERING THE ELIGIBILITY OF THE PROJECT THE ELIGIBILITY OF THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY IS TO BE SEEN. IF T HE PART OF THE PROJECT IS TO BE CONSIDERED INDEPENDENT THAN THE REQUIREMEN T OF HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY WILL HAVE N O MEANING. IN THAT ITA NO.2200 & 2633/A/2008 9 CASE AN APPROVED PROJECT CAN BE DEVELOPED BY MANY U NDERTAKINGS AND STILL CLAIM THE FULFILLMENT OF OTHER CRITERIAS. THEREFORE IT IS CLEAR THAT WHAT IS TO BE SEEN IS THE APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY. IF THE SAME IS NOT APPROVED AS 'HOUSING PROJECT' THE UNDERTAKING DEVELOPING THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) . IN VIEW OF THE FACT THAT APPELLANT'S PROJECT APPROVED BY LOCAL AUTHORITY HAD APPROVAL OF COMMERCIAL CONSTRUCTION' TO THE EXTENT OF MORE THAN 500 SQ. MT . AND AS SUCH THE APPELLANT DOES NOT FULFILL THE PRIMARY CONDITION OF ITS PROJECT BEING 'HOUSING PROJECT' APPROVED BY LOCAL AUTHORITY. APPELLANT REFERRED THE DECISION OF MUMBAI ITAT IN T HE CASE OF HARSHAD P. DOSHI VS ACIT REPORTED IN 109 TTJ 335. IN THE SAID DECISION THE FACTS ARE DIFFERENT THAN THE FACTS OF APPELLANT AND LAUKIK DE VELOPER. IN THAT CASE THE PROJECT WAS APPROVED AS 'HOUSING PROJECT'. SINCE THE BASIC CONDITION THAT PROJECT WAS APPROVED AS HOUSING PROJECT THE A PPELLANT WAS HELD TO BE ELIGIBLE FOR DEDUCTION U/S.80IB(10). IN ANY CASE T HAT DECISION DID NOT CONSIDER THE DECISION OF LAUKIK DEVELOPERS WHICH WA S DELIVERED SIX MONTHS BEFORE THE SAID DECISION. IN LAUKIK DEVELOPE R'S CASE ALL ASPECTS OF THE ISSUE WERE DEALT WITH WHEREAS IN THE CASE OF HA RSHAD P. DOSHI IT STARTED WITH THE FACT THAT APPROVAL WAS GIVEN AS 'H OUSING PROJECT'. SINCE IN THE CASE OF HARSHAD DOSHI THE DECISION OF HON. ITAT IS ONLY ON THE FACT THAT APPROVAL WAS GIVEN AS 'HOUSING PROJEC T' IT DOES NOT OVERRULE THE FINDINGS OF LAUKIK DEVELOPERS. IN THE FACTS WHE RE APPROVAL WAS GRANTED AS RESIDENTIAL-CUM-COMMERCIAL PROJECT THE DECISION OF LAUKIK DEVELOPER IS CLEARLY APPLICABLE AS AGAINST THE DECISION IN THE C ASE OF HARSHAD P. DOSHI. APPELLANT ALSO RELIED UPON THE MADRAS ITAT'S DECISI ON IN THE CASE OF ARUN EXCELLO FOUNDATION PVT. LTD. REPORTED IN 108 TTJ 7 1. IN THAT CASE IT WAS HELD THAT THE AMENDMENT BROUGHT OUT BY FIN. ACT 20 04 WITH EFFECT FROM 1 ST APRIL 2005 WILL NOT APPLY RETROSPECTIVELY. THIS DECISION DISCUSSED ONLY THREE CONDITIONS REQUIRED FOR A PROJECT BEING ELIGI BLE FOR DEDUCTION U/S.80IB AS MENTIONED IN PARA-19 OF THE ORDER. THE VERY FACT THAT SECTION 80IB(10) STARTS WITH THE REQUIREMENT OF 'HO USING PROJECT 1 APPROVED BY A LOCAL AUTHORITY REQUIRE THAT IF THE P ROJECT IS NOT A HOUSING PROJECT OR NOT APPROVED BY THE LOCAL AUTHOR ITY SUCH UNDERTAKING WILL NOT BE ELIGIBLE FOR DEDUCTION U/S. 80IB(10). SINCE PROJECTS APPROVED AS RESIDENTIAL-CUM-COMMERCIAL P ROJECTS DO NOT FULFILL THE FIRST PRIMARY CONDITION OF 'HOUSING PROJECT' THE S AME ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10). IN THIS CASE O WHICH IS DE LIVERED MORE THAN SIX MONTHS LATER NO REFERENCE TO THE LAUKIK DEVELOPER' S DECISION IS MADE. ACCORDINGLY THE DECISION IN THE CASE OF LAUKIK DEV ELOPERS DELIVERED BY HON. ITAT MUMBAI THAT IF THE PROJECT IS NOT APPROVED AS 'HOUS ING PROJECT' EVEN IF IT IS FULFILLING ALL OTHER CONDIT IONS THE DEDUCTION U/S.80IB(10) WILL NOT BE AVAILABLE IS STILL REQUIR ED TO BE FOLLOWED. AS REGARDS APPELLANT'S CLAIM THAT SUBSTANTIAL COMPL IANCE OF THE CONDITIONS PRECEDENT TO THE CLAIM OF DEDUCTION IS MADE AND THE REFORE THE SAME SHOULD NOT BE DENIED KEEPING IN VIEW THAT LIBERAL I NTERPRETATION OF BENEFICIAL PROVISIONS IS TO BE MADE. WHAT IS TO BE SEEN IS WHE THER THE PROJECT ITA NO.2200 & 2633/A/2008 10 UNDERTAKEN BY THE ENTITY IS ELIGIBLE OR NOT. THE PR OJECT BECOME ELIGIBLE ONLY IF ALL THE CONDITIONS PRECEDENT THERETO ARE SATISFI ED. BY NOT FULFILLING A SINGLE CONDITION THE PROJECT GOES OUT OF ELIGIBILITY. THER EFORE WHILE DECIDING THE ELIGIBILITY OF ANY PROJECT FOR BENEFICIAL PROVISION S THE INTERPRETATION HAS TO BE STRICTLY LEGAL AND NOT LIBERAL. THE INTERPRETATI ON GIVEN HERE IS NOT RESTRICTED OR NARROW. THE RULE OF LIBERAL INTERPRET ATION OF AN INCENTIVE PROVISION CANNOT HOLD GOOD WHEN IT IMPAIRS THE LEGI SLATIVE REQUIREMENT AND SPIRIT OF PROVISION. THESE ARE THE SUPREME COURT'S DECISIONS RELEVANT ON THIS ISSUE 1. IPCA LABORATORIES VS DCIT 266 ITR 521 (SC) 2. PANDIAN CHEMICALS LTD. VS CIT 262 ITR 278 (SC) 3. CIT VS N C BUDDHIRAJ & CO. 204 ITR 412 (SC) THESE DECISIONS CLEARLY LAID DOWN THAT WHEN THE PRO VISION IS CLEAR THE WORD CANNOT BE IGNORED OR MISINTERPRETED TO CONFER AN UNINTENDED BENEFIT. WHEN APPELLANT DOES NOT FULFILL THE BASIC REQUIREME NTS OF ITS PROJECTS APPROVED AS 'HOUSING PROJECT' THE PROJECTS BECOME INELIGIBLE. THERE IS NO SCOPE FOR DIVIDING THE PROJECT AS ELIGIBLE PA RT AND INELIGIBLE PART. SINCE APPELLANT'S CASE IS NOT IDENTICAL TO THE CASE OF HARSHAD P DOSHI VS ACIT AS THE APPELLANT'S PROJECTS WERE NOT APPROVED AS 'HOUSING PROJECT'. ON THE OTHER HAND THE APPELLANT'S FACTS ARE IDENTIC AL TO THE CASE OF LAUKIK DEVELOPERS WHERE THE APPROVAL GRANTED BY LOCAL AUTH ORITY WAS RESIDENTIAL-CUM-COMMERCIAL' PROJECTS. RESPECTFULLY FOLLOWING THE DECISION OF MUMBAI ITAT IN THE CASE OF LAUKIK DEVEL OPERS I HOLD THAT THE PROJECT APPROVED BY LOCAL AUTHORITY UNDERTAKEN BY THE APPELLANT WAS RESIDENTIAL-CUM-COMMERCIAL PROJECT AND THE SAME WAS NOT ELIGIBLE SINCE THE CONDITIONS PRECEDENT FOR APPLICA TION OF SECTION 80IB(10) IS NOT FULFILLED. I THEREFORE CONFIRM TH E REJECTION OF DEDUCTION U/S. 80IB(10) ON THIS GROUND. ADDITION MADE BY THE ASSESSING OFFICER U/S. 80IB(10) IS CONFIRMED. 4. FOLLOWING HIS REASONING IN THE AY 20 04-05 THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF RS.24 56 032/- U/S 80IB(10) OF TH E ACT IN THE AY 2005-06 ALSO. 5. ON APPEAL THE LD. CIT(A) WHILE REFERRING TO CLAUSE (D) IN SEC. 80IB(10) INTRODUCED W.E.F. 1.4.2005 DENIED THE CL AIM FOR DEDUCTION ON THE GROUND THAT THE APPROVAL OF THE COMPETENT AUTHORITY WAS FOR RESIDENTIAL CUM COMMERCIAL PROJECT RATHER THAN HOUS ING PROJECT AND THE COMMERCIAL AREA BUILT UP BY THE ASSESSEE WAS M ORE THAN 5000 SQ. FT. ITA NO.2200 & 2633/A/2008 11 6. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A) IN THESE TWO ASSESSMENT YEARS. THE LD. AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON DECISI ON OF THE SPECIAL BENCH IN BRAHMA ASSOCIATES VS. JT. CIT (2009) 119 I TD 255 (PUNE)(SB) CONTENDED THAT THE ISSUE MAY BE RESTORE D BACK TO THE FILE OF THE AO IN THE AY 2004-05 FOR READJUDICATI ON IN THE LIGHT OF VIEW TAKEN BY THE SPECIAL BENCH. SINCE THEIR PROJEC T WAS APPROVED BEFORE THE AMENDMENT INTRODUCED BY WAY OF CLAUSE (D ) IN SEC. 80IB(10) OF THE ACT THE LD. CIT(A) WAS NOT JUSTIFI ED IN DENYING THE DEDUCTION IN THE AY 2005-06 HAVING RECOURSE TO THE SAID CLAUSE (D) WHICH WAS APPLICABLE PROSPECTIVELY THE LD. AR ARGU ED. ON THE OTHER HAND THE LD. DR WHILE SUPPORTING THE FINDINGS OF T HE LD. CIT(A) CONTENDED THAT LAW AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION HAS TO BE APPLIED WHILE CONSIDERING THE CLAIM FOR T HE DEDUCTION.. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE FIND THAT THE AO DISALLOWED THE CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT IN THESE TWO ASSESSMENT YEARS ON THE GROUND THAT THE ASSESSE E WAS NOT THE OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT WHILE THE APPROVAL OF THE HOUSING PROJECT ISSUED BY THE COMPETENT AUTHORITY WAS IN THE NAME OF OTHER PERSONS I.E SANJ EEV DIGMBAR BHARMBHE P.A OF FABHSINH MANGALSINH DODIA & AARTIBE N FATEHSINH DODIA AND THAT THE LAND OWNERS SOLD PIECES OF LAND TO THE UNIT HOLDERS DIRECTLY AND ASSESSEE ACTED MERELY AS CONF IRMING PARTY AND A CONTRACTOR FOR THE PROJECT AND NEVER SOLD THE HO USES TO THE UNIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESP ECT THEREOF. THE LD. CIT(A) DID NOT ACCEPT THESE FINDINGS OF THE A O RELYING ON THE DECISION OF THE ITAT IN THE CASE OF RADHE DEVELOPER S(SUPRA). THE REVENUE HAVE NOT DISPUTED BEFORE US THESE FINDINGS OF THE LD. CIT(A) NOR APPEARS TO HAVE FILED ANY APPEAL ON THESE ISSUE S. IN ANY CASE THE LD. CIT(A) WHILE RELYING ON THE DECISION OF T HE MUMBAI TRIBUNAL IN THE CASE OF LAUKIK DEVELOPERS VS. DCIT (MUM) 108 TTJ 36 4 UPHELD THE ITA NO.2200 & 2633/A/2008 12 DISALLOWANCE IN THE AY 2004-05 ON THE GROUND THAT THE ASSESSEE'S PROJECT WAS NOT APPROVED AS HOUSING PROJECT WITHI N THE MEANING OF PROVISIONS OF SEC. 80IB(10) OF THE ACT AND INSTEAD WAS APPROVED AS RESIDENTIAL-CUM- COMMERCIAL PROJECT. APPARENTLY THE LD. CIT(A) WE NT BY THE NOMENCLATURE OF THE PROJECT AS CLASSIFIED BY THE APPROVING AUTHORITY . UNDISPUTEDLY THE COMMERCIAL CONSTRUCTION WAS CARRIED OUT BY THE ASSESSEE TO TH E EXTENT OF 549.36 SQ. MT. BEFORE PROCEEDING FURTHER WE MAY HAVE A LOOK AT TH E RELEVANT PROVISIONS APPLICABLE IN THE CASE. THE PROVISIONS RELATING T O THE BENEFIT OF DEDUCTION OF PROFITS DERIVED BY AN UNDERTAKING DEVELOPING AND BU ILDING HOUSING PROJECTS WERE FIRST INTRODUCED BY THE FINANCE ACT 1998 W.E.F. 1- 4-99 IN SUB-SECTION (4F) TO SEC.80IA OF THE ACT WHICH READ AS UNDER: THIS SECTION APPLIES TO AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY SUBJ ECT TO THE CONDITION THAT THE SIZE OF A PLOT OF LAND HAS A MINIMUM AREA OF ONE AC RE AND THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA NOT EXCEEDING ONE THOUSAND SQUARE FEET; PROVIDED THAT THE UNDERTAKING SUCH UNDERTAKING COMM ENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER 1998 AND COMPLETES THE SAME BEFORE 31 ST DAY OF MARCH 2001; 7.1 . FINANCE ACT 1999 W.E.F. 1-4-2000 CONFERRE D THE BENEFIT OF THE AFORESAID DEDUCTION IN TERMS OF THE FOLLOWING PROVISIONS OF SEC.80-IB(10) OF THE ACT: (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHO RITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVAN T TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER 1998 AND COMPLETES THE SAME BEFORE 31ST T DAY OF MARCH 2003; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE: (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A 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 CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; 7.2. IN THE FINANCE ACT 2000 W.E.F.1-4-2001 THE WORDS BEFORE 31ST DAY OF MARCH 2001 WERE INSERTED AFTER THE WORDS HOUSING PROJECT APPROVED. THUS ALL ITA NO.2200 & 2633/A/2008 13 CONDITIONS FOR GRANT OF DEDUCTION REMAINED THE SAME EXCEPT THAT THE APPROVAL OF LOCAL AUTHORITY FOR THE DEVELOPMENT HAS TO BE OBTAI NED BEFORE 31ST DAY OF MARCH 2001. 7.3 FOR THE AY 02-03 THE LAW APPLICABLE WAS THA T THE CONDITION REGARDING COMPLETION OF THE PROJECT BEFORE 31ST MARCH 2003 W AS DISPENSED WITH. 7.4. FOR THE AY 03-04 AND 04-05 ALL THE COND ITIONS REMAINED THE SAME EXCEPT THE CONDITION REGARDING APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY WAS STIPULATED TO BE BEFORE 31ST DAY OF MARCH 2005 W HILE THE PERIOD OF COMPLETION OF THE CONSTRUCTION ON OR BEFORE 31ST MARCH 2003 WAS DISPENSED WITH AND THERE WAS NO TIME LIMIT GIVEN FOR COMPLETION OF THE CONS TRUCTION. 7.5. BY THE FINANCE ACT 2004 W.E.F. 1.4.2005 CL AUSE (D) TO SECTION 80IB(10) WAS INTRODUCED WHICH PROVIDED THAT BUILT UP AREA O F SHOPS OR OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOU LD NOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2 000 SQ.FT. WHICHEVER IS LESS. THUS THE RELEVANT PROVISIONS OF SEC. 80IB(10) APP LICABLE IN THESE TWO ASSESSMENT YEARS READ AS UNDER: THE PROVISIONS AS ON 1.4.2004 80IB (10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKIN G DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH 2005; BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT. OF TH E PROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF --- (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT 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 WH ICH HAS A MINIMUM AREA OF ONE ACRE; AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A 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 THOUSA ND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. ITA NO.2200 & 2633/A/2008 14 EXPLANATION.-FOR THE REMOVAL OF DOUBTS IT IS HEREB Y DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UN DERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AW ARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). THE PROVISIONS AS ON 1.4.2005 80IB(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B EFORE THE 31ST DAY OF MARCH 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED P ER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESS MENT YEAR FROM SUCH HOUSING PROJECT IF (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT 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 APPR OVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL 20 04 ON OR BEFORE THE 31ST DAY OF MARCH 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN OR IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL 2004 WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY TH E LOCAL AUTHORITY. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH 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 WH ICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSI NG PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CL AUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF E XISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW ITA NO.2200 & 2633/A/2008 15 FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTI FIED BY THE BOARD IN THIS BEHALF; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSA ND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; AND (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMER CIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUS ING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LESS. EXPLANATION.-FOR THE REMOVAL OF DOUBTS IT IS HEREB Y DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UN DERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AW ARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). 7.6 AS IS APPARENT FROM A BARE PERUSAL OF THE AFORE SAID PROVISIONS THE CLAUSE (D) RELATING TO INCLUSION OF SHOPS AND OTHER COMM ERCIAL ESTABLISHMENTS IN A HOUSING PROJECT DID NOT EXIST PRIOR TO 1.4.2005 AND IT IS NOT IN DISPUTE BEFORE US THAT THE SAID CLAUSE IS PROSPECTIVE IN OPERATION AS HELD BY THE LD. CIT(A) AS ALSO IN THE CASE OF BRAHMA ASSOCIATES VS. JT. CIT (2009) 119 ITD 255 (PUNE)(SB) AND ARUN EXCELLO FOUNDATIONS (P) LTD. VS. ACIT CIRCLE- 1(1) CHENNAI 108 TTJ (MAD) 71. THE ONLY DISPUTE BEFORE US IS AS TO WHETHER TH E EXPRESSION HOUSING PROJECTS INCLUDES RESIDENTIAL CUM COMMERCIAL PROJECTS AND WHETHER THE CLAUSE (D) OF SEC. 80IB(10) OF THE ACT IS APPLICABLE IN THE AY 2005-0 6 FOR THE PROJECTS ALREADY APPROVED BY THE COMPETENT AUTHORITY IN THE PRECEDI NG YEARS AND/OR ENJOYING THE BENEFITS OF THE SAID DEDUCTION ON FULFILLING THE CO NDITIONS STIPULATED IN THE EXTANT PROVISIONS OF SEC. 80IB(10) OF THE ACT . THE LD. C IT(A) DISALLOWED THE CLAIM FOR DEDUCTION IN THESE TWO ASSESSMENT YEARS ON THE GRO UND THAT PROJECT IN QUESTION WAS APPROVED AS A RESIDENTIAL CUM HOUSING PROJECT A ND NOT AS A HOUSING PROJECT AND THEREFORE IN TERMS OF DECISION OF THE ITAT IN THE CASE OF LAUKIK DEVELOPERS VS. DCIT 108 TTJ 364(MUM.) THE ASSESSEE WAS NOT EL IGIBLE FOR THE SAID DEDUCTION. THIS DECISION WAS CONSIDERED BY THE SPEC IAL BENCH IN BRAHMA ASSOCIATES(SUPRA). BEFORE ADVERTING TO THE DECISI ONS RELIED UPON BY THE LD. CIT(A) OR THE LD. AR WE MAY POINT OUT THAT THE EXPRESSION HOUSING PROJECTS HAS NOT BEEN DEFINED IN SECTION 80IB OF THE ACT. HO WEVER IN SECTION 80HHBA ITA NO.2200 & 2633/A/2008 16 WHICH PROVIDES FOR A DEDUCTION IN RESPECT OF PROFI TS AND GAINS DERIVED FROM THE EXECUTION OF THE HOUSING PROJECT WHICH ARE AWARDED ON THE BASIS OF GLOBAL TENDER AND ALSO AIDED BY THE WORLD BANK THE EXPRE SSION 'HOUSING PROJECT' BY WAY OF EXPLANATION HAS BEEN DEFINED TO MEAN A PROJ ECT FOR THE CONSTRUCTION OF ANY BUILDING ROAD BRIDGE OR OTHER STRUCTURE IN A NY PART OF INDIA; AND THE EXECUTION OF SUCH OTHER WORK(OF WHATEVER NATURE) AS MAY BE PRESCRIBED. THUS THE CONCEPT OF HOUSING PROJECT IN SECTION 80HHBA IS VERY WIDE. THE CONCISE OXFORD DICTIONARY SIXTH EDITION GIVES ITS MEANING IN NOUN FORM AS A PLAN SCHEME PLANNED UNDERTAKING. AS PER CHAMBERS TWEN TIETH CENTURY DICTIONARY (REVISED EDITION) PROJECT MEANS A SCHEME OF SOMETH ING TO BE DONE; A PROPOSAL FOR AN UNDERTAKING; AN UNDERTAKING. THESE DEFINIT IONS INDICATE THAT A PROJECT MUST BE A PLANNED AFFAIR OR A SCHEME OF SOMETHING U NDERTAKEN TO BE DONE. SINCE A HOUSING PROJECT IS REQUIRED TO BE APPROVED BY A L OCAL AUTHORITY IT WOULD BE FAIR TO CONSTRUE THAT THE SCHEME OR PLAN OF THE HOUSING PROJECT MUST BE IN KEEPING WITH SCHEMES LAID DOWN BY THE APPROVING LOCAL AUTHO RITY. IF THERE ARE CONVENIENCE SHOPS OR COMMERCIAL AREA BUILT UP BY THE ASSESSEE WITHIN THE PROJECT CAN THE PROJECT BE STILL CONSIDERED AS HOUSING PROJECT W ITHIN THE MEANING OF PROVISIONS OF SEC. 80IB(10) OF THE ACT. THE CBDT VIDE CIRCULAR F. NO. 205/3/2000/ITA II DATED 4-5-2001 IN REPLY TO A QUERY POSED BY THE MAHARASH TRA CHAMBER OF HOUSING INDUSTRY CLARIFIED THAT ANY PROJECT WHICH HAS BEE N APPROVED BY A LOCAL AUTHORITY AS HOUSING PROJECT SHOULD BE CONSIDERED AS ADEQUATE FOR PURPOSE OF SECTION 80IB(10). IN THEIR INSTRUCTION DATED 30.6.2009 THE CBDT ALS O CLARIFIED THAT THE DEDUCTION CAN BE CLAIMED ON A YEAR TO YEAR BASIS WH ERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL COMPLETION OF THE PROJECT IN EV ERY YEAR. I N SAROJ SALES ORGANIZATION VS. ITO 115 TTJ 485 (MUM) THE ITAT F OUND THAT THERE WERE TWO PROJECTS BEING CONSTRUCTED BY NAME NISARG AND BREEZ Y CORNER. FOR THE AY 05- 06 THE ASSESSEE IN THE SAID CASE CLAIMED DEDUCTIO N U/S.80-IB(10) OF THE ACT ON THE PROFITS OF NISARG PROJECT. THE AO TREATED BOTH THE PROJECTS AS ONE PROJECT AND FOUND THAT IN THE PROJECT BREEZY CORNER THE BUILT U P AREA OF SOME OF FLATS WAS MORE THAN 1000 SQ.FT. AND HE THEREFORE HELD THAT THE A SSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.80-IB(10) OF THE ACT. ANOTHER REASON GIVEN BY THE AO FOR DISALLOWING THE CLAIM WAS THAT THE SHOPPING AREA O F NISARG PROJECT WAS 7.60% OF THE TOTAL BUILT UP AREA OF THE SAID PROJECT. THE A O RELIED ON THE CLAUSE (D) ITA NO.2200 & 2633/A/2008 17 INTRODUCED IN THE AMENDED PROVISIONS OF SEC.80-IB(1 0) OF THE ACT W.E.F. 1-4-05 AND REJECTED THE CLAIM . THE TRIBUNAL ON THE SECOND ISSUE HELD THAT THE HOUS ING PROJECT NISARG WAS APPROVED BEFORE 31ST MARCH 2005 AND WHEN APPROVAL WAS OBTAINED THERE WAS NO SUCH STIPULATION REGARDING T HE SHOPPING COMPLEX AREA OR COMMERCIAL SPACE IN THE PROJECT. THE AMENDMENT HAVI NG BEEN MADE SUBSEQUENTLY WHILE EXTENDING THE DEDUCTION OF INCOM E FROM HOUSING PROJECT APPROVED UPTO 31ST MARCH 2007 THE ITAT CONCLUDED THAT ON THIS GROUND DEDUCTION U/S.80IB(10) OF THE ACT CANNOT BE DENIED . 7.7 NOW ADVERTING TO THE DECISIONS RELIED UPON BY BOTH THE SIDES AS ALREADY STATED THE LD. CIT(A) UPHELD THE DISALLOWANCE OF C LAIM RELYING INTER ALIA ON THE DECISION OF THE ITAT IN THE CASE OF LAUKIK DEVELOP ERS(SUPRA) WHICH HAS NOT BEEN APPROVED BY THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES(SUPRA). THE LD. CIT(A) THOUGH ACCEPTED THE CONTENTION ON BE HALF OF THE ASSESSEE THAT CLAUSE (D) INTRODUCED BY THE FINANCE ACT 2004 W.EF . 1.4.2005 WAS PROSPECTIVE IN OPERATION HE INFERRED IN THE AY 2005-06 THAT THE SAID CLAUSE WAS APPLICABLE EVEN TO THE PROJECTS ALREADY APPROVED BY THE COMPE TENT AUTHORITY IN THE PRECEDING YEARS. AS REGARDS COMMERCIAL AREA BUILT UP INCLUDED IN THE HOUSING PROJECT TH E ITAT CHENNAI BENCH IN THE CASE OF ARUN EXCELLO FOUNDATIONS (P) LTD.(SUPRA) CONCLUDED THAT THE FORESAID CLAUSE (D ) BROUGHT IN THE STATUTE BOOK WITH EFFECT FROM 1-4-2005 BY THE FINAN CE (NO.2) ACT 2004 WAS PROSPECTIVE IN OPERATION. AS REGARDS TH E OTHER ISSUE OF COMMERCIAL SPACE BUILT UP IN THE HOUSING PROJECT T HE ITAT WHILE ACCEPTING THE ALTERNATIVE PLEA ON BEHALF OF THE AS SESSEE DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE ON THE RE SIDENTIAL UNITS CONSTRUCTED ON PRORATA BASIS AND THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB(10) ON THE COMMER CIAL AREA CONSTRUCTED IN THE PROJECT TO THE EXTENT OF 9.31 PE R CENT OF THE TOTAL CONSTRUCTED AREA. THE DECISION OF THE CHENNAI BENCH IN ARUN EXCELLO FOUNDATIONS (P) LTD.(SUPRA) AND THAT OF THE MUM BAI BENCH IN LAUKIK DEVELOPERS(SUPRA) WERE CONSIDERED BY THE SPE CIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES(SUPRA). IN THE SAID CASE THE TRI BUNAL WHILE CONSIDERING THE ISSUE OF DEDUCTION U/S 80IB(10) OF THE ACT FOR THE AY ITA NO.2200 & 2633/A/2008 18 2003-04 IN RESPECT OF A HOUSING PROJECT WHICH A LSO INCLUDED BUILT UP COMMERCIAL AREA CONCLUDED IN THE FOLLOWING TERM S: 121. WE HAVE ALSO NOTED REVENUES PLEA THAT AS LON G AS IT IS USE OF BUILT-UP AREA FOR COMMERCIAL PURPOSES IS CON FINED TO CONVENIENCE SHOPPING WITHIN PERMISSIBLE LIMITS AND SUBJECT TO THE CONDITIONS AS PER DEVELOPMENT CONTROL RULES EL IGIBILITY FOR DEDUCTION UNDER S. 80-IB(10) REMAINS INTACT AND THA T THE MOMENT SUCH USAGE GOES BEYOND WHAT IS PERMISSIBLE A S CONVENIENCE SHOPPING AS PER DEVELOPMENT CONTROL RUL ES THE ELIGIBILITY FOR DEDUCTION UNDER S. 80-IB(10) IS LOS T. WE ARE UNABLE TO APPROVE THIS PLEA EITHER AS IT GOES WELL BEYOND THE LIMITATIONS SET OUT EVEN IN POST-2004 AMENDMENTS. C LAUSE (D) OF S. 80-IB(10) WHICH WAS INTRODUCED VIDE FINANCE (NO. 2) ACT 2004 PROVIDES THAT 'THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF AGGREGATE BUILT-UP AREA OR TWO THOUSAND SQUARE FEET WHICHEVER IS LESS'. THIS HAS NOTHING TO DO WITH CONVENIENCE SHOPPING WHICH NOT ONLY RESTRIC TS THE SIZE OF EACH SHOP TO 20 SQ. MTRS. BUT ALSO LIMITS THE PU RPOSES FOR WHICH THESE SHOPS CAN BE USED. TAKE FOR EXAMPLE A S ITUATION IN WHICH A HOUSING PROJECT HAS ONLY ONE COMMERCIAL UNIT OF 185 SQ. MTRS. WHICH IS CLEARLY NOT PERMISSIBLE IN TERMS OF THE PROVISIONS OF CONVENIENCE SHOPPING WHICH RESTRICTS THE SIZE OF UNIT TO 20 SQ. MTRS. BUT IT IS JUST WITHIN 2 000 S Q. FTS. LIMIT LAID DOWN UNDER S. 80-IB(10)(D). THIS DOES NOT VIOLATE T HE REQUIREMENT OF S. 80-IB(10) BUT IF WE ARE TO ACCE PT THE PROPOSITION ADVANCED BY THE LEARNED SPECIAL COUNSEL WILL RENDER ASSESSEES CLAIM FOR DEDUCTION UNDER S. 80-I B(10) INADMISSIBLE. IT ALSO DEMOLISHES THE THEORY THAT BY THE VIRTUE OF INTRODUCTION OF CL. (D) IN S. 80-IB(10) WHAT WAS I MPLICIT (I.E. PERMISSION TO BUILD CONVENIENCE SHOPPING) IN A HOUS ING PROJECT HAS BEEN MADE EXPLICIT IN THE SECTION ITSELF. THERE CAN ALSO BE SITUATIONS IN WHICH EVEN MINIMUM REQUIREMENT OF CON VENIENCE SHOPPING COULD RENDER THE PROJECT INELIGIBLE FOR DE DUCTION UNDER S. 80-IB(10) SAY FOR EXAMPLE IN CASES IN W HICH TOTAL PLOT AREA IS MORE THAN 1 00 000 SQ. FT. IN VIEW OF THESE DISCUSSIONS IN OUR CONSIDERED VIEW LINKAGE OF CON VENIENCE SHOPPING TO THE LIMITATION ON USE OF BUILT-UP AREA AS COMMERCIAL SPACE IS A LEGALLY UNSUSTAINABLE PROPOSI TION. 122. IN VIEW OF THE ABOVE DISCUSSIONS WE ARE OF TH E CONSIDERED VIEW THAT DEDUCTION UNDER S. 80-IB (10) AS APPLICABLE PRIOR TO 1ST APRIL 2005 IS INDEED ADMI SSIBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOU SING UNITS AND COMMERCIAL ESTABLISHMENTS. QUESTION NO. 1 THER EFORE MUST BE ANSWERED IN THE AFFIRMATIVE. ACCORDINGLY W E APPROVE DECISIONS OF THE DIVISION BENCHES IN THE CASES OF A RUN EXCELLO ITA NO.2200 & 2633/A/2008 19 FOUNDATIONS (P) LTD. (SUPRA) HARSHAD P. DOSHI (SUP RA) AND SAROJ SALES ORGANISATION (SUPRA) IN THIS RESPECT A ND WE DECLINE TO CONCUR WITH THE VIEW EXPRESSED IN THE CA SE OF LAUKIK DEVELOPERS (SUPRA). AS A MATTER OF FACT THE VIEW E XPRESSED BY THE DIVISION BENCH IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) AS WE HAVE NOTED EARLIER IN THIS ORDER HAS NOT EVE N BEEN CANVASSED BEFORE US BY THE REVENUE. 123. THE NEXT QUESTION IS WHETHER OR NOT THE DEDUCT ION UNDER S. 80-IB(10) IS TO BE GRANTED IN RESPECT OF ONLY OF SUCH PROFITS AS ARE ATTRIBUTABLE TO THE RESIDENTIAL UNITS. 124. THERE IS NOT MUCH OF A DISPUTE ON THIS ASPECT ALSO. LEARNED REPRESENTATIVES AGREE THAT THERE ARE NO ENA BLING PROVISIONS SO FAR AS ALLOCATION OF PROFITS INTO PRO FITS RELATABLE TO RESIDENTIAL UNITS AND COMMERCIAL UNITS ARE CONCERNE D. WE HAVE NOTED THAT S. 80-IB(10) CATEGORICALLY REFERS TO THE 'PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSES SMENT YEAR FROM SUCH HOUSING PROJECT'. WHAT IS DEDUCTIBLE IS PROFIT OF THE HOUSING PROJECT AND NOT THE PROFIT ATTRIBUTABLE T O THE RESIDENTIAL UNITS'. ONCE THEREFORE WE HOLD THAT T HE PROJECT IN QUESTION IS A HOUSING PROJECT ENTIRE PROFITS OF TH E HOUSING PROJECT ARE DEDUCTIBLE UNDER S. 80-IB(10). THE QUES TION OF PROPORTIONATE DEDUCTION IS THEREFORE NOT AT ALL R ELEVANT IN THIS CONTEXT. 125. WE HAVE ALSO TAKEN NOTE OF THE FACT THAT IN AR UN EXCELLO FOUNDATIONS (P) LTD. CASE (SUPRA) CHENNAI DIVISION BENCH HAS GRANTED PROPORTIONATE DEDUCTION @ 90.69 PER CENT BA SED ON THE PERCENTAGE OF RESIDENTIAL UNITS IN THE HOUSING PROJECT BUT INTERESTINGLY THAT WAS THE ALTERNATE PLEA RAISED B Y THE ASSESSEE AND THE DIVISION BENCH PROCEEDED TO ACCEPT THE ALTERNATE PLEA WITHOUT DEALING WITH THE MAIN PLEA A T ALL. THE QUESTION OF DEALING WITH ALTERNATE PLEA ARISES ONLY WHEN THE MAIN PLEA IS REJECTED. NEITHER WE APPROVE SUCH AN A PPROACH OF THE DIVISION BENCH IN PRINCIPLE NOR AS DISCUSSED ABOVE ARE WE INCLINED TO APPROVE ON MERITS THE DECISION OF DIVISION BENCH IN THE CASE OF ARUN EXCELLO FOUNDATIONS (P) L TD. CASE (SUPRA) ON THE QUESTION OF GRANT OF PROPORTIONATE D EDUCTION. 126. AN EXCEPTION HOWEVER WILL HAVE TO BE MADE OU T IN A CASE WHERE COMMERCIAL USE OF BUILT-UP AREA IS MORE THAN 10 PER CENT OF THE TOTAL AREA AND YET IN TERMS OF OUR OB SERVATIONS IN PARA 115 ABOVE THE ASSESSEE IS ELIGIBLE FOR DEDUCT ION IN RESPECT OF PROFITS OF THE RESIDENTIAL UNITS SEGMENT OF THE PROJECT. IN SUCH A SITUATION SINCE RESIDENTIAL UNI T SEGMENT IS BEING TREATED ON A STANDALONE BASIS FOR ELIGIBILITY TO DEDUCTION UNDER S. 80-IB(10) THE ELIGIBILITY FOR SUCH DEDUCT ION CAN ONLY BE FOR THE PROFITS WHICH ARE IN RESPECT OF RESIDENT IAL UNIT ITA NO.2200 & 2633/A/2008 20 SEGMENT OF THE OVERALL PROJECT BECAUSE IN THE LIG HT OF THE DISCUSSIONS ONLY THAT PART OF THE OVERALL PROJECT CAN BE SAID TO BE HOUSING PROJECT. ACCORDINGLY ELIGIBILITY FOR DE DUCTION UNDER S. 80-IB(10) MUST REMAIN CONFINED TO THE SAME. 127. THE ANSWER TO QUESTION NO. 2 IS THUS IN NEGATI VE THOUGH WITH THE RIDER AS SET OUT ABOVE. 128. THE LAST QUESTION BEFORE US IS (WHETHER) THE L IMIT UNDER CL. (D) OF S. 80-IB(10) WILL OPERATE RETROSPECTIVELY AN D WILL ALSO APPLY FOR THE ASSESSMENT YEAR BEFORE US. 129. THERE IS NO DISPUTE ON THIS QUESTION ALSO. LEA RNED REPRESENTATIVES HAVE AGREED THAT CL. (D) IS NOT TO BE TREATED AS RETROSPECTIVE IN APPLICATION. THAT ASPECT OF THE MA TTER IS ALSO NOT IN DISPUTE BEFORE US. WE ACCORDINGLY HOLD THA T THE LIMIT UNDER CL. (D) OF S. 80-IB(10) WILL NOT APPLY. 130. TO SUM UP THE CONCLUSIONS ARRIVED AT BY THIS SPECIAL BENCH ARE AS FOLLOWS : (A) THE DEDUCTION UNDER S. 8 0-IB(10) AS APPLICABLE PRIOR TO 1ST APRIL 2005 SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAS IS AD MISSIBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDENTIA L HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CASE THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHO RITY SUCH AN APPROVAL AS HOUSING PROJECT IS SUFFICIENT FOR TH E PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE WHERE 90 PER CENT O R MORE OF THE TOTAL BUILT-UP AREA IS USED FOR DWELLING UNITS IN ACCORDANCE WITH THE SCHEME OF S. 80-IB(10) THE BENEFIT OF DE DUCTION UNDER S. 80-IB(10) WILL NOT BE DECLINED. IN CASE CO MMERCIAL USE OF BUILT-UP AREA IS MORE THAN 10 PER CENT BUT THE R ESIDENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF S. 80-IB (10) ON STANDALONE BASIS I.E. (I) THE SIZE OF THE PLOT EXCLUDING PORTION UNDER COMMERCIAL UNIT IS MORE THAN MINIMUM AREA OF ONE ACRE (II) RESIDENTIAL UNITS BUILT ON SUCH AREA MUST SATISFY CONDITION OF CL. (C) OF THE PROVISION AND (III) OT HER NECESSARY CONDITIONS ARE FULFILLED AND WHERE INCOME FROM CON STRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STA NDALONE BASIS DEDUCTION UNDER S. 80-IB(10) WILL BE AVAILAB LE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDU CTION UNDER S. 80-IB(10) IS AVAILABLE IN RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE AND AS SUCH IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUT ABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THA T IN CASE COMMERCIAL USE OF BUILT-UP AREA IN A PROJECT IS MOR E THAN 10 PER CENT AND FOR THIS REASON THE PROJECT CANNOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJECT BUT IN TERMS OF OBS ERVATIONS MADE IN PARA 115 ABOVE THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNIT SEGMENT OF THE OVERA LL PROJECT ON ITA NO.2200 & 2633/A/2008 21 FULFILLMENT OF NECESSARY CONDITIONS THE ENTITLEMEN T OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS T O THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT-UP AREA AS PRESCRIBED BY CL . (D) OF S. 80-IB(10) HAS NO RETROSPECTIVE APPLICATION AND IT APPLIES ONLY W.E.F. THE ASST. YR. 2005-06. 7.8 IN THE LIGHT OF VIEW TAKEN BY THE SPECIAL BENCH IN THEIR AFORESAID DECISION ESPECIALLY WHEN THE AO DID NOT EXAMINE T HE ISSUE AS TO WHETHER OR NOT THE RESIDENTIAL- CUM- COMMERCIAL PROJECT UNDE RTAKEN BY THE ASSESSEE IN TERMS OF APPROVAL DATED 24.1.2002 OF THE COMPETENT AUTHORITY WAS A HOUSING PROJECT WITHIN THE MEANING PROVISIONS OF SEC. 80IB (10) OF THE ACT WHILE NEITHER THE AO NOR THE LD. CIT(A) HAD THE BENEFIT OF AFORESAID DECISION IN THE CASE OF BRAHMA ASSOCIATES(SUPRA) AND THE PERCENTAGE OF BUIL T AREA FOR THE SHOPS AND COMMERCIAL ESTABLISHMENTS IS NOT EVIDENT FROM THE ORDERS OF THE LOWER AUTHORITIES NOR THE LD. REPRESENTATIVE S OF BOTH THE PARTIES COULD THROW ANY LIGHT ON THIS ASPECT AND IT HAS NOT BEEN EXAMINED AS TO WHETHER OR NOT THE AFORESAID CLAUSE (D) IN THE SEC. 80IB(10) INTRODUCED W.E.F.1.4.2005 IN THE AMENDED PROVISIONS IS APPLICABLE TO THE PROJECTS ALREADY APPROVED BY THE COMPETENT AUTHORITY IN THE PRECEDING YEARS AND/OR ENJOYING THE BENEFITS OF THE SAID DEDUCTION ON FUL FILLING THE CONDITIONS STIPULATED IN THE EXTANT PROVISIONS OF SEC. 80IB(10) OF THE ACT WE FIND MERIT IN THE CONTENTIONS OF THE LD. AR AND ACCORDINGLY CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUES RAI SED IN GROUND NOS.1 & 2 OF THESE TWO APPEALS TO THE FILE OF THE AO FOR DECIDING TH E MATTER AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATION S KEEPING IN VIEW THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THOSE REFERRED T O ABOVE AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. WITH THESE OBSERVATIONS GROUND NOS. 1 & 2 IN THESE TWO APPEALS ARE DISPOSED OF. 8.. GROUND NO. 3 IN THESE APPEALS RELATES TO INITI ATION OF PENALTY PROCEEDINGS WHILE GROUND NO. 5 PERTAINS TO LEVY OF INTEREST U /S 234A 234B & 234C OF THE ACT. THE LD. AR DID NOT MAKE ANY SUBMISSIONS ON THESE GR OUNDS. MERE INITIATION OF PENALTY PROCEEDINGS IS NOT APPEALABLE WHILE THE LEV Y OF INTEREST U/S 234A 234B & 234C OF THE ACT BEING MANDATORY [COMMISSIONER OF I NCOME TAX.VS ANJUM M. H. ITA NO.2200 & 2633/A/2008 22 GHASWALA AND OTHERS 252 ITR 1(SC) AFFIRMED BY HON' BLE APEX COURT IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ] THESE TWO GROUNDS ARE DISMISSED. HOWEVER THE AO SHALL ALLOW CONSEQUE NTIAL RELIEF WHILE GIVING EFFECT TO OUR AFORESAID DIRECTIONS. 9. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND THIS GROUND IS THEREFORE DISMIS SED. 10. IN THE RESULT BOTH THESE APPEALS ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 27-08-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 27-08-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S RAJ DEVELOPERS 33 VIHALKRUPA SOCIETY NEAR VIDYADHAM SOCIETY NEW SAMA ROAD BARODA 2. THE ITO WARD-3(2) BARODA 3. CIT CONCERNED 4. CIT(A)-II BARODA 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD