M/s Agrawal Construction Co., Bhopal v. The ACIT, 1(1), Bhopal

ITA 342/IND/2012 | 2006-2007
Pronouncement Date: 28-10-2013 | Result: Dismissed

Appeal Details

RSA Number 34222714 RSA 2012
Assessee PAN AAEFA8225A
Bench Indore
Appeal Number ITA 342/IND/2012
Duration Of Justice 1 year(s) 4 month(s) 20 day(s)
Appellant M/s Agrawal Construction Co., Bhopal
Respondent The ACIT, 1(1), Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 28-10-2013
Date Of Final Hearing 08-06-2015
Next Hearing Date 08-06-2015
Assessment Year 2006-2007
Appeal Filed On 07-06-2012
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA HONBLE ACCOUNTANT MEMBER ITA NOS. 341 & 342/IND/2012 A.YS. 2005-06 & 2006-07 AGRAWAL CONSTRUCTION COMPANY BHOPAL PAN AAEFA 8225A ::: APPELLANT VS ASSTT.COMMR. OF INCOME TAX 1(1) BHOPAL ::: RESPONDENT ITA NOS. 735 & 736/IND/2014 A.YS. 2007-08 & 2008-09 AGRAWAL CONSTRUCTION COMPANY BHOPAL PAN AAEFA 8225H ::: APPELLANT VS ASSTT.COMMR. OF INCOME TAX 1(1) BHOPAL ::: RESPONDENT 2 ITA NOS. 723 & 724/IND/2014 A.YS. 2002-03 & 2003-04 DY. COMMR. OF INCOME TAX CENTRAL BHOPAL ::: APPELLANT VS M/S AGRAWAL CONSTRUCTION COMPANY BHOPAL PAN AAEFA 8225H ::: RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE AND SHRI M. AYACHIT RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 8 . 6 .2015 DATE OF PRONOUNCEMENT 30 .7.2015 O R D E R PER BENCH ITA NOS. 341 & 342/IND/2012 BOTH THESE APPEALS OF THE ASSESSEE EMANATE FROM THE COMMON ORDER OF THE LEARNED CIT(A) DATED 30.3.20 12. 3 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT OF RESIDENTIAL COLONIES. THE ASSESSEE FIRM HAS DEVELOPED AND SOLD THREE RESIDENTIAL HOUSING PROJECTS DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEARS 2005-06 AND 2006-07 NAMELY SAGARPARISAR SITUATED AT VILLAGE BAWADIA KALA BHOPAL SAGAR ESTATES SITUATED AT VILLAGE DHAMKHEDA AYODHYA BYE PASS ROAD BHOPAL AND SAGAR GREEN ESTATES SITUATED AT VILLAGE DAMKHEDA AYODHYA BYE PASS ROAD BHOPAL. THE DETAILS OF THE PROJECTS ARE AS UNDER :- NAME OF PROJECT SAGAR ESTATES SAGAR GREEN ESTATES SAGARPARISAR LOCATION OF THE PROJECT DAMKHEDA AYODHYA BYE PASS ROAD BHOPAL DAMKHEDA AYODHYA BYE PASS ROAD BHOPAL BAWADIA KALA BHOPAL AREA 7.03 ACRES 1.07 ACRES 1.30 ACRES TNCP APPROVAL NO. 5018 2960/L.P113 /29 NOT DESIRED BECAUSE THE AREA WAS ALREADY APPROVED BY TNCP DATE OF TNCP APPROVAL 31.10.2000 16.12.2004 BMC APPROVED 1165 - 02091 - 1163 - 01958 - 1053 - 1737 - 4 0700 0305 1203 DATE OF BMC APPROVAL 05.07.2000 15.03.2005 22.12.2003 NUMBER OF UNITS 208 28 29 COMMENCING YEAR OF THE PROJECT F.Y. 2000 - 01 2005 - 06 2003 - 04 COMPLETION YEAR OF THE PROJECT F.Y. (AS PER VARIOUS PROOF SUBMITTED BEFORE LOWER AUTHORITIES) 2005 - 06 2006 - 07 2006 - 07 LAST POSSESSION DATE (AS PER POSSESSION LETTERS SUBMITTED BEFORE LOWER AUTHORITIES 29.09.2007 (ONLY THREE COMPLETED UNITS WERE GIVEN POSSESSION IN FY 2006-07 19.02.2007 09.05.2006 COMPLETION CERTIFICATE OBTAINED ON 12.07.2010 31.03.2009 (UNDER PRESCRIBED LIMIT) NOT ISSUED THE ASSESSEE HAD APPLIED FOR COMPLETION CERTIFICATE IN CASE OF SAGAR ESTATE ON 28.9.2007. WHILE FRAMING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSI NG OFFICER DISALLOWED DEDUCTION U/S 80IB(10) OF THE ACT ON THE FOLLOWING GROUNDS :- 5 1. THE ASSESSEE IS MERELY ACTING AS A CONTRACTOR TO THE CUSTOMERS TO WHOM LAND HAS BEEN SOLD. 2. NO REGISTRY IS BEING MADE FOR THE CONSTRUCTION WORK DONE BY THE ASSESSEE. NO NEW RESIDENTIAL PROPERTY IS BEING CONSTRUCTED OR TRANSFERRED BY THE ASSESSEE AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE. 3. INTENTION BEHIND ANY DEDUCTION U/S 80IB IS TO PROMOTE INVESTMENT IN A PARTICULAR SECTOR WHICH IS LESS PROFITABLE. IN ASSESSEES CASE VIRTUALLY NO INVESTMENT WAS MADE TO START THE PROJECT AND RETURN ON CAPITAL OR PROFITABILITY IS VERY SUBSTANTIAL. 6 4. PROJECT IS NOT APPROVED ASSESSEE A WHOLE BY THE MUNICIPAL CORPORATION INDIVIDUAL BUILDING PERMISSION HAS BEEN GIVEN. 5. IN THE A.Y. 2004-05 THE MEASUREMENT TAKEN BY THEN A.O. FOR THE SAME PROJECT WHICH ARE STILL CONTINUED IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CONSTRUCTED THE DUPLEXES WHICH EXCEEDS THE MAXIMUM LIMIT OF 1500 SQ . FT SPECIFIED IN SECTION 80IB(1) WHICH IN FACT IS ONE OF THE MAIN BASIC CONDITION TO BE FULFILL IN ORDER TO CLAIM THE EXEMPTION. THE ASSESSEE HAS FAILED TO FULFIL THIS MAIN BASIC CONDITION. 6. FOR BEING ELIGIBLE FOR DEDUCTION UNDER S. 80IB IT IS ESSENTIAL THAT THE APPROVED PROJECT IS COMPLETED AS LAID DOWN UNDER S. 80IB(10). THE SECTION 80IB(10) PRESCRIBED THE DATE OF COMPLETION IS TO BE TAKEN AS THE DATE ON WHICH 7 COMPLETION CERTIFICATE WAS ISSUED BY THE LOCAL AUTHORITY. NO SUCH CERTIFICATE HAS BEEN ISSUED BY THE LOCAL AUTHORITY. ON THE SIMILAR LINES THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS REOPENED AND THE CLAIM OF DEDUCTION U/ S 80IB(1) WAS DISALLOWED. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(A ) AND THE LEARNED CIT(A) DID NOT SUSTAIN THE ASSESSING OFFICERS CONTENTION IN RESPECT OF THE GROUND AS MEN TIONED ABOVE FROM 1 TO 4. THE RELEVANT PORTION OF THE ORDER OF THE LEARNED CIT(A) IS REPRODUCED HEREUNDER :- IN THIS CONNECTION IT MAY BE MENTIONED THAT THE OBJECTIONS RAISED BY THE A.O. AS STATED ON S. NO. 1 TO 4 ARE NOT SUSTAINABLE IN AS MUCH AS THE ASSESSEE WAS OWING THE LAND AND AFTER PURCHASING SUCH LAND THE ASSESSEE HAS 8 DEVELOPED THE HOUSING PROJECT ON THE SAID LAND. IN FACT AFTER PURCHASE OF LAND ALL WORK RELATING TO PLANNING OF THE HOUSING PROJECT INITIAL INFRASTRUCTURE DEVELOPMENT CONSTRUCTION OF THE DWELLING UNITS BOOKING OF SUCH RESIDENTIAL UNITS WERE CARRIED OUT BY THE APPELLANT. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS SIMPLY ACTED ASA CONTRACTOR OR THAT NO NEW RESIDENTIAL PROPERTY IS BEING CONSTRUCTED AND NO REGISTRY FOR CONSTRUCTION WORK WAS MADE. THE OBSERVATIONS OF THE A.O. ARE IN FACT FACTUALLY NOT CORRECT. AS REGARDS THE OBSERVATION THAT NO INVESTMENT WAS MADE THE SAME IS ALSO FOUND TO BE INCORRECT AS ALL NECESSARY INVESTMENTS FOR SUCH PROJECTS HAS BEEN MADE BY THE PARTNERS BY WAY OF CAPITAL CONTRIBUTION AND IN A.Y. 2006-07 INVESTMENT 9 TO THE EXTENT OF RS.221.19 LACS WAS MADE OUT OF TOTAL INVESTMENT OF RS. 309.04 LACS. THE FINDINGS OF THE A.O. THAT PROJECT IS NOT APPROVED AS A WHOLE BY MUNICIPAL CORPORATION IS ALSO FACTUALLY INCORRECT IN AS MUCH AS THE LAYOUT PLAN OF HOUSING PROJECT WAS APPROVED BY THE MUNICIPAL CORPORATION AS A WHOLE AND NO INDIVIDUAL PERMISSION HAS BEEN GIVEN. IN VIEW OF THESE FACTS THE OBJECTIONS MENTIONED AT S. NO. 1 TO 4 TRACED BY THE A.O. CANNOT BE SUSTAINED. HOWEVER HE HAS CONFIRMED THE ASSESSING OFFICERS CONTENTION ON TWO GROUNDS ONE IS REGARDING EXCEEDIN G THE MAXIMUM LIMIT OF 1500 SQ. FT. IN RESPECT OF TWO UNIT S ON THE BASIS OF MEASUREMENT TAKEN DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05 AND ON THE BASIS THAT ASSESSEE HAS NOT OBTAINED COMPLETION CERTIFIC ATE 10 BY 31.3.2008 ISSUED BY THE LOCAL AUTHORITY IN RESPEC T OF SAGAR ESTATE PROJECT. 4 NOW THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE DECISION OF THE LEARNED CIT(A) IS MATERIALLY INCORRECT AND BAD ON FACTS AND UNSUSTAINABLE IN LAW AND HIS FINDINGS ARE MATERIALLY INCORRECT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSEE SUBMITS THAT ITS HOUSING PROJECT FULFILS ALL THE CONDITIONS LAID DOWN IN SECTION 80IB(10) OF THE IT ACT AND THEREFORE THE INCOME FROM SUCH PROJECT IS DEDUCTIBLE UNDER THE SAID PROVISIONS. THE LEARNED CIT(A) ERRED AND NOT JUSTIFIED IN HIS 11 FINDINGS THAT THE ASSESSEE IS NOT ELIGIBLE FOR THE DEDUCTIBLE U/S 80IB(10) AND THEREFORE THE FINDINGS OF THE LEARNED CIT(A) BE QUASHED AND THE EXEMPTION AS CLAIMED U/S 80IB(10) BE KINDLY ALLOWED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE DENIAL OF DEDUCTION U/S 80IB(10) BY THE LEARNED LOWER AUTHORITIES ON THE BASIS OF MEASUREMENTS OF THE PROJECT TAKEN IN PREVIOUS YEARS AND NOT CONSIDERING THE MEASUREMENT TAKEN IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS WHOLLY UNJUSTIFIED INJUDICIOUS AND UNLAWFUL. THE BUILT UP AREA OF UNITS OF THE PROJECT OF THE ASSESSEE DURING THE ASSESSMENT UNDER CONSIDERATION WERE WITHIN THE PRESCRIBED LIMIT OF 1500 SQ. FT. AS EVIDENT BY THE MEASUREMENT TAKEN BY THE LEARNED A.O. 12 THE FINDINGS OF THE LEARNED LOWER AUTHORITIES FOR NOT ALLOWING THE DEDUCTION BE QUASEHD AND IT BE HELD THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S 80IB(10). THE DEDUCTION AS CLAIMED BE KINDLY ALLOWED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT SUBMITS THAT THE AMENDMENT BROUGHT BY THE FINANCE ACT 20-04 REGARDING THE COMPLETION OF THE PROJECT IN SPECIFIED TIME AND TO OBTAIN THE COMPLETION CERTIFICATE IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE PROJECT OF THE ASSESSEE IS APPROVED BEFORE THE YEAR 2004 AND THE SAID AMENDMENT IS APPLICABLE FOR THE ASSESSMENT YEAR 2005-06 AND THEREAFTER. THE LEARNED CIT(A) ERRED AND NOT JUSTIFIED IN HIS FINDINGS THAT THE SAID AMENDMENT IS RETROSPECTIVE AND 13 BE APPLICABLE IN THE CASE OF APPELLANT AND THEREFORE THE FINDINGS OF THE LEARNED CIT(A) BE QUASHED. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT SUBMITS THAT THE VARIOUS PROOFS SUBMITTED SHOWING THE COMPLETION OF THE PROJECT WITHIN THE SPECIFIED DATE. THE LEARNED CIT(A) ERRED AND NOT JUSTIFIED NOT ACCEPTING ALL THESE PROOFS AND ALSO NOT ACCEPTING THE DEEMED COMPLETION UNDER THE PROVISIONS OF SECTION 301 OF M.P. NAGAR PALIKA ADHINIYAM 1956 AND ONLY RELYING ON THE COMPLETION CERTIFICATE AS MENTIONED IN THE EXPLANATION TO THE SECTION 80IB(10) AND THEREFORE THE FINDINGS OF THE LEARNED CIT(A) BE QUASHED. 14 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEVY OF INTEREST U/S 234B IS UNLAWFUL AND HENCE BE CANCELLED. 5. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 6. GROUND NO. 6 IS REGARDING LEVY OF INTEREST U/S 23 4B. IN THIS REGARD WE HOLD THAT THE LEVY OF INTEREST U/S 234B IS MANDATORY AND CONSEQUENTIAL. THEREFORE THIS GROUND IS DISMISSED. 7. IN GROUND NOS. 2 TO 5 THE ISSUE IS REGARDING NOT ALLOWING DEDUCTION U/S 80IB(10) OF THE ACT. THEREFO RE IN THE FOREGOING PARAS WE ARE DISCUSSING THIS ISSUE. 8. IN THE ASSESSMENT YEAR 2004-05 THE CLAIM OF THE ASSESSEE WAS DISALLOWED ON THE GROUND THAT TWO UNITS HA VE EXCEEDED THE STIPULATED CONSTRUCTED AREA. THE MEASUREMENT TAKEN FOR THE ASSESSMENT YEAR 2004-05 WERE 15 CONTINUED TO BE CONSIDERED BY THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDERATION WITH REGARD TO EXCESS OF AREA O F MAXIMUM LIMIT OF 1500 SQ. FT. TO QUALIFY FOR 80-IB(10 ) DEDUCTION AND THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE PROVISIONS OF SECTION 80IB ARE IN RESPECT OF COM PLETE HOUSING PROJECT AND NOT INDIVIDUAL UNITWISE THEREOFR E 80IB DEDUCTION SHALL BE ALLOWED FOR COMPLETE HOUSING PROJECT. THE VIOLATION IN RESPECT OF A SINGLE UNIT SH ALL BE A VIOLATION FOR WHOLE OF THE PROJECT. THE ASSESSING OF FICER ALSO HELD THAT FOR BEING ELIGIBLE FOR DEDUCTION U/S 80IB IT IS ESSENTIAL THAT THE APPROVED PROJECT IS COMPLETED AS PRESCRIBED U/S 80IB(10) WHERE THE DATE OF COMPLETION IS TO BE TAKEN AS THE DATE ON WHICH THE COMPLETION CERTIFICA TE WAS ISSUED BY THE LOCAL AUTHORITY AND IN THESE CASES NO SUCH CERTIFICATE WAS ISSUED BY THE LOCAL AUTHORITY. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE FRAMING THE ASSESSMENT FOR THE ASSESSMENT YEAR 16 2006-07 THE ASSESSING OFFICER AGAIN REFERRED THE MATTE R TO THE DVO FOR DETERMINING THE AREA OF UNITS. THE APPROV ED ENGINEEER HAS REPORTED THAT THERE WAS NO EXTRA CONSTRUCTION. THE CONSTRUCTION HAS BEEN DONE IN LIMI TS AS PRESCRIBED U/S 80IB(10) READ WITH SECTION 80IB(14) O F THE ACT. HE FURTHER SUBMITTED THAT TWO PROJECTS WERE APP ROVED PRIOR TO 1.4.2004. THE SAME WERE COMPLETED WITHIN T HE STIPULATED PERIOD. THE PROJECT SAGAR ESTATES WAS COMPL ETE AND THE LAST POSSESSION WAS GIVEN ON 29.9.2007. THE ASSESSEE HAS APPLIED FOR COMPLETION CERTIFICATE ON 28.9.2007. HE SUBMITTED THAT THE ASSESSEE HAS SUBMIT TED REMINDERS THEREAFTER. ULTIMATELY THE COMPLETION CE RTIFICATE WAS ISSUED TO THE ASSESSEE ON 5.7.2010. THIS CERTIFIC ATE ISSUED ON 5.7.2010 RELATE BACK TO THE DATE OF APPLICATI ON I.E. 28.9.2007. IT IS CLEAR FROM THE LETTER ISSUED BY MUNICIPAL CORPORATION BHOPAL ON 12.5.2015. A COPY O F THE SAME WAS PLACED ON RECORD. THE COMPLETION CERTIFIC IATE 17 WITH REGARD TO SAGAR GREEN ESTATE WAS OBTAINED WITHIN T HE STIPULATED PERIOD I.E. 31.3.2009. SAGAR PARISAR PROJE CT WAS COMPLETE IN 2006 ITSELF. HE FURTHER SUBMITTED THAT THE AMENDED PROVISIONS OF SECTION 80IB(10) OF THE ACT CA ME INTO EXISTENCE W.E.F. 1.4.2005. THESE PROVISIONS CAN NOT BE APPLIED RETROSPECTIVELY FOR THE PROJECTS WHICH WERE SANCTIONED PRIOR TO 1.4.2004. IN THE ASSESSEES CASE WHERE THE PROJECT MAPS WERE SANCTIONED PRIOR TO 1.4.2004 S UCH CONDITIONS SHALL NOT BE APPLIED. HE ALSO PLEADED THAT T HE DISALLOWANCE IN THE ASSESSMENT YEAR 2004-05 WAS ALSO MADE ON ACCOUNT OF EXCEEDING THE AREA OF PRESCRIBED LIM IT. HON'BLE ITAT CONSIDERED THE APPLICATION OF THE AMENDED PROVISIONS AND ON THE BASIS OF EARLIER PROVISIONS ALLO WED THE APPEAL OF THE ASSESSEE WITH THE REMARK THAT THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS PRESCRIBED U/ S 80IB(10) OF THE ACT PRIOR TO AMENDMENT IN THE ACT. H E FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN GIVEN THE 18 COMPLETION CERTIFICATE BY LOCAL AUTHORITY IN THE CASE O F SAGAR ESTATES BELATELY. HOWEVER ASSESSEE WAS NOT AT FA ULT AS THE PROJECT WAS COMPLETE AND THE ASSESSEE HAS SUBMITTED AN APPLICATION FOR ISSUING THE COMPLETION CERTIFICATE IN TIME. ISSUING THE CERTIFICATE WAS NOT I N THE HANDS OF THE ASSESSEE. HE ALSO SUBMITTED THAT THE AMENDE D SECTION OF 80IB DOES NOT APPLY TO THE PROJECT SAGAR GREEN ESTATE BECAUSE THE PROJECT WAS APPROVED PRIOR TO INS ERTION OF AMENDMENT IN THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS BEEN GIVEN COMPLETION CERTIFICATE BY THE LOCAL AUTHORITY WITHOUT MENTIONING ANY DEVIATION IN THE SANCTIONED PLAN. THIS F ACT ESTABLISHES THAT THE ASSESSEES PROJECT DOES NOT VIOL ATE THE SANCTIONED PLAN. IN ALL THESE SANCTIONED PLANS THE ARE A OF INDIVIDUAL UNIT WAS WITHIN LIMITED PROVIDED U/S 80IB( 10) OF THE ACT. THE LEARNED AR ALSO PLACED RELIANCE ON THE 19 FOLLOWING DECISIONS OF THE HON'BLE HIGH COURT AND HO N'BLE ITAT :- (I) CIT VS. CHD DEVELOPERS; 362 ITR 177 (DEL) (II) CIT VS. HAPPY HOME ENTERPRISES; 271 CTR 524 (BO M). THE CASE OF BRAHMA ASSOCIATES DISCUSSED. (III) CIT VS. GR DEVELOPERS; 353 ITR P 12 (IV) MANAN CORPN. VS. ACIT; 255 CTR 415 (GUJ.) 10. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUB MITTED THAT SINCE THE AMENDMENT IS NOT RETROSPECTIVE THEREF ORE THESE WILL NOT APPLY IN THE CASE OF SAGAR PARISAR WHERE THE PROJECT WAS COMPLETE AND POSSESSION OF UNITS WAS HANDED OVER BY 9.5.2006. THE COMPLETION CERTIFICATE WAS NOT OBTAINED. HE FURTHER SUBMITTED THAT THE ASSESSEE PRODU CED SUFFICIENT EVIDENCE INCLUDING POSSESSION LETTER ISS UED TO THE PURCHASER TO ESTABLISH THAT ALL THESE PROJECTS WERE COM PLETE EVEN PRIOR TO THE STIPUALTED DATE AND THE ASSESSEE HAS APPLIED FOR COMPLETION CERTIFICATE AND AS PER THE PROVI SIONS OF BMC ACT THE ASSESSEE HAS DISCHARGED ITS ONUS OF 20 INTIMATING THE COMMISSIONER REGARDING COMPLETION OF T HE CONSTRUCTION. THE ASSESSEE COULD NOT BE HELD RESPONS IBLE FOR NOT ISSUING THE CERTIFICATE AS THIS WAS BEYOND HI S CONTROL. THE ASSESSEE COMPLETED THE PROJECT IN TIME AND APPLIED FOR COMPLETION CERTIFICATE. SECTION 301(4) O F M.P. NAGAR PALIKA NIGAM ADHINIYAM 1956 PROVIDES THAT UNLESS THE COMMISSIONER HAS FAILED FOR 15 DAYS AFTER THE RECE IPT OF THE NOTICE OF COMPLETION TO INTIMATE HIS REFUSAL TO G RANT THE SAID PERMISSION NO PERSONAL SHALL OCCUPY OR PERMIT TO BE OCCUPIED SUCH BUILDING FOR USE. IN THIS CASE THE ASSE SSEE HAS APPLIED FOR COMPLETION CERTIFICATE AND THE COMMISSIONER HAS FAILED FOR 15 DAYS AFTER THE RECEIPT OF THE NOTICE OF COMPLETION TO INTIMATE HIS REFUSAL TO GRANT THE PERMISSION THEREFORE THE ASSESSEE AND THE PURCHASER S BECOME ENTITLED TO OCCUPY THE BUILDING AND IT IS A DE EMED COMPLETION CERTIFICATE ISSUED BY THE COMMISSIONER. 21 11. ON THE OTHER HAND THE LEARNED SR. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO COMPLETION CERTIFICATE WAS ISSUED TO THE ASSESSEE IN PRESCRIBED TIME. THE ASSESSING OFFICER RECEIVED THE INFORMATION BY ISSUING NOTICE U/S 133(6) OF THE ACT FROM THE LOCAL AUTHORITY WHERE THE LOCAL BODY HAS CERTIFIED TH AT THEY HAVE NOT ISSUED ANY COMPLETION CERTIFICATE. FURTHER T HE BUILT UP AREA WAS FOUND EXCEEDING 1500 SQ. FT. IN CASE O F TWO UNITS DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05. ONCE THERE IS VIOLATION IN R ESPECT OF ANY ONE UNIT THEN ASSESSEE SHALL NOT BE ENTITLED FO R DEDUCTION U/S 80IB(10) OF THE ACT. HE RELIED ON THE DECISIONS OF THE LOWER AUTHORITIES. 12. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO CONSIDERED THE VARIOUS CASE LAWS RELIED UPON BY BOTH SIDES. ONE OF THE GROUNDS ON WHICH THE ASSESSEE HAS BEEN DEN IED DEDUCTION U/S 80IB IS WITH REGARD TO MEASUREMENT OF T WO 22 UNITS TAKEN DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05 WHEREIN THE DEFINITION OF BUI LT UP AREA BY THE DEPARTMENTAL VALUER HAS BEEN TAKEN BY APPLYING THE PROVISIONS OF SECTION 80IB(14) OF THE A CT. THIS APPEAL FOR THE ASSESSMENT YEAR 2004-05 REACHED UP TO THE LEVEL OF ITAT WHEREIN THE BENCH HAS CONCLUDED THAT TH E APPELLANT HAS NOT BUILT UP THE UNIT EXCEEDING 1500 SQ. FT. THE BUILT UP AREA EXCEEDED FOR THE ASSESSMENT YEAR 200 4- 05 WAS DUE TO PROJECTION AND MUMTTY. VARIOUS COURTS HAVE HELD THAT THE DEFINITION OF BUILT UP AREA IN T HE NEWLY INSERTED PROVISIONS OF SECTION 80IB(14)(A) SHAL L BE APPLICABLE W.E.F. 1.4.2005. PRIOR TO THIS DEFINITION IN THE INCOME TAX ACT W.E.F. 1.4.2005 THE BUILT UP AREA HAS TO BE CALCULATED AS PER THE LOCAL MUNICIPAL LAWS. THE BUILT U P AREA HAS BEEN DEFINED IN THIS PROVISION AS UNDER :- 80IB(14)(A) BUILT UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDING THE PROJECTIONS AND BALCONIES AS 23 INCREASED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS. IN VIEW OF VARIOUS DECISIONS OF COURTS THESE PROVIS IONS SHALL NOT BE APPLICABLE TO THE PROJECTS SANCTIONED PR IOR TO 1.4.2005. THE MEASUREMENTS WERE ALSO TAKEN DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006-07 WHERE THE BUILT UP AREA OF UNITS WAS FOUND WITHIN THE LIMIT OF 1500 SQ. FT. WE WOULD LIKE TO STATE THAT THE ASSESSE E HAS BEEN GRANTED COMPLETION CERTIFICATE AS PER THE SANCTION ED PLAN AND NO DEVIATIONS OR COMPOUNDING FEE HAVE BEEN REPORTED/LEVIED. FURTHER WE WOULD ALSO LIKE TO STATE THAT THOSE CONDITIONS CAN BE APPLIED TO THE HOUSING PROJEC TS WHICH WERE ON THE STATUTE BOOK ON THE DATE WHEN THE HOUSING PROJECTS WERE APPROVED BY LOCAL AUTHORITY. I N OTHER WORDS IN CASE THE HOUSING PROJECTS WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO 31.3.2004 THEN THE NEWLY INS ERTED DEFINITION OF BUILT UP AREA IN SECTION 80(1B)(14A) SHALL NOT 24 BE APPLICABLE TO SUCH HOUSING PROJECTS. THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY PRIOR TO 31.3 .2004 ONLY REQUIRED TO FULFIL ONLY FOLLOWING THREE CONDITI ONS (I) THE DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT WAS COMMENCED ON OR AFTER OCTOBER 1 1998 AFTER APPROVAL OF LOCAL AUTHORITY. (II) THE PROJECT WAS ON A PLOT OF LAND WHICH HAS A MINIMUM AREA OF 1 ACRES (III) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA O F 1000 SQ. FT. WHERE SUCH RESIDENTIAL UNIT WAS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN 25 KMS OF MUNICIPAL LIMITS OF THESE CITIES AND 1500 SQ. FT. AT ANY OTHER PLACE. ONLY THESE CONDITIONS WERE REQUIRED TO BE COMPLIED W ITH. AN ASSESSEE CANNOT BE ASKED TO COMPLY WITH THE CONDIT IONS WHICH WERE NOT A PART OF THE STATUTE WHEN THE HOUSING 25 PROJECT WAS APPROVED AND MORE SO WHEN SUCH CONDITIONS ARE INEXTRICABLY LINKED WITH THE APPROVAL GRANTED TO THE HOUSING PROJECT BY THE LOCAL AUTHORITY UNDER ITS OWN RULES AND REGULATIONS. IF THE CONDITION OF SUB-SECTION (14 )(A) OF SECTION 80IB IS HELD APPLICABLE TO THE PROJECTS APPRO VED PRIOR TO 1.4.2005 THEN THE ASSESSEE HAS TO NECESSARILY SEEK FOR A MODIFIED PLAN OTHERWISE THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 80IB(10) AND WHEN THE ASS ESSEE OBTAINED VALID APPROVAL AND CONSTRUCTED THE BUILDING IN ALL RESPECT PRIOR TO IST APRIL 2005 THEN ALSO IF THE P ROVISIONS ARE APPLIED RETROSPECTIVELY THE ASSESSEE WOULD NOT BE ENTITLED TO BENEFIT OF TAX EXEMPTION. SUCH AN INTERP RETATION NOT ONLY WOULD BE ABSURD BUT ALSO LEAD TO DISASTROUS CONSEQUENCES. THEREFORE IT CANNOT BE THE INTENTION O F THE LEGISLATURE WHILE BRINGING THE DEFINITION OF BUILT U P AREA IN THE STATUTE. WE WOULD LIKE TO MENTION THAT SUCH BENEF ICIAL PROVISIONS IN THE ACT HAVE BEEN BROUGHT INTO TO BRIN G IN 26 INVESTMENT AND TO ENCOURAGE INFRA-STRUCTURE DEVELOPME NT OF MIDDLE INCOME HOUSING PROJECTS. IF THESE AMENDED PROVISIONS ARE MADE EFFECTIVE RETROSPECTIVELY THEN I T WILL NEGATE THE OBJECT OF THE PROVISION. IF CERTAIN AREAS ARE NOT CONSIDERED AS PART OF BUILT UP AREA AS PER MUNICIPAL ACT THEN THE DEFINITION OF BUILT UP AREA THAT IS INTRODUCE D IN THE ACT AT LATER STAGE SHALL NOT BE SUBSTITUTED TO THE PROJ ECT APPROVED PRIOR TO THAT DATE. IT IS A SETTLED LAW THAT TH E COURT HAS TO HARMONIZE THE PROVISION AND INTERPRET THE SAME IN A MANNER TO ACHIEVE THE OBJECT OF LEGISLATURE TH AN TO DISTRESS THE SAID OBJECT. THEREFORE IN OUR CONS IDERED VIEW THE DEFINITION OF BUILT UP AREA AS INSERTED BY SUB- SECTION (14)(A) TO SECTION 80IB OF THE ACT BY THE FI NANCE ACT (NO. 2) 2004 CANNOT BE APPLIED RETROSPECTIVELY AND IF THIS DEFINITION IS NOT APPLIED THE MEASUREMENT OF CONSTRU CTED UNIT COMES WITHIN THE LIMIT AS PROVIDED IN THE ACT. A SIMILAR VIEW HAS BEEN HELD BY THE HON'BLE GUJARAT HIGH COURT I N 27 THE CASE OF MANAN CORPORATION; 356 ITR 44. HELD AS UNDE R :- HELD THAT THERE WAS NO CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIOR TO THE AMENDMENT OF THE SECTION AND THE PLANS WERE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY FOR BOTH THE PROJECTS OF THE ASSESSEE. PERMISSION FOR CONSTRUCTION OF SHOPS HAD 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 WAS ALSO QUITEN APPARENT FROM THE CERTIFICATES ISSUED BY THE LOCAL AUTHORITY AND THEREFORE NEITHER THE ABSENCE OF SUCH PROVISION OF COMMERCIAL SHOPS NOR ON ACCOUNT OF SUCH COMMERCIAL CONSTRUCTION HAVING 28 EXCEEDED THE AREA CONTEMPLATED IN THE PROSPECTIVE AMENDMENT COULD THE DEDUCTION BE DENIED TO THE ASSESSEE WHOSE PLANS WERE SANCTIONED ACCORDING TO THE PREVALENT RULES. THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE KARNATAKE HIGH COURT IN THE CASE OF CIT VS. GR DEVELOPERS; 353 ITR 1 WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER :- THE DEFINITION OF BUILT UP AREA AS INSERTED IN SUB-SECTION (14)(A) OF SECTION 80IB BY THE FINANCE (NO. 2) ACT OF 2004 WHICH CAME INTO EFFECT FROM APRIL 1 2005 CANNOT BE HELD TO BE RETROSPECTIVE. IT APPLIES ONLY TO SUCH HOUSING PROJECTS WHICH ARE APPROVED SUBSEQUENT TO APRIL 1 2005. 29 THE HOUSING PROJECT CONTEMPLATED UNDER SUB-SECTION (10) OF SECTION 80IB INCLUDES COMMERCIAL ESTABLISHMENTS OR SHOPS ALSO. NOW BY WAY OF AN AMENDMENT AN ATTEMPT IS MADE TO RESTRICT THE SIZE OF THE SHOPS OR COMMERCIAL ESTABLISHMENTS. THEREFORE NECESSARILY THE PROVISION HAS TO BE READ PROSPECTIVELY AND NOT RETROSPECTIVELY. AS IS CLEAR FROM THE AMENDMENT THIS PROVISION CAME INTO EFFECT ONLY FROM THE DAY THE PROVISION WAS SUBSTITUTED. THEREFORE IT CANNOT BE RETROSPECTIVE. HELD DISMISSING THE APPEAL (I) THAT THE ASSESSEE OBTAINED APPROVAL FOR BUILDING HOUSING PROJECT ON JUNE 14 2002 AND HAD BUILT 84 FLATS IN AN AREA WHICH WAS IN EXCESS OF ONE ACRE OF LAND. THE CONSTRUCTION WAS COMPLETED WITHIN THE PERIOD STIPULATED. ACCORDING TO THE ASSESSEE 84 30 FLATS WERE WITHIN 1500 SQ. FT. THE MATERIAL ON RECORD DISCLOSED THAT A HEAD ROOM WAS CONSTRUCTED. THE HEAD ROOM WAS NOT INCLUDED IN THE SALE DEED. THE LOCAL AUTHORITY AFTER CONSTRUCTION OF THE BUILDING INSPECTED THE BUILDING AND GRANTED THE OCCUPANCY CERTIFICATE. THEREFORE THE CONSTRUCTION PUT UP BY THE ASSESSEE PRIMA FACIE COULD BE SAID TO BE IN ACCORDANCE WITH THE SANCTIONED PLAN. IF AFTER ISSUE OF THE OCCUPANCY CERTIFICATE AND AFTER SALE OF THESE RESIDENTIAL FLATS THE OWNERS OF THE FLATS ON THE TOP FLOOR DECIDED TO PUT UP A HEAD ROOM AND ENGAGED THE VERY SAME CONTRACTOR AND THE ENGINEER MAY HAVE PUT UP IDENTICAL STRUCTURES IT COULD NOT BE SAID THAT THE ASSESSEE HAD PUT UP THE CONSTRUCTION AND THUS CONTRAVENED THE REQUIREMENT OF SECTION 80IB. THE MATERIAL ON 31 RECORD DID NOT DISCLOSE THAT THE ASSESSEE PUT UP THE CONSTRUCTION PRIOR TO THE SALE OF THOSE FLATS AND EXCLUDED THE CONSTRUCTION IN THE SALE DEED WITH AN INTENTION OF GETTING THE BENEFIT OF SECTION 80IB(10). IN SO FAR AS BALCONIES WERE CONCERNED PRIOR TO APRIL 1 2005 THE AREA COVERED BY THEM HAD TO BE EXCLUDED IN CALCULATING THE BUILT UP AREA. AS THE HOUSING PROJECT WAS APPROVED ON JUNE 14 2002 AND IN THE PLAN ALL THESE BALCONIES WERE SHOWN AND EXCLUDING THOSE BALCONIES THE CONSTRUCTION PUT UP WAS ADMITTEDLY LESS THAN 1500 SQ. FT. AFTER APRIL 1 2005 THE AUTHORITIES COULD NOT ADD THE BALCONY AREA TO THE BUILT UP AREA AND DENY THE BENEFIT TO THE ASSESSEE. THEREFORE AS THE MATERIAL ON RECORD DISCLOSED THAT ALL THE 84 OR 83 FLATS CONSTRUCTED WERE LESS THAN THE 1500 SQ. FT. THE 32 ASSESSEE COULD NOT BE DENIED THE BENEFIT AND TAXED ON THE GROUND THAT THEY EXCEED 1500 SQ. FT. (II) THAT THE INTERPRETATION PLACED BY THE ASSESSING OFFICER AND THE APPELLATE COMMISSIONER THAT THE APPROVAL WAS FOR A HOUSING-CUM-COMMERCIAL COMPLEX AND THEREFORE THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF SECTION 80IB(10) WAS UNWARRANTED. THE OTHER OBJECTION OF THE REVENUE IS WITH REGARD NO T OBTAINING THE COMPLETION CERTIFICATE. THE ASSESSEE HAS APPLIED FOR COMPLETION CERTIFICATE WELL IN TIME. TH E ASSESSEE SUBMITTED VARIOUS EVIDENCES INCLUDING THE POSSESSION CERTIFICATE TO THE PURCHASERS AND THE EVIDENCE REGARDI NG OCCUPANCY OF THE UNITS IN SUPPORT OF THE PHYSICAL COMPLETION OF THE PROJECT. THE ASSESSEE HAS APPLIED IN TIME FOR OBTAINING THE COMPLETION CERTIFICATE. BHOPAL MUNIC IPAL 33 CORPORATION HAS APPROVED THE PROJECT OF THE ASSESSEE W HICH IS THE COMPETENT AUTHORITY IN VIEW OF M.P. NAGAR PALIKA NIGAM ADHINIYAM 1956. SECTION 301 OF THE SAME ACT SPEAKS ABOUT COMPLETION CERTIFICATE AND THE RELEVANT PORTION IS REPRODUCED HEREUNDER :- 301. COMPLETION CERTIFICATE AND PERMISSION TO OCCUPY OR USE (1) EVERY PERSON WHO (I) ERECTS OR RE-ERECTS ANY BUILDING; OR (II) MAKES ANY MATERIAL EXTERNAL ALTERATION IN OR ADDITION TO ANY EXISTING BUILDING : OR (III) CONSTRUCTS OR RE-CONSTRUCTS ANY PROJECTING PORTION OF A BUILDING WHICH THE COMMISSIONER IS EMPOWERED IS EMPOWERED UNDER SECTION 305 REQUIRE TO BE SET BASK OR IS 34 EMPOWERED TO GIVE PERMISSION TO CONSTRUCT OR RE-CONSTRUCT. SHALL WITHIN ONE MONTH OF THE COMPLETION OF THE WORK DELIVER TO THE COMMISSIONER AT HIS OFFICE A NOTICE IN WRITING OF SUCH COMPLETION AND SHALL GIVE TO THE COMMISSIONER ALL NECESSARY FACILITIES FOR THE INSPECTION OF SUCH WORK. (2) WITHIN SEVEN DAYS AFTER THE RECEIPT OF THE SAID NOTICE THE COMMISSIONER SHALL DEPUTE AN OFFICER TO COMMENCE THE INSPECTION OF SUCH WORK. (3) WITHIN SEVEN DAYS FROM THE DATE OF COMMENCEMENT OF SUCH INSPECTION THE COMMISSIONER SHALL 35 (A) GIVE PERMISSION FOR THE OCCUPATION OF THE BUILDING ERECTED OR FOR THE USE OF THE PART OF THE BUILDING RE-ERECTED; OR (B) REFUSE SUCH PERMISSION IN CASE SUCH ERECTION CONSTRUCTION OR RE-CONSTRUCTION IS IN CONTRAVENTION OF ANY PROVISION OF THIS ACT OR ANY RULE OR BYELAW MADE THEREUNDER OR ANY OTHER ENACTMENT FOR THE TIME BEING IN FORCE. (4) NO PERSON SHALL OCCUPY OR PERMIT TO BE OCCUPIED ANY SUCH BUILDING OR USE OR PERMIT TO BE USED ANY PART AFFECTED BY THE RE-ERECTION OF SUCH BUILDING (A) UNTIL THE PERMISSION REFERRED TO IN CLAUSE (A) OF SUB-SECTION (3) HAS BEEN GRANTED IN THE MANNER PRESCRIBED BY BYELAWS; 36 (B) UNLESS THE COMMISSIONER HAS FAILED FOR FIFTEEN DAYS AFTER THE RECEIPT OF NOTICE OF COMPLETION TO INTIMATE HIS REFUSAL TO GRANT THE SAID PERMISSION. 13. AS PER THE ABOVE PROVISIONS WHEREVER A BUILDING IS ERECTED WITHIN ONE MONTH OF THE COMPLETION OF TH E WORK THE PERSON WAS UNDER OBLIGATION TO DELIVER TO THE OFF ICE OF THE COMMISSIONER A NOTICE IN WRITING OF SUCH COMPLET ION AND SUBMIT ALL NECESSARY FACILITIES FOR INSPECTION OF S UCH COMPLETED WORK. THEREAFTER WITHIN 7 DAYS OF THE RE CEIPT OF SUCH NOTICE FROM THE PERSON THE COMMISSIONER SHALL DEPUTE AN OFFICER TO COMMENCE THE INSPECTION OF SUCH WORK. WITHIN 7 DAYS FROM THE DATE OF COMMENCEMENT OF SUCH INSPECTION THE COMMISSIONER SHALL GIVE PERMISS ION FOR OCCUPATION OF THE BUILDING ERECTED OR REFUSE SUC H PERMISSION IN CASE SUCH ERECTION IS IN CONTRAVENTION TO ANY PROVISION OF THE ACT OR ANY RULE OR ANY BYELAWS MADE UNDER 37 ANY OTHER ENACTMENT FOR THE TIME BEING IN FORCE. NO PERSON WAS ALLOWED TO OCCUPY OR PERMIT TO OCCUPY SUCH BUILDI NG UNTIL THE PERMISSION HAS BEEN GRANTED IN THE MANNER PRESCRIBED BY BYELAWS. HOWEVER THERE IS A PROVISIO N THAT UNLESS THE COMMISSIONER HAS FAILED FOR 15 DAYS AFTER T HE RECEIPT OF THE NOTICE OF COMPLETION INTIMATE HIS RE FUSAL TO GRANT THE SAID PERMISSION. THE PERSON SHALL NOT OCCUP Y THE BUILDING. THUS WHEN THE COMMISSIONER HAS NOT ACTED UPON FOR 15 DAYS ON THE APPLICATION OF THE ASSESSEE REGARDING COMPLETION OF THE PROJECT THEN THE PERSONS CAN OCCUPY SUCH BUILDING. IN THE ASSESSEES CASE THE ASSE SSEE HAS SUBMITTED THE APPLICATION WELL IN TIME AND THE COMMISSIONER HAS FAILED FOR MORE THAN 15 DAYS AFTER THE RECEIPT OF THE NOTICE OF COMPLETION TO INTIMATE THE ASSESSEE REGARDING REFUSAL TO GRANT THE PERMISSION. THE ASSESSEE OTHERWISE HAS ALSO SUBMITTED VARIOUS DOCUMENTS WHICH ESTABLISH THAT THE PROJECT WAS PHYSICALLY COMPLETE AS P ER 38 THE APPROVED BUILDING PLAN PRIOR TO THE STATUTORY PERI OD. IN THE CASE OF CIT VS. CHD DEVELOPERS LTD.; 362 ITR 177 (DEL) THE HON'BLE DELHI HIGH COURT HAS HELD AS UNDER :- SECTION 80-IB(10) OF THE INCOME-TAX ACT 1961 BEFORE SUBSTITUTION BY THE FINANCE (NO. 2)ACT 2004 ALLOWED A HUNDRED PER CENT DEDUCTION OF THE PROFITS IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE MARCH 31 2005 BY A LOCAL AUTHORITY. BY THE FINANCE (NO. 2) ACT 2004 WITH EFFECT FROM APRIL 1 2005 THE CONDITIONS FOR GRAN T OF DEDUCTION WERE THAT IN A CASE WHERE A HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY BETWEEN APRIL 1 2004 AND MARCH 31 2005 THE PROJECT SHOULD BE COMPLETED WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH IT IS APPROVED BY THE LOCAL AUTHORITY. THE ASSESSEE A REAL ESTATE 39 DEVELOPER OBTAINED APPROVAL FOR A HOUSING PROJECT ON MARCH 16 2005 FROM THE DEVELOPMENT AUTHORITY. IT COMPLETED THE PROJECT IN 2008 AND BY LETTER DATED NOVEMBER 5 2008 APPLIED TO THE COMPETENT AUTHORITY FOR THE ISSUE OF THE COMPLETION CERTIFICATE. FOR THE ASSESSMENT YEAR 2007-08 ITS CLAIM TO DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT 1961 WAS DENIED INTER ALIA ON THE GROUND THAT THE ASSESSEE HAD VIOLATED THE CONDITIONS STIPULATED UNDER SECTION 80IB(10) INASMUCH AS IT HAD NOT OBTAINED THE COMPLETION CERTIFICATE FOR THE PROJECT FROM THE COMPETENT AUTHORITY WITHIN FOUR YEARS AS STIPULATED IN EXPLANATION (II). THE COMMISSIONER (APPEALS) UPHELD THE ASSESSMENT ORDER. THE TRIBUNAL HELD THAT THE ASSESSEE WAS EXPECTED TO COMPLETE THE PROJECT IN ACCORDANCE WITH THE 40 APPROVED PLAN AT A PARTICULAR POINT OF TIME AND THE ASSESSEE WAS NOT EXPECTED TO DO OR TO FULFIL THE CONDITIONS WHICH WERE NOT IN EXISTENCE AT THE RELEVANT POINT OF TIME OR MADE COMPULSORY BY AMENDMENT IN THE ACT FROM THE FUTURE DATE. SINCE THE ASSESSEE WAS TO COMPLETE THE PROJECTION ON OR BEFORE MARCH 31 2009 AND A REQUEST WAS DULY MADE WITH THE COMPETENT AUTHORITY ON NOVEMBER 5 2008 MENTIONING THAT THE PROJECT HAD BEEN COMPLETED AND THE COMPLETION CERTIFICATE MAY BE ISSUED AND IF THE CERTIFICATE WAS NOT ISSUED BY THE COMPETENT AUTHORITY THE ASSESSEE SHOULD NOT BE PENALIZED THEREFORE UNLESS AND UNTIL SOME CONTRARY FACTS WERE BROUGHT ON RECORD EVIDENCING THAT THE ASSESSEE CONTRAVENED THE CONDITIONS CONTAINED IN THE APPROVAL GRANTED BY SUCH COMPETENT AUTHORITY. HOWEVER SINCE THE APPROVAL 41 WAS GRANTED TO THE ASSESSEE ON APRIL 1 2005 THE ASSESSEE WAS NOT EXPECTED TO FULFIL THE CONDITIONS WHICH WERE NOT ON THE STATUTE WHEN SUCH APPROVAL WAS GRANTED TO THE ASSESSEE. THE TRIBUNAL ACCEPTED THE ASSESSEES CLAIM TO DEDUCTION UNDER SECTION 80-IB(10). ON APPEAL : HELD DISMISSING THE APPEAL THAT THE APPROVAL FOR THE PROJECT WAS GIVEN BY THE DEVELOPMENT AUTHORITY ON MARCH 16 2005. CLEARLY THE APPROVAL RELATED TO THE PERIOD PRIOR TO 2005 I.E. BEFORE THE AMENDMENT WHICH INSISTED ON ISSUANCE OF THE COMPLETION CERTIFICATE BY THE END OF THE FOUR-YEAR PERIOD WAS BROUGHT INTO FORCE. THE APPLICATION OF SUCH STRINGENT CONDITIONS WHICH ARE LEFT TO AN INDEPENDENT BODY SUCH AS THE LOCAL AUTHORITY WHO IS TO ISSUE THE COMPLETION CERTIFICATE WOULD HAVE LED TO NOT ONLY HARDSHIP 42 BUT ABSURDITY. AS A CONSEQUENCE THE TRIBUNAL WAS NOT THEREFORE IN ERROR OF LAW WHILE HOLDING IN FAVOUR OF THE ASSESSEE. 14. IN THE CASE OF CIT VS. HAPPY HOMES ENTERPRISES (SUPRA) THE HON'BLE BOMBAY HIGH COURT HELD AS UNDER :- 34. AS CAN BE SEEN FROM THE HISTORY OF SECTION 80- IA(4F) AND THEN SECTION 80-IB(10) PRIOR TO 1ST APR IL 2005 AN ASSESSEE DEVELOPING AND BUILDING A HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY BEFORE 31ST MARCH 2005 WAS ENTITLED TO A DEDUCTION OF 100% OF THE PROFITS DERIVED FROM SUCH HOUSING PROJECT IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR PROVIDED (I) THE DEVELOPMENT AND CONSTRUCTION OF THE SAID PROJECT HAD COMMENCED ON OR AFTER 1ST OCTOBER 1998; (II) THE PROJECT WAS ON THE SIZE OF A PLOT OF LAND WHICH HAD A MINIMUM AREA OF ONE ACRE AND (III) THE 43 RESIDENTIAL UNIT HAD A MAXIMUM AREA OF 1 000 SQ.FT. WHERE SUCH RESIDENTIAL UNIT WAS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN 25 KMS FROM THE MUNICIPAL LIMITS OF THESE CITIES AND 1 500 SQ.FT. AT ANY OTHER PLACE. BEFORE 1ST APRIL 2005 THERE WAS NO CONDITION AND/OR RESTRICTION ON THE QUANTUM OF THE COMMERCIAL AREA THAT COULD BE INCLUDED IN A HOUSING PROJECT. THAT HAD TO BE DETERMINED ON THE BASIS OF THE RULES AND REGULATIONS OF THE LOCAL AUTHORITY APPROVING THE SAID HOUSING PROJECT. HOWEVER THE PROVISIONS OF SECTION 80-IB(10) WERE SUBSTANTIALLY AMENDED BY WAY OF FINANCE (NO.2) ACT 2004 W.E.F. 1ST APRIL 2005. AS CAN BE NOTED FROM THE AMENDED PROVISIONS THERE WERE SEVERAL CONDITIONS THAT WERE IMPOSED IN THE NEWLY SUBSTITUTED SECTION 80- IB(10) THAT WERE ABSENT IN THE SAID SECTION PRIOR T O 44 ITS AMENDMENT. ONE SUCH CONDITION INSERTED W.E.F. 1 ST APRIL 2005 WAS CLAUSE (D) THAT PUT A RESTRICTION ON THE QUANTUM OF COMMERCIAL AREA THAT COULD BE INCLUDED IN A HOUSING PROJECT IN ORDER TO ENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION AS SET OUT IN THE SAID SECTION. IT CANNOT BE SAID THAT THE LEGISLATURE INTENDED TO GIVE ANY RETROSPECTIVETY TO CL. (D) OF S. 80IB(10). THIS IS MORE SO BECAUSE IT IS CLEARLY A CONDITION THAT RELATES TO TIME WHEN THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. IT DECIDES SUBJEC T TO ITS OWN RULES AND REGULATIONS WHAT QUANTUM OF COMMERCIAL AREA IS TO BE INCLUDED IN THE SAID PROJECT. IT IS ON THIS BASIS THAT BUILDING PLANS AR E APPROVED BY THE LOCAL AUTHORITY AND CONSTRUCTION IS COMMENCED AND COMPLETED. IT IS VERY DIFFICULT I F NOT IMPOSSIBLE TO CHANGE THE BUILDING PLANS 45 AND/OR AFTER CONSTRUCTION MIDWAY. IN ORDER TO COMPLY WITH CL. (D) OF S. 80IB(10). IT WOULD BE HIGHLY UNFAIR TO REQUIRE AN ASSESSEE TO COMPLY WITH S. 80IB(10)(D) WHO HAS GOT HIS HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY BEFORE 31 ST MARCH 2005 AND HAS EITHER COMPLETED THE SAME BEFORE THE SAID DATE OR EVEN SHORTLY THEREAFTER MERELY BECAUSE THE ASSESSEE HAS OFFERED ITS PROFIS TO TAX IN ASST. YR. 2005-06 OR THEREAFTER. REQUIRIN G THE ASSESSEE TO COMPLY WITH THE CONDITION SET OUT IN CL. (D) OF SUB-S. (10) OF S. MERELY BECAUSE HE HAS OFFERED HIS PROITS TO TAX IN ASST. YR 2005-06 O R THEREAFTER EVEN THOUGH HIS HOUSING PROJECT WAS APPROVED BEFORE 31 ST MARFH 2005 WOULD BE REQUIRING THE ASSESSEE TO VIRTUALLY DO A HUMANLY IMPOSSIBLE TASK. THIS COULD NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE. IN FACT IT WOULD RUN 46 COUNTER TO THE VERY OBJECT FOR WHICH THESE PROVISIONS WERE INTRODUCED NAMELY TO TACKLE THE SHORTAGE OF HOUSING IN THE COUNTRY AND ENCOURAGE INVESTMENT THEREIN BY PRIVATE PLAYERS. IT IS THEREFORE CLEAR THAT CL (D) OF SUB-S. (10) OF S. 80 IB CANNOT HAVE ANY APPLICATION TO HOUSING PROJECTS THAT ARE APPROVED BEFORE 31 ST MARCH 2005. THE SAID CL (D) BEING INEXTRICABLY LINKED TO THE DATE O F APPROVAL OF THE HOUSING PROJECT IT WILL HAVE TO BE HELD THAT THE SAID CLAUSE OPERATES ONLY PROSPECTIVELY I.E. FOR HOUSING PROJECTS APPROVED AFTER IST APRIL 2005. THIS IS NOTWITHSTANDING TH E FACT THAT THE PROFITS WERE OFFERED TO TAX BY THE ASSESSEE FOR THE ASST. YR 2005-06 OR THEREAFTER CIT VS. BRAHMA ASSOCIATES (2011) 239 CTR (BOM) 30 : (2011) 51 DTR (BOM) 298 : 92011) 333 ITR 289 (BOM) AND CIT VS. G.R. DEVELOPERS (2013) 353 47 ITR 1 (KAR) RELIED ON; MANAN CORPORATION VS. ASSTT. CIT (2013) 255 CTR (GUJ) 415 : (2012) 78 DTR (GUJ) 205 : (2013) 356 ITR 44 (GUJ) CONCURRED WITH :RELIANCE JUTE & INDUSTRIES LTD. VS. CIT (1979) 13 CTR (SC) 186 : (1979) 120 ITR 921 (SC) AND SECURITIES & EXCHANGE BOARD OF INDIA VS. AJAY AGARWAL AIR 2010 SC 3466 DISTINGUISHED. THERE IS YET ANOTHER REASON FOR COMING TO THE AFORESAID CONCLUSION. TAKE A SCENARIO WHERE AN ASSESSEE FOLLOWING THE PROJECT COMPLETION METHOD OF ACCOUNTING HAS COMPLETED THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY COMPLYING WITH ALL THE CONDITIONS AS SET OUT IN SECTION 80-IB(10) AS I T STOOD PRIOR TO 1ST APRIL 2005. IF WE WERE TO ACCEP T THE ARGUMENT OF THE REVENUE THEN IN THAT EVENT DESPITE HAVING COMPLETED THE ENTIRE CONSTRUCTION PRIOR TO 1ST APRIL 2005 AND COMPLYING WITH ALL THE 48 CONDITIONS OF SECTION 80-IB(10) AS IT STOOD THEN THE ASSESSEE WOULD BE DISENTITLED TO THE ENTIRE DEDUCTION CLAIMED IN RESPECT OF SUCH HOUSING PROJECT MERELY BECAUSE HE OFFERED HIS PROFITS TO TA X IN THE A.Y. 2005-06. IN CONTRAST IF THE SAME ASSESSEE HAD FOLLOWED THE WORK-IN-PROGRESS METHOD OF ACCOUNTING HE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION UNDER SECTION 80-IB(10) UPTO THE A.Y. 2004-05 AND DENIED THE SAME FROM A.Y. 2005-06 AND THEREAFTER. IT COULD NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE THAT THE DEDUCTION UNDER SECTION 80-IB(10) AVAILABLE TO A PARTICULAR ASSESSEE WOULD BE DETERMINED ON THE BASIS OF THE ACCOUNTING METHOD FOLLOWED. THIS WOULD LEAD TO STARTLING RESULTS. THEREFORE THERE IS NO HESITATION IN HOLDING THAT SECTION 80IB(10B) IS PROSPECTIVE IN NATURE AND CAN HAVE NO APPLICATION 49 TO A HOUSING PROJECT THAT IS APPROVED BEFORE 31ST MARCH 2005. AS THE DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 80-IB(10) IS INSEPARABLY LINKED WITH THE DATE OF APPROVAL OF THE HOUSING PROJECT IT WOULD MAKE NO DIFFERENCE IF THE CONSTRUCTION OF THE SAID PROJECT WAS COMPLETED ON OR AFTER 1ST APRIL 2005 OR THAT THE PROFITS WERE OFFERED TO TAX AFTER 1ST APRIL 2005 I.E. IN A.Y. 2005-06 OR THEREAFTER. THE TRIBUNAL WAS RIGHT IN ALLOWING THE ASSESSEE COMPANY A DEDUCTION U/S 80IB(10) FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE COMMERCIAL AREA BUILT BY THE ASSESSEE EXCEEDED THE LIMIT SPECIFIED IN CLAUSE (D) OF SECTION 80IB(10). 15. IN VIEW OF THE ABOVE DECISIONS OF THE HON'BLE HI GH COURT AND ALSO THE FACTUAL MATRIX OF THE ASSESSEES CASE WE ALLOW THESE APPEALS OF THE ASSESSEE. 50 16. IN THE RESULT ITA NOS. 341 & 342/IND/2012 STAND ALLOWED. ITA NOS. 735 & 736/IND/2012 17. BOTH THE APPEALS - ITA NO. 735/IND/2012 AND ITA NO. 736/IND/2012 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY EMANATE FROM THE ORDER DATED 31.3.2014 OF THE LEARNED CIT(A) BILASPUR CAMP AT BHOP AL. IN BOTH THESE APPEALS THE ISSUES ARE SAME WHICH ARE INVOLVED IN ITA NOS. 341 & 342/IND/2012 FOR THE A.Y S. 2005-06 & 2006-07 (SUPRA). IN THESE APPEALS WE HAVE DECIDED THESE ISSUES AS ABOVE. SINCE ON THE SAME FACTS AND CIRCUMSTANCES WE HAVE DECIDED THE SIMILAR ISSUE O N THE SAME GROUNDS OF APPEAL IN FAVOUR OF THE ASSESSEE IN ITA NOS. 341 & 342/IND/2012 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 WE ALLOW THESE APPEALS OF THE ASSESSEE ALSO BY FOLLOWING THE REASONING GIVEN THEREIN ABOVE. 51 ITA NOS. 723 & 724/IND/2014 18. THESE APPEALS FILED BY THE REVENUE EMANATE FROM THE ORDERS DATED 31.3.2014 OF THE LEARNED CIT(A) BILASPUR CAMP AT BHOPAL. 19. IN THESE APPEAL THE FOLLOWING COMMON GROUND HAS BEEN TAKEN BY THE REVENUE :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.37 13 525/- (A.Y.2002-0 3) AND RS.1 32 52 149/- (A.Y. 2003-04) MADE ON ACCOUNT OF DISALLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT 1961. 20. THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- 52 DECISION THE SUBMISSION OF LD. AR WAS FORWARDED TO THE A.O. FOR VERIFICATION AND REPORT U/S 250(4) ON 24.09.2011. THE A.O. WAS REMINDED MANY A TIMES FOR THE REQUIRED REPORT BUT IT WAS NOT RECEIVED TILL THE DATE OF ORDER. IN THE MEAN TIME THE CASE HAS BEEN TRANSFERRED TO THE DCIT(CENTRAL CIRCLE) BHOPAL AND THEREFORE AFTER DISCUSSION WITH THE A.O. ON THE ISSUE INVOLVED THE GROUNDS OF APPEAL ARE BEING DISPOSED OFF AS PER THE LINES INDICATED BELOW. (I) INITIALLY SECTION 80 IA(4F) R.W.S. 80IA(5)(VI) ALLOWED 100% DEDUCTION ON PROFITS AND GAINS DERIVED BY AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY SUBJECT TO CONDITIONS SET OUT THEREIN. THE OBJECT OF GRANTING 53 100% DEDUCTION WAS TO PROMOTE HOUSE BUILDING ACTIVITY SO AS TO PROVIDE AFFORDABLE DWELLING UNITS TO A COMMON MAN. BY FINANCE ACT 1999 THE ENTIRE SECTION 80 IA WAS SUBSTITUTED BY NEWLY INTRODUCED SECTION 80IA AND 80IB WHICH WERE ON THE LINES OF EXISTING SECTION 80IA BUT WITH CERTAIN MODIFICATION. THE RELEVANT PROVISIONS OF LAW AS THEY STOOD READ AS UNDER:- (10) THE AMOUNT OF PROFIT IN CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT APPROVED BEFORE 31-3-05 BY A LOCAL AUTHORITY SHALL BE 100% OF THE PROFIT DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY AY FROM SUCH HOUSING PROJECT IF (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1-10-98 54 (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF 1 ACRE AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF 1 000 SQ. FT. WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN 25 K.M. FROM THE MUNICIPAL LIMIT OF THESE CITIES AND 1 500 SQ. FT. AT ANY OTHER PLACE. THERE IS FURTHER AMENDMENT IN THE PROVISIONS OF THE SECTION 80IB & FOLLOWING SUB- SECTION (10) WAS SUBSTITUTED FOR EXISTING SUB- SECTION 10 OF SECTION 80IB BY THE FINANCE (2) ACT 2004 W.E.F. 01-04-2005: (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31-3-08 BY A LOCAL AUTHORITY SHALL BE 100% OF THE PROFITS 55 DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY AY FROM SUCH HOUSING PROJECT IF - (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1-10-98 AND COMPLETES SUCH CONSTRUCTION- (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1-4-04 ON OR BEFORE THE 31-3-08; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN OR IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1-4-04 BUT NOT LATER THAN THE 31-3- 05 WITHIN 4 YEARS (I.E. UP TO 31-3-09) FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. 56 (III) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1-4-05 WITHIN 5 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE 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 WHICH THE COMPLETION CERTIFICATE IN RESPECT OF 57 SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF 1 ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CLAUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT- UP AREA OF 1 000 SQ FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR 58 MUMBAI OR WITHIN 25 KMS FROM THE MUNICIPAL LIMITS OF THESE CITIES AND 1 500 SQ FEET AT ANY OTHER PLACE; (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED 5% OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR 2 000 SQ FEET WHICHEVER IS HIGHER. THE PERCENTAGE OF COMMERCIAL ESTABLISHMENT AND SHOPS SHOULD NOT EXCEED 3% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 5000 SQ.FT WHICHEVER IS HIGHER AS PER THE AMENDMENT MADE BY THE FINANCE ACT 2010 W.E.F. 01-04-2010. (II) THUS IN THE PRE-AMENDED PROVISIONS OF SECTION 80IB(10) THERE WAS NO CONDITION FOR 59 OBTAINING COMPLETION CERTIFICATE OF THE HOUSING PROJECT AND LIMIT ON BUILT UP AREA OF THE SHOPS AND THE OTHER COMMERCIAL ESTABLISHMENT ON TOTAL BUILT UP AREA OF THE HOUSING PROJECT FOR CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND THE APPELLANT COMMENCED DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECTS BEFORE 01-04-2004 AFTER GETTING THE APPROVAL FROM MUNICIPAL CORPORATION BHOPAL. EACH PROJECT WAS ON SIZE OF PLOT OF LAND WITH MINIMUM AREA OF ONE ACRE. THUS THE APPELLANT HAS COMPLIED THE FIRST TWO CONDITIONS REQUIRED FOR CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT. REGARDING THE THIRD CONDITION IT CAME TO THE KNOWLEDGE OF THE AO IN COURSE OF ASSESSMENT PROCEEDINGS OF THE SUBSEQUENT YEAR THAT SOME UNITS WERE CONSTRUCTED EXCEEDING BUILT-UP AREA 60 OF 1500 SQ.FT. AND OBVIOUSLY THIS IS IN CONTRAVENTION TO THE PROVISIONS OF THE SECTION EXISTING IN THE YEAR UNDER REFERENCE. FOR THE FAILURE OF THE APPELLANT TO FURNISH FULLY AND TRULY ALL MATERIAL FACTS AND RELYING ON THE DECISION OF HONBLE JURISDICTIONAL TRIBUNAL IN THE CASE OF FORTUNE BUILDERS WITH PAN AAAFF9074H FOR ASSESSMENT YEAR 2004-05 IN ITA NO. 511/IND/2005 DATED 21-11-2011 I FIND NO INFIRMITY IN JURISDICTION OF THE AO OF ISSUING NOTICE U/S 148 OF THE ACT TO INITIATE PROCEEDINGS U/S 147 OF THE ACT. (III) REGARDING THE QUESTION OF RETROSPECTIVE EFFECT OF THE AMENDMENT IT IS ESTABLISHED LAW THAT SUBSTANTIVE LAW UNLESS MADE SPECIFICALLY RETROSPECTIVE HAS ONLY TO BE UNDERSTOOD AS HAVING PROSPECTIVE OPERATION FROM THE DATE ON 61 WHICH IT BECOMES LAW OR ANY OTHER DATE SPECIFIED IN THE STATUTE. THE HONBLE APEX COURT IN THE CASE OF STATE OF KERELA VS. LEX GEORGE REPORTED IN 271 ITR 290; GOVIND GANGA SARAN V. CST 155 ITR 144; GOOD YEAR INDIA LTD V. STATE 188 ITR 402; KESHAVE RAM IND. & COTTON MILLS VS. CWT 59 ITR 767; RELIANCE & JUTE IND. LTD. VS. CIT 120 ITR 921; S.A.L. NARAYAN RAO VS. ISWARLAL BHAGWANDAS 57 ITR 149 ETC. HAS HELD THAT RETROSPECTIVE EFFECT TO AMENDMENT/SUBSTITUTION IS NOT PERMISSIBLE UNLESS SPECIFICALLY PROVIDED. THE HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT V. BRAHMA ASSOCIATES REPORTED IN 333 ITR 289 HAS HELD THAT CLAUSE (D) INSERTED IN SECTION 80IB(10) W.E.F. 01-04-2005 WHICH SEEKS TO DENY DEDUCTION UNDER SECTION 80IB(10) TO PROJECT 62 HAVING COMMERCIAL USER BEYOND LIMIT PRESCRIBED UNDER CLAUSE (D) EVEN THROUGH THE COMMERCIAL USER IS APPROVED BY THE LOCAL AUTHORITY IS PROSPECTIVE AND THEREFORE CANNOT BE APPLIED FOR PERIOD PRIOR TO 01-04-2005. THE HONBLE HIGH COURT GUJARAT IN THE CASE OF MANAN CORPORATION VS. ACIT REPORTED IN 214 TAXMAN 373 AND HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF ANRIYA PROJECT MANAGEMENT SERVICES PVT. LTD. REPORTED IN 209 TAXMAN 1 HAVE ALSO HELD THE SIMILAR VIEW THAT THE AMENDMENT INSERTED BY THE FINANCE (NO. 2) ACT 2004 BEING A SUBSTANTIVE AMENDMENT AND NOT A CLARIFICATORY AMENDMENT THE AMENDMENT OF THIS NATURE CANNOT HAVE RETROSPECTIVE EFFECT. (IV) IN VIEW OF THE AMENDED PROVISIONS W.E.F. 01- 04-2005 AN ASSESSEE IS REQUIRED TO FURNISH 63 COMPLETION CERTIFICATE FOR GRANT OF DEDUCTION U/S 80IB(10) FROM ASSTT. YR. 2005-06 AND ONWARD BUT NOT WITH RESPECT TO THE ASSESSMENT YEAR FALLING PRIOR TO IT. IN THIS REGARD I DERIVE SUPPO RT FROM THE DECISION OF HONBLE JURISDICTIONAL TRIBUNAL IN THE CASE OF PRIYADARSHANI CONSTRUCTION ITA NO. 509 & 510/IND/2010 DATED 30-11-2011 AND ORDER IN THE CASE OF SURBHI HOMES PVT. LTD. VS. ACIT FOR ASSESSMENT YEAR 2004-05 ASSTT. YR. 2005-06 ASSTT. YR. 2006-07 AND ASSTT. YR. 2007-08 ITA NO. 04/IND/2011 AND 139/IND/2011 DATED 19-03- 2012. IN THE CASE OF SURABHI HOMES PVT. LTD. VS. ACIT THE ASSESSEE HAS UNDERTAKEN DEVELOPMENT AND BUILDING OF HOUSING PROJECTS FOR WHICH DEDUCTION WAS CLAIMED U/S 80IB(10). 64 THE AO DENIED CLAIM OF DEDUCTION ON THE PLEA THAT THE ASSESSEE HAS NOT OBTAINED COMPLETION CERTIFICATE THE CIT(APPEALS) CONFIRMED THE DISALLOWANCE OF DEDUCTION FOR FAILURE TO FULFILL THE CONDITIONS LAID DOWN IN PLAIN AND CLEAR LANGUAGE OF CLAUSE (A)(I) READ WITH EXPLANATION (II) OF SECTION 80IB(10). THE ASSESSEE PLEADED BEFORE THE HONBLE TRIBUNAL INDORE BENCH INDORE THAT IT GOT ITS APPROVAL FOR BUILDING PLAN ON 27-05-2003 AND THE PROJECT WAS COMPLETED BY 31-03-2008 FOR WHICH APPLICATION FOR GRANT OF COMPLETION CERTIFICATE WAS GIVEN ON 15-01-2008 AND REMINDERS FOR THE SAME WERE GIVEN TO MUNICIPAL CORPORATION ON 21-04-2008 AND 07- 07-2008. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE COMPLETION CERTIFICATE HAS NOT BEEN GRANTED BY MUNICIPAL AUTHORITIES TILL DATE. 65 HE PLACED RELIANCE IN SECTION 301 OF M.P. & CG MUNICIPAL CORPORATION ACT WHEREIN IT HAS BEEN PROVIDED THAT IF ANY PERSON APPLIES FOR OBTAINING COMPLETION CERTIFICATE THE MC SHALL GRANT COMPLETION CERTIFICATE WITHIN 15 DAYS AND IF IT IS NOT SO GRANTED IT SHALL BE DEEMED THAT THE COMPLETION CERTIFICATE IS GRANTED. HE FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF C.I. BUILDERS PVT. LTD. VS. ACIT 1(2) BHOPAL IN ITA NOS. 299 TO 305/IND/2010 FOR ASSTT. YR. 2001-02 TO 2007-08. THE HONBLE TRIBUNAL DISCUSSED THE ISSUE AT LENGTH AND HELD THAT BY APPLYING THE RELEVANT PROVISIONS OF THE LAW WITH RESPECT TO THE DATE OF APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY AS ON 04-12-2002 IT CAN SAFELY BE CONCLUDED THAT THE PROVISIONS 66 APPLICABLE FOR THE ASSTT. YR. 2004-05 DOES NOT REQUIRE ANY COMPLETION CERTIFICATE OF THE LOCAL AUTHORITY INSOFAR AS AMENDMENT WAS BROUGHT W.E.F. 1-4-05 I.E. ASSTT. YR. 2005-06. ACCORDINGLY THE AO WAS DIRECTED TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) FOR THE ASSTT. YR. 2004-05. IN RESPECT OF THE ASSTT. YR. 2005-06 SINCE THE AMENDED PROVISIONS CAME INTO FORCE THE ASSESSEE WAS REQUIRED TO OBTAIN CERTIFICATE FROM THE LOCAL AUTHORITY FOR COMPLETION OF THE PROJECT AS A PRE-CONDITION FOR DEDUCTION U/S 80IB(10). AS THE ASSESSEE HAS NOT OBTAINED SUCH CERTIFICATE THE ACTION OF THE AO DECLINING THE CLAIM OF DEDUCTION U/S 80IB(10) TO THE ASSESSEE FOR THE ASSTT. YR. 05-06 WAS CONFIRMED. SIMILARLY SINCE THE COMPLETION CERTIFICATE FOR 67 ASSTT. YR. 2006-07 AND ASSTT. YR. 2007-08 WAS NOT ISSUED TILL DATE THE HONBLE JURISDICTIONAL TRIBUNAL HELD THAT THERE IS NO REASON TO RESTORE THE MATTER BACK TO THE FILE OF AO AND THE ASSESSEE IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT AND THE LOWER AUTHORITIES WERE JUSTIFIED IN DECLINING THE CLAIM OF DEDUCTION U/S 80IB(10). IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE WERE DISMISSED. IN THE PRESENT CASE IN HAND THE HOUSING PROJECT SAGAR KUNJ WAS DEVELOPED ON A LAND AREA OF 1.22 ACRE AFTER GETTING THE APPROVAL OF THE PROJECTS FROM BHOPAL MUNICIPAL CORPORATION ON 09.08.1999. THE PROJECT WAS COMPLETED IN THE F.Y. 2001-02 AND ALL THE UNITS WERE SOLD BY THAT YEAR. THE CONDITIONS LAID DOWN IN THE SECTION APPLICABLE FOR THE ASSTT. YR 2002-03 WAS 68 FULFILLED AND CLAIM OF DEDUCTION MADE FOR THE IST TIME IN THAT YEAR ALLOWED BY THE A.O. IN HIS ORDER U/S 143(3) OF THE ACT. THE PROJECT SAGAR GARDEN WAS DEVELOPED ON A LAND AREA OF 1.22 ACRES AFTER GETTING THE APPROVAL FROM BHOPAL MUNICIPAL CORPORATION ON 28.03.2001. IT WAS COMPLETED IN THE F.Y. 2003-04. THE UNITS WERE SOLD IN F.Y. 2001-02 F.Y. 2002-03 F.Y. 2003- 04 AND F.Y. 2005-06. THE DEDUCTION ON COMPLETED UNITS WAS CLAIMED FOR THE IST TIME IN THE RELEVANT ASSESSMENT YEAR WHICH WAS ACCEPTED BY THE A.O. IN HIS ORDER U/S 143(3) OF THE ACT. THE PROJECT SAGAR ESTATE WAS DEVELOPED ON LAND AREA OF 7.03 ACRES AFTER GETTING APPROVAL FROM BHOPAL MUNICIPAL CORPORATION ON 05.07.2000. UNITS WERE SOLD IN THE F.Y. 2001-02 ALSO AND THE PROFIT CLAMED AAS 69 DEDUCTIBLE U/S 80IB(1) WAS ACCEPTED BY THE A.O. IN HIS ORDER U/S 143(3) OF THE ACT. THE A.O. HAS DENIED DEDUCTION U/S 80IB(10) FOR THE YEAR UNDER REFERENCE FOR THE FAILURE OF THE APPELLANT TO PRODUCE THE COMPLETION CERTIFICATE FROM MUNICIPAL CORPORATION BHOPAL. BUT IN VIEW OF THE STATUTORY PROVISIONS AND THE LEGAL PROPOSITIONS INCLUDING THE DECISIONS OF JURISDICTIONAL TRIBUNAL INDORE BENCH INDORE IN THE CASES DISCUSSED ABOVE I FIND THAT SINCE THE IMPUGNED ASSESSMENT YEAR IS GOVERNED BY PRE- AMENDED PROVISIONS OF SECTION 80IB(10) WHERE THERE WAS NO STIPULATION FOR FURNISHING COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY DEDUCTION CANNOT BE DENIED FOR WANT OF COMPLETION CERTIFICATE. IN THIS CONTEXT IT IS PERTINENT TO MENTION HERE THAT THE APPELLANT 70 CLAIMED DEDUCTION UNDER THE AFORESAID SECTION EVERY YEAR AND ON THE BASIS OF PARTIAL COMPLETION OF PROJECTS AND SOME PROJECTS WERE COMPLETED AND FULLY SOLD BY THE END OF THE IMPUGNED ASSESSMENT YEAR. THERE IS NO MATERIAL ON RECORD TO SUGGEST THE SPECIFIC DATE OF COMPLETION OF THE PROJECTS ON WHICH INCOME WAS OFFERED ON THE BASIS OF PARTIAL COMPLETION. IN THE GIVEN CIRCUMSTANCES OF THE CASE THE A.O. IS AT LIBERTY TO INVOKE INSTRUCTION NO. 4 OF 2009 DATED 30.06.2009 OF CBDT IF IT IS DETECTED AT LATER DATE THAT COMPLETION CERTIFICATES OF THE PROJECTS WERE NOT AVAILABLE OR PROVISIONS OF SECTION 80IB(10) WERE NOT COMPLIED FOR EARLIER YEARS. (V) THE AO COMPLETED THE ASSESSMENT FOR THE YEAR UNDER REFERENCE U/S 143(3) ON 28-02-2005 71 AND THE DETAILS FURNISHED BY THE APPELLANT FIRM REGARDING PROFITS EARNED FROM THE TWO PROJECTS WERE EXAMINED AND AFTER BEING SATISFIED THAT THE APPELLANT FIRM FULFILLS ALL CONDITIONS FOR AVAILING DEDUCTION U/S 88IB(10) THE SAME WAS ALLOWED. THE DEDUCTION CANNOT BE WITHDRAWN WITHOUT ANY POSITIVE FINDINGS BROUGHT ON TO THE RECORD THAT THE APPELLANT IS A MERE CONTRACTOR AND IT HAS NOT INVESTED FUNDS IN DEVELOPMENT OF THE HOUSING PROJECTS OR IT HAS NOT TAKEN ANY RISK OF CONSTRUCTING THE PROJECTS AS HELD IN THE CASE OF AAYOJAN DEVELOPERS VS. ITO REPORTED IN 335 ITR 234; CIT VS. SANGHVI AND DOSHI ENTERPRISES REPORTED IN 255 CTR 156; SITA WORLD TRAVEL (INDIA) LTD. V. CIT 140 TAXMAN 381 (DELHI) AND CIT V. KELVINATOR OF INDIA LTD. (2010) 34 DTR (SC) 49. 72 (VI) RELATING TO ADMISSIBILITY OF DEDUCTION U/S 80IB(10) FOR VIOLATION OF CRITERIA OF BUILT-UP AREA OF RESIDENTIAL UNITS THERE ARE DIFFERENT OPINION HELD BY HONBLE TRIBUNALS LIKE THE HONBLE ITAT BENCH-A CHENNAI IN THE CASE OF ACIT CENTRAL CIRCLE VS. CHITRA CONSTRUCTION PVT. LTD. CHENNAI IN ITA NO. 343/NDS/07 FOR ASSTT. YR. 2003-04 AND ITA NO. 1291/NDS/07 FOR ASSTT. YR. 2004- 05 DATED 28-03-2008; HONBLE ITAT BENCH-B CHENNAI IN THE CASE OF ACIT VS. VISWAS PROMOTERS PVT. LTD. MADURAI IN ITA NO. 1912 (MDS) 2007 FOR ASSTT. YR. 2004-05 IN ORDER DATED 13-10-2008 HAVE HELD THAT WHEN THE MANDATE OF SECTION 80IB(10) IS THAT THE EXEMPTION IN THIS REGARD IS TO BE PROVIDED TO THE PROJECT IN WHICH THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF 1500 SQ.FT. THEN IF 73 THERE IS VIOLATION OF THE CONDITION IN ANY OF THE RESIDENTIAL UNITS THERE IS A CLEAR VIOLATION OF TH E PROVISIONS OF THE ACT. TO CAMOUFLAGE THE VIOLATION OF THE PROVISIONS OF THE ACT THE PROJECT CANNOT BE BIFURCATED INTO BLOCKS AND FLOORS ETC. ON THE OTHER HAND THE DECISION OF THE HONBLE TRIBUNAL CHENNAI BENCH CHENNAI IN THE ABOVE CASE WAS REVERSED BY THE HONBLE HIGH COURT OF MADRAS REPORTED IN 214 TAXMAN 524 255 CTR 149 AND THE HONBLE HIGH COURT HAS HELD THAT SIMPLY BECAUSE THE APPELLANT HAS NOT FULFILLED THE CRITERIA IN SOME RESIDENTIAL UNITS DEDUCTION CANNOT BE DENIED FOR THE ENTIRE PROJECT. IN OTHER WORDS DEDUCTION IS NOT AVAILABLE ON UNITS WHERE BUILT UP AREA EXCEED 1500 SQ.FT. EACH. SIMILAR VIEW OF ADMISSIBILITY OF DEDUCTION UNDER THE AFORESAID SECTION ON PRO- 74 RATA BASIS HAS BEEN HELD BY THE HONBLE HIGH COURTS IN THE CASE OF SANGHVI & DOSHI ENTERPRISES 214 TAXMAN 463 255 CTR 156 (MAD) VANDANA PROPERTIES 206 TAXMAN 584 (MUM) BANGAL AHUJA HOUSING DEVELOPMENT IN ITA NO.1595/KOL/2005 DATED 24-03-2006 AFFIRMED BY HONBLE HIGH COURT OF KOLKOTTA ETC. THE LD. AR RELIED ON ORDER OF THE HONBLE ITAT IN ITA NO. 242/IND/08DATED 11.05.2010 FOR A.Y. 2004-05 AND ITA NO. 243/IND/08 FOR A.Y. 2004-05 IN THE CASE OF M/S. AGRAWAL BUILDERS BHOPAL WHEREIN THE DISPUTE RELATING TO BUILT-UP AREA OF FEW RESIDENTIAL UNITS EXCEEDING 1500 SQ.FT. WAS DECIDED IN FAVOUR OF THE APPELLANT. IT WAS ALSO STATED BY HIM THAT SINCE THERE WAS NO CRITERIA OF BUILT UP AREA OF 75 RESIDENTIAL UNITS IN THE PROVISIONS OF SECTION APPLICABLE PRIOR TO 01.04.2005 AND SINCE THE ALLEGED RESIDENTIAL UNITS OF THE APPELLANT FIRM VIOLATING THE BUILT UP NORMS WERE SOLD IN THE SUBSEQUENT YEAR EVEN DISALLOWANCE OF THE DEDUCTION ON PROCEEDINGS RATA BASIS CANNOT BE AFFECTED FROM THE SALE OF THE YEAR UNDER REFERENCE. AFTER CONSIDERING THE SUBMISSION OF THE LD. AR FROM THE MATERIAL FACTS AVAILABLE ON RECORD I FIND THAT THE HOUSE NO. A-39 SAGAR ROYAL GARDEN AND HOUSE NO. A-169 SAGAR ESTATE CONSTRUCTED OVER BUILT UP AREA EXCEEDING 1500 WERE SOLD NOT IN THE YEAR UNDER REFERENCE BUT IN A.Y. 2004-05 AND HENCE EVEN THE THEORY OF PROCEEDINGS RATA DISALLOWANCE OF DEDUCTION 76 CANNOT BE EFFECTED OUT OF SALE OF THE YEAR UNDER REFERENCE. IN VIEW OF THE ABOVE AND RELYING ON THE ABOVE LEGAL PROPOSITIONS INCLUDING DECISION OF THE TRIBUNAL IN THE CASE OF AGRAWAL BUILDERS I FIND THAT DEDUCTION UNDER SECTION 80IB(10) CANNOT BE DENIED FOR VIOLATION OF BUILT UP AREA OF THE ABOVE TWO HOUSES SOLD ON SUBSEQUENT YEAR. 20. LD. DR RELIED UPON THE DECISIONS OF THE ITAT IN THE CASES OF SKY BUILDERS & DEVELOPERS VS. ITO; 14 TAXMANN.COM 78 (INDORE); VEENA DEVELOPERS; (2015) 277 CTR 297 AND OF THE HON'BLE M.P. HIGH COURT IN THE CAS E OF NAVRATAN TECHBUILD PRIVATE LTD.; AIT-2014-91-HC. 21. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(A). 77 22. WE WOULD LIKE TO MENTION HERE THAT IN THIS CASE T HE LEARNED CIT(A) IN THE ASSESSMENT YEARS 2005-06 AND 2006 - 07 HAS ACCEPTED THE ASSESSEE AS A BUILDER AND DEVELOPER AND THE DEPARTMENT DID NOT PREFER ANY APPEAL TO THE ITAT . FURTHER ON THE ISSUE OF REGISTRY OF THE CONSTRUCTE D PORTION THIS ISSUE HAS ALREADY BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS. FURTHER IN THE ASSESSMENT YEAR 2004-05 WHERE TWO UNITS WERE FOUND TO BE IN EXCESS OF THE AR EA AS MENTIONED IN THE AMENDED ACT W.E.F. 1.4.2005 IT IS HELD BY HON'BLE ITAT COORDINATE BENCH THAT THE UNITS WERE WEL L WITHIN THE LIMITS. MOREOVER WE HAVE ALREADY DECIDED T HIS ISSUE THAT THE NEWLY INSERTED PROVISION FOR DEFINITI ON OF BUILT UP AREA IN SECTION 80IB(14)(A) WAS PROSPECTIV E AND NOT RETROSPECTIVE. WITH REGARD TO THE COMPLETION CE RTIFICATE WE HAVE ALREADY DECIDED THIS ISSUE WHILE DECIDING ITA NOS. 341 AND 342/IND/2012 (SUPRA). IN THESE YEARS THE CLAIM OF 78 SECTION 80IB(10) OF THE ACT OF THE ASSESSEE WAS FOR S AME PROJECTS. THEREFORE WE FIND NO MERIT IN THE APPEALS OF THE REVENUE AND DISMISS THE SAME. PRONOUNCED IN OPEN COURT ON 30 TH JULY 2015 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 30 TH JULY 2015 DN/-