Income tax - Whether a prospective nature of amendment in statute can make any difference in assessment of year which is prior to date of amendment - NO: HC
By TIOL News Service
MUMBAI, MAY 11, 2015: THE issue before the Bench is - Whether a prospective nature of amendment in statute can make any difference in the assessment of the year which is prior to the date of amendment. NO is the answer.
Facts of the case
The assessee is a developer who had obtained approval of a project by Pune Municipal Corporation for constructing residential and commercial premises consisting of 10 buildings. AO held that in respect of AY 2003-04, assessee declared total sales in relation to its project "Citadel" at Rs.13,97,83,157/- on which net profit was shown at Rs.4,88,52,973/- and after adjusting the brought forward losses of Rs.48,15,337/- the gross total income was computed at Rs.4,40,37,636/- which was claimed as exempt u/s 80IB(10). It was observed that the assessee had constructed commercial premises with total area of 13,2480.06 sq. ft. which was 6.6% of the total area and therefore AO held that the assessee having constructed commercial area in excess of 2000 sq. ft., had violated clause (d) of section 80IB(10). On appeal CIT held that amended provisions with effect from 1.4.2005 cannot have retrospective effect so as to be applicable to AY 2003- 04 but the implication of inclusion of definition of built-up area in section 80IB(10) being declaratory and curative in nature it was held to be applicable to the assessment year under consideration. On further appeal, Tribunal held that the assessee had commenced development and construction of the housing project in terms of the approval granted by the Corporation which was admittedly granted on 16th July, 2002, well before the 1st April, 2005. With reference to the stand that Comerica area constructed was more than permissible area of 2000 sq. ft. or at 5% of total built up area whichever was less, reliance placed by the revenue on clause (d) of section 80IB(10) was misplaced in view of the judgment of HC in case of Brahma Associates which laid down that the provision was prospective and not retrospective in nature and therefore, cannot be applied retrospectively. Tribunal also held that the contention that only a pure housing project was eligible for deduction was also misconceived in view of the judgment of Brahma Associates. The Tribunal held that the project in order qualify for benefit of section 80IB(10) could include residential and commercial premises as approved by the Corporation. Furthermore, there were objections raised by the revenue that built up area of some of the units exceed 1500 sq. ft. and therefore provision of section 80IB(10) would not apply since the said section was inserted with effect from 1st April, 2005. The tribunal once again decided issue in favour of the assessee and directed AO to allow deduction u/s 80IB(10).
Held that,
++ we find that issues in the present case and five questions proposed as essential questions revolve around eligibility to claim benefit of section 80IB(10). Since the project is admittedly approved prior to 1.4.2005 the assessee is covered in the case of the Commissioner of Income Tax Vs. M/s. Happy Home Enterprises decided in two appeal being ITA No.201/2012 alongwith ITA No.308 of 2012. In the case of Happy Home Enterprises this Court in a judgment to which one of us (Shri S.C. Dharmadhikari, J.) was a party, after considering the submissions of revenue on the issue of applicability of the judgment of Brahma Associates has held that the clause (d) of section 80IB(10) is prospective in nature and would not apply to the housing projects commenced prior to 1.4.2005. We are of the view that Mr.Gupta's submission apropos assessment year 2005-06 will make no difference since the provisions of section 80IB(14)(a) will not affect the present project having been sanctioned prior to 1.4.2005. In the present case it is seen that the approval of the project was granted on 16th July, 2002 well before introduction of the provisions of clause (d) which came into effect from 1.4.2005. In the circumstances and in the facts of the present appeals these issues are covered by the judgment in M/s. Happy Home Enterprises and M/s. Kanakia Spaces Pvt. Ltd., we do not find that any of the questions proposed give rise to any substantial questions of law. The appeals are accordingly, dismissed. There will be no order as to costs.
(See 2015-TIOL-1204-HC-MUM-IT)
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