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IN THE ITAT MUMBAI BENCH ‘A’
Ms. Asha Kashiprasad Ringshia Pandurang Sadan
IT Appeal No. 2901 (Mum.) of 2011
[Assessment year 2007-08]
Date of Pronouncement – September 12, 2012
Amit Shukla, Judicial Member – The present appeal preferred by the Revenue, is directed against the impugned order dated 31st January 2011, passed by the learned Commissioner (Appeals)-XXXII, Mumbai, for assessment year 2007-08, on the following grounds:-
“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing deduction under section 80IB(10) of Rs. 1,47,11,573, without appreciating the fact that the project is not eligible for deduction under section 80IB(10).
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in appreciating that the date of approval of SRA scheme project is 03.07.2003 and is not covered by the notification no.02/2011 – Income Tax (F.no.178/37/2006-ITA-11) dt. 05.01.2011, issued to clarify the notification dt. 03.02.2010.
2. Briefly stated the facts of the case are that, the assessee is engaged in the business as builder and developer through a proprietorship concern namely M/s. K.R. Builders. During the year under consideration, the assessee has declared income under the head “Income from Business” to the tune of Rs. 1,54,59,252, out of which a sum of Rs. 1,47,11,5733, was claimed as deduction under section 80IB(10) of the Act.
3. During the course of assessment proceedings, the Assessing Officer noticed that the size of plot of land on which the housing project was undertaken by the assessee was only 1064.70 sq.mtrs. i.e., less than one acre. The Assessing Officer required the assessee to submit Slum Rehabilitation Authority (for short “SRA”) details, copy of approval, IOD, etc., in respect of the said project. The assessee submitted that it had applied for approval from SRA through letter of intent on 3rd July 2003, and intimation of approval was given on 4th August 2003, with certain condition to be fulfilled. On verification of these details, the Assessing Officer found that the assessee’s Dharavi Project is in sum area, which is a slum project and area of the plot of land is less than one acre, therefore, the assessee does not fulfill the basic condition of the claim for deduction under section 80-IB(10). In response to the show cause notice, the assessee submitted that this condition of “project size should be on a plot of one acre” has been removed by the Finance Act, 2004, w.e.f. 1st April 2005, in case of housing project being carried out in slum areas as per the Govt. scheme. The assessee’s project has been approved by SRA, Govt. of Maharashtra, which provides for strict compliance of various Rules and Acts and which again is guided by Circulars and Notifications, therefore, the developer has no “say” in its implementation and execution. Further, the assessee has complied with all the conditions prescribed in section 80-IB(10) namely – (i) Project is approved by BMC as well as by SRA. (Copy of the approved plan was submitted); (ii) Built size of the residential unit is less than 1,000 square ft.; (iii) Built size of the commercial establishment does not exceed 5% of the aggregate size of the project or two thousand square ft, whichever is less; and (iv) Project has been completed within the stipulated period.
4. However, till the date of the completion of assessment proceedings, the CBDT had not issued any notification in terms of the proviso to sub-section (10) of section 80-IB. The assessee before the Assessing Officer pleaded that since all other conditions stands fulfilled, the claim for deduction under section 80-IB(10), should be otherwise allowed.
5. The Assessing Officer, after analysing the provisions of section 80-IB(10), which was applicable prior to 1st April 2005, and also after 1st April 2005, held that the assessee does not fulfil the conditions given in the proviso to section 80-IB(10), which clearly states that the claim has to be notified by the CBDT, which, in the present case, the scheme on which the assessee has done her project has not been notified which is evident from the letter dated 23rd August 2007, issued by the CBDT. Accordingly, he disallowed the claim of Rs. 1,47,11,573, made under section 80-IB(10), vide order dated 24th December 2009.
6. Aggrieved, the assessee carried the matter in first appeal, wherein the assessee produced a copy of Notification dated 3rd August 2010, issued by the CBDT, wherein by the scheme of SRA of the Govt. of Maharashtra, was notified. It was submitted that the same could not be produced before the Assessing Officer as the notification was not issued till the time of completion of the assessment proceedings. After going through the notification, the Commissioner (Appeals) noted that the CBDT has notified the claim contained in Regulation no.33(10) of D.C. Rules for Greater Mumbai, 1991, r/w provision of notification no.PB-4391/4080(A)/UD-II(ROP), dated 3rd June 1992, in the following manner, subject to the following conditions:-
(i) Slum development falling in Category-VII mentioned in notification no.TPB-4391/4080(A)/UD-11(RDP) dated 3rd June 19992, shall be excluded from the scheme;
(ii) Slum development falling within clause 7.7 of the appendix IV of regulation 33(10) which provides for joint development of slum and non-slum area shall be excluded from the scheme, and
(iii) Any amendment in the scheme hereby notified shall be required to be re-notified by the Board.
7. The said notification dated 3rd August 2010, was to come into force w.e.f. from the date of its publication. Later on, the assessee also furnished the Notification number 2 of 2011, dated 5th January 2011, issued by the CBDT, clarifying that “this notification shall be deemed to apply to the projects approved by a local authority under the aforesaid scheme on or after 1st day of April 2004, and before 31st day of March 2008, thereby making the income arising from such project eligible for deduction under sub-section (10) of section 80IB from the A.Y. 2005-06 onwards”.
8. In view of this specific clarification by the CBDT, the Commissioner (Appeals) directed the Assessing Officer to allow the deduction under section 80IB(10) on the ground that the conditions provided in the proviso to section 80IB(10) stands fulfilled. The relevant findings of the Commissioner (Appeals), for the sake of ready reference, is reproduced herein below:-
3.4 Therefore, in view of specific clarification issued by the CBDT on 5/1/2011, the notification dated 3.8.2010, will be applicable to all projects approved by a local authority under the aforesaid scheme on or after 1st day of April 2004, and before 31st day of March 2008, thereby making the income arising from such project eligible for deduction under sub-section (10) of section 80IB from the A.Y. 2005-06 onwards. The appellant also satisfies other conditions of the notifications, such as the project is approved by the slum rehabilitation authority and the scheme is notified by the notification dated 3/8/2010 and such scheme does not fall under category VII mentioned in notification no.TPB-4391/4080(A)/UD-11(RDP) dated 3rd June 1992, or within clause 7.7 of the Appendix IV of regulation 33(10) which provides for joint development of slum and non-slum area. Therefore, after the clarificatory notification issued by CBDT on 5.1.2011, the appellant is now eligible for deduction under section 80IB(10) in respect of the profits derived from housing project on a land though the same is less than 1 acre. Therefore, A.O. is directed to allow the deduction of Rs. 1,47,11,573 under section 80IB(10).
Aggrieved, the Revenue is in appeal before the Tribunal.
9. The learned Departmental Representative, first of all, submitted before us that the notification issued by the CBDT, was a fresh evidence which was not available before the Assessing Officer, therefore, the Commissioner (Appeals) should have called for the remand report. Secondly, he submitted that approval was given by the SRA on 4th August 2003, whereas the subsequent notification of CBDT categorically states that the benefit of the scheme would be available on the projects approved after 1st April 2004, and therefore, the benefit of proviso, relaxing the conditions of one acre would not be available to the assessee. Accordingly, the deduction under section 80IB(10), allowed by the Commissioner (Appeals) was not justified, either in law or on facts. He made detail submission with reference to various documents filed by the assessee and the findings of the Assessing Officer as well as learned Commissioner (Appeals).
10. On the other hand, the learned Counsel submitted that the Department has raised no such ground about the furnishing of a fresh evidence and moreover this is a Govt. notification which does not require any investigation of facts, therefore, the learned Commissioner (Appeals) has rightly taken into cognizance. Further, he submitted that in view of the amended provisions brought by the Finance Act, 2004, w.e.f. 1st April 2005, by which proviso was inserted, has relaxed the condition of minimum area of one acre for the housing project in a case where the housing project is carried out in a slum area as per the Govt. scheme. Once this benefit has been made available, the assessee is entitled to deduction from assessment year 2005-06 onwards. Regarding approval date of 4th August 2003, by SRA, he submitted that the said approval was given with lot of conditions to be fulfilled before the commencement of the project and it was only when the assessee had fulfilled all the terms and conditions given in the intimation of approval dated 4th August 2003, the final commencement certificate was given on 17th October 2004. Therefore, for all the practical purposes, the date of 17th October 2004, should be taken as the date of approval. Without prejudice, he submitted that the amendment in section 80-IB(10), brought by the Finance Act, 2004, is curative in nature and, hence, the same should be given retrospective effect. For this purposes, he referred to the speech given by the Finance Minister at the time of introduction of the proviso to section 80-IB. From the said speech, he submitted that it was never intended that the benefit would be available from a particular date so long as the scheme has been approved. The CBDT cannot, in any manner, frustrate the object and intent of the legislation by providing the time limit of approval. In support of this contentions, he relied upon the judgment of the Hon’ble Supreme Court in Shashikant Laxman Kale v. UOI  185 ITR 104 and various other decisions. He further submitted that once the amendment has been brought with a view to cure the hardship being faced in re-development of slums under the approved scheme of the State or Central Govt., the same should be treated as retrospective. In support of this pleading of retrospective effect is such situation, he relied on two Supreme Court judgments namely CIT v. Alom Extrusions Ltd. , 319 ITR 306 and Allied Motors (P.) Ltd. v. CIT  224 ITR 677.
11. We have carefully considered the rival contentions and have perused the findings of the learned Commissioner (Appeals) as well as the material available on record. The assessee has undertaken a project under the scheme of Slum Rehabilitation Authority (SRA) framed by the Govt. of Maharashtra for carrying out a housing project in Dharavi, which is one of the biggest slum areas. The assessee, vide letter of intent dated 3rd July 2003, had sought for an approval under Regulation of 2.3 of Appendix-4 of DCR no. 33(10). The SRA has given the intimation of approval on 4th August 2003, wherein various terms and conditions were required to be fulfilled by the assessee before the commencement of the project. The assessee complied with all the objects and the terms given in the intimation of approval vide letter dated 12th April 2004, to the Executive Engineer, SRA, and in response to which commencement certificate was issued on 17th October 2004. After the amendment brought in the statute by Finance Act, 2004, w.e.f. 1st April 2004, various conditions laid down in clauses (a) and (b) and particularly in clause (b), wherein one of the conditions for availing the deduction under section 80-IB(10), was that the project should be on the plot of land which has a minimum area of one acre, has been relaxed by insertion of a proviso. The amended provision of section 80IB(10) r/w proviso, reads as under:-
1103[(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007, by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,-
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,-
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, 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 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 such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;”
12. From the plain reading of the above, it would be seen that the condition precedent for availing the deduction under section 80IB(10), has been given in clauses (a) and (b). On these conditions, rider has been put by the proviso which starts with a kind of non-obstante clause that “nothing contained in clauses (a) and (b) shall apply” to a housing project which has been carried out in accordance with the scheme framed by the Central Govt. or State Govt. for re-construction or re-development in areas to be slum under any law and it further provides that such a scheme should be notified by the Board in this behalf. Thus, an exception has been carved out by the proviso in cases of housing project development in slum area under a Govt. scheme and overrides the condition mentioned in clauses (a) and (b). The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010, which has been incorporated in the preceding paragraphs. This notification was further clarified by the CBDT in Notification no.2 of 2011 dated 5th January 2011, wherein it was provided that:-
“In the notification of the Govt of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number S.O. 1898(E), dated the 3rd August, 2010 (2010) 233 CTR (ST.) 56 : 2010) 43 DTR (St.) 8] published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), dated the 3rd August, 2010, in paragraph 2 for “This notification shall come into force with effect from the date of its publication”, read “This notification shall be deemed to apply to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub-section (10) of section 80IB from the assessment year 2005-06 onwards.”
13. The proviso inserted w.e.f 1st April 2005, thus relaxes the conditions given in clauses (a) and (b) of section 80-IB to remove the problem of rehabilitation and development of slum area. The intention of the legislature in bringing such an amendment can also be gazed from the speech of the Finance Minister at the time of introduction of the bill, which reads as under;-
“110. A small problem has plagued the reconstruction and development of existing buildings under approved plans in the city of Mumbai. Perhaps the problem is there in some other cities too. I, therefore, propose to relax the condition of minimum plot size of one acre in the case of housing projects, as long as the projects are implemented in accordance with a scheme for reconstruction or development approved by the Central or State Government.”
14. Thus, rigours of the conditions enumerated in clauses (a) and (b) of section 80-IB, has been relaxed by the legislature to achieve certain socio-economic object and, therefore, proviso to section 80-IB should be given a liberal interpretation so as to not to defeat a genuine claim for deduction by a developer who undertakes to develop a housing project in a slum area under the scheme approved by the Central or State Govt. The CBDT which had issued the notification after more than five years of the amendment, has put a time limit of those housing projects which has been approved by the local authority on/or after 1st April 2004. Such a time limit can defeat the basic purpose of the proviso for which it was enacted as in the said proviso, the time limit provided in clause (a) of section 80-IB(10) has not been specifically made applicable, therefore, such a time limit cannot be imposed by way of subordinate legislation. Such notification can only clarify the statutory provisions and not over-ride them or restrict the operation of the main enactment. Therefore, in our considered opinion, the time limit of approval on/or after 1st April 2004, will not be applicable in the case of the proviso to section 80-IB(10).
15. Moreover, in the instant case, the approval which was given on 4th August 2003, was loaded with lot of terms and conditions to be fulfilled before the commencement. It was only after such terms and conditions were fulfilled, the assessee was given the commencement certificate issued after 1st April 2004, i.e., on 17th October 2004 to start the project. In such a case or situation, it cannot be held that the assessee’s project is not liable for deduction under section 80-IB, once all other conditions are fulfilled. In this case, one can say that the date of commencement i.e., 17th October 2004, can be taken as the date of approval as it was from this date the approval given by the SRA becomes operative. Thus, the contentions of the learned Departmental Representative cannot be sustained.
16. In ground no.2, the Revenue has challenged that the date of approval of SRA scheme project is 3rd July 2003, and is not covered by the Notification no.2 of 2011, which was issued to clarify the earlier notification dated 3rd August 2010. Such a ground taken by the Department is wholly misconceived as there is no such scheme dated 3rd July 2003. The said date of 3rd July 2003, is when the assessee has applied before the SRA for its approval of the project. The scheme in which the approval has been granted is DCR no.33 (10), which has been notified by the CBDT. Thus, there is no merit in ground no.2, taken by the Revenue.
17. In view of our above findings, we do not find any reason to deviate from the ultimate findings given by the Commissioner (Appeals) and, consequently, the same is hereby confirmed by holding that the assessee is eligible for deduction under section 80-IB(10), for Rs. 1,47,11,573, in respect of its development project carried out in Dharavi slum area, which was a scheme framed by Maharashtra Govt. and duly notified by the CBDT. Accordingly, the grounds raised by the Revenue are treated to be dismissed.
18. In the result, Revenue’s appeal is dismissed.