COMMISSIONER OF INCOME TAX-19 MUMBAI. vs. M/S. SARKAR BUILDERS

CIVIL APPEAL No. 4476/2015Supreme Court[2015] 7 S.C.R. 5615 May 2015Bench: 2 JudgesAuthor: A.K. SIKRI, R.F. NARIMAN30 pages
AI SummaryDismissed

What were the facts?

The appeals before the Supreme Court involved multiple assessees and assessment years, all concerning the benefit of Section 80-IB(10) of the Income Tax Act, 1961. This section provides a deduction for profits from housing projects. A key amendment, Clause (d) inserted by the Finance (No. 2) Act, 2004, effective from April 1, 2005, restricted the built-up area of shops and commercial establishments in such projects to 5% of the aggregate built-up area or 2000 sq. feet, whichever was less. The Revenue argued that this amendment applied to projects approved before April 1, 2005, but completed on or after that date. The assessees contended that the amendment was prospective and should not apply to projects sanctioned and commenced prior to the effective date.

What did the Supreme Court hold?

The Supreme Court held that the amendment to Section 80-IB(10)(d) of the Income Tax Act, 1961, is prospective and applies only to housing projects approved on or after April 1, 2005. The Court reasoned that the restriction on the extent of commercial area was introduced by the amendment and therefore could not be applied retrospectively to projects that were sanctioned and commenced prior to its effective date, even if their completion extended beyond April 1, 2005. The Court emphasized that the right to deduction under Section 80-IB(10) is linked to the date of project approval and commencement. Applying the principle from Commissioner of Income Tax, U.P. v. M/s. Shah Sadiq and Sons, accrued rights are saved unless expressly taken away. The Court found no indication that the amendment intended to extinguish rights that had already accrued to assessees who had arranged their affairs based on the law as it stood before the amendment. Therefore, the assessees were entitled to the benefit of Section 80-IB(10) for projects approved before March 31, 2005. The appeals filed by the Revenue were dismissed.

What were the issues?

1. Whether Section 80-IB(10)(d) of the Income Tax Act, 1961, as amended, applies to a housing project approved before March 31, 2005, but completed on or after April 1, 2005? Assessee's Contentions: - The amendment introducing Section 80-IB(10)(d) is prospective in nature and came into effect from April 1, 2005. - Projects sanctioned and commenced before April 1, 2005, even if completed after this date, should not be subjected to the restrictions imposed by the amendment. - The right to deduction under Section 80-IB(10) accrues based on the date of project approval and commencement, not the year of completion or profit realization. - Relied on the principle that accrued rights are saved unless expressly taken away, citing Commissioner of Income Tax, U.P. v. M/s. Shah Sadiq and Sons. Revenue's Contentions: - The amendment to Section 80-IB(10)(d) applies to all housing projects where profits are offered to tax in assessment years subsequent to April 1, 2005, irrespective of the approval or commencement date. - The restriction on commercial area must be complied with in the assessment year the profits are brought to tax.

Which sections of the Income-tax Act were involved?

Section 80-IB(10),Section 80-IB(10)(d)

AI-generated summary — verify with the full judgment below

[2015] 7 S.C.R. 56 A COMMISSIONER OF INCOME TAX-19 MUMBAI. \ B v. M/S. SARKAR BUILDERS (Civil Appeal No. 44 76 Of 2015) MAY15,2015 [A. K. SIKRI AND R. F. NARIMAN, JJ.] Income Tax Act, 1961: s.8018(10) (as amended by c Finance No.2 Act, 2004 w.e.f. 1.4.2005- Deduction in case of undertaking developing and building housing projects - By Clause (d) inserted by amendment and made effective from 1.4.2005, it was stipulated that the built up area of shop and other commercial establishments in the housing projects D would not exceed 5% .'lf aggregate built up area of housing project or 2000 sq. feet whichever is less -Whether s.80/B(10)(d) applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005 - Held: This amendment is prospective and has come into effect E from 1. 4. 2005, therefore, the restriction on extent of commercial area in housing project imposed w.e.f. 1.4.2005 would not apply to housing projects which had been sanctioned and started earlier even if they finished after 1.4.2005. F Dismissing the appeals, the Court HELD: 1. Prior to 01.04.2005, the developers/ assessees who had got their projects sanctioned from G

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