DEVISHA INFRASTRUCTYURE P.LTD,MUMBAI vs. ADDL CIT 6(2), MUMBAI

This appeal by the assessee is directed against the order of learned CIT(A) dated 21.2.2016 and pertains to A.Y. 2011-12.

read as under : The Commissioner of Income Tax Appeal -

8. (hereinafter referred as "CIT") has erred in confirming the addition made by Leaned Assessing Officer of deduction claim made by the Appellant U/s. 80IB(10) of the Income Tax Act, 1961 of Rs. 57,89,55,065/- without considering the facts and also by wrong interpretation of the provisions of Section 80IB(10) of the Act.

It is submitted that the Appellant has claimed deduction U/s. 80IB(10) of the Act in respect of its Project - "Hex Blox" after complying with all the conditions prescribed U/s. 80IB(10) of the Act. In this regard, the Appellant has made a detailed submission/explanation with regard to the such deduction claimed U/s. 80IB(10) of the Act and relevant documents were also submitted during the assessment proceeding. The CIT erred in rejection the appellant's claim of section 80IB (10) of the Act and confirming the addition made by Learned Assessing Officer on the following basis:

The CIT erred in confirming the alleging that appellant has violated the provisions of newly inserted clause (e) and clause (f) to section 80IB(10) of the Act by allotting the multiple units to persons not being individual, individuals and their relatives. It is submitted that appellant has complied with all the provisions as prescribed in section 80IB(10) of the Act and in this regard detailed submissions made during the assessment proceedings, however the learned AO failed to take cognisance of the same and misinterpreted the restrictive provisions of the Act.

It is submitted that appellant has provided complete details along with supporting and explanations for complying each of the clauses prescribed in section 80IB (10) of the Act. It is therefore prayed to your honour to allow deduction as claimed by the Appellant U/s. 80IB(10) of the Income Tax Act, 1961 in full and necessary direction should be given in this regard.

Without prejudice to above, even if the Appellant has violated the provisions of the Act, deduction U/s. 80IB(10) of the Act shall be allowed on prorate basis.

Your appellant craves to add, alter, or amend any of the grounds of appeal on or before the date of hearing of appeal.

“Thus, the multiple allotments in violation of section 80IB(10)(e) and (f) is seen under four different situations:-

Upto A.Y. 2011-12 (i) Cases where the booking and allotment were purportedly done in pre amendment period but substantial payments and registration of sale deed has taken place in post amendment period; (ii) Cases wherein both first allotment and the booking were purportedly done in pre amendment period but second booking and allotment were done only in post amendment period.

(iii) All multiple booking and allotments were done in post amendment period only to the same person or members of the family.

After A.Y. 2011-12 (iv) Later assessment years where entire booking and allotment were done only in post amendment period in total violation of section 80IB(10)(e) and (f).

Thereafter AO gave a chart of flats given in violation of the provisions and observed that proper explanation in this regard has not been given.

“2.38 For the reasons as discussed supra, and on the basis of clear finding of fact that the assessee company has not complied with the provisions of section 80IB(10(e) & (f) in post amendment period, the deduction of Rs. 57,63,91,353/- claimed by the assessee under section 80IB(10) is hereby disallowed and the entire income from the project is brought to tax accordingly.

2.35 Even otherwise, when as many as 230 out of 309 units have been sold to persons and-individuals coming under the definition of clause (e) and (f), no such liberal or pro rate allowance can be justifiably argued on any counts. Doing so, would only be a travesty of justice which will result in bringing to naught the very purpose of the amendments. The claim of liberal interpretation and pro rata allowance of deduction as It stood before the amendment are no longer legally sanctioned after the introduction of clause (e).and (f) which are basically aimed at preventing such mischief after the relevant date. When the assessee company has consciously chose to perpetrate the same mischief even after the very introduction of the prohibitive clauses, then, no tenable claim can be made on the grounds of liberal Interpretation and or pro rata benevolence.

2.36 Therefore, it is not even a dispute as to the effective date of the amended provisions, namely 19.08,2009 as per Board's circular versus 01.04.2010 as per the amendment. On, both counts, the assessee company has failed to comply with the provisions and continue to do so, that too on-such a larger scale, in later years as pointed out earlier.

2.37 In view of the above it is held that :

(i) The assessee company has not complied with the provisions of section 801B(10), as mandated under clause (e) and also clause (f) after the coming into effect of such amended provisions.

(ii) On its failure to comply with the said clauses, the assessee company's project '"Hex Blox" does not qualify for deductions as contemplated under the amended provisions of section 801B(10)(e) and (f).

(iii) Since the question of eligibility has to be seen from the perspective of the project as a whole, the claim of the assessee company for pro rata allowance is found to be untenable under the amended Jaw as discussed supra. Reference and particular reliance is placed on the case laws on interpretation of statutes aimed at preventing mischief as discussed supra.

(v) Without prejudice to the stated legal position on the issue, no such pro rata allowance is warranted in assessee's case even on pure facts and merits, considering the large scale instances of multiple allotments since the beginning of the project to the end, both in the pre and post amendment periods.

2.38 For the reasons as discussed supra, and on the basis of clear finding of fact that the assessee company has not complied with the provisions of section 80IB(10)(e) and (f)-in post amendment period, the deduction of Rs.57,63,91,353/-, claimed by the assessee under section 80IB(10) is hereby disallowed and the entire income from the subject is brought to tax accordingly.

The ground relates to the disallowance of deduction claimed u/s 80IB(10) of Rs 57,98,02,670/-, The appellant submitted that there were only two instances of default and hence the deduction claimed u/s 80IB on the income of entire project should not be disallowed.

The assessment order and the submissions made before the undersigned is carefully considered. In this case, the important question is that when amendment in section 80IB(10) (e) and (f) was not in force and the amendment was made subsequently and the appellant had given booking, allotment letter before the amendment made by the Finance Act (No.2) Act, 2009 is applicable in this case,

The allotment of units/ flats after amendment in Finance Act, 2009, i.e., after 19.08.2009 and when income from such sale is reported, in subsequent year i.e., not during the year, will notify the reason for disallowance u/s 80IB(10) for the entire project.

On perusal of the assessment order and the submission made before me, it is seen that there is no doubt that the appellant has committed default in view of newly inserted section (e) & (f) of 80IB'(10) of the. Act As per appellant, there was only two instances and as per AO there were more instances for such default. The AO has merely relied on the surnames of the buyers to describe and establish that the appellant has committed default in various instances and has not invested through buyer. Now, the question is whether the entire deduction should be disallowed on prorate basis.

I do not find any cause or reason for prorate "basis disallowance when the appellant has purposely committed default after knowing that the deduction is not eligible if the units were allotted to the person referred in Section 80IB(10)(e) &(f). In this case the appellant has not only committed default in the year under consideration but also in the subsequent year. This clearly indicates that the appellant has committed default purposely so the request made to get relief on the basis of prorate is not acceptable.

The Hon'ble Supreme Court in the case of Reliance Jute & Industries Ltd.Reported in l20 ITR 921 held as under:

"It is a cardinal principle of the tax law that the law to be applied Is that in force in the assessment year unless otherwise provided expressly or by necessary implications. On that principle, it is abundantly clear that, for the assessment year 1960-61, it is section 14(1l) that is in force in that assessment year which has to be applied. There is no question of the assessee possessing any vested right under the law as it stood before the amendment. The assessment for one assessment year cannot, in the absence of a contrary provision, be affected by the law in force in another assessment year. A right claimed by an assesse under the law in force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year."

It is a well established rule: of 'interpretation that any amendment which is in force at the beginning of the relevant year must govern the case The ratio laid down by the Hon'ble Supreme Court in. the case of Reliance Jute. & Industries: Ltd. V/s CIT (1979) 120 ITR 921 squarely .apply on .the facts of the case as the- appellant had not fulfilled the condition precedent provided under section-80 IB(10) (e) & (f) as applicable front A.Y, 2010-11. There is no dispute that the appellant fulfilled all condition of section 80IB(10) as it stood prior to 1.4.2010 but after amendment, the appellant is not eligible for the deduction u/s 801B (10).

With the insertion of clause (e) & (f) with effect from 19.8.2009, now there was no alternative to the appellant but to allot the unit to the buyer keeping in view clause (e) & (f). But, in the instance case, the appellant has not only committed default during the year but in subsequent year also.

In view of the above discussion, I find no infirmity in the assessment order and so the addition is confirmed, Hence Ground of Appeal No. 1 is dismissed.”

(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:-

(i) the individual or the spouse or the minor children of such individual

(ii) the Hindu undivided family in which such individual is the karta.

(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.

10. Upon careful consideration we find that assessee has been denied the benefit of section 80IB(10) on the ground that there is violation of provisions clause (e) and (f), there in for the current as well as subsequent assessment years. In this regard we find considerable cogency in the submissions of learned Counsel of the assessee the revenue authorities should confine themselves to the subject matter of the assessment year under consideration and the satisfaction of requirement for year under assessment. In this regard learned Counsel of the assessee has submitted a paper book by way of which he submitted that actually there is no violation as for those impugned flats, booking was done prior to amendment and that only the registration of sale deed took place subsequently. In our considered opinion these facts and submissions of learned Counsel of the assessee need to be examined by the Assessing Officer factually.

Order has been pronounced in the Court on 11.4.2019.