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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
आदेश / O R D E R
Per Joginder Singh (Judicial Member) Both these appeals are by the assessee for Assessment year 2006-07 and 2007-08, aggrieved by the impugned orders
2 M/s. Bhavya Construction Co., & 4390/Mum/2014 dated 29/04/2014 & 24/04/2014 of the Ld. First Appellate Authority, Mumbai.
The common ground raised, by the assessee, in the present appeals is with respect to claim of deduction under 80IB(10) of the Income Tax Act 1961 (hereinafter the “Act”), which was rejected by the Ld. Commissioner of Income Tax (Appeals) on the ground that the project of the assessee was approved prior to 01/04/2004, therefore, the assessee is not entitled to the benefit as the amendment made by the Finance Act, 2005. 2.1. During hearing of these appeals, the ld. counsel for the assessee, Shri Vishwas V. Mehendale advanced arguments by explaining that notification No.67/2010 dated 03/08/2010, issued by the CBDT, can only clarify the statutory provisions and cannot override the same or restrict the operation of the main enactment. It was also contended that the time limit of approval on/or after 01/04/2004 will not be applicable in the case of proviso to section 80IB(10) of the Act. Reliance was placed upon the decision in Ramesh Gunshi Dedhia Vs. Income Tax Officer (2014) 148 ITD 356 (Mum.-Trib.) and Income Tax Officer vs. M/s. Asha Kashiprasada Ringshia Pandurang Sadan (2013) 29 taxmann.com 160 (Mum. – Trib.). On the other hand, Shri O.P. Meena, ld. DR strongly defended the impugned order by contended that the assessee has not fulfilled the conditions contained in section 80IB(10) of the Act. It was also pleaded that the cases relied upon by the 3 M/s. Bhavya Construction Co., & 4390/Mum/2014 assessee are on different facts, therefore, not applicable to the case of the assessee. 2.2. We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee a partnership firm, originally declared income of Rs.28,69,487/- on 31/10/2006. Later on, the assessee revised his return declaring “NIL” income. The assessee during the previous year relevant to Assessment year 2007-08 constructed housing project, which was approved by Slum Rehabilitation Authority on which, the assessee claimed the amount of Rs. 28,69,487/- under section 80IB(10), being the income from approved housing project. The ld. Assessing Officer rejected the claim of the assessee on the ground that the assessee has not been notified by CBDT. The ld. Assessing Officer assessed the income under section 143(3) of the Act determining the total income at Rs. 28,69,487/-, rejecting the claimed deduction, vide assessment order dated 30/10/2008. 2.3. On appeal before the Ld. Commissioner of Income Tax (Appeals), the stand taken in the assessment order was affirmed. Before the Ld. Commissioner of Income Tax (Appeals) this stand of the assessee was that the conditions stipulated under section 80IB(10) has been satisfied by the assessee, therefore, eligible for deduction. 2.4. Aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals) the assessee preferred appeal before the Tribunal, wherein the assessee produced CBDT notification dated 03/08/2010, accordingly the Tribunal vide order dated
4 M/s. Bhavya Construction Co., & 4390/Mum/2014 14/10/2011 (ITA NO. 3090/MUM/2010), set aside the order of the Ld. Commissioner of Income Tax (Appeals) and restored the matter to the file of the Assessing Officer to decide the claim of the assessee, afresh made under section 80IB(10) of the Act considering the aforementioned CBDT notification. 2.5 Pursuant to the direction of the Tribunal, the ld. Assessing Officer considered notification No. 67/2010, dated 03/08/2010, notification No. 02/2011 dated 05/01/2011, submissions of the assessee and held that the notification cannot give benefit to the projects approved before 01/04/2004, therefore, he denied the claimed deduction under section 80IB(10) of the Act. This stand of the ld. Assessing Officer was affirmed by the Ld. Commissioner of Income Tax (Appeals). The assessee is in further appeal before this Tribunal. 2.6 Before coming to any conclusion we are reproducing hereunder the relevant portion from the provision of section 80IB(10) of the Act for ready reference and analysis:- 80IB.Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to(11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
5 M/s. Bhavya Construction Co., & 4390/Mum/2014
(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 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 but not later than the 31st day of March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority; (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five 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 6 M/s. Bhavya Construction Co., & 4390/Mum/2014
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 one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square 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 three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher; (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. Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).
2.7 It is noticed that section 80IB(10)(a)(i) of the Act lays down that where the housing project has been approved by the 7 M/s. Bhavya Construction Co., & 4390/Mum/2014 local authorities before the 1st day of April 2004 and the Explanation has clarified that:-
(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.
2.8 We find that the Slum Rehabilitation Authority, vide communication No. SRA/Ch.E/101/H.E/PLILOI, dated 10/07/1998 (page No. 9 to 14 of the paper book) considered the proposal of the assessee and principally approved the same with certain conditions as enumerated therein. Commencement Certificate for building No. C-2 was issued to the assessee on 29/06/2002 (page No. 19 of the paper book) subject to condition enumerated in communication dated 10/07/1998 (supra). Full occupation certificate for Rehabilitation of building No.A was issued to the assessee on 27/01/2001. Full occupancy certificate for building No. C-1 was issued on 02/06/2003 and for building No.B was issued on 27/04/2004. Full occupation permission for sale of building No.C-2 was issued on 17/01/2008 (No.SRA/Eng/ 731/HE/PL/AP/OCC).
2.9 Under the aforementioned facts, now we shall deal with the legal position and objections raised in the impugned
8 M/s. Bhavya Construction Co., & 4390/Mum/2014 order. One of the objections raised by the Ld. Commissioner of Income Tax (Appeals) is that the plot of land on which rehabilitation was done by the assessee is less than one acre. The stand of the Department is that minimum one acre land is required for getting the benefit of deduction. However, we note that as per amendment by the Finance Act (No.2) 2004, w.e.f. 01/04/2005, a proviso was added to the said section, wherein, the condition of one acre was relaxed in the cases of metros like Delhi or Mumbai for practical reason. The Legislature put the condition that such relaxation will be available to those projects which are approved by the local authorities under the Slum Rehabilitation Scheme and notified by the Board. The project of the assessee is with respect to slum development and the intention of the Legislature is to extend the benefit of deduction under section 80IB(10) of the Act to the projects approved by the SRA, of course, subject to fulfillment of other conditions. The project of the assessee was completed before 31/03/2008. The Budget Speech of the Hon'ble Finance Minister on the floor of the house while introducing Finance Bill 2004 on introduction of relaxation of condition of minimum one acre of plot size for slum rehabilitation and redevelopment is reproduced below:
“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.”
9 M/s. Bhavya Construction Co., & 4390/Mum/2014 2.10. Notes on Clauses on the Finance Bill 2004 are reproduced hereunder:- “Under the existing provisions contained in sub-section (10), hundred per cent, deduction of the profits of an undertaking developing and building housing projects is allowed if the housing project is approved by a local authority before the 31st March, 2005 subject to the conditions specified in clauses (a) to (c) of the said sub-section. The existing provisions of the said sub-section provides that (a) the undertaking should have commenced development of the housing project after the 1st day of October, 1998, (b) the project should be on a size of a plot of land which has a minimum area of one acre, and (c) the residential unit should have a maximum built-up area of one thousand square feet where such residential units is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Sub-clause (d) seeks to substitute sub-section (10) of the said section so as to provide, inter alia, a hundred per cent, deduction of the profits derived by an undertaking developing and building housing projects approved by a local authority before 31st March, 2007 instead of 31st March, 2005 under the existing provisions, subject to the conditions that (a) such undertaking has commenced or commences development and construction of the housing project on or after 1st October, 1998 and completes the construction within four years, from the end of the financial year in which the housing project is approved by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre except in the case of 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, and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent, of the aggregate built-up area of the housing project or two thousand square feet, whichever is less. It is further proposed to insert an Explanation in clause (a) of the proposed sub-section (10) so as to provide that the date of approval
10 M/s. Bhavya Construction Co., & 4390/Mum/2014 shall be the date on which the building plan of the said project is first approved by the local authority in case where the approval in respect of the same is obtained more than once and also to provide that the date of completion of construction shall be the date on which the completion certificate is issued by the local authority.”
The conjoint reading of the Section and the notes on clauses along with Speech of Hon'ble Finance Minister on the floor of the house makes the intention of the legislature clear that relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre shall also apply to the existing approved projects provided other conditions as mandated by Section 80IB(10) of the Act are fulfilled. Thus, the said relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre is curative in nature and is intended to remove unintended hardship caused to the approved projects in the city of Mumbai/Delhi where there is shortage of land and the approved project sizes are less than one acre and such relaxation shall apply to existing approved projects also , provided other conditions being fulfilled to remove the un-intended hardship faced by these projects in city of Mumbai/Delhi. 2.11 From the plain reading of section 80IB(10) of the Act 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 11 M/s. Bhavya Construction Co., & 4390/Mum/2014 "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. 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."
12 M/s. Bhavya Construction Co., & 4390/Mum/2014 2.12 Thus, the rigours of Section 80IB(10) were relaxed by the introduction of proviso by Finance Act , 2004 wherein conditions as stipulated in clause (a) and (b) shall not be applicable provided the slum rehabilitation project is approved by Central or State Government and the same is notified by the Board. The notification issued by the Board dated 5th January 2011 clearly stipulates that the benefit of Section 80IB(10) shall be available 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. There is no equity in tax legislation and the exemption provisions are to be strictly construed at the first stage to establish the eligibility of the tax-payer for the benefit of exemption and once the tax-payer establishes its entitlement to the exemption, then exemption provisions are to be liberally construed to give the full intended benefit to the tax-payer so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. 2.13 The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt J. in his classic statement in Cape Brandy Syndicate v I.R.C. (1 KB 64, 71): "In a taxing
13 M/s. Bhavya Construction Co., & 4390/Mum/2014 statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used." If the revenue satisfied the court that the case falls strictly within the provisions of the law, the subject can be taxed. A taxing statute is to be strictly construed. The well- established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means: "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words". (Ref : Re,Micklethwait, (1885) 11 Ex 452, p. 456; referred to in Tenant v. Smith, (1892) AC 150, p. 154 (HL) (LORD HALSBURY); St. Aubyn v. A.G., (1951) 2 All ER 473, p. 485: 1952 AC 15 (HL) (LORD SIMONDS); Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd., AIR 1989 se 611, p. 614 : (1989) 1 SCC 44; Saraswati Sugar Mills v. Haryana State Board, AIR 1992 se 224, p. 228 : 1992 (1) see 418.) . In a classic passage LORD CAIRNS stated the principle thus: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the 14 M/s. Bhavya Construction Co., & 4390/Mum/2014 spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute”. (Ref: Partington v. A.G., (1869) LR 4 HL 1OO, p. 122: 21 LT 370, referred to in IRC v. Duke of Westminster, (1936) AC 1, p. 24 (HL); Bank of Chettinad v. CIT, AIR 1940 PC 183, p. 185; Potts' Executors v. IRC, (1951) 1 All ER 76, p. 81 (HL); A.V. Fernandez: v. State of Kerala, AIR 1957 SC 657, p. 661 : 1957 SCR 837; CIT v. M & G Stores, AIR 1968 SC 200, p. 205 : 1967 (3) SCR 876; J.K. Steel Ltd. v. Union of India, AIR 1970 SC 1173, p. 1182: 1969 (2) SCR 481; Ransom (Inspector of Taxes) v. Higgs, (1974) 3 All ER 949, p. 970 (HL). See further Hansraj & Sons v. State of Jammu & Kashmir, AIR 2002 SC 2692, pp. 2698, 2699 : (2002) 6 SCC 227; M/s. Geo Miller and Co. Pvt. Ltd. v. State of M.P., AIR 2004 SC 3552, p. 3556 : (2004) 5 SCC 209; Government of Andhra Pradesh v. Laxmi Devi, (2008) 4 SCC 720 paras 19,20,21 : (2008) 2 JT 639).
VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” (Ref: Cape Brandy Syndicate v. IRC, (1921) 1
15 M/s. Bhavya Construction Co., & 4390/Mum/2014 KB 64, p. 71 (ROWLATT, J.); referred to in Canadian Eagle Oil Co. Ltd. v. R., (1945) 2 All ER 499, p. 507 (HL); Gursahai v. CIT, AIR 1963 SC 1062, p. 1064 : 1963 (3) SCR 893; Banarsi Debi v. Income Tax Officer, AIR 1964 SC 1742, p. 1744; Commissioner of Central Excise Pondicherry v. ACER India Ltd., (2004) 8 SCC 173, p. 183 : (2004) 8 JT 53. See further CIT v. Firm Muar, AIR 1965 SC 1216, p. 1221 : 1965 (1) SCR 815; CIT, Patiala v. Shahzadanand & Sons, AIR 1966 SC 1342, p. 1347 : (1966) 3 SCR; Janapada Sabha, Chhindwara v. Central Provinces Syndicate, AIR 1971 SC 57, p. 60 : (1971) 1 SCC 509; Owen Thomas Mangin v.IRC, (1971) 2 WLR 39, p. 42 (PC); Controller of Estate Duty v. Kantilal Trikamlal, AIR 1976 SC 1935, p. 1943 : (1976) 4 SCC 643; Tarulata Syam v. Commissioner of Income-tax, West Bengal, AIR 1977 SC 1802 : (1977) 3 SCC 305; Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd., AIR 1989 SC 611, p. 614 : (1989) 1 SCC 44; Aphali Pharmaceuticals Ltd. v. State of Maharashtra, AIR 1989 SC 2227, p. 2239 : (1889) 4 SCC 378; Goodyear India Ltd. v. State of Haryana, AIR 1990 SC 781, p. 793 : 1990 (2) SCC 71; Sutlej Cotton Mills Ltd. v. Commissioner of Income- tax, West Bengal, AIR 1991 SC 218, p. 220 : (1992) Supp (1) SCC 50; Saraswati Sugar Mills v, Haryana State Board, AIR 1992 SC 224, p. 228 : 1992 (1) SCC 418; Oswal Agro Mills Ltd v. Collector of Central Excise, AIR 1993 SC 2288, p. 2291 : 1993 Supp. 3 SCC 716; Calcutta Jute Manufacturing Co. v, Commercial Tax Officer, AIR 1997 SC 2920, p. 2923 : (1997) 6
16 M/s. Bhavya Construction Co., & 4390/Mum/2014 SCC 262; Orissa State Warehousing Corporation v, CIT: JT 1999 (2) SC 527, p. 539 : AIR 1999 SC 1388, p. 1397 : (1999) 4 SCC 197; The Federation of Andhra Pradesh Chamber of Commerce and Industry v, State of Andhra Pradesh, AIR 2000 SC 2905, p. 2906 : (2000) 6 SCC 550; Commissioner of Central Excise v. Kisan Sahkari Chinni Mills Lid., AIR 2001 SC 3379, p. 3380 : (2001) 6 SCC 697; Union of India v, Azadi Bachao Andolan, AIR 2004 SC 1107, p. 1137 : 2003 Supp (2) JT 205. Relying upon this passage LORD UPJOHN said: “fiscal measures are not built upon any theory of taxation. (Ref: Commr. of Customs v. Top Ten Promotions, (1969) 3 All ER 39, p. 90 (HL).) The above passage stating the principle of strict construction of taxing statutes was quoted with approval in Commissioner of Income-tax, Madras v. Kasturi & Sons, JT 1999(2)SC 272 where the word 'moneys' in the expression 'moneys payable' in section 41(2) of the Income-tax Act, 1961 was not construed to include 'money's worth'. In fiscal legislation a transaction cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy". (Ref: IRC v. Duke of Westminster, (1936) AC 1, pp. 19,24 (HL); Bank of Chittinad v. CIT, AIR 1940 PC 183, p. 185 : (1940) 8 ITR 522; Potts' Executors v. IRC, (1951) 1 All ER 76, p. 81 (HL); A. V. Fernandez v. State of Kerala, AIR 1957 SC 657, p.
17 M/s. Bhavya Construction Co., & 4390/Mum/2014 661 : 1957 SCR 837; CIT v. Keshavlal, AIR 1965 SC 866, p. 868 (para 12) : (1965) 2 SCR 100; CIT v, M & G Stores, AIR 1968 SC 200, p. 205; Joint Commercial Tax Officer v. YMA, Madras, AIR 1970 SC 1212, p. 1217 : (1970) 1 SCC 462; Europa Oil (NZ) Ltd. v, Inland Revenue Commissioner, (1976) 1 All ER 503, p. 508 (PC) (Legal rights arising from a transaction and not its economic results are material); Gujarat State Financial Corporation v, Natson Manufacturing Co. Ltd., AIR 1978 SC 1765, p. 1769 : (1979) 1 SCC 193; Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v, Andhra Pradesh Rayons Ltd., AIR 1989 SC 611, p. 614 : (1989) 1 SCC 44; Mathuram Agrawal v. State of Madhya Pradesh, JT 1999 (8) SC 505, pp. 511, 512 : AIR 2000 SC 109, p. 113 : (1999) 8 SCC 667. See further Hansraj & Sons v. State of Jammu & Kashmir, AIR 2002 SC 2692, pp. 2698, 2699 : (2002) 6 SCC 227; Commissioner of Central Excise, Pondicherry v. ACER India Ltd., (2004) 8 SCC 173, p. 184: (2004) 8 JT 53.) In refuting the doctrine of 'the substance of the matter' LORD TOMLIN observed:
“"It is said that in revenue cases there is a doctrine that the court may ignore the legal position and regard what is called 'the substance of the matter'. This supposed doctrine seems to rest for its support upon a misunderstanding of language used income in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed
18 M/s. Bhavya Construction Co., & 4390/Mum/2014 doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting 'the uncertain and crooked cord of discretion' for 'the golden and straight metwand of the law'.” (Ref: IRC v. Duke of Westminster, supra, referred to in Pott's Executors v. IRC, supra, p. 80 (LORD NORMAND); CIT, Gujarat v. B.M. Kharwar, AIR 1969 SC 812 : (1969) 1 SCR 651; J.K. Steel Ltd. v. Union of India, supra, p. 1192; CIT, Calcutta v. G. Arbuthnot & Co., AIR 1973 SC 989, p. 995 : (1973) 5 SCC Tax 359 : (1973) 3 SCC 845; Commrs. of Customs v. Top Ten Promotions, (1969) 3 All ER 39, p. 90 (HL); Ransom (Inspector of Taxes) v. Higgs, (1974) 3 All ER 949, p. 970 (HL). See further Hansraj and Sons v. State of Jammu & Kashmir, AIR 2002 SC 2692, pp. 2698, 2699 : (2002) 6 SCC 227; Commissioner of Central Excise Pondicherry v. ACER India Ltd., (2004) 8 SCC 173, p. 184 : (2004) 8 JT 53). In the same case LORD WRlGHT pointed out that "the true nature of the legal obligation "arising out of a genuine transaction" and nothing else is the substance". (Ref: IRC v. Duke of Westminster, supra). The above principle which is known as Duke of Westminster principle is subject to the new approach of the courts towards tax evasion schemes consisting of a series of transactions or a composite transaction."
19 M/s. Bhavya Construction Co., & 4390/Mum/2014 In interpreting a section in a taxing statute, according to LORD SIMONDS, "the question is not at what transaction the section is according to some alleged general purpose aimed, but what transaction its language according to its natural meaning fairly and squarely hits.” (Ref: St. Aubyn (LM) v. A.G., (1951) 2 All ER 473, p. 485: 1952 AC: 15 (HL). See further Commissioner of Central Excise, Pondicherry v. ACER India Ltd., supra, pp. 183, 184).LORD SIMONDS call this "the one and only proper test.” It is, therefore, not the function of a court of law to give to words a strained and unnatural meaning to cover loopholes through which the evasive tax- payer may find escape or to tax transactions which, had the Legislature thought of them, would have been covered by appropriate words. (Ref: IRC v. Wolf son, (1949) 1 All ER 865, p. 868 (HL); See further W.M. Cory & Sons Ltd. v. IRC, (1965) I All ER 917, p. 921 : 1964 AC 1088 : 1065 (2) WLR 924 (HL), where LORD REID said: "The words of a taxing Act must never be stretched against a tax-payer. There is a very good reason for that rule. So long as one adheres to the natural meaning for the charging words the law is certain, or at least as certain as it is possible to make it, but if courts are to give ·to Charging words what is sometimes called a liberal construction who can say just how far this will go. It is much better that evasion should be met by amending legislation.”)
20 M/s. Bhavya Construction Co., & 4390/Mum/2014 As stated by LORD SIMON: "It may seem hard that a cunningly advised tax-payer should be able to avoid what appears to be his equitable share of the general fiscal burden and cast it on the shoulders of his fellow citizens. But for the courts to try to stretch the law to meet hard cases (whether the hardship appears to bear on the individual tax-payer or on the general body of tax-payers as represented by the Inland Revenue) is not merely to make bad law but to run the risk of subverting the rule of law itself." The same rule applies even if the object of the enactment is to frustrate legitimate tax avoidance devices for moral precepts are not applicable to the interpretation of revenue statutes." (Ref: Ransom (Inspector of Taxes) v. Higgs, (1974) 3 All ER 949, p. 969 (HL) . Owen Thomas Mangin v. IRC, (1971) 2 WLR 39, p. 42 (PC).)
It may thus be taken as maxim of tax law, which although not to be overstressed ought not to be forgotten that, "the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him.” (Ref: Russel v. Scott, (1948) 2 All ER 1, p. 5 (HL), (LORD SIMONDS); Mathuram Agrawal v. State of Madhya Pradesh, JT 1999 (8) SC 505, p. 512: AIR 2000 SC 109, pp. 113, 114: (1999) 8 SCC 667.) The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to 21 M/s. Bhavya Construction Co., & 4390/Mum/2014 one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. (Ref: Ormond Investment Co. v. Betts, (1928) AC 143 : (1928) All ER Rep 709, p. 719 (HL) (LORD ATKINSON).)
Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. (Ref: Mapp v. Oram, (1969) 3 All ER 215, pp. 222, 223 (HL); State Bank of Travancore v. Commissioner of Income-tax, (1986) 2 SCC 11, p. 68: AIR 1986 SC 757.)
It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect.” .(Ref: IRC v. Ross and Coulter, (1948) 1 All ER 616, p. 625 (HL); referred to in Gursahai v. CIT, AIR 1963 SC 1062, p. 1064 : (1963) 3 SCR 893.) The Supreme Court has enunciated in similar words the principle of interpretation of taxing laws.
BHAGWATI, J. stated the principle as follows:
"In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to 22 M/s. Bhavya Construction Co., & 4390/Mum/2014 the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.”
SHAH, J., has formulated the principle thus: "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency.” The Hon'ble Supreme Court decision in the case of Joshi Technolgies Inc. v. UOI reported in (2015) 374 ITR 322(SC) has followed principles of strict interpretation of taxing statute by observing as under: “70. Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the view that on the facts of the present case, it is not 23 M/s. Bhavya Construction Co., & 4390/Mum/2014 a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.
As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. The appellant is presumed to have knowledge of the legal provision, namely, in the absence of such a clause, special allowances under Section 42 would be impermissible. Still it signed the contract without such a clause, with open eyes. No doubt, the appellant claimed these deductions in its income tax returns and it was even allowed these deductions by the Income Tax Authorities. Further, no doubt, on this premise, it shared the profits with the Government as well. However, this conduct of the appellant or even the respondents, was outside the scope of the contract and that by itself may not give any right to the appellant to claim a relief in the nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder.
Having considered the matter in the aforesaid prospective, we come to the irresistible conclusion that the appellant is not entitled to the relief claimed. Though it may be somewhat harsh on the appellant when it availed the benefit of Section 42 for few years and acted on the understanding that such a benefit would be given to it, but we have no option but to hold that PSCs did not provide for this benefit to be given to the appellant and the contract can be amended only if both the parties agree to do so, and not otherwise. Therefore, we are constrained to dismiss the appeal for the reasons given above.”
24 M/s. Bhavya Construction Co., & 4390/Mum/2014 2.14. Thus as discussed in details in preceding para’s of this order , the rigours of Section 80IB(10) were relaxed by the introduction of proviso by Finance Act , 2004 wherein conditions as stipulated in clause (a) and (b) shall not be applicable provided the slum rehabilitation project is approved by Central or State Government and the same is notified by the Board. The notification issued by the Board dated 5th January 2011 clearly stipulates that the benefit of Section 80IB(10) shall be available 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. There is no equity in tax legislation and the exemption provisions are to be strictly construed wherein the assessee has to establish at the first stage the eligibility for the benefit of deduction u/s 80IB(10) of the Act in accordance with the provision of the statute and once the assessee establishes its entitlement to the said deduction, then deduction provisions are to be liberally construed to give the full intended benefit of Section 80IB(10) of the Act to the assessee so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. Considering the factual
25 M/s. Bhavya Construction Co., & 4390/Mum/2014 matrix and the judicial precedent discussed hereinabove , we are of the view that the proviso introduced by Finance Act , 2004 clearly grant relief to slum redevelopment or reconstruction projects which are approved by Central Government or State Government and the scheme is notified by the Board. The Board Notification clearly stipulate that benefit shall be granted to the 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, while in the case of the assessee the projects are approved prior to 1st day of April 2004 as set out above in preceding para’s, and the assessee is not able to establish its entitlement to deduction u/s 80IB(10) of the Act at the first stage itself for reason cited above. Thus, the contention of the assessee cannot be accepted and hence are rejected. We order accordingly. Resultantly, both the appeals of the assessee are dismissed. This Order was pronounced in the open court on 09/12/2016.