ITO 25(2)(3), MUMBAI vs. SWASTIK DEVELOPERS, MUMBAI

This appeal is filed by the Revenue against the order of the Ld. CIT(A)-35, Mumbai dated 24.10.2013 pertaining to assessment year 2005-06.

The Revenue is challenging the order of the Ld. CIT(A) in allowing the claim of deduction u/s. 80IB(10) of the Act.

The Ld. Counsel for the assessee at the outset submits that in the immediately preceding Assessment Year i.e. 2004-05, the claim of 2 the assessee u/s. 80IB(10) was allowed by the Co-ordinate Bench of the Tribunal by sustaining the order of the Ld. CIT(A) and dismissing the revenue appeal. Therefore he prays that since facts and circumstances being similar, the same may be followed for this Assessment Year also.

The Ld. Departmental Representative places reliance on the orders of the Assessing Officer.

We have perused the orders of the authorities below. In this case, the Assessing Officer denied deduction u/s. 80IB(10) of the Act on the housing project constructed by the assessee on the ground that the project was commenced well before the crucial date specified in Sec. 80IB(10) and obtained completion certificate before 31.3.2008. Therefore, conditions specified in Sec. 80IB(10) have not been complied with. The Ld. CIT(A) following the order of the Tribunal in assessee’s own case for Assessment Year 2007-08 and 2003-04 allowed the claim of the assessee observing as under: “3. The Hon’ble ITAT, Mumbai has heard appeal of the appellant for A.Y.2007-08 and for A.Y.2003-04. The issue is found to be identical and in & 3659/M/11 dated 28.08.2013, the Hon’ble ITAT have upheld the view of the CIT(A) thereby allowing the deduction claimed by the appellant u/s.80IB(10) in respect of the concerned project ‘Sundar Sagar’ for A.Yrs 2003-04 and 2007-08. The Hon’ble ITAT have based their decision on the decisions of the jurisdictional High Court in the case of CIT Vs. Vandana Properties, ITA No. 3633 of 2009 and 4361 of 2010 dated 28.03.2012 and the case of CIT Vs. Brahma Associates (2011) 333 ITR 289. 4. Respectfully following the decisions in the appellants’s own case, the appeal is allowed.”

Without prejudice to the above, on merits it is seen that what the section requires •5 commencement of the project after 01.10.1998 and not the approval of the project after 01.10.1998 and this point was duly examined at the time of original assessment proceedings whereas the AO based on explanation (i) to section 80IB(10) which was inserted by Finance Act, 2004 w.e.f. 01.04.2005 held that the project is deemed to have been approved on the date on- which the building plan was first approved by the local authority. Further, this explanation was relevant only to determine the period of completion of the project and not for determining the commencement of the project. The AO misdirected himself in applying this explanation for commencement of the project ignoring the fact that the condition in section 801B(10) is that the project should be commenced on or after 1.10.1998. Thus, the first reasoning given by the A.O. is not correct. Regarding completion of the project before 31.03.2008, I find that the A.O. held that, the amendment in section 80IB(10) was clarificatory in nature, However, the stand of the AO cannot be accepted as the amendment is always prospective in nature unless it is specifically provided that the same is retrospective in nature. Recently the Jurisdictional High Court of Bombay held in the case of Brahma Associates by judgment dt. 22.02.2011 that clause (d) inserted to section 80IB(10) w.e.f. 01.04,2005 is prospective and not retrospective and hence it cannot be applied for the period prior to 01.04.2005. Following the same ratio, I find that the amendment by Finance Act, 2004 w.e.f. 01.04.2005 cannot be applied for the assessment years upto A.Y. 2004-05. Accordingly, the AO was not justified in denying deduction u/s. 80IB (10) and he is directed to allow the same as claimed by the appellant.

After considering the aforementioned order of learned CIT(A) and after hearing the both the counsels of the party we are of the view that learned CIT(A) has correctly interpreted the provisions contained in section 4 and has rightly considered that section requires is commencement of the project after 1.10.1998 and not the approval of the project after 1.10.1998. Learned CIT(A) has rightly held that the Assessing Officer misdirected himself in applying this explanation for commencement of the project ignoring the fact that the condition in section 80IB(10) is that the project should be commenced on or before 1.10.1998. Therefore the Assessing Officer has not correctly appreciated the provisions of law. We have also considered the Judgments passed by Hon'ble Bombay High Court in the case of “Brahma Associates”(supra), wherein it has been categorically mentioned that clause (d) inserted to section 80IB(10) is prospective and not retrospective and hence it cannot be applied for the period 1.4.2005. The said ratio was also followed by learned CIT(A) and it has been rightly held that amendment by the Finance Act, 2004 w.e.f. 1.4.2005 cannot be applied for the assessment years upto A.Y. 2004-05. Therefore order passed by learned CIT(A) does not require any interference from us, hence we uphold the order passed by learned CIT(A) and reject the grounds raised by the Revenue”.