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Income Tax Appellate Tribunal, BENCH “B”, KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM]
Per Shri N.V.Vasudevan, JM This is an appeal by the Revenue directed against the order dated 15.07.2011 of CIT(A)-XII, Kolkata relating to A.Y.2006-07.
2 . The grounds of appeal raised by the revenue read as follows :- “1. Whether, on the facts and in the circumstances of the case, ld. CIT(A) is justified in treating WBIHDCO as Local Authority for allowing deduction u/s 80IB although it does not fall under the categories as defined in Section 10(20) of the I.T.Act.”
The Assessee is a company. It is engaged in Real Estate business. During the previous year relevant to AY 2006-07 the Assessee derived income of Rs.1,85,03,189/- from construction of a housing project at New Town, Rajarhat, Kolkata. The said housing project was jointly developed and built by the Assessee along with West Bengal Housing Board (WBHB). The plans in respect of the housing project were sanctioned by West Bengal Housing Infrastructure Development Corporation Ltd., (WBHIDCO). The Assessee claimed that its income from construction of a housing project at New Town, Rajarhat,Kolkata was eligible for
2 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 100% deduction u/s.80IB(10) of the Income Tax Act, 1961 (Act). The relevant provisions of Sec.80-IB(10) of the Act applicable for AY 2006-07 read as follows:
“(10) The amount of deduction in the case of an undertaking developing and building housing projects approved 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; 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;
(b) the project is on the size of a plot of land which has a minimum area of one acre: (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 five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.”
3 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 4. It can be seen from the provisions of Sec.80-IB(10) that one of the conditions for getting deduction u/s.80-IB(10) of the Act is that housing project should be approved by a local authority.
Sec.10(20) of the Act provides that the income of a local authority which is chargeable under the head "Income from house property", "Capital gains", or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area. Explanation to Sec.10(20) of the Act defines “Local Authority” for the purpose of Sec.10(20) of the Act as follows:
'Explanation.—For the purposes of this clause, the expression "local authority" means— (i) Panchayat as referred to in cl. (d) of Art. 243 of the Constitution; or (ii) Municipality as referred to in cl. (e) of Art. 243P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Government Board as defined in s. 3 of the Cantonments Act, 1924 (2 of 1924).';
According to the AO, since the housing project in question was approved by WBHIDCO and since income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and the housing project of the Assessee cannot be said to be approved by local authority and therefore the deduction u/s.80-IB(10) of the Act is not admissible.
The submission of the Assessee before the AO was that the assessee has fulfilled all the conditions to claim deduction u/s.80-IB(10) of the Act, viz.,:
4 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 1. The housing project had commenced during April, 2004. 2. The sanction date of approval of the housing project is 16.7.2004 issued by WBHIDCO (the developing local housing authority for sanction of the project at New Town) 3. The size of the plot of land is 5 acres 4. The size of the residential unit has a maximum built-up area of one thousand five hundred square feet. Having fulfilled the conditions, the assessee is entitled to claim deduction u/s. 80IB(10) of the Act.
The AO did not dispute satisfaction of any of the above conditions. The only objection raised by the AO was that the income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and therefore it is not a local authority as envisaged in section 80lB(10) of the Act.
In response to the above stand of the AO, the Assessee submitted that in the year 1993, the Kolkata Municipal Development Authority prepared a concept plan that drew the proposal for the New Town. A layout plan was then prepared on the basis of a plane table survey of the acquired land and in accordance with the norms and standards evolved by West Bengal Housing Board for providing a congenial living environment. In 1999, West Bengal Housing Infrastructure Development Corporation Limited was established to oversee the implementation. The Corporation has been given wide powers to develop the entire range of infrastructure services, construct housing and commercial premises, acquire and sell land for different purposes and also to maintain the New Town. Attention was drawn to section 13A of West Bengal Town & Country (Planning and Development) Act, 1979 which reads as under: “The State Government may, by notification, for such period and on such terms and conditions as may be specified, empower a Planning Authority or a development Authority or any other authority to regulate building operation within the Planning Area, and to impose fees for such purpose, and in such manner, as may be prescribed.”
5 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 Thus, the state Government may, by notification, declare any area in West Bengal to be a planning area for the purpose of West Bengal Town and Country (Planning and development) Act, 1979 (WBTCPA). Every such notification shall define the limits of the area to which it relates. After declaration of an area as a planning area, the State Government may constitute a planning authority for that area or a development authority in respect of that planning area. In the present case, the Government of West Bengal appointed WBHIDCO as the Planning Authority for the New Town Area under the seal of the Hon’ble Governor vide order dated 14.9. 1999. Relevant portion of the notification was as follows: 'In exercise of the power conferred by. sub-section (4) of section 11 of the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal XIII of 1979), the Governor is pleased to appoint the West Bengal Housing Infrastructure Development Corporation Ltd. (HIDCO) as the Planning Authority in respect of the Planning Area declared as such under Notification No 1423/IIG/NTP/lM-l/98 dated 27th August, 1999 from the date of this order.'
The notification further reads as under: 'In exercise of the power conferred by sub-section (3) of section 1 of the West Bengal Town and Country (Planning and Development) Act, 1979 (West Bengal Act XIII of 1979) the Governor is pleased hereby to appoint the 1st day of September, 1999 as the date on which the said Act shall come in force in that ……..described in the schedule below:
Schedule
Name of the district Name of Police Station J.L. Nos
North 24 Parganas Rajarhat 11,12,13,14,15,16,19, 20,21,22,23,24,25,33, 34,35,36 & 55 South 24 Parganas Bhangar 2,3,8,9 and 10
The Assessee pointed out that from the above, it would be clear that WBHIDCO had been notified as the local housing authority and any Housing Project would require approval from the said authority for its development in the specified area mentioned in the notification. The Assessee submitted that it has taken due approval
6 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 from WBHIDCO for the purpose of development of Housing Project at New Town, Rajarhat thereby fulfilling the condition as laid down in section 801B(10).
However, the AO invoked explanation to section 10(20) of the Act for the purpose of ascertaining definition of 'local authority' and by applying the same to section 801B( 10) he denied the deduction claimed by the assessee.
Before CIT(A), the Assessee apart from reiterating the stand taken before the AO, further submitted that no specific definition or meaning has been assigned to the expression 'Local authority' in section 80lB(10) of the Act. It was submitted that the expression 'local authority' has nowhere been defined in the Act for the purpose of Sec.10(20) of the Act. A bare perusal of the provisions of section 801B(10) of the Act would make it clear that no reference to explanation to section 10(20) has been made in the section. The situation being so, the reference made by the A O. to section 10(20) in the assessee's case was not proper. It was pointed out that the term “Local Authority” as defined in Explanation to Sec.10(20) of the Act, is only for the purpose of the said clause and cannot be extended to Sec.80-IB(10) of the Act. It was pointed out that the words 'for the purpose of this clause' suggest that the explanation has been inserted exclusively for section 10(20) of the Act and will not apply to any other provisions of the Act, which please note.
It was submitted that meaning of an expression should be assigned with reference to the purpose for which it had been laid down and the same should not be stretched further to defeat the said purpose. It was submitted that it was a well settled rule of construction that in construing the provisions of beneficial legislation the court should adopt the construction which advances, fulfils and furthers the object of the Act rather than one which would defeat and render the benefit illusory. A beneficial provision should receive fair, liberal and progressive construction that its true objects might be promoted. The language of a beneficial statute must be construed so as to suppress the mischief and advance its object. While interpreting a taxing statute, one has simply to look to what is clearly stated therein. It was pointed out that the Legislature has
7 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 introduced section 80-IB(10) of the Act, to encourage residential housing projects of units not exceeding specified built-up area. In order to avail of the tax exemption with regard to the housing project, the assessee has to fulfill all the conditions laid down under the beneficial provision of section 80-IB(10) of the Act and it would be sufficent if approval for the development of the housing project is taken from WBHIDCO because WBHIDCO has been appointed as the local housing authority capable of granting the same, as per notification mentioned supra.
It was also submitted that the term 'local authority' in common parlance would mean, 'local' meaning relating to or pertaining to a place and the term 'authority' means a person or organization having power or control in a particular sphere. Thus a local authority will mean a person or organization having power or control in a particular sphere relating to a place. Applying this in the assessee's case, it has to be held that WBHIDCO has been appointed by the State Government as the local housing authority capable of granting approval for the development of housing projects in Rajarhat area. There is no other local authority except WBHIDCO which is capable of sanctioning the development of the housing projects in the New Town, Rajarhat. WBHIDCO is the sole authority without the approval of which development' of housing projects in the Rajarhat area cannot take place. In other words, in the assessee's case, for the purpose of section 80lB( 10), WBHIDCO is the 'local authority' and approval from the some would be sufficient to entitle the assessee for deduction. It was submitted that the court is to ascribe the natural and ordinary meaning to the words used by the Legislature and the court ought not, under any circumstances, substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions. By reason of the clarity of expression in section 80IB(10), the question of there being any other local authority, which should also be covered by the explanation to section 10(20), does not arise at all.
The CIT(A) agreed with the contentions raised on behalf of the Assessee and he held as follows:
8 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 “ After careful consideration of the above submission and assessment order it is noticed that Sec.10(20) defines local authority which is for the specific purpose of that clause which is very evident from plain reading of Sec.10(20) of I.T.Act, 1961. The Govt. of West Bengal appointed the West Bengal Housing Infrastructure Development Corporation Ltd. (HIDCO) as the planning authority vide its notification dated 14-09-1999 and Rajarhat is specifically covered under notifications issued by the Govt. of West Bengal. These notifications have been issued by the West Begal Govt. u/s.13A of WB Town & Country (Planning & Devewlopment) Act, 1979. It is pertinent to mention that these notifications have been issued bya democratically elected Govt. of W.B. after due process of law. Therefore, the HIDCO is held as a local authority within the meaning of Sec.80-IB(10) of I.T.Act, 1961 and A.O is directed to allow deduction u/s.80-IB as claimed by the assessee. therefore, the ground Nos. 1 to 3 are allowed.”
Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. The grounds of appeal raised by the Revenue before the Tribunal reads thu: “1) Whether, on the facts and in the circumstances of the case, Ld.CIT(A) is justified in treating WBHIDCO as Local Authority for allowing deduction u/s.80-IB(10) although it does not fall under the categories as defined in Sec.10(20) of the I.T.Act.”
When the case was called for hearing none appeared on behalf of the Revenue. We therefore proceed to decide the appeal after hearing the submissions of the learned counsel for the Assessee.
We have heard the submissions of the learned counsel for the assessee. The learned counsel for the assessee placed reliance on the decision of the Hon’ble Chennai Bench in the case of Sreevatsa Real Estates P.Ltd. vs ITO (2011) 9 ITR (Trib.) 808 wherein on identical facts the Tribunal held that the Village Administrative Officer was competent authority for approval of plans for the purpose of Sec.80-IB(10) of the Act. He also relied on the submissions made before the CIT(A) and the order of the CIT(A).
We have given a careful consideration to the submissions made on behalf of the Assessee and perused the orders of the AO and CIT(A) and other relevant material.
9 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 We are of the view that the order of the CIT(A) does not call for any interference. The only reason assigned by the AO for not allowing deduction u/s.80-IB(10) of the Act was since the housing project in question was approved by WBHIDCO and since income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and the housing project of the Assessee, it cannot be said that the housing project was approved by local authority and therefore the deduction u/s.80-IB(10) of the Act is not admissible. As rightly contended by the Assessee and held by the CIT(A), the explanation below Sec.10(20) of the Act is only for the purpose of Clause (20) of Sec.10 and this has been made very clear in the said explanation itself. It cannot therefore be extended to the provisions of Sec.80-IB(10) of the Act. WBHIDCO has been appointed as a Planning authority in respect of the Planning area of Rajarhat pursuant to notification issued under the WB Town and Country (Planning & Development) Act, 1979. For the purpose of Sec.80-IB(10) of the Act it is natural that the authority in charge of planned developed in an area should be the proper authority to sanction plans for housing project keeping in view the need for planned and organized development. We are of the view that the AO misdirected himself in making reference to provisions of Explanation to Sec.10(20) of the Act which defines the term “Local Authority” only for the purpose of the purpose of Clause (20) of Sec.10. For the reasons given above, we confirm the order of the CIT(A) and dismiss the appeal by the Revenue.
In the result, appeal by the revenue is dismissed. Order pronounced in the court on 03.02.2016.
Sd/- Sd/- [M.Balaganesh] [N.V.Vasudevan] Accountant Member Judicial Member
Date: 03.02.2016. R.G.(.P.S.)
10 ITA No.1413/Kol/2011 M/s. Bengal Greenfield Housing Development Co.Ltd.. A.Yr.2006-07 Copy of the order forwarded to:
M/s. Bengal Greenfield Housing Development Co.Ltd., 84/1B, Hi-Tech Chamber, Topsia Road (South), Kolkata-700046.
2 The D.C.I.T., Circle-11, Kolkata. 3. The CIT-IV, Kolkata, 4. The CIT(A)-XII, Kolkata. 5. DR, Kolkata Benches, Kolkata True Copy, By order,
Deputy /Asst. Registrar, ITAT, Kolkata Benches