Case Law Details
RELEVANT PARAGRAPH
7. It is first contended on behalf of the assessee that the view taken by the CIT that section 80IB(2) also applies to assessee’s claiming deduction under sub-section (10) of the section in respect of housing projects is erroneous and untenable as has been held by the Mumbai Bench of the Tribunal in (a) Parth Corpn. v. ITO [2008] 23 SOT 368 and (b) Shreejee Ratna Corpn. Vs. ITO [IT Appeal No. 3106(Mum) of 2007 dated 10-2-2009. It is therefore contended that the CIT was not right in law in holding the assessment to be erroneous and prejudicial to the interests of the revenue on the ground that the Assessing Officer overlooked the provisions of sub-section (2) of section 80IB. Copies of the orders of the Tribunal in the above cases were filed. We find force in the contention. A perusal of the orders of the Tribunal shows that the Tribunal has taken the view, on identical matters while hearing an appeal from the order of the CIT passed under section 263 of the Act, that the CIT is not right in holding that an assessee engaged in developing housing projects and claiming exemption of its income under section 80IB(10) should be an industrial undertaking and should therefore fulfil all the conditions prescribed by sub-section (2). In paragraph 8 of its order in the case of Parth Corporation, (supra) the Tribunal has discussed the issue and the conclusions can be summarised as below:-
(a) the provisions of section 80JB(2) have no application for claiming deduction under section 80IB(10) and therefore, the condition that the assessee should be an industrial undertaking is not applicable for claiming the deduction under sub-section (10).
(b) Section 80-IB(2) relates to “industrial undertaking” which manufactures or produces any article or thing whereas section 80IB(10) relates to deduction in the case of an “undertaking” which develops and builds housing project. In CIT v. N.C Budharaja & Co; [1993] 204 ITR 412, the Supreme Court has held that building of roads etc. does not amount to manufacture or production of articles or things. If that is so, it is impermissible to insist that an undertaking which is engaged in building housing projects should also fulfil the conditions of subsection (2) which applies to an industrial undertaking which is engaged in the manufacture or production of articles or things,
(c) The CBDT has issued circular no. 772 dated 23.12.1998 explaining the earlier provisions of section 80IA(4F) which correspond to section 80H3(10). It has been explained that the section has been introduced to promote investments in housing. The conditions are that the project should be approved by the local authorities, the size of the land should be a minimum of one acre, the residential unit should not exceed 1000 sq.ft built up area and the undertaking should commence and complete the project within a specified period. If these conditions are fulfilled, the entire profit from the project would be deductible. There is no whisper in the circular that the assessee should also fulfil all the conditions necessary for being termed as an “industrial undertaking’ ‘ as a prerequisite for claiming the benefit of the deduction.
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