Minimum Area of one acre of land for Section 80IB (10)- HC explains

PCIT Vs Karavali Housing (Karnataka High Court)

Section 80IB (10) it is not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre and that where a new housing project is constructed on a plot of land having minimum area of one acre but with existing housing projects would qualify for Section 80IB(10) deduction. Even otherwise, the argument of the Revenue does not stand to reason because, in the city of Mumbai where there is acute space crunch, it is difficult to find a vacant plot having minimum area of one acre and even if few such plots are existing it cannot be said that Section 80IB(10) deduction was intended to give benefit only to the undertakings who construct housing projects on those few plots. Therefore, it is clear that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfill the conditions set out under Section 80IB(10), the deduction thereunder cannot be denied to all those housing projects. Section 80IB(10) while specifying the size of the plot of land, does not specify the size or the number of housing projects that are required to be undertaken on a plot having minimum area of one acre. As a result, significance of the size of the plot of land is lost and, therefore, the assessee subject to fulfilling other conditions becomes entitled to Section 80IB(10) deduction on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In these circumstances, the decision of the Tribunal in rejecting the contention of the Revenue regarding the size of the plot cannot be faulted.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

This appeal is preferred by the Revenue under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’ for short) assailing the order of the Income Tax Appellate Tribunal, Bengaluru (‘Tribunal’ for short) passed in ITA No.1804/BANG/2010 dated 11.09.2015 relating to the Assessment Year 2011-2012.

2. The appeal was admitted by this Court to consider the following substantial question of law:

“Whether on the facts and in the circumstances of the case, the Tribunal was right in law in allowing deduction under Section 80IB(10) to the assessee despite violation of condition contained in 80IB(10)(b) which states that the housing project should be on a plot of land which has a minimum area of 1 acre?”

3. The assessee is a partnership firm engaged in the business of development of real estate and construction of residential apartments and business complexes and execution of housing projects. For the assessment years under consideration, proceedings were concluded by the Assessing Officer under Section 143(3) read with Section 147 of the Act disallowing the deduction under Section 80IB(10) as amended by the assessee. On further appeal, the Commissioner of Income Tax (Appeals) relying on his own order under ITA 185/MNG/CI(A)MNG/2012-13 dated 14.03.2013 for the assessment year 2010-11, allowed the assessee’s appeal. Aggrieved by the order of the CIT (A), revenue preferred appeal before the Tribunal. Tribunal has dismissed the appeal. Hence, this appeal by the revenue.

4. Learned counsel appearing for the revenue stoutly argued that the finding of the Tribunal in as much as interpreting the provisions of Section 80IB(10) is wholly not in conformity with the purport and object of the Act. It is submitted that the deduction being in the nature of exemption, it should strictly comply with the conditions stipulated in the provisions. The language employed under Section 80IB(10) of the Act would clearly establish that the minimum one Acre of land is sine qua non for each project for claiming deduction under Section 80IB(10). The four housing projects considered by the Tribunal relating to the partnership firm do not satisfy the fundamental condition stipulated in 80IB(10)(b). Reliance has been placed on the judgment of the Hon’ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai. v. M/s. Dilip Kumar and Company and Others reported in (2018) 95 taxmann.com 327, and Commissioner of Income Tax Vs. Veena Developers reported in (2015) 277 CTR 0297.

5. On the contrary, learned counsel for the revenue would submit that the assessee being a partnership firm, four housing projects were sanctioned by the Mangaluru City Municipal Corporation in the very same Sy.No.132, in which the extent of land was more than the area of one acre. Considering these aspects, the Commissioner as well as Income Tax Appellate Tribunal has reversed the finding of the Assessing Authority and held that the assessee is eligible for the deduction claimed under Section 80IB(10) of the Act. Accordingly, seeks to answer the substantial question of law in favour of the assessee and against the revenue.

6. Learned counsel placed reliance on the judgment of Hon’ble High Court in the case of Commissioner of Income Tax Vs. Vandana Properties reported in [2012] 19 com 316 and the judgment of the Coordinate Bench of this Court in the case of Commissioner of Income Tax Vs. Brigade Enterprises Ltd., reported in (2020) 429 ITR 0511 (Karn).

7. Heard the learned counsel for the parties and perused the material on record.

Section 80IB(10)(b) of the Act reads thus:

“(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). . . ..

(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 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.”

8. The controversy relates to the four housing projects sanctioned by the Mangaluru City Municipal Corporation in the individual name of partners in a size of a plot of land which is more than one acre. The particulars of the extent of housing projects sanctioned in the same Sy.No.132 situated at Derebail Village, Mangaluru in the individual names of the partners of the firm is as under:

9. Having regard to these aspects, the Tribunal placing reliance on the judgment of the Hon’ble Mumbai High Court in the case of Vandana Properties (supra) has held that as long as housing projects are approved by the local authorities, on a plot of land having minimum of one acre, irrespective of the number of housing projects, the assessee is entitled for deduction under Section 80IB (10) of the Act.

10. The Hon’ble High Court of Mumbai in Vandana projects has held thus:

“29. From the aforesaid letter of CBDT, it is clear that for the purpose of Section 80IB (10) it is not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre and that where a new housing project is constructed on a plot of land having minimum area of one acre but with existing housing projects would qualify for Section 80IB(10) deduction. Even otherwise, the argument of the Revenue does not stand to reason because, in the city of Mumbai where there is acute space crunch, it is difficult to find a vacant plot having minimum area of one acre and even if few such plots are existing it cannot be said that Section 80IB(10) deduction was intended to give benefit only to the undertakings who construct housing projects on those few plots. Therefore, it is clear that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfill the conditions set out under Section 80IB(10), the deduction thereunder cannot be denied to all those housing projects. Section 80IB(10) while specifying the size of the plot of land, does not specify the size or the number of housing projects that are required to be undertaken on a plot having minimum area of one acre. As a result, significance of the size of the plot of land is lost and, therefore, the assessee subject to fulfilling other conditions becomes entitled to Section 80IB(10) deduction on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In these circumstances, the decision of the Tribunal in rejecting the contention of the Revenue regarding the size of the plot cannot be faulted.”

11. This ruling of Hon’ble High Court of Mumbai is squarely applicable to the facts of the present case. We concur with the said ruling. In the case of Dilip Kumar & Company (supra), referred to by the learned counsel for the revenue, the Hon’ble Apex Court has considered the exemption notification and in that context, it has been held that exemption notification should be interpreted strictly and the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption notification. With great respect, this finding of the Hon’ble Apex Court would not come to the aid of the revenue to deny the deduction under Section 80IB(10) of the Act for the reasons that four projects of the assessee firm are sanctioned by the local authority in more than one acre. The reading of the provision by the revenue has misdirected itself in giving the narrow meaning to the provision which otherwise would render the provision otiose or redundant.

12. In the light of the finding given by the Tribunal, on the factual aspects of the case, it is trite that no substantial question of law would arise for consideration, when the matter is adjudicated on the factual aspects which would contain the characteristic of a pure question of facts rather any question of law much less the substantial question of law.

13. Viewed from any angle, we are not inclined to countenance with the submission made by the learned counsel for the revenue. For the aforesaid reasons, we answer the substantial question of law in favour of the assessee and against the revenue.

In the result, appeal stands dismissed.