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.
8. The aforesaid reasoning of the Tribunal in M/ts. Parth Corpn.’s case (supra) has been followed by the Tribunal in the case of jShreejee Ratna Corpn. (supra) . In the light of the aforesaid orders of the co-ordinate Benches, it is not possible to accept the view taken by the CIT that an assessee claiming deduction under sub-section (10) of section 80IB is governed also by sub- section (2) of the section and it is necessary for him to fulfil the conditions mentioned in that sub-section and prove that he is an industrial undertaking. In addition to the above reasoning of the Tribunal, which has been pressed into service before us on behalf of the assessee, it was further submitted that there is inherent evidence in section 80IB itself to show that the conditions mentioned in sub-section (2) are not required to be fulfilled by an assessee engaged in the development of housing projects and claiming deduction under sub-section (10). It is pointed out that there are several sub-sections, which specifically require the assessee claiming deduction there under that it should not be formed by reconstruction or splitting up of existing businesses and if, as claimed by the CIT, sub-section (2) and the conditions mentioned therein are to govern an assessee claiming deduction under the other sub-sections including sub-section (10), then there was really no need for the legislature to specifically provide in some of the sub-sections that the business should not have been formed by the splitting up or reconstruction of an existing business or by the transfer of any building or machinery previously used for any purpose. In this behalf our attention was drawn to sub-sections (7), (7A) and (7B). A perusal of these sub-sections shows that they apply respectively to the hotel, multiplex theatre and convention centre. Clause (c) (i) and (ii) of sub-section (7) provides that the deduction in respect of the profits of the hotel shall be available only if the business is not formed by the splitting up or reconstruction of a business already in existence or by the transfer to a new business of a building previously used as a hotel or any machinery or plant previously used for any purpose. Similarly, clause[b)(ii) of sub-section (7A) provides for such a condition in the case of profits of a multiplex theatre. Clause (b)(ii) of sub-section (7B) also prescribes an identical condition in the case of convention centre. There was no need, as rightly pointed out on behalf of the assessee, for prescribing these conditions in the sub-sections noted above, if sub-section (2) and the conditions prescribed therein are to have overriding effect or to govern all the other sub-sections of section 80IB. Therefore, there is good reason to hold that the conditions prescribed in sub-section (2) are relevant only in the case of an industrial undertaking and wherever such conditions are required to be fulfilled by other types of businesses, such as a hotel or a multiplex theatre or a convention centre the legislature has expressly said so and sub-section (10) not having specifically provided for such conditions in the case of an undertaking engaged in the development of housing projects, it is not possible to telescope the conditions mentioned in subsection (2) into the provisions of sub-section (10); Sub-section (10) has to be interpreted on its own terms.
9. Thus the first reason given by the CIT namely that the provisions of sub-section (10) are governed by the provisions of sub-section (2) of section 80-IB is without merit.
