Case Law Details

Case Name : Commissioner of Income Tax-II, Pune V/s. M/s. Brahma Associates (Bombay High Court)
Appeal Number : Income Tax Appeal No. 1194 OF 2010
Date of Judgement/Order : 22/02/2011
Related Assessment Year :
Courts : All High Courts (4249) Bombay High Court (767)

As the legislature has provided that the deduction is available to all housing projects approved by a local authority, the result is that even projects with commercial user approved as a “housing project” are eligible for deduction.

Revenue was not justified in confining the deduction only to projects having commercial area up to 10% of the BUA because once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, no restriction could be imposed. If the project is approved as a “housing project” deduction u/s 80-IB(10) is allowable irrespective of the commercial area;

The insertion of clause (d) to s. 80-IB(10) w.e.f. 1.4.2005 to deny s. 80-IB (10) deduction to projects having commercial user beyond the prescribed limits is not retrospective.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

INCOME TAX APPEAL NO. 1194 OF 2010

Commissioner of Income Tax-II, Pune V/s. M/s. Brahma Associates

JUDGMENT RESERVED ON : 7TH FEBRUARY, 2011

JUDGMENT PRONOUNCED ON : 22ND FEBRUARY,, 2011

JUDGMENT

(PER J.P. DEVADHAR, J.)

1. Although this appeal was admitted on 01/12/2009 on only question, at the hearing of the appeal counsel on both sides agreed that all the questions raised in the appeal be admitted and heard on merits. Accordingly, the following questions of law are admitted and heard on merits :-

(i) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that the deduction u/s.80IB (10), as applicable prior to 1/4/2005 is admissible to a “Housing Project” comprising of residential housing units and commercial establishments?

(ii) Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in holding that a project having commercial area up to 10% of the project is eligible for deduction on the entire profits of the project u/s.80IB(10) up to 1/4/2005 ?

(iii) Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in holding that the projects wherein the commercial area is more than 10% of the project and the profits from the residential dwelling units in that project can be worked out separately then, subject to fulfilling other conditions, deduction on the profits relatable to the residential part of the project would be eligible for deduction under Section 80IB(10) ?

(iv) Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in holding that the limit on commercial use of built up area as prescribed by clause (d) of section 80IB(10) has no retrospective application and it applies only w.e.f. the assessment year 2005-06 ?

2. The assessment year involved herein is AY 2003-04.

3. The respondent (“assessee” for the easy reference) carries out business as builders, promoters, contractors and dealers in Real Estate.

4. The assessee had undertaken a construction project called “Brahma Estate” at Pune as per the layout approved by the Pune Municipal Corporation which is the local authority. The project “Brahma Estate” consists of fifteen residential buildings and two commercial buildings. The local authority had approved the said project as “residential plus commercial”. The total plot area as per the layout plan was 34,209.79 sq. mtrs. The Built-up area of the residential flats was 24,583.31 sq. mtrs. whereas the Built-up area of the commercial premises was 7,128.87 sq. mtrs. Thus the percentage of the commercial area to the total area of the plot was 20.83%. The aforesaid project commenced on 14/08/2000 and was completed on 03/10/2005.

5. In the assessment year in question, the assessee claimed deduction under Section 80IB(10) of the Income Tax Act,1961 [‘the Act’ for short] on the profits derived from the sale of the residential units in the project in question. The profit was computed by following the recognized sale method. The assessing officer opined that the expression “Housing Project” in Section 80IB(10) applies to projects consisting of residential units only. Since the project of the assessee was approved by the local authority as “residential plus commercial”, the assessing officer held that the project is not a housing project covered under Section 80IB(10) of the Act and accordingly not entitled to the deduction under Section 80IB(10).

6. The appeal filed by the assessee against the decision of the assessing officer was dismissed by the Commissioner of Income Tax (Appeals). On further appeal filed by the assessee, the matter was referred to a Special Bench in view of the conflicting decisions of the Tribunal. Accordingly, a Special Bench of the ITAT was constituted for hearing the appeal filed by the assessee as also several other appeals involving similar issues. By the impugned judgment and order dated 06/04/2009, the Special Bench of the ITAT held that the deduction under Section 80IB(10) as it stood prior to its amendment by Finance (No.2) Act of 2004 with effect from 01/04/2005 would be available in the following cases:-

(a) Where the project consisting of residential units and commercial units is approved as a ‘housing project’ by the local authority, then irrespective of the percentage of the commercial user in the housing project, deduction under Section 80IB(10) would be allowable on the profits of the entire project;

(b) where the project is approved as residential plus commercial, the deduction under Section 80IB (10) would be allowable only if the total Built-up area used for residential units in the project is 90% or more;

(c) Where the commercial user is more than 10% of the total built-up area and the profits of the residential units can be worked out on stand alone basis, then deduction under Section 80IB(10) would be allowable only on the residential units;

Challenging the aforesaid decision of the Special Bench, the present appeal is filed by the Revenue.

7. We have heard Mr. Gupta and Mr. Ahuja, learned counsel for the revenue and Mr. Tralshawala, learned counsel for the respondents. We have also heard Mr. Inamdar, Mr. Pardiwala, learned senior Advocates and Mr. Jitendra Jain, Dr. K.Shivram, Mr. A.K.Jasani and Ms. Madhavi Tavanandi, learned advocates for intervenors.

8. The arguments advanced by the counsel for the Revenue can be summarised thus:-

(a) Section 80IB(10) as originally enacted allowed 100% deduction on the profits derived from the housing projects approved by a local authority subject to the conditions set out in the Section. It is only by amending Section 80IB(10) with effect from 1/4/2005 deduction is extended to housing projects having residential units with commercial units to the extent permitted therein. As the dispute in the present case relates to the period prior to 1-4-2005 the deduction can be allowed only if the housing project consists of residential units only. The project ‘Brahma Estate’ developed by the assessee consists of both the residential units and commercial units and, therefore, the assessee is not entitled to deduction under Section 80IB(10).

(b) Section 80IB(10) specifically allows deduction to a ‘housing project’, which obviously means a housing project consisting of residential units only. Section 80IB(10) as it stood prior to 1/4/2005 does not even remotely suggest that the deduction is intended to be given to housing projects consisting of both residential and commercial units. Therefore, the Tribunal was not justified in holding that the housing projects with commercial units upto 10% of the plot area are entitled to deduction under Section 80IB(10) of the Act.

(c) Since the expression ‘housing project’ in Section 80IB (10) is not defined, plain and literal meaning must be assigned to that expression. The expression ‘house’ ordinarily means a building for human habitation or occupation. Therefore, the expression ‘housing project’ would literally mean a project to construct dwelling units / residential units for human habitation. The Tribunal committed an error in construing the expression ‘housing project’ to mean a project for residential units including commercial units. Such a construction amounts to enlarging the scope of the expression ‘housing project’ which is impermissible in law. Relying on the decision of the Apex Court in the case of Orissa State Warehousing Corporation V/s. CIT reported in 237 I.T.R. 589, it is contended that the taxing statutes should be interpreted literally by giving natural and ordinary meaning to the words used in the statute. Meaning of the expression ‘housing project’ in Section 80IB(10) as it stood prior to 1/4/2005 being clear and unambiguous, the Tribunal was not justified in construing the words ‘housing project’ to mean a project having residential units as well as commercial units.

(d) The fact that the local authorities were approving the housing projects with the commercial units to the extent permissible under the respective development Control Rules cannot be a ground to hold that the legislature under Section 80IB(10) intended to extend the deduction to housing projects having commercial units. However, it is conceded by counsel for the revenue before the ITAT and also before this Court that where the projects are approved by the local authorities as ‘housing project’ with residential units and commercial units to the extent permissible under the Rules, then, deduction under Section 80IB(10) would be allowable on the entire project and where the project is approved as ‘residential plus commercial’, then deduction under Section 80IB(10) would not be allowable. As an alternative argument, it is contended that a project approved with residential units and convenient shopping may be considered a housing project, but a project approved as residential plus commercial cannot be considered as a housing project.

(e) Decision of the Tribunal that a project where 90% or more of the area is used for residential purposes and the commercial user is not more than 10% of the total area of the plot would constitute a housing project is wholly arbitrary and unreasonable as neither the language of Section 80IB(10) warrant such interpretation nor there is any basis for such interpretation.

(f) The fact that the legislature with effect from 1/4/2005 decided to extend the benefit of Section 80IB(10) to the projects having residential units plus commercial establishments to the extent permitted therein, clearly shows that till 1/4/2005 the benefit of Section 80IB(10) was not allowable to the projects having both residential units plus commercial units. The submission is that upto 1/4/2005 the legislature intended to allow deduction under Section 80IB(10) to housing projects consisting of only dwelling units / residential units and with effect from 1/4/2005 the legislature decided to extend the benefit of Section 80IB(10) to projects consisting of commercial establishments to the extent permitted by Section 80IB(10) as amended by Finance Act, 2004. Accordingly, counsel for the revenue submit that the decision of the ITAT in the case of Laukik Developers V/s. DCIT reported in (2007) 108 TTJ (Mum) 364 must be affirmed by holding that prior to 1/4/2005, projects approved as ‘residential plus commercial’ would not be eligible for deduction under Section 80IB(10) of the Act.

9. Counsel for the assessee as also counsel for the intervenors, on the other hand, supported the order passed by the Special Bench of the ITAT. They submit that prior to 1/4/2005 all projects approved by the local authorities permitting commercial user within the limits prescribed under the respective Development Control Rules must be held to be housing projects for the purposes of Section 80IB(10) of the Act. Accordingly, it is contended that it was not necessary for the ITAT to restrict the benefit of Section 80IB(10) to housing projects having commercial establishments upto 10% of the total area of the plot. However, counsel for the assessee / intervenors submit that 10% ceiling being reasonable and in almost all the cases before the Court the housing projects approved by the local authorities have commercial establishments less than 10% of the total area of the plot, the assessee’s have not challenged the decision of the ITAT. In the case of Brahma Estate, the housing project consists of 15 buildings which are exclusively meant for residential purposes and 2 commercial buildings which are exclusively meant for commercial purposes. Though the commercial user in the project Brahma Estate exceeds 10% of the total area of the plot, the Tribunal has allowed deduction under Section 80IB(10) by treating the 15 residential buildings as a independent housing project because profits from the 15 residential buildings could be ascertained and computed on stand alone basis. Being satisfied with the relief given to 15 buildings the assessee has chosen not to file any appeal claiming deduction on the entire project.

10. Dealing with the merits of the case, counsel for the assessee / intervenors contend that Section 80IB(10) does not define the expression ‘housing project’ but provides deduction to a housing project approved by a local authority. Therefore, if any local authority approves a project to be a housing project with commercial units to the extent permitted, then it would not be open to the income tax authorities to hold that such a project is not a housing project for the purposes of Section 80IB(10). Referring to Section 22, 54, 54F of the Income Tax Act and Section 2(ea) of the Wealth Tax Act, 1957 it is contended that if the term ‘house property’ could include premises used for commercial purposes, then, there is no reason as to why the expression ‘housing project’ should not include residential buildings with commercial establishments to the extent permitted under the Rules framed by the respective local authorities. They also rely on the CBDT circular dated 4/5/2001 wherein the Board has clarified that a project approved by a local authority as a housing project would qualify for deduction under Section 80IB(10).

11. We have carefully considered the rival submissions.

12. Initially Section 80IA(4F) read with Section 80IA(5)(vi) allowed 100% deduction on profits and gains derived by an undertaking engaged in developing and building housing projects approved by a local authority subject to the conditions set out therein. The object of granting 100% deduction was to promote house building activity so as to provide affordable dwelling units to a common man.

13. By Finance Act, 1999, entire Section 80IA was substituted by the newly introduced Section 80IA & 80IB which were on the lines of the existing Section 80IA but with certain modifications. The expression ‘housing project’ is not defined under the Act and, therefore, the dispute is whether the expression ‘housing projects’ in Section 80IB(10) applies to projects being commercial user or not. Clause (d) inserted to Section 80IB(10) with effect from 1/4/2005 provides that Section 80IB(10) deduction would be available where 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. By Finance Act, 2010 clause (d) is amended with effect from 1/4/2010. It provides that Section 80IB(10) deduction would be available where the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher.

14. Thus, the dispute in the present case is, whether deduction under Section 80IB(10) as it stood prior to 1/4/2005 is allowable to a housing project approved by a local authority with commercial user to the extent permitted under the development under the Development Control Rules framed by the local authority. For proper evaluation of the dispute, we quote hereinbelow relevant portion of Section 80IB(10) as it stood before 1/4/2005 and as modified with effect from 1/4/2005:-.

Section 80IB(10) [as it stood prior to 1/4/2005]

” (10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any 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;

(b) the project is on the size of a plot of land which has a minimum area of one acre; and

(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities 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. “

Section 80IB(10) [after amendment with effect from 1/4/2005]

” 10 The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2007] 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 —

(b)

(c)

(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];

As noted earlier, with effect from 1/4/2010, Section 80IB(10) deduction is allowable where the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet which is higher.

15. There is no dispute that the assessee fulfills all conditions of Section 80IB(10) as it stood prior to 1/4/2005. The only question is, since the project ‘Brahma Estate’ consists of 15 residential buildings and 2 commercial buildings, whether the said project can be said to be a ‘housing project’ under Section 80IB(10) of the Act, as it stood prior to 1/4/2005 ?

16. As noted earlier, the expression ‘housing project’ is not defined under the Act. However, Section 80IB(10) refers to the housing projects which are approved by the local authorities. Therefore, for the purposes of Section 80IB(10) which project should be treated as a housing project is left to the local authorities. The question, therefore, to be considered is, whether a local authority can approve a project to be a housing project with commercial establishments.

17. Development of every region is regulated by the concerned local authority in accordance with the Development Control Rules / Regulation framed by that local authority. The Development Control Rules / Regulations are framed by the local authority depending upon the needs of that region and hence differ from region to region. We have perused DC Rules framed by the authority at Pune and Mumbai. In both the cases, it is seen that the DC Rules framed by the local authorities do not define the expression ‘housing project’. Thus, the expression ‘housing project’ is neither defined under the Income Tax Act nor it is defined under the Development Control Rules / Regulation framed by the local authorities. Therefore, which project would qualify to be called as a housing project has to be gathered from the Rules / Regulation framed by the local authority.

18. In Mumbai, Municipal Corporation for Greater Mumbai is the local authority and the development projects in Mumbai are approved by the Municipal Corporation as per the Development Control Regulation of Greater Mumbai, 1991 (‘DC Regulation Mumbai’ for short). Similarly, in Pune, the Pune Municipal Corporation is the local authority and the development projects at Pune are approved as per the Development Control Rules for Pune Municipal Corporation, Pune, 1982 (‘DC Rules Pune’ for short).

19. Rule 2.56.1 of DC Rules Pune defines the expression ‘Residential Buildings’ as follows:-

” Residential Buildings – These shall include any building in which sleeping accommodation is provided for normal residential purposes with or without cooking or dining or both facilities. It includes one or two or multi-family dwellings, lodging or rooming houses, hostels, dormitories, apartment houses and flats, residential hotels and private garages . “

Thus, the DC Rules Pune permits commercial user in Residential Buildings.

20. Rule 13.6 of the DC Rules Pune provides that in the case of layouts or sub division of areas in residential and commercial zones, provision shall be made for convenient shopping. The size of the convenient shopping and categories of the convenient shopping are specified in that rule. The total area for convenient shopping permitted is not less than 2% but not exceeding 5% of the area of the plot. Rule M-1.1 in Appendix M to the DC Rules Pune provides for commercial user specified therein even in purely residential zone (R-1). Under Rule M-2.2 of Appendix M, a building or premises in residential zone (R-2) may be approved with convenient shopping and additional user for commercial purposes to the extent of 0.33 FSI in non congested area and not exceeding 0.50 FSI in congested area. Thus, under the DC Rules, Pune commercial user in a residential building by way of convenient shopping / ancillary use is permitted between 2% to 50% of the total area depending upon the location of the plot. Similarly, the DC Regulation of Gr. Mumbai, provides that in a residential building commercial user by way of convenient shopping / ancillary use could be between 5% to 50% of the total area.

21. Thus, on the date on which the legislature introduced 100% deduction under the Income Tax Act, 1961 on the profits derived from housing projects approved by a local authority, it was known that the local authorities could approve the projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective local authority. In other words, it was known that the local authorities could approve a housing project without or with commercial user to the extent permitted under the Development Control Rules. If the legislature intended to restrict the benefit of deduction only to the projects approved exclusively for residential purposes, then it would have stated so. However, the legislature has provided that Section 80IB(10) deduction is available to all the housing projects approved by a local authority. Since the local authorities could approve a project to be a housing project with or without the commercial user, it is evident that the legislature intended to allow Section 80IB(10) deduction to all the housing projects approved by a local authority without or with commercial user to the extent permitted under the DC Rules.

22. It is not in dispute that where a project is approved as a housing project without or with commercial user to the extent permitted under the Rules / Regulations, then, deduction under Section 80IB(10) would be allowable. In other words, if a project could be approved as a housing project having residential units with permissible commercial user, then it is not open to the income tax authorities to contend that the expression ‘housing project’ in Section 80IB(10) is applicable to projects having only residential units.

23. Once it is held that the local authorities could approve a project to be housing project without or with the commercial user to the extent permitted under the DC Rules, then the project approved with the permissible commercial user would be eligible for Section 80IB(10) deduction irrespective of the fact that the project is approved as ‘housing project’ or approved as ‘residential plus commercial’. In other words, where a project fulfills the criteria for being approved as a housing project, then deduction cannot be denied under Section 80IB(10) merely because the project is approved as ‘residential plus commercial’.

24. The fact that the deduction under Section 80IB(10) prior to 1/4/2005 was allowable on the profits derived from the housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under Section 80IB(10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view to make available large number of affordable houses to the common man and not with a view to deny commercial user in residential buildings. In other words, the restriction under Section 80IB(10) regarding the size of the residential unit would in no way curtail the powers of the local authority to approve a project with commercial user to the extent permitted under the DC Rules / Regulations. Therefore, the argument of the Revenue that the restriction on the size of the residential unit in Section 80IB(10) as it stood prior to 1/4/2005 is suggestive of the fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted.

25. The above conclusion is further fortified by Clause (d) to Section 80IB(10) inserted with effect from 1/4/2005. Clause (d) to Section 80IB(10) inserted w.e.f. 1/4/2005 provides that even though shops and commercial establishments are included in the housing project, deduction under Section 80IB(10) with effect from 1/4/2005 would be allowable where such commercial user does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet whichever is lower. By Finance Act, 2010, clause (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet whichever is higher. The expression ‘included’ in clause (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting clause (d) to Section 80IB(10) the legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules / Regulation were entitled to Section 80IB(10) deduction, with effect from 1/4/2005 such deduction would be subject to the restriction set out in clause (d) of Section 80IB(10). Therefore, the argument of the revenue that with effect from 1/4/2005 the legislature for the first time allowed Section 80IB(10) deduction to housing projects having commercial user cannot be accepted.

26. The alternative argument of the revenue is that the projects with convenient shopping could be considered as housing projects under Section 80IB(10) upto 1/4/2005. That argument is also without any merit, because, so long as the DC Rules permit convenient shopping as also other commercial user in a housing project, it would not be open to the income tax authorities to contend that the projects with convenient shopping alone could be considered as housing projects. In the present case, it is not in dispute that the project is approved for residential and commercial buildings as per the DC Rules, Pune. The fact that the residential buildings under the DC Rules can have commercial user upto 50% of the built-up area of the plot cannot be a ground to hold that the project is not a housing project. It is for the legislature to impose restrictions on commercial user in a project for the purposes of availing Section 80IB(10) deduction and that has been done by inserting clause (d) to Section 80IB(10) with effect from 1/4/2005. Therefore, the decision of the Tribunal in holding that a project with residential and commercial user to the extent permitted under DC Rules would be a housing project and hence eligible for deduction under Section 80IB(10) upto 31/3/2005 cannot be faulted.

27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction Section 80IB(10) on the entire project upto 1/4/2005. Once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user up to 10% of the plot area would alone be entitled to deduction under Section 80IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80IB(10) with effect from 1/4/2005. Therefore, it was not open to the Tribunal to hold that prior to 1/4/2005, projects having commercial user upto 10% of the plot area alone would be eligible for Section 80IB(10) deduction.

28. In the present case, though the commercial user is more than 10% of the plot area, the Tribunal has allowed Section 80IB(10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on stand alone basis. In our opinion that would not be proper, because, Section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in Section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to Section 80IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to Section 80IB(10) deduction on the profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb the decision of the Tribunal in restricting the Section 80IB(10) deduction only in respect of the profits derived from 15 residential buildings.

29. Lastly, the argument of the revenue that Section 80IB(10) as amended by inserting clause (d) with effect from 1/4/2005 should be applied retrospectively is also without any merit, because, firstly, clause (d) is specifically inserted with effect from 1/4/2005 and, therefore, that clause cannot be applied for the period prior to 1/4/2005. Secondly, clause (d) seeks deny Section 80IB(10) deduction to projects having commercial user beyond the limit prescribed under clause (d), even though such commercial user is approved by the local authority. Therefore, the restriction imposed under the Act for the first time with effect from 1/4/2005 cannot be applied restrospectively. Thirdly, it is not open to the revenue to contend on the one hand that Section 80IB(10) as it stood prior to 1/4/2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced with effect from 1/4/2005 should be applied restrospectively. The argument of the revenue is mutually contradictory and hence liable to be rejected. Thus, in our opinion, the Tribunal was justified in holding that clause (d) inserted to Section 80IB(10) with effect from 1/4/2005 is prospective and not retrospective and hence cannot be applied to the period prior to 1/4/2005.

30. In the result, the questions raised in the appeal are answered thus:-

a) Up to 31/3/2005 (subject to fulfilling other conditions), deduction under Section 80IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the DC Rules / Regulations framed by the respective local authority.

b) In such a case, where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules / Regulation, the deduction under Section 80IB(10) up to 31/3/2005 would be allowable irrespective of the fact that the project is approved as ‘housing project’ or ‘residential plus commercial’.

c) In the absence of any provisions under the Income Tax Act, the Tribunal was not justified in holding that up to 31/03/2005 deduction under Section 80IB(10) would be allowable to the projects approved by the local authority having residential building with commercial user up to 10% of the total built-up area of the plot.

d) Since deductions under Section 80IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting Section 80IB(10) deduction only to a part of the project. However, in the present case, since the assessee has accepted the decision of the Tribunal in allowing Section 80IB(10) deduction to a part of the project, we do not disturb the findings of the Tribunal in that behalf.

e) Clause (d) inserted to Section 80IB(10) with effect from 1/4/2005 is prospective and not retrospective and hence cannot be applied for the period prior to 1/4/2005.

The appeal is disposed off accordingly with no order as to costs.

(MRS. MRIDULA BHATKAR, J) (J.P. DEVADHAR, J.)

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