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In our considered opinion, reliance placed by the Revenue on clause (d) to sec. 80-IB(10) of the Act to defeat the assessee’s claim for deduction in the present case is quite misplaced. Firstly, the Hon’ble Bombay High Court in the case of Brahma Associates (supra) has laid down that the said provision is prospective and not retrospective in nature and therefore, it cannot be applied retrospectively. Further, the plea of the Revenue that only a pure housing project is eligible for deduction is also completely misplaced having regard to the judgment of Hon’ble Bombay High court in the case of Brahma Associates (supra).
Sub-rule (3) of rule 18DA itself provides the consequence of violation of sub-rule (2). As per sub-rule (3), if at any stage it is found that any provisions of the Act or the rules have been violated, the prescribed authority specified may withdraw the approval so granted. Therefore, if there is a violation of sub-rule (2), the prescribed authority has to take action against the assessee by withdrawing the approval.
We are not inclined to interfere with the finding of the CIT(A) because on account of violation of conditions prescribed under clause (ia) the implication u/s.40(a) would be that the said amount will not be deducted in computing income chargeable under the head ‘profits and gains of business or profession’. The same will form part of profits and gains of business or profession of the assessee which could be included along with income under all the other heads in the assessee’s gross total income.
As for the excess area constructed, as rightly held by the learned CIT(A), it is for the BBMP to look into the violations if any in the construction of the housing project. That however does not authorize the Assessing Officer to hold that the assessee has not got approval for the housing project OR that the conditions laid down in section 80IB (10) stated violated.
In the present case, therefore, the fact that the assessee had completed the construction well before 31st March, 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause (a) to section 80-IB(10) links the completion of the construction to the BU permission being granted by the local authority.
The ratio laid down by the Supreme Court in the case of Reliance Jute & Industries Ltd. v. CIT [1979] 120 ITR 921, squarely apply on the facts of the case as the assessee had not fulfilled the conditions precedent provided under section 80-IB(10)(d) as applicable from assessment year 2005-06.
It is settled position of law that where any issue is debatable, it cannot be corrected u/s 154 of the Act. In this regard, the Hon’ble Apex Court in the case of T.S. Balaram ITO v. Volkart Bros. [1971] 82 ITR 50 is relevant wherein an action taken by Assessing Officer u/s 154 of the Act was found to be illegal.
The first issue before us is whether the assessee is a developer and builder and, thus, entitled to deduction u/s. 80IB(10) qua the Sadguru Krupa Project, or only a Contractor and, thus, not so entitled. No argument, much less materials, has been advanced or adduced before us
S.80IB(3)(ii) provides for deduction to small scale industrial units engaged in manufacture or producing articles or things. S.80IB(14)(b) defines a small scale industrial undertaking, which is regarded as such under S.11B of the Industries(Development and Regulation) Act, 1951.
The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects.
