COMMISSIONER OF INCOME TAX Vs. SARKAR BUILDERS

JUDGEMENT

(1.) Leave granted.

(2.) No doubt the assessees/respondents in all these appeals are different and even assessment years are different. But the question of law which is raised by the Income Tax Authorities (hereinafter referred to as the 'Revenue') is identical. The assessees are subject to the jurisdiction of the different High Courts, all of whom had claimed the benefit of Section 80IB of the Income Tax Act ('Act' for short), namely, deduction in respect of profits and gains on the ground that their cases were covered by sub- section (10) of Section 80IB which provides for deduction of 100% of profits in the case of an undertaking developing and building housing projects when such profits are derived in the previous year relevant to any assessment year from such housing projects, provided the conditions contained in the said sub-section are satisfied. High Courts have taken the same view holding that these assessees would be entitled to the deduction under Section 80IB(10) of the Act. We may also point out at this stage itself that though Section 80IB has been on the statute book for quite some time, a new Section 80IB had been introduced by the Finance Act, 1999 w.e.f. 01.04.2000. All these cases are covered by the said Section, as introduced. However, insofar as sub-section (10) is concerned, with which we are directly concerned, there have been amendments in that provision from time to time. We are concerned with the amendment to the said sub-section carried out by Finance No.2 Act, 2004 w.e.f. 01.04.2005. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01.04.2005 when amended provision has come into operation. It is also not in dispute that the amendment is prospective in nature. Interestingly, when the housing project was approved by a local authority, which is the requirement under sub-section (10) of Section 80IB, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 01.04.2005 is not fulfilled. In this scenario, the question is as to whether the new conditions mentioned in the amended provision have also to be fulfilled only because the housing projects in question, though started before 01.04.2005, were completed after the said date. The question of law, that arises for discussion that needs to be answered is thus common in all these appeals and can be formulated as under:

(3.) As pointed out above, sub-section (10) stipulates certain conditions which are to be satisfied in order to avail the benefit of the said provision. Further, it is also clear that the benefit is available to those undertakings which are developing and building 'housing projects' approved by a local authority. Thus, this Section is applicable in respect of housing projects and not commercial projects. At the same time, we are conscious of the fact that even in the housing projects, there would be some area for commercial purposes as certain shops and commercial establishments are needed even in a housing projects. That has been judicially recognised while interpreting the provision that existed before 01.04.2005 and there was no limit fixed in Section 80IB(10) regarding the built-up area to be used for commercial purpose in the said housing project. As would be noticed later, the extent to which such commercial area could be constructed was as per the local laws under which local authority gave the sanction to the housing project. However, vide clause (d), which was inserted by the aforesaid amendment and made effective from 01.04.2005, it was stipulated that the built-up area of the shops and other commercial establishments in the housing projects would not exceed 5% of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less (there is a further amendment whereby 5% is reduced to 3% and instead of the words "2000 sq. feet whichever is less" the words "5000 sq. feet, whichever is higher" have been substituted. However, we are not concerned with this amendment).The question, thus, that arises for consideration is as to whether in respect of those housing projects which finished on or after 01.04.2005, though sanctioned and started much earlier, the aforesaid stipulation contained in clause (d) also has to be satisfied. All the High Courts have held that since this amendment is prospective and has come into effect from 01.04.2005, this condition would not apply to those housing projects which had been sanctioned and started earlier even if they finished after 01.04.2005.