COMMISSIONER OF INCOME TAX Vs. G.R. DEVELOPERS

JUDGEMENT

(1.) The assessee is carrying on the business in real estate, development construction and sale of apartments. The assessee obtained approval for building housing project in an area of 1 acre 14 guntas of land in Kanakapura Road. The approved housing project included construction of commercial building. The assessee has built 84 apartments. The commercial building was also constructed within the super built up area of 17,600 sq. ft. The approval of project was granted on June 14, 2002. The construction had to be completed on or before June 14, 2006. The assessee claimed 100 per cent. exemption from payment of income-tax in respect of the residential flats. A survey under section 133A of the Income-tax Act, 1961 (for short hereinafter referred to as "the Act") was carried out on November 24, 2005, to verify whether the assessee-firm satisfied all the conditions laid down under the provisions of section 80-IB(10) of the Act. In the course of survey. It was noticed that the construction of the residential flats at G.R. Grand Residency and the commercial complex in the said complex was undertaken with many deviations from the sanctioned plan and that the assessee-firm had contravened the provisions of section 80-IB(10) of the Act. The said deviations are set out. Further, it was noticed that the sanctioned plan provided for 84 units and a swimming pool was at the centre, open to sky but as per the actual construction, one of the units was replaced by the swimming pool resulting in 83 units, as certified by the principal architect of the assessee, Shri K.V. Harsha Babu, on January 6, 2006. It was also noticed that the project called G.R. Grand Residency also contains some flats with pent houses on the third floor. In the said pent houses, a room was, constructed on the terrace, which was called as head rooms. It was noticed that these head rooms were constructed in similar design with spiral staircases with the same type of materials, designs and colours. It was further found that these constructions were constructed with the help of the engineers of the assessee with the materials supplied by such purchasers and payments were made separately in addition to the costs of the flat as per the sale deed. The total built up area of many top floor flats with head rooms far exceeds the limit of 1,500 sq. ft. The said head rooms were the integral part of the housing project. The assessee contended that as the construction of the head rooms were made by the purchasers, the said construction cannot be taken into account to find out whether the each unit is within the limit of 1,500 sq. ft. Similarly, the space occupied by the balcony also should be excluded as per the National Building Code, as it does not fall within the definition of built up area. If these two things are excluded all the 84 flats would be within the 1,500 sq. ft., and, therefore, the assessee is entitled to the benefit under section 80-IB. However, the assessee did not claim the benefit in respect of the commercial construction. The Assessing Officer held that as all these head rooms is so unique in style and design with spiral staircase and exactly the same material with the same colour, if the purchaser has constructed the same, such a similarity would not have been there. Therefore, he recorded a finding that the assessee has constructed these head rooms though in the registered sale deed it is not a part of it. The assessing authority held that there are considerable deviations and violations in the construction of the housing project compared to the sanctioned plan and several flats with the built up area far in excess of 1,500 sq. ft. and the housing project cannot strictly come within the purview of a housing project as envisaged in section 80-IB(10) and, therefore, the assessee is not entitled to the benefit of section 80-IB(10) of the Act. Aggrieved by the said order, the assessee preferred an appeal to the Appellate Commissioner, who upheld the said order. Aggrieved by the same, the assessee preferred an appeal before the Tribunal. The Tribunal by setting aside the aforesaid orders held that the material on record does not establish the fact that several flats were built up in an excess area of 1,500 sq. ft. to deny the legitimate claim of the assessee. The municipal authorities have not pointed out the alleged excess built up area of such flats while giving the occupancy certificate. Merely because these head rooms were identical, no inference could be drawn that the said construction is put up by the assessee. The purchasers of the said fiats would have engaged the same masons and the engineer who were working with the assessee for the construction of the said flats. When once the occupation certificate is issued by the municipal authorities being satisfied with the construction put up and held that the same is in accordance with the sanctioned plan and, thereafter, if construction are put up by the owners of the building, the assessee cannot be held responsible. The provision of section 80-IB(14)(a) cannot be interpreted with retrospective effect so as to deny the benefit of section 80-IB(10) to the assessee. It was further held that a housing project approved by a local authority may include a commercial building also and, therefore, the conditions prescribed under section 80-IB(10) is satisfied and the assessee is entitled to the benefit and, therefore, the appeal was allowed granting benefit to the assessee. Aggrieved by the said order, the Revenue is in appeal. This appeal was admitted on December 14, 2010, to consider the following substantial questions of law:

(2.) From the aforesaid material, it is clear that the assessee obtained approval for building housing project on June 14, 2002, and has built 84 flats in an area, which is in excess of one acre of land. The construction is completed within the period stipulated. 84 flats, according to the assessee, is within the 1,500 sq. ft. The material on record discloses that a head-room is constructed. The head room is not included in the sale deed. The local authority, after construction of the building, inspected the same and has granted the occupancy certificate. Therefore, the construction put up by the assessee prima facie can be said to be as per the sanctioned plan. If after issue of the occupancy certificate and after sale of these residential flats, if the owners of these flats on the top floor decided to put up a head room and engaged the very same contractor and the engineer may have put up the identical structures, it cannot be said that the assessee has put up the said construction and, thus, contravened the requirement of section 80-IB. The material on record does not disclose that the assessee put up the said construction prior to the sale of those flats and excluded the said construction in the sale deed with an intention of getting the benefit of section 80-IB(10).

(3.) The question is whether the definition of "built up area" as inserted by the Finance (No. 2) Act of 2004 with effect from April 1, 2005, is prospective or retrospective in nature. The said provision reads as under: