Income Tax Appellate Tribunal - Mumbai
Ito 3(2)(4), Mumbai vs Omega Investment & Properties Ltd., ... on 9 April, 2018
आयकर अपीऱीय अधिकरण "C" न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपीऱ सं./I.T.A. No.868/Mum/2016
(नििाारण वर्ा / Assessment Year: 2007 -08)
ITO-3(2)(4), बिाम/ M/s. Omega Investment &
Room No. 673, 6 t h Floor, Properties Ltd.,
Aayakar Bhavan, M.K. Marg v. 34-B, Jolly Maker
Mumbai 400020
Chambers No. 2,
Nari man Point,
Mumbai 400021
स्थायी ऱेखा सं ./ PAN : AAACO0978L
(अपीऱाथी /Appellant) .. (प्रत्यथी / Respondent)
Revenue by : Shri. Rajat Mittal (DR)
Assessee by: Shri. Rakesh Joshi
सन
ु वाई की तारीख /Date of Hearin g : 18-01-2018
घोषणा की तारीख /Date of Pronouncement : 09-04-2018
आदे श / ORDER
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the Revenue, being ITA No. 868/Mum/2016 for assessment year 2007-08 is directed against the appellate order dated 30.11.2015 passed by learned Commissioner of Income-tax (Appeals)-8, Mumbai (hereinafter called "the CIT(A)") for assessment year 2007-08, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 07.03.2014 passed by learned Assessing Officer (hereinafter called "the AO") u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called "the Act").
2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:-
1. "Whether on the facts of the case and in law, the Ld. CIT (A) was right in quashing the order passed u/s 143(3) r.w.s 147 of I.T. Act I.T.A. No.868/Mum/2016 holding that the reopening of the assessment u1s 147 was bad in law as it was a clear case of change of opinion."
2. "On the facts and circumstances of the case the Ld.CIT (A) erred in ignoring the fact that there was no change of opinion as the matter was not examined in the proceedings u/s 143(3) of I.T. Act and the material on record proved that there was escapement of income as such the claim of assessee for the deduction u/s 80IB (10) was allowed without examination."
3. "Whether on the facts of the case and in law the Ld. CIT (A) was right in allowing the claim of the assessee of deduction u/s 80IB(10) of Rs.2,05,33,831/- in respect of Slum Rehabilitation Project (SRA) ignoring the fact that project was approved prior to 1.04.2004 and was not eligible for deduction u1s 80IB(10) as per the notification of CBDT no.67 dated 03.08.2010 read with corrigendum vide notification no.2 of 2011.
4. "The appellant prays that the order of CIT CA) on the above ground be set aside and that of the Assessing Officer be restored."
5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
3. The brief facts of the case are that the assessee was in the business of building and developing and also trading in shares and securities . During the course of assessment proceedings for the assessment year 2009-10 carried out by AO u/s. 143(3) r.w.s 143(2), the AO observed that the assessee has claimed deduction u/s. 80IB(10) amounting to Rs. 1,03,79,815/- for AY 2009-10 in respect of profits derived from development of residential building at Parel, Mumbai, in the name and style of "Kingston Tower" . The project was approved by Slum Rehabilitation Authority(SRA) of the Maharashtra State. On perusal of auditors report , the AO observed that the assessee has completed 67% of the project at Parel as on 31.03.2009 . It was observed by the AO that as per Clause (a) to section 80IB(10), where a house project has been approved by local authority on or before 1st April, 2004, it should have been completed construction of the project on or before 31st March, 2008. The AO observed that the construction project of the assessee was approved by Slum Rehabilitation Authority on 07.10.2002 and the Commencement Certificate was issued on 31.03.2003. Thus , it was observed by the AO that the project was approved prior to 1st day of April 2004, and as per Notification of CBDT no. 67 dated 03.08.2010 read with Corrigendum vide Notification no. 2 of 2011 of the CBDT, the project of the 2 I.T.A. No.868/Mum/2016 assessee did not fall within the period of approval mentioned in the said notification dated 03.08.2010. The AO , therefore while finalising assessment for AY 2009-10 held that the assessee has not satisfied condition as laid down in Clause (a) to section 80IB(10) and hence the AO disallowed the claim of the assessee for deduction u/s. 80IB(10) amounting to Rs. 1,03,79,815/- for AY 2009-10.
The AO having the said incriminating information in his possession for AY 2009-10 , proceeded to reopen the assessment for AY 2007-08 u/s. 147 of the Act, as the AO had reasons to believe that income of the assesseee has escaped assessment to the extent of the claim of the deduction u/s. 80IB of the Act filed by the assessee in its return of income for AY 2007-08 amounting to Rs. 2,05,33,831/- and the same needed to be withdrawn. Notice u/s. 148 was issued by the AO on 17.12.2012 after recording reasons for reopening of the concluded assessment u/s 147 of the 1961 Act. The AO also obtained necessary approval from learned Commissioner of Income Tax before reopening the concluded assessment u/s 147. The reasons for reopening of the concluded assessment u/s 147 were provided by the AO to the assessee . The assessee submitted before the AO on 25.10.2013 that the original return of income filed may be treated as return of income in response to notice u/s. 148 . The assessee objected to the reopening of the assessment and made submissions before the AO on 18.12.2013 . The objections of the assessee were disposed of by the AO vide letter dated 27.12.2013. The AO observed that during FY 2006-07 relevant to the impugned AY 2007-08 , the project was incomplete . It was observed by the AO that the assessee project at Parel,Mumbai was approved by Slum Rehabilitation Authority on 07.10.2002 and the commencement certificate was issued on 31.03.2003. Thus, the AO observed that the project was approved prior to 1st day of April of 2004, and hence the project did not fall within the notification of the CBDT no. 67 dated 31.08.2010 read with Corrigendum vide notification no. 2 of 2011 by CBDT. The assessee claimed that the project was initially approved by Slum Rehabilitation Authority(SRA) on 07.10.2002 but final approval for the amended plan was granted on 04.06.2004 i.e. after 01.04.2004. It was observed by the AO that revised approval obtained by the assessee from SRA is of no consequence as the first approval was obtained on 07.10.2002 which is prior to 01.04.2004 . The 3 I.T.A. No.868/Mum/2016 AO also observed that the commencement certificate for the project was granted by SRA on 31.03.2003 which is also prior to 01.04.2004 and hence it was observed by the AO that the claim of the assessee for deduction u/s. 80IB(10) is not allowable and is liable to be withdrawn. The AO observed that the assessee has admitted that the project was completed 64% as on 31-03- 2007 and upto 67% as on 31-03-2008. The AO observed that the CBDT notification dated 03.08.2010(paragraph 2) states that it shall come into force w.e.f. date of its publication i.e. from 03-08-2010 . The project of the assessee was approved by SRA on 07-10-2002 which was prior to publication of the notification and the assessee was asked to explain as to how the assessee is entitled for waiver of clause(a) and (b) of Section 80IB(10). The assessee in response submitted as under:
― The assessee submits that if any project is declared within scheme framed by the central government or state government for slum Rehabilitation then rigorous of clause (a) and (b) will not apply for such project . Further, provision of clause 80IB(10)a(i) relating to approval of the project is also not applicable for slum project.‖ The AO observed that as per corrigendum issued by CBDT, the notification dated 3rd August 2010 referred to by the assessee company during the assessment proceeding for AY 2009-10 shall be deemed to apply to construction projects approved by local authority under the scheme on or after 1st day of April, 2004 and before 31st Day of March 2008. The AO observed that construction project of the assessee at Parel , Mumbai was approved by SRA on 07-10-2002 and the commencement certificate was issued on 31-03-2003 and thus the project was approved prior to 1st day of April 2004. The AO relied upon explanation to Clause (a) of Section 80IB (10) and observed that project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. Thus , the AO observed that clause(a) and (b) of section 80IB(10) is applicable in the instant case as the assessee has not complied with term & condition as the assessee project admittedly has not been completed before 31st March 2008, which led to the addition to tune of Rs.
2,05,33,831/- as the claim of deduction u/s. 80IB (10) stood withdrawn. The contention of the assessee to accept revised project submitted on 28/04/2004 and approval by SRA of the revised project on 04/06/2004 as 4 I.T.A. No.868/Mum/2016 date of approval was rejected by the AO, vide assessment order dated 07-03- 2014 passed u/s 143(3) r.w.s. 147 of the 1961 Act.
5. Aggrieved by the assessment order dated 07-03-2014 passed by the AO u/s 143(3) r.w.s. 147 of the 1961 Act, the assessee came in appeal before the learned CIT-A and the learned CIT-A granted relief to the assessee by holding as under:-
"5. DECISION 5.1 I have given due consideration to the facts of the case and the contentions of the appellant. It is noted that the instant case has its origin in the assessment order u/s 143(3) for A.Y. 2009-10 wherein the AO had disallowed appellant's claim u/s 80lB (10) for the first time. The instant assessment year 2007-08 had already been assessed u/s. 143(3) of the Income Tax Act,1961 was passed by the Assessing Officer on 15.05.2009 accepting the returned income as Assessed income. It was only due to the assessment proceedings for A.Y. 2009-10 that this case has been reopened u/s.143(3) of the Income Tax Act,1961 was passed by the Assessing Officer on 15.05.2009 accepting the returned income as Assessed income.
5.2 Ground 1 5.2.1 This ground challenges the validity of reopening of the assessment u/s 147 of the Act, it is noted that in his order u/s 143(3) rws 147 of the Act dt. 07.03.2014, the AO has himself stated in para 4 that the assessment is being reopened based on the decision of the AO in AY 2009-10 that-the appellant was not entitled to deduction u/s 801B. He has not mentioned anything about any new tangible material that came to his knowledge that would lead him to have reasons to believe that income has escaped assessment.
5.2.2 The fact remains that the instant year had already been assessed u/s 143(3) wherein the claim of the assessee had been scrutinized and the returned income accepted. It was only after the AO decided not to allow the deduction u/s 80IB for AY 2009-10 that the AO in the instant case changed his opinion about the admissibility of the claim in AY 2007-08 and issued notice u/s 147. The order of the AO u/s 143(3) rws 147 does not reveal any other justification or logic.
5.2.3 I have given due consideration to the contention of the appellant on this ground of appeal and also referred to the decisions cited by them. Inter alia, the decision of the jurisdictional Hon'ble High Court of Bombay in Purity Techtextile (P) Ltd. vs. ACIT & Anr. (2010) 325 ITR 459 (Bom.) applies in full force to the appellant's case.
5.2.4 The power of the Assessing Officer to reopen the assessment is quite vast in its realm. One of the most important aspects under section 147 is that Reopening of Assessment under section 147 cannot be made on a "Mere Change of Opinion". This position is supported by a 5 I.T.A. No.868/Mum/2016 plethora of judicial decisions both from the jurisdictional legal for a as well as from other jurisdictions.
5.2.5 Recently in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/ 187 Taxman 312 (SC) affirming CIT v. Kelvinator of India Ltd. [2002] 2561TR 1/123 Taxman 433 (Delhi) (FB)] J. Kapadia held that the concept of 'change of opinion' must be treated as an in-built test to check abuse of power by the Assessing Officer and that the reasons must have a live link with formation of belief. Important excerpt of the decision is reproduced hereunder:
"However, one needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer."
5.2.6 In the Kelvinator's judgment the true meaning of the phrase 'Reason to Believe' was also explained. 'Change of opinion' rebuts the formation of 'Reason to believe' which is the crux. If there is "Change of opinion" it is essentially a Review which cannot be done as it is a separate statutory process.
5.2.7 The Bombay High Court in the case of M.J. Pharmaceuticals Ltd. v. Dy.CIT [2008] 297 ITR 119/ 167 Taxman 136 held that reassessment proceedings based on change of opinion are not valid. Issue regarding addition of amount of deferred taxation for computing book profits under section 115JB having been raised by the Assessing Officer at the time of original assessment under section 143(3), and no addition having been made by the Assessing Officer on the account on being satisfied with the explanation of the assessee, reopening of assessment on the very same issue suffered from change of opinion in the absence of any fresh material hence, invalid.
5.2.8 It was held in CIT v. Former France [2003] 264 ITR 566 / 129 Taxman (SC) that reopening of an assessment on mere change of opinion is bad in law has been held in CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC) that when the primary facts necessary for assessment are fully and truly disclosed, the ITO will not be entitled on change of 6 I.T.A. No.868/Mum/2016 opinion to commence proceedings for reassessment. Similarly, if he has raised a wrong legal inference from the facts disclosed, he will not, on that account, be competent to commence reassessment proceedings. Similar view was taken in ITO v. Nawab Mir Barkat Ali Khan Bahadur [1974] 97 ITR 239 (SC) where the Hon'ble Apex Court held that having second thoughts on the same material, and omission to draw the correct legal presumption during original assessment do not warrant the initiation of a proceeding under section 147.
5.2.9 Where a deduction has been considered and allowed, subsequent withdrawal of same under section 148 amounts to change of opinion. Notice under section 148 is not valid - CIT v. Chakiat Agencies (P.) Ltd. [2009] 314 ITR 200 (Mad.); Cartini India Ltd. v. Addl. CIT [2009] 314 ITR 275/179 Taxman 157 (Bom.); Pan Drugs Ltd. v. DCIT[2009] 121 TTJ 81 (Ahd.) 5.2.10 In view of the unequivocal stance of the jurisdictional High Court of Bombay and in line with the judicial view across jurisdictions, I find that in the instant case the AO has reopened the assessment on change of opinion and decided to disallow a deduction earlier claimed by the appellant, scrutinized by the AO and allowed in original assessment order u/s 143(3) of the Act. Therefore, I find that reopening of the assessment for AY 2007-08 was not justified. Respectfully following the decisions of Hon'ble High Court of Bombay, this ground of appeal is allowed.
ALLOWED 5.3 Ground 2 & 3 5.3.1 These grounds pertain to the substantive issue of appellant's claim of deduction u/s 80IB of the Income Tax Act, 1961. As stated above, the instant reassessment has its genesis in the order u/s 143(3) for AY 2009-10. I find that the claim has been examined and adjudicated upon by my Ld. Predecessor in his appellate order CIT -(A)- 4/IT -57/ITO 3(2}(4)/2011-12 dt. 30.11.2012. After examining the facts and considering the contentions of the appellant, my Ld. Predecessor has concluded in para 6.2 of his order:
Therefore, respectfully following the decision of Hon'ble ITAT, Mumbai in the case of Asha Kashiprasad Ringshia, the assessee is allowed deduction u/s 80IB(10) of Income-tax Act because the provisions of clause (a) and (b) of sub-section 80/B(10) regarding start and completion of project are not applicable to the case of the assessee, in view of proviso below clause (b) to sub-section 80IB(10), because the claim relates to a Slum Rehabilitation Project. In result, the grounds of appeal ere allowed.
5.3.2 Since the facts of AY 2009-10 are identical to those for the current year, I find no reason to differ from the decision of my Ld. Predecessor as quoted above Therefore, the claim of deduction u/s. 80IB (10) of the Income Tax Act, 1961 amounting to Rs.2,05,33,831/- is allowed. This ground of appeal is allowed.
ALLOWED‖ 7 I.T.A. No.868/Mum/2016 In nutshell the learned CIT-A allowed the relief to the assessee on the ground of reopening of the assessment wherein the reopening was quashed and also on merit the claim of the assessee was allowed by learned CIT(A) by following the appellate orders of learned CIT(A) for AY 2009-10, vide appellate order dated 30-11-2015 .
6. Aggrieved by the appellate order dated 30-11-2015 passed by learned CIT(A), the Revenue has come in an appeal before the tribunal.
7. Heard both the parties and perused the material on record including orders of the authorities and cited case laws. We have observed that the assessee is in the business of building and developing and also trading in shares and securities . The assessee has claimed deduction u/s. 80IB(10) in respect of profits derived from development of residential building at Parel, Mumbai, in the name and style of "Kingston Tower" . The project was approved by Slum Rehabilitation Authority(SRA) of the Maharashtra State on 7th October 2002 and the commencement certificate was issued on 31 st March 2003. The final approval for the amended plan was granted by SRA on 04.06.2004. The assessee has admittedly completed 64% of this project as on 31-03-2006 , 67% of the project at Parel as on 31-03-2008 and also 67% of the project was completed as on 31.03.2009 . Thus, it is undisputed that the first approval of this Residential Project located at Parel, Mumbai was granted by SRA before 01-04-2004 and project could not be completed before 31-03-2008. This information came into possession of the AO during the course of assessment proceedings conducted for AY 2009-10 which led to reopening of the concluded assessment for AY 2007-08 u/s 147 of the 1961 Act. The AO disallowed the entire claim of deduction u/s 80IB which was later allowed by learned CIT(A) both on merits as well on re-opening of the concluded assessment u/s 147 of the 1961 Act.
It is important at this stage to refer to the provisions of Section 80IB(10), which are reproduced hereunder:
"Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
**** **** 8 I.T.A. No.868/Mum/2016 [(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,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority.
Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city 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; and
(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.] ― Thus, as per provisions of Section 80IB , the relevant date of approval is the date when the project was first approved by local authority as per 9 I.T.A. No.868/Mum/2016 explanation (i) to clause (a) to Section 80IB(10) . In the instant case, the project was first approved by SRA on 07.10.2002 and commencement certificate was received on 31-03-2003 which are prior to 01-04-2004 and hence that shall be deemed to be the relevant dates and hence the project ought to be completed by the assessee by 31-03-2008 which is not been done in the instant case as only 67% of the project was admittedly complete by 31-03-2008 . The proviso after clause(b) to Section 80IB(10) carries non obstante clause which stipulates that nothing contained in clause(a) and (b) to Section 80IB(10) shall apply to housing project provided housing project is carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf. The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010. This notification was further clarified by the CBDT in Notification no.2 of 2011 dated 5th January 2011, wherein it was provided that:--
"In the notification of the Govt. of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number S.O. 1898(E), dated the 3rd August, 2010 (2010) 233 CTR (ST.) 56 2010) 43 DTR (St.) 8] published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), dated the 3rd August, 2010, in paragraph 2 for "This notification shall come into force with effect from the date of its publication", read "This notification shall be deemed to apply to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards."
Thus, on careful perusal of the above notifications it would reveal that although notification were issued on 3-08-2010 which was later clarified further on 5-01-2011 by CBDT which carried a deeming fiction that the benefit of deduction u/s 80IB(10) shall be extended to eligible projects which are approved on or after 01-04-2004 , and before 31-03-2008 . The lawmakers had in statute vide Section 10 I.T.A. No.868/Mum/2016 80IB(10) had clearly inserted proviso after clause (b) to Section 80IB(10) which carried non obstante clause granting exemption from rigors of clause(a) and(b) to Section 80IB(10) with the express condition that housing project should be carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in area declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf. Thus, the tax-payer were expressly put to notice at the first instance by the Legislature itself in the statute that the benefit of deduction u/s 80IC from the income and consequently foregoing of Revenue/tax by Government will be done , even if conditions as stipulated in clause
(a) and (b) to Section 80IB(10) are not met provided housing project for slum rehabilitation is undertaken in accordance with scheme framed by Government and said scheme is notified by the Board. The Board has notified the scheme in the State of Maharashtra for slum rehabilitation provided the project is approved by local authority(SRA) on or after 01-04-2004 but before 31-03-2008. In the instant case before us the project of the assessee is approved prior to 01-04-2004 and hence the assessee will not be entitled for exemption from the rigors of clause(a) and clause(b) of Section 80IB(10) and consequently the assessee will not be entitled for deduction u/s 80IB(10) as its project was first approved prior to 01-04-2004. Whence the Parliament while enacting statute has clearly stipulated in provisions of Section 80IB(10) that deduction shall be available subject to certain conditions, it becomes absolutely essential that those conditions are met as Revenue is foregone by Government by way of granting deduction u/s 80IB(10) based on fulfillment of certain conditions which were required to be essentially fulfilled before any deduction can be allowed u/s 80IB(10) and one of the conditions, inter-alia, was that scheme is approved for slum rehabilitation/redevelopment by local authority on or after 01-04-2004, but before 31-03-2008 which came by way of CBDT notifications and it was very much mandated in 11 I.T.A. No.868/Mum/2016 the statute itself by way of proviso after clause (b) to Section 80IB(10) that the project has to comply with said notification issued by CBDT to get out of rigors of clause(a) and (b) to Section 80IB(10). There is no equity in tax laws and provisions of taxing statute are to be strictly construed and if the subject falls within the four corners of the taxing- statute, he must be taxed howsoever the harsh consequences might be. The exemption provisions are to be firstly strictly construed to see the eligibility of the tax-payer to get the exemption/deduction, but once the assessee establishes its eligibility to the exemption/deduction within the framework of the statute, then the exemption /deduction provisions are to be construed liberally to give effect to the intended benefit of the provision as mandated by legislature. In the instant case, the intended benefit is to grant deduction of profits of approved housing projects from the taxability to encourage development of housing for which Revenue/taxes are slated to be foregone by the Government as mandated in statute in Section 80IB(10) of the 1961 Act for which the tax-payer is required to meet the conditions stipulated of eligibility of claiming deduction u/s 80IB(10) for becoming entitled for deduction u/s 80IB(10). At this juncture we would like to refer to judgment of Hon'ble Supreme Court in the case of Joshi Technologies International Inc. v. UOI in Civil Appeal No. 6929 of 2012 , dated 14-05-2015, the relevant extracts are reproduced hereunder:
―37) Answer to question No. (i) - First and foremost aspect which has to be kept in mind while answering this issue is that the Income Tax Authorities while making assessment of income of any assessee have to apply the provisions of the Income Tax Act and make assessment accordingly. Translating this as general proposition contextually, what we intend to convey is that the Assessing Officer is supposed to focus on Section 42 of the Act on the basis of which he is to decide as to whether deductions mentioned in the said provision are admissible to the assessee who is claiming those deductions. In other words, the Assessing Officer is supposed to find out as to whether the assessee fulfills the eligibility conditions 12 I.T.A. No.868/Mum/2016 in the said provision to be entitled to such deductions. We have already reproduced the language of Section 42, which deals with special provisions of deductions in the case of business for prospecting, etc. for mineral oil. Since, the appellant herein, in its income tax returns for the assessment year in question, i.e., Assessment Year 2005-06, had claimed the deductions mentioned in Section 42(1)(b) and (c) of the Act, we should take note of the nature of these deductions. Section 42(1)
(b) provides for deductions of expenditure incurred in respect of drilling or exploration activities or services or in respect of physical assets used in that connection, except for those assets on which allowance for depreciation is admissible under Section 32. Section 42(1)(c) speaks of allowances pertaining to the depletion of mineral oil in the mining area. In order to be eligible to the deductions, certain conditions are stipulated in this very section which have to be satisfied by the assessees. As is clear from the reading of this Section, these conditions are as under:
(a) it grants such special allowances to those assessees who carry on business in association with the Central Government or with any person authorized by it;
(b) business should relate to prospecting for, extracting or producing mineral oils, petroleum or natural gas;
(c) there has to be an agreement in writing between the Central Government and the assessees in this behalf;
(d) it is also a requirement that such an agreement has been laid on the Table of each House of Parliament;
(e) the allowances which are claimed are to be necessarily specified in the agreement entered into between the two contracting parties; and
(f) allowances are to be computed and made in the manner specified in the agreement.
38) From the nature of allowances specified in this provision, it is clear that such allowances are otherwise inadmissible on general principles, for e.g. allowances relating to diminution or exhaustion of wasting capital assets or allowances in respect of expenditure which would be regarded as on capital account on the ground that it brings an asset of enduring benefit into existence or constitutes initial expenditure incurred in setting up the profit earning machinery in motion. It is for this reason this Section itself clarifies that the provisions of this Act would be deemed to have been modified to the extent necessary 13 I.T.A. No.868/Mum/2016 to give effect to the terms of the agreement, as otherwise, the other provisions of the Act specifically deny such deductions. A fortiorari, the PSC entered into between the parties becomes an independent accounting regime and its provisions prevail over generally accepted principles of accounting that are used for ascertaining taxable income (See - Commissioner of Income Tax, Dehradun & Anr. v.
Enron Oil and Gas India Limited7 ). Thus, by virtue of this Section, it is the PSC which governs the field as without it, such deductions are not permissible under the Act. IF PSC also does not contain any stipulation providing for such allowances, the Assessing Officer would be unable to give the benefit of these deductions to the assesee.
39) We would also like to point out, at this juncture itself, that this Court held in CIT v. Enron Expat Service Inc.that the mere fact that the assessee had offered to pay tax under Section 44 (BB) of the Act in some of the earlier years will not operate as an estoppel to claim the benefit of Double Taxation Avoidance Agreement (DTAA), where the assessee operates under the same PSC which was before the Court. While holding so, the Court had followed its earlier judgment in the case of Enron Oil and Gas India Limited (Supra).
40) In the present case, it is an admitted fact that conditions mentioned in Section 42 of the Act are not fulfilled. In the two PSCs, no provision is made for making admissible the aforesaid allowances to the assessee. It is obvious that the Assessing Officer could not have granted these allowances/deductions to the assessee in the absence of such stipulations, a mandatory requirement, in the PSCs.
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46) The matter is, however, compounded by certain acts of respondent no. 1 and made complex to some extent by the Income Tax Authorities in giving benefit of these allowances/deductions under Section 42 of the Act to the appellant under these very PSCs in respect of earlier assessment years. Further, this very state of affairs continued for few years insofar as giving such a benefit by the Income Tax Authorities is concerned it may not pose a serious problem. We have already held above that on proper construction of the provisions of Section 42 of the Act and application of these provisions to the instant case, the appellant was not entitled to any such deductions under 14 I.T.A. No.868/Mum/2016 the PSCs. Thus, when in law no such deduction was permissible as per the PSCs in the present form, even if such deduction was given wrongly in the earlier years that would not amount to a wrong act on the part of the Income Tax Authorities and, therefore, would not enure to the benefit of the appellant in the Assessment Year in question as well. The appellant cannot say that merely because this benefit is extended in the previous years; albeit wrongly, this wrong act should continue to perpetuate. There is no estoppel against law. We have taken note of the judgment of this Court in Enron Expat Service Inc. (Supra) where the assessee had offered to pay tax under Section 44(BB) of the Act in the earlier years wrongly and the Court held that it would not operate as an estoppel to claim the benefit of DTAA for the Assessment Year in question when it was found that the assessee was otherwise entitled to it. Same principle applies, though it is a converse situation where assessee has not offered to pay tax wrongly [which was the situation in Enron Expat Service Inc. (Supra)] and instead the tax authorities have extended the benefit wrongly to the assessee.‖ The assessee in the instant case did not meet the required conditions as proviso is not applicable to its project as the project was approved by SRA prior to 01-04-2004 and its project could not be completed prior to 31-03-2008 and consequently no deduction u/s 80IB(10) can be allowed to the assessee with respect to profit of this residential project developed by assessee at Parel, Mumbai. The similar view has been taken by co-ordinate benches of the tribunal in the case of Bhavya Construction v. ACIT reported in (2017) 77 taxmann.com 66(Mum-trib). The said decision is reproduced in succeeding para of this order. The tangible and material incriminating information came in possession of the AO during the course of assessment proceedings conducted by the AO for AY 2009-10 that the assessee did not meet the conditions stipulated for claiming deduction u/s 80IB(10) but still the same were claimed by the assessee for AY 2007-08, which led to reopening of the concluded assessment for the impugned assessment year 2007-08 u/s 147 of the 1961 Act. There is no estoppel against law and any view which is adopted by the AO in original assessment proceedings which is in contravention of the law is not sustainable will 15 I.T.A. No.868/Mum/2016 fall within rigors of Section 147/148 as the AO cannot form any opinion which is contrary to the express provisions of law and hence the instant case is covered within rigors of Section 147/148 of the 1961 Act as the view adopted by the AO was perverse and contrary to the provisions of Section 80IB(10), as there could not be two different views on this issue and hence there can be no question of change of opinion by the AO. Any view adopted by the AO which is contrary to the provisions of law will give rise to an occasion for Revenue to reopen the concluded assessment within rigors of Section 147/148 as the income had escaped assessment due to perverse view contrary to law adopted by the AO in original assessment. Hence reopening of the concluded assessment u/s 147 in the instant case before us is considered to be valid as also on merits , the assessee claim for deduction u/s 80IB(10) deserves to be rejected and the appeal of the Revenue stood allowed.
Reference is drawn to Mumbai tribunal decision in the case of Bhavya Construction v. ACIT reported in (2017) 77 taxman.com 66 (Mumbai- trib.), wherein the tribunal has elaborated deliberated and discussed this issue in details as under:-
"2.6 Before coming to any conclusion we are reproducing hereunder the relevant portion from the provision of section 80IB(10) of the Act for ready reference and analysis:--
"80IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings:--
(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section.
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16
I.T.A. No.868/Mum/2016
(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 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,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 but not later than the 31st day of March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority;
(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.
Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of
(ii) such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five 17 I.T.A. No.868/Mum/2016
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;
(d) 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;
(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and
(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:--
(i) the individual or the spouse or the minor children of such individual,
(ii) the Hindu undivided family in which such individual is the karta,
(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.
Explanation.--For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)."
2.7 It is noticed that section 80IB(10)(a)(i) of the Act lays down that where the housing project has been approved by the local authorities before the 1st day of April 2004 and the Explanation has clarified that:--
18I.T.A. No.868/Mum/2016 2 such housing project is issued by the local authority. .
8 We find that the Slum Rehabilitation Authority, vide communication No. SRA/Ch.E/101/H.E/PLILOI, dated 10/07/1998 (page No. 9 to 14 of the paper book) considered the proposal of the assessee and principally approved the same with certain conditions as enumerated therein. Commencement Certificate for building No. C-2 was issued to the assessee on 29/06/2002 (page No. 19 of the paper book) subject to condition enumerated in communication dated 10/07/1998 (supra). Full occupation certificate for Rehabilitation of building No. A was issued to the assessee on 27/01/2001. Full occupancy certificate for building No. C-1 was issued on 02/06/2003 and for building No. B was issued on 27/04/2004. Full occupation permission for sale of building No.C-2 was issued on 17/01/2008 (No.SRA/Eng/ 731/HE/PL/AP/OCC).
2.9 Under the aforementioned facts, now we shall deal with the legal position and objections raised in the impugned order. One of the objections raised by the Ld. Commissioner of Income Tax (Appeals) is that the plot of land on which rehabilitation was done by the assessee is less than one acre. The stand of the Department is that minimum one acre land is required for getting the benefit of deduction. However, we note that as per amendment by the Finance Act (No.2) 2004, w.e.f. 01/04/2005, a proviso was added to the said section, wherein, the condition of one acre was relaxed in the cases of metros like Delhi or Mumbai for practical reason. The Legislature put the condition that such relaxation will be available to those projects which are approved by the local authorities under the Slum Rehabilitation Scheme and notified by the Board. The project of the assessee is with respect to slum development and the intention of the Legislature is to extend the benefit of deduction under section 80IB(10) of the Act to the projects approved by the SRA, of course, subject to fulfillment of other conditions. The project of the assessee was completed before 31/03/2008. The Budget Speech of the Hon'ble Finance Minister on the floor of the house while introducing Finance Bill 2004 on introduction of relaxation of condition of minimum one acre of plot size for slum rehabilitation and redevelopment is reproduced below:
"110. A small problem has plagued the reconstruction and development of existing buildings under approved plans in the city of Mumbai. Perhaps the problem is there in some other cities too. I, therefore, propose to relax the condition of minimum plot size of one acre in the case of housing projects, as long as the projects are implemented in accordance with a scheme for reconstruction or development approved by the Central or State Government."19
I.T.A. No.868/Mum/2016 2.10 Notes on Clauses on the Finance Bill 2004 are reproduced hereunder:--
"Under the existing provisions contained in sub-section (10), hundred per cent, deduction of the profits of an undertaking developing and building housing projects is allowed if the housing project is approved by a local authority before the 31st March, 2005 subject to the conditions specified in clauses (a) to (c) of the said sub-section. The existing provisions of the said sub-section provides that (a) the undertaking should have commenced development of the housing project after the 1st day of October, 1998, (b) the project should be on a size of a plot of land which has a minimum area of one acre, and (c) the residential unit should have a maximum built-up area of one thousand square feet where such residential units is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place.
Sub-clause (d) seeks to substitute sub-section (10) of the said section so as to provide, inter alia, a hundred per cent, deduction of the profits derived by an undertaking developing and building housing projects approved by a local authority before 31st March, 2007 instead of 31st March, 2005 under the existing provisions, subject to the conditions that (a) such undertaking has commenced or commences development and construction of the housing project on or after 1st October, 1998 and completes the construction within four years, from the end of the financial year in which the housing project is approved by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre except in the case of a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings, and such scheme is notified by the Board in this behalf; (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; and (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. It is further proposed to insert an Explanation in clause (a) of the proposed sub-section (10) so as to provide that the date of approval shall be the date on which the building plan of the said project is first approved by the local authority in case where the approval in respect of the same is obtained more than once and also to provide that the date of completion of construction shall 20 I.T.A. No.868/Mum/2016 be the date on which the completion certificate is issued by the local authority."
The conjoint reading of the Section and the notes on clauses along with Speech of Hon'ble Finance Minister on the floor of the house makes the intention of the legislature clear that relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre shall also apply to the existing approved projects provided other conditions as mandated by Section 80IB(10) of the Act are fulfilled. Thus, the said relaxation granted to slum rehabilitation and redevelopment projects in City of Mumbai/Delhi for being developed on plot size of less than one acre is curative in nature and is intended to remove unintended hardship caused to the approved projects in the city of Mumbai/Delhi where there is shortage of land and the approved project sizes are less than one acre and such relaxation shall apply to existing approved projects also, provided other conditions being fulfilled to remove the un- intended hardship faced by these projects in city of Mumbai/Delhi.
2.11 From the plain reading of section 80IB(10) of the Act it would be seen that the condition precedent for availing the deduction under section 80IB(10), has been given in clauses (a) and (b). On these conditions, rider has been put by the proviso which starts with a kind of non-obstante clause that "nothing contained in clauses (a) and (b) shall apply" to a housing project which has been carried out in accordance with the scheme framed by the Central Govt. or State Govt. for re-construction or re-development in areas to be slum under any law and it further provides that such a scheme should be notified by the Board in this behalf. Thus, an exception has been carved out by the proviso in cases of housing project development in slum area under a Govt. scheme and overrides the condition mentioned in clauses (a) and (b). The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010. This notification was further clarified by the CBDT in Notification no.2 of 2011 dated 5th January 2011, wherein it was provided that:--
"In the notification of the Govt. of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number S.O. 1898(E), dated the 3rd August, 2010 (2010) 233 CTR (ST.) 56 2010) 43 DTR (St.) 8] published in the Gazette of India, Extraordinary, Part-II, section 3, sub-
section (ii), dated the 3rd August, 2010, in paragraph 2 for "This notification shall come into force with effect from the date of its publication", read "This notification shall be deemed to apply to projects approved by a local authority 21 I.T.A. No.868/Mum/2016 under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards."
2.12 Thus, the rigours of Section 80IB(10) were relaxed by the introduction of proviso by Finance Act, 2004 wherein conditions as stipulated in clause (a) and (b) shall not be applicable provided the slum rehabilitation project is approved by Central or State Government and the same is notified by the Board. The notification issued by the Board dated 5th January 2011 clearly stipulates that the benefit of Section 80IB(10) shall be available to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards. There is no equity in tax legislation and the exemption provisions are to be strictly construed at the first stage to establish the eligibility of the tax-payer for the benefit of exemption and once the tax-payer establishes its entitlement to the exemption, then exemption provisions are to be liberally construed to give the full intended benefit to the tax-payer so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. 2.13 The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt J. in his classic statement in Cape Brandy Syndicate v. I.R.C. [1921] 1 KB 64 : "In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used." If the revenue satisfied the court that the case falls strictly within the provisions of the law, the subject can be taxed.
A taxing statute is to be strictly construed. The well- established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means: "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words". (Ref : Micklethwait [1885] 11 Ex 452, p. 456, referred to in Tenant v. Smith [1892] AC 150, St. Aubyn v. A.G. [1951] 2 All ER 473, Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd. AIR 1989 22 I.T.A. No.868/Mum/2016 SC 611, Saraswati Sugar Mills v. Haryana State Board AIR 1992 SC 224. In a classic passage LORD CAIRNS stated the principle thus: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute".
(Ref: Partington v. A.G. [1869] LR 4 HL 100, in IRC v. Duke of Westminster [1936] AC 1 (HL); Bank of Chettinad v. CIT AIR 1940 PC 183, Potts' Executors v. IRC [1951] 1 All ER 76, A.V. Fernandez v. State of Kerala AIR 1957 SC 657; CIT v. M & G Stores AIR 1968 SC 200; J.K. Steel Ltd. v. Union of India AIR 1970 SC 1173, Ransom (Inspector of Taxes) v. Higgs [1974] 3 All ER 949. See further Hansraj & Sons v. State of Jammu & KashmirAIR 2002 SC 2692, Geo Miller and Co. (P.) Ltd. v. State of M.P. AIR 2004 SC 3552, Government of Andhra Pradesh v. Laxmi Devi [2008] 4 SCC 720.
VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." (Ref: Cape Brandy Syndicate (supra); referred to in Canadian Eagle Oil Co. Ltd. v. R. (1945) 2 All ER 499; Gursahai v. CIT AIR 1963 SC 1062; Banarsi Debi v. ITO AIR 1964 SC 1742, CCE v. ACER India Ltd. [2004] 8 SCC 173, CIT v. Firm Muar AIR 1965 SC 1216, CIT v. Shahzadanand & Sons AIR 1966 SC 1342; Janapada Sabha v. Central Provinces Syndicate AIR 1971 SC 57; Owen Thomas Mangin v. IRC [1971] 2 WLR 39, Controller of Estate Dutyv. Kantilal Trikamlal AIR 1976 SC 1935; Tarulata Syam v. CIT AIR 1977 SC 1802; Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution (supra); Aphali Pharmaceuticals Ltd. v. State of MaharashtraAIR 1989 SC 2227; Goodyear India Ltd. v. State of Haryana AIR 1990 SC 781; Sutlej Cotton Mills Ltd. v. CIT AIR 1991 SC 218; Saraswati Sugar Mills (supra); Oswal Agro Mills Ltd. v. Collector of Central Excise AIR 1993 SC 2288; Calcutta Jute Mfg. Co. v. CTO AIR 23 I.T.A. No.868/Mum/2016 1997 SC 2920; Orissa State Warehousing Corpn. v. CIT AIR 1999 SC 1388;Federation of Andhra Pradesh Chamber of Commerce and Industry v. State of Andhra Pradesh AIR 2000 SC 2905; CCEv. Kisan Sahkari Chinni Mills Lid. [2001] 6 SCC 697; Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/132 Taxman 373 (SC).
Relying upon this passage LORD UPJOHN said: "fiscal measures are not built upon any theory of taxation. (Ref: Commissioner of Customs v. Top Ten Promotions [1969] 3 All ER 39.
The above passage stating the principle of strict construction of taxing statutes was quoted with approval in CIT v. Kasturi & Sons JT 1999 (2) SC 272 where the word 'moneys' in the expression 'moneys payable' in section 41(2) of the Income-tax Act, 1961 was not construed to include 'money's worth'.
In fiscal legislation a transaction cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy". (Ref: IRC (supra); Bank of Chittinad (supra); Potts' Executors (supra); A.V. Fernandez (supra); CIT v. Keshavlal AIR 1965 SC 866; M & G Stores (supra), Jt. CTO v. YMA Madras AIR 1970 SC 1212; Europa Oil (NZ) Ltd. v. Inland Revenue Commissioner [1976] 1 All ER 503, (Legal rights arising from a transaction and not its economic results are material); Gujarat State Financial Corpn. v. Natson Mfg. Co. Ltd. AIR 1978 SC 1765; Andhra Pradesh Rayons Ltd. (supra), Mathuram Agrawal v. State of Madhya Pradesh, AIR 2000 SC 109. See further Hansraj & Sons v. State of Jammu & Kashmir AIR 2002 SC 2692; Commissioner of Central Excise v. ACER India Ltd. (supra). In refuting the doctrine of 'the substance of the matter' LORD TOMLIN observed:
"It is said that in revenue cases there is a doctrine that the court may ignore the legal position and regard what is called 'the substance of the matter'. This supposed doctrine seems to rest for its support upon a misunderstanding of language used income in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting 'the uncertain and crooked cord of discretion' for 'the golden and straight metwand of the law'." (Ref: IRC v. Duke of Westminster, supra, referred to in Pott's Executors v. IRC, supra, p. 80 (LORD NORMAND); CIT, Gujarat v. B.M. Kharwar, AIR 1969 SC 812 : (1969) 1 SCR 651; J.K. Steel Ltd. v. Union of India, supra, p. 1192; CIT, Calcutta v. G. Arbuthnot & Co., AIR 1973 SC 989, p. 995 : (1973) 5 SCC Tax 359 : (1973) 3 SCC 845; Commrs. of Customs v. Top Ten Promotions, (1969) 3 All ER 39, p. 90 (HL); Ransom (Inspector of Taxes) v. Higgs, (1974) 3 All ER 949, p. 970 (HL). See further 24 I.T.A. No.868/Mum/2016 Hansraj and Sons v. State of Jammu & Kashmir, AIR 2002 SC 2692, pp. 2698, 2699 : (2002) 6 SCC 227; Commissioner of Central Excise Pondicherry v. ACER India Ltd., (2004) 8 SCC 173, p. 184 : (2004) 8 JT 53)."
In the same case LORD WRIGHT pointed out that "the true nature of the legal obligation "arising out of a genuine transaction" and nothing else is the substance". Duke of Westminster, (supra). The above principle which is known as Duke of Westminster principle is subject to the new approach of the courts towards tax evasion schemes consisting of a series of transactions or a composite transaction." In interpreting a section in a taxing statute, according to LORD SIMONDS, "the question is not at what transaction the section is according to some alleged general purpose aimed, but what transaction its language according to its natural meaning fairly and squarely hits." (Ref: St. Aubyn (LM) (supra). See further ACER India Ltd. (supra) pp. 183, 184). LORD SIMONDS call this "the one and only proper test." It is, therefore, not the function of a court of law to give to words a strained and unnatural meaning to cover loopholes through which the evasive tax- payer may find escape or to tax transactions which, had the Legislature thought of them, would have been covered by appropriate words. (Ref: IRC(supra); See further W.M. Cory & Sons Ltd. (supra), where LORD REID said:
"The words of a taxing Act must never be stretched against a tax- payer. There is a very good reason for that rule. So long as one adheres to the natural meaning for the charging words the law is certain, or at least as certain as it is possible to make it, but if courts are to give to Charging words what is sometimes called a liberal construction who can say just how far this will go. It is much better that evasion should be met by amending legislation.") As stated by LORD SIMON:
"It may seem hard that a cunningly advised tax-payer should be able to avoid what appears to be his equitable share of the general fiscal burden and cast it on the shoulders of his fellow citizens. But for the courts to try to stretch the law to meet hard cases (whether the hardship appears to bear on the individual tax-payer or on the general body of tax-payers as represented by the Inland Revenue) is not merely to make bad law but to run the risk of subverting the rule of law itself. The same rule applies even if the object of the enactment is to frustrate legitimate tax avoidance devices for moral precepts are not applicable to the interpretation of revenue statutes." (Ref: Ransom (Inspector of Taxes) v. Higgs [1974] 3 All ER 949, p. 969 (HL). Owen Thomas Mangin (supra).
It may thus be taken as maxim of tax law, which although not to be overstressed ought not to be forgotten that, "the subject is not to be 25 I.T.A. No.868/Mum/2016 taxed unless the words of the taxing statute unambiguously impose the tax on him." (Ref: Russel v. Scott [1948] 2 All ER 1, p. 5 (HL), (LORD SIMONDS); Mathuram Agrawal (supra). The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. (Ref: Ormond Investment Co. v. Betts [1928] AC 143 :
Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. (Ref: Mapp v. Oram [1969] 3 All ER 215, pp. 222, 223 (HL); State Bank of Travancore v. CIT[1986] 2 SCC 11.
It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect." (Ref: IRC v. Ross and Coulter [1948] 1 All ER 616; referred to in Gursahai Saigal v. CIT AIR 1963 SC 1062. The Supreme Court has enunciated in similar words the principle of interpretation of taxing laws.
BHAGWATI, J. stated the principle as follows:
"In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter."
SHAH, J., has formulated the principle thus:
"In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency."
The Hon'ble Supreme Court decision in the case of Joshi Technologies Inc. v. UOI [2015] 374 ITR 322/232 Taxman 201/57 taxmann.com 290 has followed principles of strict interpretation of taxing statute by observing as under:
"70. Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the 26 I.T.A. No.868/Mum/2016 view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded.
71. As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. The appellant is presumed to have knowledge of the legal provision, namely, in the absence of such a clause, special allowances under Section 42 would be impermissible. Still it signed the contract without such a clause, with open eyes. No doubt, the appellant claimed these deductions in its income tax returns and it was even allowed these deductions by the Income Tax Authorities. Further, no doubt, on this premise, it shared the profits with the Government as well. However, this conduct of the appellant or even the respondents, was outside the scope of the contract and that by itself may not give any right to the appellant to claim a relief in the nature of Mandamus to direct the Government to incorporate such a clause in the contract, in the face of the specific provisions in the contract to the contrary as noted above, particularly, Article 32 thereof. It was purely a contractual matter with no element of public law involved thereunder.
72. Having considered the matter in the aforesaid prospective, we come to the irresistible conclusion that the appellant is not entitled to the relief claimed. Though it may be somewhat harsh on the appellant when it availed the benefit of Section 42 for few years and acted on the understanding that such a benefit would be given to it, but we have no option but to hold that PSCs did not provide for this benefit to be given to the appellant and the contract can be amended only if both the parties agree to do so, and not otherwise. Therefore, we are constrained to dismiss the appeal for the reasons given above."
2.14 Thus as discussed in details in preceding para's of this order , the rigours of Section 80IB(10) were relaxed by the introduction of proviso by Finance Act, 2004 wherein conditions as stipulated in clause
(a) and (b) shall not be applicable provided the slum rehabilitation project is approved by Central or State Government and the same is notified by the Board. The notification issued by the Board dated 5th January 2011 clearly stipulates that the benefit of Section 80IB(10) shall be available to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, thereby making the incomes arising from such projects eligible for deduction under sub section (10) of section 80IB from the assessment year 2005-06 onwards. There is no equity in tax legislation and the exemption provisions are to be strictly construed 27 I.T.A. No.868/Mum/2016 wherein the assessee has to establish at the first stage the eligibility for the benefit of deduction u/s 80IB(10) of the Act in accordance with the provision of the statute and once the assessee establishes its entitlement to the said deduction, then deduction provisions are to be liberally construed to give the full intended benefit of Section 80IB(10) of the Act to the assessee so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. Considering the factual matrix and the judicial precedent discussed hereinabove , we are of the view that the proviso introduced by Finance Act , 2004 clearly grant relief to slum redevelopment or reconstruction projects which are approved by Central Government or State Government and the scheme is notified by the Board. The Board Notification clearly stipulate that benefit shall be granted to the projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, while in the case of the assessee the projects are approved prior to 1st day of April 2004 as set out above in preceding para's, and the assessee is not able to establish its entitlement to deduction u/s 80IB(10) of the Act at the first stage itself for reason cited above. Thus, the contention of the assessee cannot be accepted and hence are rejected. We order accordingly.
Resultantly, both the appeals of the assessee are dismissed.‖ The assessee has relied on the decision of the tribunal in its own case for AY 2010-11 which has mainly followed the decision for AY 2009-10, we have observed that in these appeals the assessee has contended that date of approval of the project by SRA is 04-06-2004 which is the basis on which learned CIT(A) as well tribunal proceeded , while fact of the matter is that the date of first approval of the project by SRA is 07-10-2002 and it is only the final approval by SRA to the amended project which was granted on 04-06- 2004, and as per explanation(i) to clause (a) to Section 80IB(10) , it is the date of first approval by authorities of the project which is relevant and not the subsequent amended date. CBDT vide its notification no. 67 dated 31- 08-2010 which was later clarified vide notification no. 2 of 2011 had mandated grant of benefit u/s 80IB(10) to slum rehabilitation / redevelopment project which were approved on or after 01-04-2004 but by local authority , and before 31st March 2008 . The said explanation is reproduced is hereunder:
―Explanation.--For the purposes of this clause,--28
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(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;"
The relevant extract of the tribunal order in ITA No.997/Mum/2013 for AY 2009-10 , vide orders dated 05-08-2014 is reproduced hereunder:
―5. We have heard both the parties and perused the orders of the Revenue authorities as well the relevant material before us. After hearing both the parties and on perusal of the CIT(A)'s order, we find the CIT(A) has given the finding categorically by holding that the project is a Slump Rehabilitation Project and the time limit provided in the statute will not be applicable to the assessee in view of the proviso to Section 80IB(10), The contents of para 6.1 of the impugned order are relevant and the same read as under:
―6.1 Therefore, from the proviso below clause (b) of sub-section 80IB(10), it is clear that if any project is declared within the scheme framed by Central Government or State from Slum Rehabilitation /Redevelopment, then rigors of clause (a) and (b) will not apply to such projects. There is no denial of the fact that the project of the assessee has been approved as Slum Rehabilitation Project by Slum Rehabilitation Authority of Maharashtra State and the approval has been given on 4.6.2004, therefore , it is clearly covered by the proviso below clause(b) of sub-section 80IB(10),.........."
The above order was followed by tribunal in ITA no. 6645/Mum/2014 for AY 2010-11, vide orders dated 30-05-2016. Thus, in view of the major error which crept in the orders for AY 2009-10 and AY 2010-11 wherein the learned CIT(A) and tribunal proceeded on the belief that the project was approved by SRA on 04-06-2004 which was a wrong belief instead of correct date of approval of the project by SRA on 07-11-2002 and the said error goes to the root of the matter to decide this controversy because CBDT vide its notification no. 67 dated 31-08-2010 which was later clarified vide notification no. 2 of 2011 had mandated grant of benefit u/s 80IB(10) to slum rehabilitation / redevelopment project which were approved on or after 01-04-2004 but by local authority , and before 31st March 2008, thus no benefit could be allowed to projects approved prior to 01 st April 2004 , the 29 I.T.A. No.868/Mum/2016 said error/mistake cannot be allowed to be perpetuated as there is no heroism in perpetuating the mistake is a cardinal principle of jurisprudence.
The assessee also referred to the decision of the Hon'ble Bombay High Court in the case of ITO v. Asha Kashirprasad Ringshia in ITA no. 229/2014 wherein the Revenue did not challenge the appellate order of the tribunal in ITA no. 2901/Mum/2011 dated 12.09.2012 for AY 2007-08, while the Revenue came in appeal against the order passed by tribunal dated 10-05- 2013 in Miscellaneous application (MA) in MA no. 750/Mum/2012 arising out of ITA no. 2901/Mum/2011 for AY 2007-08 , wherein the Hon'ble Bombay High Court has held as under:-
" 3. Undisputedly, the period to file an appeal from the order dated 12th September, 2012 expired long before the Tribunal disposed of the respondent assessee's rectification application by an order dated 10th May, 2013. As the appellant has no grievance with regard to the order dated 10th May, 2013, it cannot use the same to challenge the order dated 12th September, 2012 which it had originally accepted.‖ The plea of the assessee is that once the order of the tribunal in the case of Asha Kashirprasad Ringshia (supra) in ITA no. 2901/Mum/2011 dated 12.09.2012 has attained finality as Revenue did not challenge the main order rather went in appeal against MA order which stood dismissed by Hon'ble Bombay High Court as the Revenue never challenged the main order of the tribunal, this issue has attained finality as it creates a bar for the Revenue to agitate this issue again in future with respect to all tax-payers. We are afraid that this contention of the assessee cannot be accepted in view of the recent decision of the Hon'ble Supreme Court in the case of CIT v. Goodwill Theatres Private Limited in Civil Appeal No. 19944/2017 (SLP(C) no. 6404/2017 orders dated 29-11-2017 wherein Hon'ble Supreme Court has held that in case Revenue appeal is dismissed in one case before Hon'ble High Court on technical ground , it will not debar Revenue from agitating the same issue in another appeal before the Hon'ble High Court and the Hon'ble High Court is bound to decide the issue on merits, the said judgment is reproduced hereunder :
―Heard learned counsel for the parties and perused the impugned judgment and order dated 06.06.2016 passed by the High Court of Judicature at Bombay in Income Tax 30 I.T.A. No.868/Mum/2016 Appeal No.2356 of 2013 whereby the High Court has dismissed the appeal preferred by the appellant herein only on the ground that the decision relied upon by the Tribunal i.e. in the case of Narang Overseas Pvt. Ltd. v. ACIT, Mumbai - (2008) 111 ITD 1 (Mum) (SB)], the appeal was preferred before the High Court and for non-removal of the defects the appeal has been dismissed. We are of the considered opinion that this was not a correct approach of the High Court for the simple reason that merely because one authority has followed its own decision in another case and that matter in appeal has been dismissed on technical grounds still the High Court has to decide the question on merits.
Therefore, we set aside the impugned judgment and order passed by the High Court and remand the matter back to the High Court for deciding the same on merits expeditiously and in accordance with law. The Civil Appeal is disposed of in the above terms.‖ Thus, in view of our detailed discussions and reasoning as set out above, we have no hesitation in holding that the assessee is not entitled for deduction u/s 80IB(10) of the 1961 Act w.r.t. its residential project at Parel,Mumbai and the appeal of the Revenue is allowed. The Revenue succeeds in this appeal. We order accordingly.
8. In the Result appeal of the Revenue is allowed.
Order pronounced in the open court on 09.04.2018 आदे श की घोषणा खुऱे न्यायाऱय में ददनांकः 09.04.2018 को की गई ।
Sd/- Sd/-
(MAHAVIR SINGH ) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, dated: 09.04.2018
Nishant Verma
Sr. Private Secretary
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copy to...
1. The appellant
2. The Respondent
3. The CIT(A) - Concerned, Mumbai
4. The CIT- Concerned, Mumbai
5. The DR Bench
6. Master File
// Tue copy//
BY ORDER
DY/ASSTT. REGISTRAR
ITAT, MUMBAI
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