Income Tax Appellate Tribunal - Mumbai
M/S.S.K.Ventures, Mumbai vs Income Tax Officer Ward-2(4), Kalyan on 5 March, 2019
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IN THE INCOME TAX APPELL ATE TRIBUNAL "G" BENCH, MUMB AI
BEFORE SRI MAHAVIR SINGH, JM AND SRI M BALAGENSH, AM
Aayakr ApIla saM
sa M . / ITA No.1248/Mum/2018
(inaQa- a rNa baYa- / Assessment Year 2013-14)
M/s. S.K.Ventures, 2 n d floor, ITO, W ard 2(4), Kalyan
Mohanplaza, W ayle Nagar,
Vs.
Khadakpad, Kalyan (W ),
Kalyan
(ApIlaaqaI
ApIlaaqaI- / Appellant) .. (p`p`%yaqaaI
%yaqaaI- / Respondent)
%yaqaa
PAN No. AADAS 2607 K
Revenue by : Shri Choudhary Arun Kumar
Singh
Assessee by : Shri Devendra Jain
Date of hearing: 5.3.2019 Date of pronouncement : 5-03-2019
AadoSa / O R D E R
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-3, Mumbai [in short CIT(A)], in appeal No. 10146-THN/16-17 dated 20.1.2017. The Assessment was framed by the Assistant Commissioner of Income Tax, Ward 2(4), Kalyan (in short 'ITO, Kalyan') for the A.Y. 2013-14 vide order dated 30.3.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act'). 2
I TA N o.1248/M um/20 18 Assessment Year 2012-13
2. At the outset, it is noticed that the appeal is barred by limitation by 334 days. The assessee has filed condonation petition supported b y affidavit of one of the members of AOP for condoning the delay giving reasons. The facts are that the CIT(A) passed the appellate order for the assessm ent year 2013-14, the year under consideration, on 20.1.2017 and claimed to have received by the assessee in the first week of February, 2017. The assessee in its petition stated that it was under im pression that further appellate proceedings before the Tribunal are being carried in co-ordination with the regular C.A. Shri Hitesh Gala and Advocate Shri Prakash C Ahuja. The assessee contended that the assessment proceedings for assessment year 2015-16 were com pleted by the Assessing Officer under section.143(3) vide order dated 27.12.2017, which was received before 31.12.2017 and during this process, the assessee came to know that no appeal was filed against the appellate order of the CIT(A) f or assessment year 2013-14. After this, the CA Shri Devendra H Jain was consulted for appeal proceedings and he advised to file the appeal immediately before the ITAT for assessment year 2013-14 alongwith filing of appeal before the CIT(A) for assessment year 2015-16. It was contended that the assessee has not received proper professional guidance at that stage and they were under impression that ITAT proceedings were jointly handled by CA Hitesh Gala and Advocate Prakash Ahuja and they m ay have filed appeal before the ITAT. Due to the wrong advice or wrong professional guidance, the assessee could 3 I TA N o.1248/M um/20 18 Assessment Year 2012-13 not file appeal within the statutory tim e limit of 60 days against the order of the CIT(A) before the Tribunal and hence there was delay of 334 days. Ld Counsel for the assessee ref erred to the affidavit filed by the mem ber of AOP of S.K.Ventures dated 28.2.2018, wherein, the entire facts are narrated. In view of above fact, ld Counsel for the assessee Shri Devendra H Jain argued that due to wrong professional guidance, the assessee could not file appeal in time and this constitute reasonable cause.
3. On the other hand, ld Sr Departm ental Representative heavil y opposed the condonation of delay.
4. After considering the submissions of both parties and also the petition for condoning the delay, we noticed that there is a fault on the part of earlier CA of the assessee Shri Hitesh Gala, who has not guided the assessee in a professional manner. Once this is the position, no fault can be attributable to the assessee for the delay. Even otherwise, the assessee will not gain anything out of the appeal being get delayed and hence, we condone the delay and admit the appeal for hearing.
5. The only issue in this appeal is against the order of the CIT(A) in sustaining the applicability of provisions of section 115 JC of the Act disregarding the fact that the housing project undertaken by the assessee has been approved prior to the date of introduction of the provisions of section 115 JC of the Act and also com pletion 4 I TA N o.1248/M um/20 18 Assessment Year 2012-13 of the project. For this, the assessee has raised the following ground:
" In the facts and circumstances of the case and in law, the ld CIT(A) erred in sustaining the applicability of the provisions of section 115JC in case of the assessee disregarding the fact that the housing project undertaken by the assessee has been approved prior to the date of introduction of the provision of section 115JC of the Act."
6. Briefly stated facts are that in this case the assessee AOP filed the original return of income by way of e-filing vide dated 30.9.2013 and subsequently the return was revised by e-filing on 31.3.2015. This return has been processed under section 143(1) of the Act and subsequently, the assessment was com pleted under section.143(3) of the Act vide order dated 30.3.2016 by accepting the returned income except making of disallowance of non paym ent of MVAT and service tax under section.43B of the Act. The deduction claim ed under Chapter VIA under section 80IB(10) in respect of housing project nam ely; KIrishna Regenc y at Kalyan was accepted amounting to ₹6,54,91,914/- but the Assessing Officer invoked the provisions of section 115 JC of the Act and adjusted total income and charged alternate minim um tax in accordance with this provisions, which was confirm ed in first appeal.
7. Ld Counsel for the assessee now before us stated that the assessee is challenging only limited issue i.e applicability of provisions of section 115 JC of the Act to the assessee for the relevant assessm ent year 2013-14. Ld Counsel for the assessee explained that the provisions of section 115 JC of the Act was made 5 I TA N o.1248/M um/20 18 Assessment Year 2012-13 applicable to certain persons other than a company by the Finance Act (No.2) with effect from 1.4.2013. Ld Counsel explained that in the project i.e. Krishna Regency, the assessee has claim ed deduction 80IB(10), as the same was started in April, 2007 and was com pleted in March, 2012. Ld Counsel for the assessee referred to pages 19 to 21 of assessee's paper book, wherein, com pletion certificate of the project is enclosed at pages 19 to 21 of PB and English translation at pages 20-21. Ld Counsel for the assessee drew our attention to pages 20 & 21 of PB, wherein, building com pletion certificate issued by Kalyan Dombivli Muncipal Corporation Town Planning Department is enclosed. This com pletion certificate is dated 31.3.2012. Ld Counsel stated that the provisions of section 115 JC was made applicable to certain persons other than a com pany by substituting limited liability partnership by the Finance Act (No.2) with effect from 1.4.2013 and the assessee' s project commenced construction in April, 2007 and project was completed as on the date of completion certificate issued by Kalyan Dombivli Muncipal Corporation Town Planning Department dated 31.3.2012. According to him, once the assessee has com pleted the project before coming into force of a particular provision, that provision cannot be applied to the facts of the assessee's case or in the year when the incom e has been booked by the assessee in that year. Ld Counsel for the assessee relied on the decision of Hon'ble Supreme Court in the case of M/s. Motilal Padam pat Sugar Mills Co. Ltd vs State of Uttar Pradesh and 6 I TA N o.1248/M um/20 18 Assessment Year 2012-13 others, AIR 1979 SC 621, wherein, the Hon'ble Court has explained the doctrine of promissory estoppel and meaning thereby. The Hon'ble Suprem e Court has considered whether the State is bound and if so to what extent it is bound by the principle of promissory estoppel. Ld Counsel relied on the following paragraphs of the judgement of Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd (supra) as under:
"On 10th October, 1968 a news item appeared in the National Herald in which it was stated that the State of Uttar Pradesh had decided to give exemption from sales tax for a period of three years under Section 4A of the U. P. Sales Tax Act to all new industrial units in the State with a view to enabling them to come on firm footing in developing stage. This news item was based upon a statement made by Shri M. P. Chatterjee the then Secretary in the Industries Department of the Government. The appellant, on the basis of this announcement, addressed a letter dated 11th October, 1968 to the Director of Industries stating that in view of the Sales Tax Holiday announced by the Government, the appellant intended to set up a Hydro-generation Plant for manufacture of Vanaspati and sought for confirmation that this industrial unit, which they proposed to set up, would be entitled to Sales Tax Holiday for a period of three years from the date it commences production. The Director of Industries replied by his letter dated 14th Oct., 1968 confirming that "there will be no sales tax for three years on the finished product of your proposed Vanaspati factory from the date it gets power connection for commencing production." The appellant later addressed a letter dated 22nd January, 1969 to the respondent who was the Chief Secretary to the Government. The respondent stated categorically in his letter in reply dated 23rd January, 1969 that the proposed Vanaspati factory of the appellant "will be entitled to exemption from U. P. Sales Tax for a period of three years from the date of going into production and that this will apply to all Vanaspati sold during that period hi Uttar Pradesh it self and expressed his surprise that a letter from the Chief Secretary to tis® State Government stating this fact i& clear and unambiguous words should not carry conviction with the financial institutions;
Held it was clear from the letter of the respondent dated 23rd January, 1969 that a categorical representation was made by the respondent on behalf of the Government that the proposed! vanaspati factory of the appellant would be entitled to exemption from sales tax in respect of sales of vanaspati effected in Uttar Pradesh for a period of three years from the date of commencement of production. The letter dated 23rd January, 1969 clearly showed that the respondent made this 7 I TA N o.1248/M um/20 18 Assessment Year 2012-13 representation in his capacity as the Chief Secretary of the Government, and it was, therefore, a representation on behalf of the Government The appellant relying on this representation of the Government, borrowed moneys from various financial institutions, purchased plant and machinery from M/s. De Smith (India) Pvt. Ltd., Bombay and set up a vanaspati factory at Kanpur. The facts necessary for invoking the doctrine of promissory estoppel were, therefore, clearly present and the Government was bound to carry out the representation and exempt the appellant from sales tax in respect of sales of vanaspati effected by it in Uttar Pradesh for a period of three years from the date of commencement of the production. The Government was bound on the principle of promissory estoppel to make good the representation made by it. "
8. Ld Counsel for the assessee also relied on the decision of Hon'ble Suprem e Court in the case of CIT vs Sarkar Builders, (2015) 57 taxmann.com 313(SC), wherein, the Hon'ble Supreme Court has considered this issue of prospectivity and applicability of the provisions vide para 20 to 22 as under:
" 20) Having regard to the above, let us take note of the special features which appear in these cases:
(a) In the present case, the approval of the housing project, its scope, definition and conditions, all are decided and dependent by the provisions of the relevant DC Rules. In contrast, the judgment in M/s. Reliance Jute and Industries Ltd.
was concerned with income tax only.
(b) The position of law and the rights accrued prior to enactment of Finance Act, 2004 have to be taken into account, particularly when the position becomes irreversible.
(c) The provisions of Section 80IB(10) mention not only a particular date before which such a housing project is to be approved by the local authority, even a date by which the housing project is to completed, is fixed. These dates have a specific purpose which gives time to the developers to arrange their affairs in such a manner that the housing project is started and finished within those stipulated dates. This planning, in the context of facts in these appeals, had to be much before 01.04.2005.
(d) The basic objective behind Section 80IB(10) is to encourage developers to undertake housing projects for weaker section of the society, inasmuch as to qualify for deduction under this provision, it is an essential condition that the residential unit be constructed on a maximum built up area of 1000 sq.ft. where such residential unit is situated within the cities of Delhi and Mumbai or within 25 kms. from the municipal limits of these cities and 1500 sq.ft. at any other place. 8
I TA N o.1248/M um/20 18 Assessment Year 2012-13
(e) It is the cardinal principle of interpretation that a construction resulting in unreasonably harsh and absurd results must be avoided.
(f) Clause (d) makes it clear that a housing project includes shops and commercial establishments also. But from the day the said provision was inserted, they wanted to limit the built up area of shops and establishments to 5% of the aggregate built up area or 2000 sq.ft., whichever is less. However, the Legislature itself felt that this much commercial space would not meet requirements of the residents. Therefore, in the year 2010, the Parliament has further amended this provision by providing that it should not exceed 3% of the aggregate built up area of the housing project or 5000 sq.ft., whichever is higher. This is a significant modification making complete departure from the earlier yardstick. On the one hand, the permissible built up area of the shops and other commercial shops is increased from 2000 sq.ft. to 5000 sq.ft. On the other hand, though the aggregate built up area for such shops and establishment is reduced from 5% to 3%, what is significant is that it permits the builders to have 5000 sq.ft. or 3% of the aggregate built up area, 'whichever is higher'. In contrast, the provision earlier was 5% or 2000 sq.ft., 'whichever is less'.
(g) From this provision, therefor, it is clear that the housing project contemplated under sub-section (10) of Section 80IB includes commercial establishments or shops also. Now, by way of an amendment in the form of Clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005.
21) These aspects are dealt with by various High Courts elaborately and convincingly in their judgments. It is not necessary to go into the detailed reasoning given by these High Courts. However, we would like to extract the following discussion from the judgment dated 25.07.2014 of the Bombay High Court in ITA Nos. 201 and 308 of 2012, where this very aspect is answered in the following manner:
"36. There is yet another reason for coming to the aforesaid conclusion. Take a scenario where an Assessee, following the project completion method of accounting, has completed the housing project approved by the local authority complying with all the conditions as set out in section 80-IB(10) as it stood prior to 1st April, 2005. If we were to accept the argument of the Revenue, then in that event, despite having completed the entire construction prior to 1st April, 2005 and complying with all the conditions of section 80-IB(10) as it stood then, the Assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-06. In contrast, if the same Assessee had followed the work-in-progress method of accounting, he would have been entitled to the deduction under section 80-IB(10) upto the A.Y. 2004-05, and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction under section 80-IB(10) available to a particular Assessee would be determined on the basis of the 9 I TA N o.1248/M um/20 18 Assessment Year 2012-13 accounting method followed. This, to our mind and as rightly submitted by Mr. Mistry, would lead to startling results. We therefore have no hesitation in holding that section 80-IB(10) is prospective in nature and can have no application to a housing project that is approved before 31st March, 2005. As the deduction sought to be claimed under section 80- IB(10) is inseparably linked with the date of approval of the housing project, it would make no difference if the construction of the said project was completed on or after 1st April, 2005 or that the profits were offered to tax after 1st April, 2005 i.e. in A.Y. 2005-06 or thereafter. We therefore find no substance in the argument of the Revenue that notwithstanding the fact that the housing project was approved prior to 31st March 2005, if the construction was completed on or after 1st April, 2005 or if the profits are brought to tax in the A.Y. 2005-06 or thereafter, the said housing project would have to comply with the provisions of clause (d of section 80-IB(10). To our mind, we do not think that the condition/restriction laid down in clause (d) of section 80-IB(10) has to be revisited and/or looked at and complied with in the assessment year in which the profits are offered to tax by the Assessee. When the Assessee claims a deduction under section 80-IB(10), the Assessee is required to comply with such a condition only if it is on the statute-book on the date of the approval of the housing project and it has nothing to do with the year in which the profits are brought to tax by the Assessee. We have come to this conclusion only because we find that clause (d) of section 80-IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/construction of the same, and has nothing to do with the profits derived therefrom. We may hasten to add that if a particular condition is not inseparably linked to the date of approval of the housing project, different considerations would arise. However, we are not called upon to decide any such condition and hence we are not laying down any general proposition of law, save and except that clause (d) of section 80-IB(10), being a condition linked to the date of the approval of the housing project, would not apply to any housing project that was approved prior to 31st March, 2005 irrespective of the fact that the profits of said housing project are brought to tax after the said provision was brought into force."
22) At this juncture, we would like to quote the following passage from Commissioner of Income Tax, U.P. v. M/s. Shah Sadiq and Sons (supra) :
"14. Under the Income Tax Act of 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses against profits made from that business in future years. The right of carrying forward and set off accrued to the assesee under the Act of 1922. A right which had accrued and had become vested continued to be capable of being enforced notwithstanding the repeal of the statute under which that right accrued unless the repealing statute took away such right expressly or by necessary implication. This is the effect of Section 6 of the General Clauses Act, 1897.
15. In this case the 'savings' provision in the repealing statute is not exhaustive of the rights which are saved or which survive the repeal of the statute under which such rights had accrued. In other words, 10 I TA N o.1248/M um/20 18 Assessment Year 2012-13 whatever rights are expressly saved by the 'savings' provision stand saved. But, that does not mean that rights which are not saved by the 'savings' provision are extinguished or stand ipso facto terminated by the mere fact that a new statute repealing the old statute is enacted. Rights which have accrued are saved unless they are taken away expressly. This is the principle behind Section 6(c) of the General Clauses Act, 1897. The right to carry forward losses which had accrued under the repealed Income Tax Act of 1922 is not saved expressly by Section 297 of the Income Tax Act, 1961. But, it is not necessary to save a right expressly in order to keep it alive after the repeal of the old Act of 1922. Section 6(2) saves accrued rights unless they are taken away by the repealing statute. We do not find any such taking away of the rights by Section 297 either expressly or by implication."
9. Ld Counsel for the assessee also relied on the decision of Hon'ble Suprem e Court in the case of CIT vs Vatika Township (P) Ltd., (2014) 227 Taxman 121 (SC).
10. On the other hand, ld Sr Departmental Representative relied on the amended provision of section 115 JC of the Act and stated that the amended provisions w.e.f 1.4.2013 will apply for and from assessm ent year 2013-14.
11. We have heard the rival contentions and gone through the facts and circumstances of the case. The admitted facts are that the assessee has claimed deduction 80IB(10), as the construction of the project was started in April, 2007 and was completed in March, 2012. W e noted this fact from the paper book pages 19 to 21 of assessee, wherein, com pletion certificate of the project is enclosed at pages 19 to 21 of PB and English translation at pages 20-21. Ld Counsel for the assessee drew our attention to pages 20 & 21 of PB, wherein, building completion certificate issued by Kalyan Dombivli Muncipal Corporation Town Planning Department is 11 I TA N o.1248/M um/20 18 Assessment Year 2012-13 enclosed. In view of these facts, we have considered the arguments made by both the sides and also considered the applicability of the provisions of section 115JC of the Act in the case of the assessee applied by the AO disregarding the fact that the housing project undertaken by the assessee has been approved prior to the date of introduction of the relevant provisions. The assessee is engaged in the construction and sale of immovable property i.e. builders. The housing project undertaken by the assessee was approved by the com petent authority and accordingly, assessee claim ed deduction under section 80IB of the Act of 100% of the profit from the housing project. W e noted that Chapter XII BA i.e. special provisions relating to certain persons other than a compan y was introduced b y the Finance Act 2011 w.e.f. 1.4.2012 and made applicable for and from A.Y. 2012-13 in respect of limited liabilit y partnerships. Further, this provision was made applicable to other categories of persons other than a com pany with effect from 1.4.2013 by the Finance Act, 2012. Accordingly, the provisions of section 115JC of the Act was made applicable to profit from housing projects deductible under section.80IB(10) of the Act only in respect of housing projects approved by the competent authority on or after 1.4.2013. Similar case was dealt with by co-ordinate bench of this Tribunal in the case of Neha Hom e Builders Pvt Ltd.vs CIT,(2018) 92 taxmann.com 102 (Mum), wherein, it is held that the assessee was entitled to claim of deduction under section,80IB(10) of the Act 12 I TA N o.1248/M um/20 18 Assessment Year 2012-13 while computing book profit u/s.115JB of the Act in respect to the profit of the housing project.
12. W e have also gone through the case law of Hon'ble Suprem e Court in the case of Sarkar Builders (supra), wherein, Hon'ble Supreme court has considered the provisions of section 6 of General clauses Act 1897 and also considered the saving provisions in the repealing statute which is not exhaustive of the rights and which are saved or which survive the repeal of the statute under which such right had accrued. Hon'ble Suprem e Court has considered whatever rights are expressly saved by the saving provisions stand saved but that does not mean rights which are not saved by the saving provisions are extinguished or stand ipso facto terminated by the mere fact that a new statue repealing the old statute is enacted. Even Hon'ble Supreme Court in the case of Vatika Township P Ltd (supra) has considered the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. One principle of law is known as lex prospicit non respicit law looks forward not backward. It was also observed that as was observed in Philips vs Eyre (1870) LR 6 QB 1 a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when 13 I TA N o.1248/M um/20 18 Assessment Year 2012-13 introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
13. In view of the above, we are of the considered opinion that the provisions of section 115JC of the Act as brought in the statute by the Finance Act (No.2) w.e.f. 1.4.13 will apply prospectively and to the projects claiming deduction under section.180IB(10) of the Act, which have come or approved on or after that date. Accordingly, this provision cannot be applied to the projects com pleted or approved retrospectively upto 31.3.2012. Hence, we allow the appeal of the assessee
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 5-03-2019. Aado S a kI Gaao YaNaa Y aNaa Ku l ao mao idnaM k 15.03.2019 kao kI ga Sd/ Sd/-
(M BALAGANESH) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 5--03-2019
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai BY ORDER,
6. Guard file.
//True Copy//
Assistant Registrar
ITAT, MUMBAI