1 AFR Reserved on 03.03.2017 06.03.2017 Delivered on 07.04.2017 Court No. 3 1. Case : INCOME TAX APPEAL No. 9 of 2014 Appellant : Commissioner Of Income Tax 1 Aayakar Bhawan Lucknow Respondent : M/S Arif Industries Ltd. 28 Naval Kishore Road Hazratganj Counsel for Appellant : Ghan Shyam Chaudhary Counsel for Respondent : Dhruv Mathur 2. Case : INCOME TAX APPEAL No. 16 of 2014 Appellant : Commissioner Of Income Tax 1 Aayakar Bhawan Lucknow Respondent : M/S Arif Industries Ltd. 28 Naval Kishore Road Lucknow Counsel for Appellant : Ghan Shyam Chaudhary Counsel for Respondent : Dhruv Mathur AND 3. Case : INCOME TAX APPEAL No. 13 of 2017 Appellant : Pr. Commissioner Of Income Tax I, Lucknow Respondent : M/S Arif Industries Pvt. Ltd., Lucknow Counsel for Appellant : Ghan Shyam Chaudhary Counsel for Respondent : Dhruv Mathur Hon'ble Sudhir Agarwal,J. Hon'ble Ravindra Nath Mishra II,J. (Delivered by Hon'ble Sudhir Agarwal, J.) 1. Heard Sri Alok Mathur, Sri Ghan Shyam Chaudhary and Sri Manish Misra, learned counsel for appellant and Sri J.N. Mathur, Senior Advocate assisted by Sri Dhurv Mathur, learned counsel for respondent. 2. All these appeals have come up at instance of Commissioner of Income Tax/Principal Commissioner of Income Tax (hereinafter referred to as "CIT/Pr. CIT"). 2 3. Income Tax Appeals No. 9 and 16 of 2014 were heard and judgment was reserved on 03.03.2017. Income Tax Appeal No. 13 of 2017 was heard on 06.03.2017. Since substantial questions of law raised therein were similar as involved in other two appeals and judgment was already reserved, hence learned counsel for parties adopted earlier arguments, and judgment was reserved on 06.03.2017. 4. Since question basically raised in all these appeals are common and interconnected, hence these Appeals are being decided by this common judgment. 5. Details of appeal numbers, date of orders of Tribunal, Assessment Years and Appeal numbers before Tribunal are being given as under: Sr. Appeal Date of Assessment Appeal numbers No. Numbers Orders of Years before Tribunal Tribunal 1. 9 of 2014 29.11.2013 2007 08 284/LKW/2013 2. 16 of 2014 30.01.2014 2006 07 60/LKW/2010 3. 13 of 2017 17.10.2016 2011 12 871/LKW/2014 6. Income Tax Appeal No. 9 of 2014 was admitted on 03.08.2015 on following substantial questions of law: "(i) Whether ITAT has erred in law in holding that area of open balcony of flat would be considered at 50% of actual area for purpose of deduction u/s 80 IB(10) of Income Tax Act. (ii). Whether ITAT on facts and circumstances of case has erred in holding that only 50% of actual area of open balcony of flats would be considered for purpose of deduction u/s 80 IB while completely ignoring that as per sale deed 3 executed, total area of flat has been considered for purpose of sale of flat. (iii) Whether under facts and circumstances, ITAT has failed to appreciate that on issue of completion certificate of project, Assessee ought to have completed project within 4 years from financial year in which housing project was approved by local authority. (iv) Whether under facts and circumstances, learned ITAT failed to appreciate that in respect of excess of 5% of commercial establishments in housing project, Assessee has not produced any documentary evidence to show that construction of commercial establishments was within limit of LDA/LMC rules and further that as per pre amended provisions, deduction was allowable only on eligible housing project and not commercial projects." 7. Income Tax Appeal No. 16 of 2014 was admitted on 03.08.2015 on following substantial questions of law: "(i) Whether on facts and circumstances of case ITAT has erred in holding that Assessee is eligible for claim of deduction u/s 80 IB(10) of Income Tax Act, while relying on its earlier order passed in A.Y. 2007 08. (ii) Whether ITAT while allowing claim of deduction u/s 80 IB(10) to Assessee, has failed to appreciate that Assessee has failed to meet out requirement of provisions of section 80 IB(10) inasmuch as built up area exceeds 1500 sq. ft., housing project has not been completed by due date 31.03.2008, built up area of commercial establishment exceed 5% of built up area or 2000 sq. ft., whichever is less, and accounting for computing income exempt u/s 80 IB was not correct. 4 (iii) Whether cryptic order passed by ITAT by simply relying on its earlier order for A.Y. 2007 08 and not discussing and deciding facts of year in question, is not bad and against settled tenets of law." 8. In third appeal, i.e., Income Tax Appeal No. 13 of 2017, substantial questions of law raised though are substantially covered by questions already raised in aforesaid two appeals but since differently worded, hence to put record straight, those questions are also reproduced as under: "(i) Whether ITAT has erred in law and on facts in holding that amended provisions with effect from 01.04.2005 are not applicable in case of Assessee for relevant year A.Y. 2011 12 as project for which deduction u/s 80 IB of Act claimed, had commenced prior to 01.04.2005. (ii) Whether ITAT has erred in law and on facts while relying on case law which apply only to sub clause (d) of section 80 IB(10), while as per section 80 IB(10), Assessee was required to fulfill all conditions to avail benefit of deduction u/s 80 IB(10) of I.T. Act. (iii) Whether under facts and circumstances, ITAT has failed to appreciate that on issue of completion of project, Assessee ought to have completed project within 4 years from financial year in which housing project was approved by local authority. (iv) Whether ITAT has failed to consider explanation (i) of sub section 10(a) of section 80 IB regarding date of approval, ignoring construction plan/building plan's approval date of Assessee. (v) Whether ITAT has failed to consider that as per clause (i) 5 and (ii) of sub section 10(a) of section 80 IB, benefit can be extended to Assessee only when project is completed within stipulated period not otherwise. (vi) Whether cryptic order passed by ITAT by simply relying on its earlier order for A.Y. 2012 13 and not discussing and deciding facts of year in question is not bad and against settled tenets of law." Income Tax Appeal No. 9 of 2014 Facts in brief: 9. Assessee is engaged in business of running hotels and construction of residential apartments. Assessee filed return of income on 15.11.2007 in status of Company at income of Rs. 79,08,674/ . Aforesaid income was shown after claiming exemption under Section 80 IB of Act, 1961 of Rs. 1,02,39,639/ . 10. Subsequently, Assessee filed revised Return of Income on 02.04.2009 showing total income of Rs. 75,04,796/ . Revised Return was filed beyond time prescribed under Section 139(5) of Act, 1961 which expired on 31.03.2009. Assessing Authority i.e. Deputy Commissioner of Income Tax (hereinafter referred to as "DCIT") treated it invalid Return for purpose of Assessment. DCIT considered correctness of deduction under Section 80 IB(10) and found that built up area exceeds 1500 sq. ft. which is in contravention of Section 80 IB(10)(c). It further held that Assessee must have satisfied requirement of Section 80 IB(10)(a)(i) of Act, 1961, which it did not. It also held that Assessee does not fulfill requirement of Section 80 IB(10)(d) and in this backdrop, claim of deduction under Section 80 IB of Rs. 1,02,39,639/ was rejected. Assessment order was finalized on 14.12.2009 for total income of Rs. 1,81,79,090/ . 11. Assessee preferred appeal before Commissioner of Income Tax (Appeals) (hereinafter referred to as "CIT(A)") which was allowed by 6 CIT(A) vide order dated 25.02.2013 and deduction under Section 80 IB(10) claimed by Assessee was affirmed. Thereagainst, Revenue preferred appeal before Tribunal. It has been dismissed vide judgment and order dated 29.11.2013 which is under appeal. Income Tax Appeal No. 16 of 2014 12. Return of income was filed on 27.11.2006 declaring total income of Rs. 56,77,029/ . Assessee claimed exemption under Section 80 IB of Act, 1961 for Rs. 1,60,10,118/ . Assessment was completed under Section 143(3) for income of Rs. 2,21,07,330/ vide order dated 26.12.2008. Assessee disallowed deduction under Section 80 IB on ground that built up area of some plots exceeded 1500 sq. ft.; project was not completed by 31.03.2008 and Assessee constructed commercial area on 31638 sq. ft. which exceeded 5% of built up area or 2000 sq. ft. whichever is less as provided in Section 80 IB(10)(d) of Act, 1961. Assessee preferred appeal before CIT(A) which was rejected on 23.11.2009 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 31.01.2014. Income Tax Appeal No. 13 of 2017 13. Return of income was filed on 29.09.2011 declaring total income of Rs. 1,54,88,102/ . Assessee claimed exemption under Section 80 IB(10) of Rs. 92,06,536/ . Rejecting claim of deduction Assessing Officer completed assessment vide order dated 23.12.2013 for total sum of Rs. 2,46,94,638/ . Appeal preferred before CIT(A) by Assessee was dismissed on 08.09.2014 whereagainst Assessee preferred appeal before Tribunal which has been allowed vide order dated 17.10.2016. Common admitted facts: 14. Since deduction under Section 80 IB(10) has been allowed by 7 Tribunal, hence all these appeals have come up under Section 260 of Act, 1961. There are some more common facts which are undisputed but would be relevant to decide questions raised in these appeals. 15. Assessee was developing/constructing housing project with name and title "Metro City" in Paper Mill Colony, Lucknow. Land on which project sought to be developed is owned by M/s Upper India Couper Paper Mills Co. Ltd. (hereinafter referred to as "UICPM Co."). UICPM Co. obtained permission to raise construction over land in question and got plan sanctioned from Lucknow Development Authority (hereinafter referred to as "LDA") on 08.01.2002. project development agreement was executed between Assessee and UICPM Co. on 26.02.2003. revised plan was submitted to LDA which was approved on 08.04.2005. According to aforesaid plan, maximum built up area of each unit was to be 138.97 sq. mtrs. Submissions: 16. Sri Alok Mathur, learned counsel for Revenue submitted that building plan was approved by Lucknow Development Authority (hereinafter referred to as "LDA") on 08.01.2002 in Financial Year 2001 02 (Assessment Year 2002 03) and, therefore, as per Central Board of Direct Taxes (hereinafter referred to as "CBDT"), Project ought to have been completed by 31.03.2006 i.e. within Financial Year 2005 06 (Assessment Year 2006 07). He further urged that any subsequent approval would not extend period of completion of Project. Built up area would have to be examined in light of sale deeds executed by Assessee with purchasers of residential units. Assessee had sold total built up area including extended area of terrace as complete flat and such built up area sold (including terrace) exceeded 1500 sq. ft. Tribunal erred in law by looking into bye laws of LDA stating that only 50% of open area/balcony would 8 be considered for built up area. When Assessee has sold entire built up area including extended area of terrace, it should have been considered as unit area sold by Assessee. 17. Sri Mathur also contended that no evidence was filed by Assessee to show that commercial area was not in excess to 5% of total built up area. In this regard, even bye laws of LDA were not brought on record. 18. Sri Mathur stressed his point urging that project was not completed within time prescribed. Completion certificate was also not submitted. Hence deduction under Section 80 IB(10) was not admissible. It is contended that even till 31.03.2011, project has not completed. Besides, approved plan of Assessee showed commercial space of 31368 sq. ft. which was more than prescribed limit of Section 80 IB(10)(d) of Act, 1961, hence deduction was not admissible. Amended Section 80 IB is applicable. Since project approved before 01.04.2004 had not completed on or before 31.03.2008, hence no deduction was admissible. 19. Sri J.N. Mathur, learned Senior Advocate assisted by Sri Dhruv Mathur, learned counsel for Assessee, on other hand, contended that amendment of Section 80 IB(10) made w.e.f. 01.04.2005 is neither applicable retrospectively nor retroactively. If housing project was approved before 31.03.2005 and completed after 01.04.2005, Assessee has vested right of Assessment as per law as it stood prior to 01.04.2005. He further submitted that Assessee has satisfied requirement of Section 80 IB(10). This is finding of fact recorded by Tribunal, hence questions raised by appellant would have to be answered in favour of Assessee and appeals deserve to be dismissed. 20. Before considering rival submissions in light of relevant provisions, we may also notice at this stage that Tribunal has passed 9 order dated 30.01.2014 which is subject to appeal in Income Tax Appeal No. 16 of 2014 by simply following its earlier judgment and order dated 29.11.2013, subject to appeal in Income Tax Appeal No. 9 of 2014. Similarly, in Income Tax Appeal No. 13 of 2017, Tribunal has passed order dated 17.10.2016 following earlier order dated 05.07.2016 passed in respect of Assessment Year 2012 13 which is also subject to Income Tax Appeal No. 121 of 2016, pending before this Court. glance over evolution of Section 80 IB(10) of Act, 1961: 21. Entire dispute has centered around Section 80 IB(10). Chapter VIA contains provisions for deductions to be made in computing total income. Section 80 IB is part thereof. It relates to deductions in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 22. In present case, we are basically concerned with Section 80 IB(10) and, therefore, our concentration would be confined to this provision. In order to appreciate rival submissions, we propose to have historical development of Section 80 IB(10). 23. Before Finance Act, 1999, there was Section 80 IA. This Section 80 IA was restructured by Finance Act, 1999 into Sections 80 IA and 80 IB w.e.f. 01.04.2000. Sub section 10 of 80 IB, as it was brought on statute book w.e.f. 01.04.2000, reads as under: "(10) amount of profits in case of undertaking developing and building housing projects approved by local authority, shall be hundred per cent of profits derived in any previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of housing project on or after 10 1st day of October, 1998 and completes same before 31st day of March, 2001; (b) project is on size of plot of land which has minimum area of one acre; and (c) residential unit has maximum built up area of one thousand square feet where such residential unit is situated within cities of Delhi or Mumbai or within twenty five kilometres from municipal limits of these cities and one thousand and five hundred square feet at any other place." (emphasis added) 24. Vide Finance Act, 2000 w.e.f. 01.04.2001, minor amendment was made but instead of simply mentioning amendment, we find it appropriate to reproduce amended provision, as it stood w.e.f. 01.04.2001: "(10) amount of profits in case of undertaking developing and building housing projects approved before 31st day of March, 2001 by local authority, shall be hundred per cent of profits derived in any previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998 and completes same before 31st day of March, 2003; (b) project is on size of plot of land which has minimum area of one acre; and (c) residential unit has maximum built up area of one thousand square feet where such residential unit is situated within cities of Delhi or Mumbai or within twenty five kilometres from municipal limits of these cities and one 11 thousand and five hundred square feet at any other place." 25. scope and effect of Amendment was explained by CDBT vide circular no. 794 dated 09.08.2000. It also provides that amendment will take effect from 01.04.2001 and shall be applicable for Assessment Year 2001 02 and subsequent years. 26. Thereafter by Finance Act, 2003 w.e.f. 01.04.2004, amendment was made in Section 80 IB(10)(a) and requirement of completion of project before 31st day of March, 2003 was omitted with retrospective effect from 01.04.2002. amended Section 80 IB(10) as stood amended by Finance Act, 2003 w.e.f. 01.04.2002 read as under: "(10) amount of profits in case of undertaking developing and building housing projects approved before 31st day of March, 2005 by local authority, shall be hundred per cent of profits derived in any previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998; (b) project is on size of plot of land which has minimum area of one acre; and (c) residential unit has maximum built up area of one thousand square feet where such residential unit is situated within cities of Delhi or Mumbai or within twenty five kilometres from municipal limits of these cities and one thousand and five hundred square feet at any other place." (emphasis added) 27. Again Board's circular no. 7/2003 dated 05.09.2003 was issued and reason for omission of time limit for completion of project was 12 explained that it was done to rationalize provision and this amendment has been made effective retrospectively w.e.f. 01.04.2002 so as to make applicable to Assessment Year 2002 03 and subsequent years. 28. Sub section 10 was substituted by Finance Act, 2004 w.e.f. 01.04.2005. It reads as under: "80 IB(10) : amount of deduction in case of undertaking developing and building housing projects approved before 31st day of March, 2007 by local authority shall be hundred per cent of profits derived in previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998 and completes such construction, (i) in case where housing project has been, approved by local authority before 1st day of April, 2004, on or before 31st day of March, 2008; (ii) in case where housing project has been, or, is approved by local authority on or after 1st day of April, 2004, within four years from end of financial year in which housing project is approved by local authority. Explanation : For purposes of this clause (i) in case where approval in respect of housing project is obtained more than once, such housing project shall be deemed to have been approved on date on which building plan of such housing project is first approved by local authority. 13 (ii) date of completion of construction of housing project shall be taken to be date on which completion certificate in respect of such housing project is issued by local authority; (b) project is on size of plot of land which has minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to housing project carried out in accordance with scheme framed by Central Government or State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum area under any law for time being in force and such scheme is notified by Board in this behalf; (c) residential unit has maximum built up area of one thousand square feet where such residential unit is situated within city of Delhi or Mumbai or within twenty five kilometres from municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) built up area of shops and other commercial establishments included in housing project does not exceed five per cent of aggregate built up area of housing project or two thousand square feet, whichever is less." (emphasis added) 29. Before 01.04.2005, there was no definition of "built up area" in Section 80 IB but by Finance Act, 2004 w.e.f. 01.04.2005, clause (a) was inserted in Section 80 IB(14) which defines "built up area" as under: 14 "(a) built up area means inner measurements of residential unit at floor level, including projections and balconies, as increased by thickness of walls but does not include common areas shared with other residential units;" 30. perusal of Section 80 IB(10), as stood prior to 01.04.2005, shows that for attracting it, requirements were; (a) housing project must have been approved before 31.03.2005 by Local Authority; (b) such undertaking commenced or commences development and construction of housing project on or after 01.10.1998; (c) size of plot of land must be minimum 1 acre, for Project; (d) residential unit must have maximum built up area of 1000 sq. ft. if Project is in Delhi or Mumbai or within 25 kms. from municipal limits of these cities, and in other places 1500 sq. ft. 31. provisions as amended w.e.f. 01.04.2005, made certain drastic changes, i.e.: (a) requirement of date of approval was extended to 31.03.2007 instead of 31.03.2005. (b) condition with regard to completion of project was reintroduced. It provides, if project was approved before 01.04.2004, it must have completed on or before 31.03.2008. If approved on or after 01.04.2004, it must complete within four years. (c) explanation provides that completion of construction means date on which completion certificate is issued by local authority. (d) If more than one approval has been granted, it is first approval which will be relevant. (e) "built up area" of shops and commercial establishment including housing project does not exceed 5% 15 of aggregate "built up area" or 2000 sq. ft. whichever is less. 32. Section 80 IB(10) provides deduction for income of undertaking, developing and building housing projects. developer may have many projects, and each project can be considered to be separate undertaking for purpose of deduction under Section 80 IB(10). Ownership of land is not criteria to attract deduction under Section 80 IB(10). Sub section (10) does not require that developer must be owner of land. promoter would qualify for deduction since it runs undertaking for developing and constructing housing project and conditions for relief were satisfied. If developer is not owner, approval of plan also, may not be in its own name, since local bodies usually insist to grant approval to title holder. However, this would neither give any right to owner to claim deduction under Section 80 IB(10) nor forfeit right of developer to claim deduction. 33. In CIT Vs. Radhe Developers, 2012 (341) ITR 403 (Gujarat), question arose, whether developer claiming deduction must be owner of land and whether approval of local authority as well as permission to develop project and permission to commence construction must be in name of Assessee/Developer. Court held that purpose of enacting Section 80 IB is to give encouragement and fillip to housing projects where acute shortage was felt in urban and semi urban areas for middle class houses. Section 80 IB(10) provides for deduction of entire amount of profits by undertaking, derived from business of developing and building housing project, which were approved by local authority before specified date. Such deduction, however, is subject to certain conditions namely that such undertaking has commenced development and construction prior to specified date, and that project was on size of plot of land with minimum area of one acre and residential unit had maximum 16 inbuilt area of 1500 sq. ft. (other than cities of Delhi and Mumbai). Essence of Section 80 IB(10) involving undertaking is development of building housing projects, approved by local authority. 34. In other words, provision is to give encouragement to housing units in urban and semi urban areas where there is perennial and acute shortage of housing, particularly for middle income group citizens. To ensure that benefit reaches people, certain conditions were provided in sub Section (10) such as specified date by which undertaking must commence developing and construction work, as also providing for minimum area of plot of land on which such project would be put up as well as maximum built up area of each residential unit to be located thereon. Section 80 IB nowhere contemplates that only those developers would receive deduction who own land. Court said that Section 80 IB(10) does not requires that ownership must vest in 'Developer' so as to qualify for deduction. 35. Secondly term 'Developer' has been understood in common parlance as well as in legal sense carrying wider connotation. When developer proceeds to make construction and sell residential unit, it is not mere Contractor. 36. In Commissioner of Income Tax Vs. Moon Star Developers [2014] 367 ITR 621 (Gujarat) and Commissioner of Income Tax Vs. Sahajanand Associates [2014] 367 ITR 645 (Gujarat), issue of ownership of land by Developer was considered and reiterated holding that it is not one of requirements of Section 80 IB(10), hence irrelevant for purpose of considering whether Developer is entitled for deduction or not. 37. When we consider facts of our case in backdrop of Section 80 IB(10) as it evolved with passage of time, we find that project was 17 approved by LDA on 08.01.2002. Section 80 IB(10) as it stood on 08.01.2002 did not cover Assessee for reason that it requires commencement of Project on or after 01.10.1998 but approval of housing project by local authority before 31.03.2001. date of completion was also mentioned as 31.03.2003. Assessee in fact got occasion for benefit under Section 80 IB(10) when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, since date of approval was changed and extended to all housing projects approved before 31.03.2005. However, there was no time limit prescribed for completion of project under Section 80 IB(10) as it stood amended by Finance Act, 2003 w.e.f. 01.04.2002, since this requirement was omitted. Thus, Assessee got right to be governed by Section 80 IB(10) as amended by Finance Act, 2003 w.e.f. 01.04.2002, due to changes made therein. 38. Question as to whether benefit became available to Assessee for deduction under Section 80 IB(10), when it was amended by Finance Act, 2003 w.e.f. 01.04.2002, can be considered vested right, is not free from doubt for reason that Assessee did not commence his project keeping in mind deduction under Section 80 IB(10). Project commenced after 01.10.1998 and approved by LDA on 08.01.2002 and at that time, deduction under Section 80 IB(10) was not available to Assessee due to conditions mentioned therein. 39. It is contingency which happened at subsequent date when amendment was made by Finance Act, 2003 that conditions got altered bringing within its ambit Assessee also. These circumstances, in our view, cannot be construed so as to give vested right to Assessee in regard to deduction under Section 80 IB(10). 40. Now we proceed to consider various substantial questions involved in these appeals to test whether Tribunal has rightly allowed deduction to Assessee or not. 18 41. Questions (i) and (ii) of Income Tax Appeal No. 9 of 2014 relates to Section 80 IB(10)(c) read with Section 80 IB(14)(a) which defines "built up area". This clause (a) in Section 80 IB(14) was inserted w.e.f. 01.04.2005. With regard to "built up area" of residential units, detailed facts have been given in order of CIT(A). On request of Assessee, Assessing Officer got measurement done through Valuation Cell of Income Tax Department. This measurement as per Valuation Cell made in relation to Assessment Year 2009 10 is as under: S. No. Type of Flats Built up area in Built up area in Square meter Square feet 1 A1 142.93 1537.93 2 A2 141.26 1519.96 3 B 137.99 1484.77 4 C1 132.44 1425.05 5 C2 128.18 1379.22 6 D 89.62 964.31 42. Aforesaid measurement included open area of balcony also. Assessee claimed that before 01.04.2005, open area of balcony, i.e., terrace was not included in "built up area" of residential units. It also pointed out that as per rules of LDA who sanctioned project, only 50% area of open balconies is included in "built up area". Approved plan was filed before Assessing Officer by Assessee, showing that there was mention of deduction of 50% for open balconies. Similarly, copy of booklet of Lucknow Nagar Nigam was filed which mentions of taking only 50% area of open balconies. Copy of registered Architect's certificate was also filed, stating that only 50% area of open balcony is considered for purposes of taking "built up area" of flat. When only 50% area of open balcony was considered, size of all residential units came down within 1500 19 sq. ft. and this was demonstrated by CIT(A) as under: S.No. Type of Flat Area as per DVO Less 50% Area for open purposes of 80 balconies IB(10) of Act Square feet Square feet 1 A1 1537.93 53.15 1484.78 2 A2 1519.96 53.15 1466.81 43. Revenue contended that definition of "built up area" as came into existence by amendment made w.e.f. 01.04.2005, would include entire balcony and that has to be applied. 44. CIT(A) and Tribunal have observed that this definition of "built up area" is prospective and prior thereto "terrace" was not included in built up area. If "terrace" is excluded, residential units were not beyond 1500 sq. ft. 45. question with regard to "built up area", whether would include balcony/terrace and whether will be applicable to housing projects approved prior to 01.04.2005, has been considered by Karnataka High Court in Commissioner of Income Tax Vs. Anriya Project Management Services (P.) Ltd., (2013) 353 ITR 12 (Karnataka) wherein Court has said: "the definition of "built, up "area" inserted by Finance No. 2 of 2004 which name into of it of from 01.04.2005 is only prospective in nature. It has no application to housing projects which were approved by local authority prior to that date. Prior to 01.04.2005, in calculating 1,500 sq. ft. of residential unit, area covered by balcony was excluded. Therefore, definition of built up area which is now inserted has no applicable to constructions which were put up in accordance with housing projects approved by local authority prior to that date." (emphasis added) 20 46. Similar view was taken in another judgment of Karnataka High Court in CIT Vs. G.R. Developers in ITA No. 355 of 2009; Bombay High Court in CIT Vs. Brahma Associates 2011 (333) ITR 289 (Bombay); Tribunal's Pune Bench in CIT Vs. Tushar Developers in ITA No. 165/PN/2007, decided on 31.05.2011; and; Mumbai Bench of Tribunal in Haware Construction Pvt. Ltd. Vs. ITO (2011) 64 DTR 251 (Mumbai). 47. applicability of Section 80 IB(14) in respect of projects which were approved before 01.04.2005, has been considered specifically in Commissioner of Income Tax 19, Mumbai Vs. Sarkar Builders, 2015 (7) SCC 579 and Court said that its application retroactively would result in absurdity which cannot be accepted or applied. Para 24, 25 and 26.2 are reproduced as under: "24. Prior to insertion of Section 80 IB(14)(a), in many of rules and regulations of local authority approving housing project built up area did not include projections and balconies. Probably, taking advantage of this fact, builders provided large balconies and projections making residential units far bigger than as stipulated in Section 80 IB(10), and yet claimed deduction under said provision. To plug this lacuna, clause (a) was inserted in Section 80 IB(14) defining words built up area to mean inner measurements of residential unit at floor level, including projections and balconies, as increased by thickness of walls, but did not include common areas shared with other residential units. 25. Can it be said that in order to avail benefit in assessment years after 1.4.2005, balconies should be removed though these were permitted earlier? Holding so would lead to absurd results as one cannot expect assessee to comply with condition that was not part of statute when housing 21 project was approved. We, thus, find that only way to resolve issue would be to hold that clause (d) is to be treated as inextricably linked with approval and construction of housing project and assessee cannot be called upon to comply with said condition when it was not in contemplation either of assessee or even Legislature, when housing project was accorded approval by local authorities. 26. Having regard to above, let us take note of special features which appear in these cases: 26.2. position of law and rights accrued prior to enactment of Finance Act, 2004 have to be taken into account, particularly when position becomes irreversible." 48. Submission of learned counsel for Revenue that Assessee sold residential units mentioning in sale deeds total area of flat which included area for balcony also, will have no relevance for question up for consideration, for reason, that applicability of statutory provision has to be examined in light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. 49. In view of above discussion, questions (i) and (ii) in Income Tax Appeal No. 9 of 2014 are answered in favour of Assessee for reason that specifications of flats have been considered by Tribunal in light of rules of local bodies which approved plan. There was no otherwise restriction available in Section 80 IB(10) in respect of projects approved before 01.04.2005. 50. Question (iv) of Income Tax Appeal No.9 of 2014 relates to built up area of shops and other commercial establishment. This condition 22 came to be inserted for first time w.e.f. 01.04.2005 vide Section 80 IB(10)(d). In Commissioner of Income Tax 19, Mumbai Vs. Sarkar Builders (supra), similar question of law came to be considered before Supreme Court, quoted in para 3 of judgment, reads as under: "Whether Section 80 IB(10)(d) of Act, 1961 applies to housing project approved before 31.03.2005 but completed on or after 01.04.2005?" 51. Supreme Court referred to decision of Bombay High Court in CIT Vs. Brahma Associates (supra) wherein Court answered this question and para 30 of High Court's judgment has been quoted in para 5 of Supreme Court's judgment and reads as under: "5. On basis of this discussion, after modifying some of directions given by ITAT, conclusions which are arrived at by High Court are as follows: "30. In result, questions raised in appeal are answered thus: a) Upto 31.03.2005 (subject to fulfilling other conditions), deduction under Section 80 IB(10) is allowable to housing projects approved by local authority having residential units with commercial user to extent permitted under DC Rules/Regulations framed by respective local authority. b) In such case, where commercial user permitted by local authority is within limits prescribed under DC Rules/Regulation, deduction under Section 80 IB(10) upto 31.03.2005 would be allowable irrespective of fact that project is 23 approved as 'housing project' or 'residential plus commercial'. c) In absence of any provision under Income Tax Act, Tribunal was not justified in holding that upto 31.03.2005 deduction under Section 80 IB(10) would be allowable to projects approved by local authority having residential building with commercial user upto 10% of total built up area of plot. d) Since deductions under Section 80 IB(10) is on profits derived from housing projects approved by local authority as whole, Tribunal was not justified in restricting Section 80 IB(10) deduction only to part of project. However, in present case, since assessee has accepted decision of Tribunal in allowing Section 80 IB(10) deduction to part of project, we do not disturb findings of Tribunal in that behalf. e) Clause (d) inserted to Section 80 IB(10) with effect from 01.04.2005 is prospective and not retrospective and hence cannot be applied for period prior to 01.04.2005. (emphasis added) 52. Supreme Court agreed with Bombay High Court's answer given above but with minor modification with regard to para 5 and para 6 of judgment which reads as under: "We are in agreement with aforesaid answers given by High Court to various issues. We may only clarify that insofar as answer at para (a) is concerned, it would mean those projects which are approved by local authorities as housing projects with commercial element therein." 53. In Commissioner of Income Tax 19, Mumbai Vs. Sarkar 24 Builders (supra), another argument was raised that Section 80 IB(10), as amended w.e.f. 01.04.2005, if not applicable to existing housing projects approved before 01.04.2005, still it would be retroactive and in respect of Assessment Year 2006 07 i.e. Assessment Years post 01.04.2005, same would be applicable. This argument was rejected and in para 17, Court said as under: "The issues dealt with from para 21 to 25 by High Court already stands approved by this Court. In para 29, High Court has held that clause (d) has prospective operation viz. with effect from 01.04.2005, and this legal position is not disputed by Revenue before us. What follows from above is that prior to 01.04.2005, these developers/assessees who had got their projects sanctioned from local authorities as "housing projects", even with commercial user, though limited to extent permitted under DC Rules, were convinced that they would be getting benefit of 100% deduction of their income from such projects under Section 80 IB of Act. Their projects were sanctioned much before 01.04.2005. As per permissible commercial user on which project was sanctioned, they started projects and date of commencing such projects is also before 01.04.2005. All these assessees were made known of provision by which these projects are to be completed as those dates have been specified from time to time by successive Finance Act in same provision Section 80 IB. In these cases, completion dates were after 01.04.2005. Once they arrange their affairs in this manner, Revenue cannot deny benefit of this section applying principle of retroactivity even when provision has no retrospectivity." (emphasis added) 54. Court considered applicability of amended provisions of 25 Section 80 IB in context whether subsequent amendment proposed to alter condition of Developer may cause serious detriment in process of construction and development activities. For example, if as per extent rules of local body, shops and commercial activities construction was permitted upto 10% and project was also sanctioned to Assessee allowing 10% area for commercial purposes, by applying amended provision which came into force on 01.04.2005, can it be said that Assessee has now to demolish extra coverage, meant for commercial purpose in order to bring its development activities within prescribed limits of new provision and to avail benefit under Section 80 IB(10), only because of reason that project was not complete as on 01.04.2005. Court said that answer would have to be given in negative on principle that planning as per law prevailing prior to 01.04.2005 has been observed and acted upon by Assessee. It has acquired vested right thereof which can not be taken away. Revenue authorities cannot be allowed to ask Assessee to do something which is almost impossible. 55. Similar view was taken in another decision in Commissioner of Income Tax Vs. Veena Developers (2015) 277 CTR Reports 297 (SC). 56. Thus, question (iv) in Income Tax Appeal No. 9 of 2014 is answered against Revenue and in favour of Assessee. 57. Question (ii) in Income Tax Appeal No. 16 of 2014 is mixed question, already answered, hence is answered against Revenue and in favour of Assessee. 58. Now we take up question (iii) of Income Tax Appeal No. 9 of 2014, questions (iii), (iv) and (v) of Income Tax Appeal No. 13 of 2017, since all these questions relate to sub section 10(a) of Act, 1961, i.e., completion of project. Historical backdrop shows that period of completion was contemplated in sub section 10(a) since 26 date of insertion of Section 80 IB but for small period, by Finance Act, 2003 when amendment was made with retrospective effect from 01.04.2002, requirement of completion of project was dispensed with and reintroduced w.e.f. 01.04.2005 by Finance Act, 2004. Thus, this requirement was not existing only between 01.04.2002 to 31.03.2005. 59. Assessee got approval of housing project for first time on 08.01.2002. At that time, it was not within ambit of benefits under Section 80 IB(10). However, with amendment of Section 80 IB(10) by Finance Act, 2003, not only Assessee got included within beneficial ambit of Section 80 IB(10) but even condition of completion of project disappeared. This condition came to be reintroduced w.e.f. 01.04.2005. 60. Thus, it is not new condition. It cannot be said that it was inserted for first time by Finance Act, 2004. In fact, this condition was there altogether but for small period from 01.04.2002 to 31.03.2005, it remained out of statute book. Otherwise, it was consistently there and governed deduction under Section 80 IB(10). It is not condition which made things impossible but gives sufficient time to Assessee to complete project, i.e., upto 31.03.2008. 61. This aspect has been considered in detail by Madhya Pradesh High Court (Jabalpur) in Income Tax Appeal No. 40 of 2012, Commissioner of Income Tax, Bhopal Vs. M/s Global Reality and other connected appeals, decided on 21.08.2015. It has been held that no Developer can claim vested right to complete housing project in indefinite period. Right arising from Section 80 IB(10) is coupled with obligation or duty to complete project in specified time frame. If Developer does not complete housing project within specified time, will not receive that benefit. There is no compulsion on him to complete project in particular period as said period is 27 contemplated only if Developer claims deduction under Section 80 IB(10) and not otherwise. Paragraphs 23 and 24 of judgment, relevant for our purpose, read as under: "23. Suffice it to observe that, no comparison can be drawn between new condition prescribed in terms of clause (d) and that of clause (a). Condition in Clause (a), neither operates retrospectively nor can be said to be absurd, unjust or expecting assessee to comply with something which is impossible to achieve. 24. next question that needs to be answered, is, whether stipulation in Section 80IB(10)(a) can be said to be directory. Considering prodigious benefit offered in terms of Section 80IB to assessee (hundred per cent of profits derived in any previous year relevant to any assessment year); and purpose underlying same which is inter alia burden on public exchequer due to waiver of commensurate revenue stipulation for obtaining completion certificate from Local Authority before cut off date, must be construed as mandatory. fact that compliance of that condition is dependent on manner in which proposal is processed by Local Authority, provision cannot be construed as directory requirement. It is substantive provision mandating issuance or grant of completion certificate by Local Authority before cut off date or specified time, as precondition to get benefit of tax deduction. Else, it will then be open to assessee to rely on other circumstances or evidence to plead that housing project is complete requiring enquiry into those matters by Tax Authorities sans completion certificate issued by Local Authority in that behalf. priori, argument of substantial compliance is sufficient, would lead to 28 uncertainty about date of completion of project which is hallmark for availing of benefit of tax deduction. Only with this intent legislature in its wisdom has predicated that, completion of construction of housing project is taken to be date on which completion certificate is issued by Local Authority. To interpret it to include ex post facto certificate or such certificate issued by Local Authority after cut off date, would not only result in rewriting of express provision and run contrary to unambiguous position pronounced in Section, but also doing violence to legislative intent. For, Explanation (ii) will then have to be read as date of completion of construction of housing project shall be taken to be date as certified by Local Authority in that behalf , irrespective of date of issuance of such certificate by Local Authority. Indeed, in given case if assessee is able to substantiate that completion certificate was in fact issued by Local Authority before cut off date, but could not be produced by him within time due to reasons beyond his control, argument of substantial compliance of provision can be tested. Any other interpretation would result not only in uncertainty (in finalization of assessment proceedings due to non issuance or delayed issuance of such certificate by Local Authority and prone to manipulations at end of Local Authority); but also have to yield to subjective satisfaction of Assessing Authority and of investing wide discretion in that Authority, which, eventually, may only end up in getting embroiled in litigation. If assessee has failed to comply with condition of obtaining completion certificate from Local Authority before cut off date, he must take consequence therefor and of denial of benefit of tax deduction offered to him on that count." 29 62. CIT(A) on this aspect has relied on Madras High Court's judgment in CIT Vs. Jain Housing and Construction Ltd., ITA No. 755 of 2010, decided on 02.11.2012 and Gujarat High Court's judgment in Manan Corporation Vs. AICT (2013) 356 ITR 44 (Gujarat). 63. There is another judgment of Delhi High Court in CIT Vs. CHD Developers Ltd. (2014) 362 ITR 177 (Delhi) which followed Manan Corporation Vs. ACIT (supra) but aforesaid judgment has been rendered after following judgment in CIT Vs. Veena Developers (supra) wherein clause (d) of sub Section 10 was considered and then it was observed that Section 80 IB(10) as amended w.e.f. 01.04.2005 is prospective and not retrospective. 64. There is another judgment of Gujarat High Court in CIT Vs. Tarnetar Corporation (2014) 362 ITR 174 (Gujarat) but as matter of fact, therein construction completed well before 31.03.2008 and hence those judgments did not consider Section 80 IB(10)(a) in light of fact that requirement of completion of project within specified time had continued since inception and was inapplicable for smaller period of three years. 65. Looking to objective and purpose of conditions of completion of project and fact that it is not provision which came for first time altogether into existence on 01.04.2005, we are inclined to follow Madhya Pradesh High Court's judgment in Commissioner of Income Tax, Bhopal Vs. M/s Global Reality (supra) and hold that Assessee in question was supposed to comply Section 80 IB(10) (a) as came to exist on amendment by Finance Act, 2004. Consequently, question (iii) in Income Tax Appeal No. 9 of 2014 and questions (iii), (iv) and (v) in Income Tax Appeal No. 13 of 2017 are answered in favour of Revenue and against Assessee. 66. We are clarifying that aforesaid questions are answered in 30 favour of Revenue in manner that requirement of completion of project reintroduced w.e.f. 01.04.2005 by Finance Act, 2004 would be applicable to Assessee but whether project in question was completed by Assessee within specified time, cannot be examined at this stage since Tribunal has not looked into this aspect of matter and this is question of fact, hence, in our view, this aspect would now have to be examined by Tribunal. 67. Now we take up questions (i) and (iii) in Income Tax Appeal No. 16 of 2014 and questions (i), (ii) and (vi) in Income Tax Appeal No. 13 of 2017. In this regard, contention of learned Counsel for Revenue is that judgments of earlier Assessment Years which were also subject to appeal in this Court, ought not have been followed blindly by Tribunal. Instead it should have looked into relevant aspects independently. We find it difficult to accept submission. If in resepct of certain questions between same parties, particular view has been taken by Tribunal in one Assessment Year, in absence of any relevant circumstances otherwise, it is not appropriate for Tribunal to re examine matter. Instead, it must follow its view already taken. In Director of Income Tax (International Taxation) Vs. Credit Agricole Indosuez [2015] 377 ITR 102 (Bombay), Court said that in matters of tax, justice requires that there must be certainty of law which presupposes equal application of law where issue in controversy stands settled by decisions of Court or Tribunal in any other case and Revenue has accepted that decision, then in that event, Revenue ought not to agitate issue further, unless there is some cogent justification such as change in law or decision of higher forum, etc. In such appropriate cases, appeal memo must itself specify reasons for preferring appeal or at least officer concerned should file affidavit pointing out reasons for filing appeal. This was rejected in CIT Vs. Goodlas Nerolac Paints Ltd. [2016] 386 ITR 108 (Bombay). 31 68. It is true that earlier judgment of Tribunal did not become final since Revenue preferred appeal in this Court but still applying rule of precedent in support of question of law, we follow view already taken. We do not find any per se impropriety or lack of jurisdiction. Question, however, as to whether Assessee satisfied all conditions required for deduction under Section 80 IB(10) or not, has not been examined by Tribunal for reason that it has proceeded with impression that entire amendment made by Finance Act, 2004 w.e.f. 01.04.2005 in Section 80 IB(10) would be prospective and, therefore, whether project of Assessee was complete or has obtained completion certificate and other relevant circumstances, we find, there is no discussion or finding recorded by Tribunal in all these appeals. Therefore, we leave aforesaid questions open at this stage, inasmuch in our view, it is appropriate that on these aspects, matter may be examined by Tribunal in light of other questions answered above by this Court. 69. summary of our answer to various questions raised in all these connected appeals is as under: Income Tax Appeal No. 9 of 2014: (A) Questions (i), (ii) and (iv) are answered in favour of Assessee. (B) Question (iii) answered in favour of Revenue. Income Tax Appeal No. 16 of 2014: (A) Question (ii) answered in favour of Assessee. (B) Questions (i) and (iii) left open so as to be decided by Tribunal on remand. Income Tax Appeal No. 13 of 2017: (A) Questions (iii), (iv) and (v) are answered in favour of Revenue. 32 (B) Questions (i), (ii) and (vi) are left open so as to be decided by Tribunal on remand. 70. In result, appeals are partly allowed. Judgments of Tribunal impugned in these appeals to extent questions have been answered in favour of Revenue are set aside and matter is remanded to Tribunal to consider questions with regard to compliance of Section 80 IB(10)(a) by Assessee and thereafter, to find out whether Assessee is entitled to deduction under Section 80 IB(10) or not. 71. Parties shall bear their own cost. Order Date : 07.04.2017 Shubham CommissionerofIncome-tax-1, Lucknow v. ArifIndustriesLtd