IMPORTANT POINT
Commercial user is an integral part of housing project. Therefore contention that benefit of section 80IB(10) would be available to housing projects having residential units only, cannot be accepted.
Clause (d) of section Section 80IB(10) of Income Tax Act, 1961 is prospective in operation.
Projects commenced and completed by stipulated date even though falling after insertion of clause (d) would not be affected by it.

Headnote:(a) Income Tax Act, 1961 – Section 80IB(10) – The provision is applicable in respect of housing projects and not commercial projects – Must have been sanctioned by local bodies and includes ‘residential cum commercial complex’ – Before 2004 amendment no ceiling on extent of commercial user area – Extent of area sanctioned for shops and commercial establishments in a housing project was immaterial and had no bearing – All housing projects having predominantly residential complexion were held entitled to deduction u/s 80IB(10) – Even clause (d) recognising that commercial user is an integral part of housing project – Contention that benefit of section 80IB(10) would be available to housing projects having residential units only, cannot be accepted. (Para 3, 5, 6, 11)
       333 ITR 289 – Cited with approval
       (b) Income Tax Act, 1961 – Section 80IB(10)(d) – Clause (d), inserted and made effective from 01.04.2005 putting a cap on extent of areas for commercial purposes – Despite sanction by local authority of larger area for shops and commercial establishment benefit of Section 80IB(10) restricted to area for shops and commercial establishment not exceeding 5% of the aggregate built-up area of the housing project or 2000 sq. feet, whichever is less. (Para 3, 6)
       (c) Income Tax Act, 1961 – Section 80IB(10)(d) – Prior to insertion of clause (d) there was no restriction on size of commercial user in a housing project – Clause (d) restricting the size of commercial user – Prospective by necessary implication. (Para 20)
       (d) Income Tax Act, 1961 – Section 80IB(10) – Benefit available to all projects commenced prior to 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005 – Projects completed by such stipulated date falling after insertion of clause (d) – Not affected by clause (d). (Para 19, 20)
       (1987) 166 ITR 102 (SC) – Relied upon
       (2008) 9 SCC 622; AIR 1966 SC 1385 : 60 ITR 262; (1987) 166 ITR 102 (SC); (2015) 1 SCC 1; (1980) 1 SCC 139 – Referred
       333 ITR 289 – Cited with approval
       Facts of the case:
       All the assessees had claimed the benefit of Section 80IB of the Income Tax Act, namely, deduction in respect of profits and gains on the ground that their cases were covered by sub-section (10) of Section 80IB which provides for deduction of 100% of profits in the case of an undertaking developing and building housing projects when such profits are derived in the previous year relevant to any assessment year from such housing projects, provided the conditions contained in the said sub-section are satisfied.
       High Courts have taken the same view holding that these assessees would be entitled to the deduction under Section 80IB(10) of the Act.
       Though Section 80IB has been on the statute book for quite some time, a new Section 80IB had been introduced by the Finance Act, 1999 w.e.f. 01.04.2000. All these cases are covered by the said Section, as introduced.
       However, sub-section (10) as amendment by Finance No.2 Act, 2004 w.e.f. 01.04.2005 being prospective in nature is in question herein. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01.04.2005 when amended provision has come into operation.
       Interestingly, when the housing project was approved by a local authority, which is the requirement under sub-section (10) of Section 80IB, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 01.04.2005 is not fulfilled.
       Therefore the question is as to whether the new conditions mentioned in the amended provision have also to be fulfilled only because the housing projects in question, though started before 01.04.2005, were completed after the said date. The question of law, that arises for discussion that needs to be answered is thus common in all these appeals and can be formulated as under:
       “Whether Section 80IB(10)(d) of the Income Tax Act, 1961 applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005?”
       Finding of the Court:
       High Courts have taken correct view.
       Result: Appeal dismissed.

JUDGMENT

A.K. SIKRI, J.

Leave granted.

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

“Whether Section 80IB(10)(d) of the Income Tax Act, 1961 applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005?”

3) As pointed out above, sub-section (10) stipulates certain conditions which are to be satisfied in order to avail the benefit of the said provision. Further, it is also clear that the benefit is available to those undertakings which are developing and building 'housing projects' approved by a local authority. Thus, this Section is applicable in respect of housing projects and not commercial projects. At the same time, we are conscious of the fact that even in the housing projects, there would be some area for commercial purposes as certain shops and commercial establishments are needed even in a housing projects. That has been judicially recognised while interpreting the provision that existed before 01.04.2005 and there was no limit fixed in Section 80IB(10) regarding the built-up area to be used for commercial purpose in the said housing project. As would be noticed later, the extent to which such commercial area could be constructed was as per the local laws under which local authority gave the sanction to the housing project. However, vide clause (d), which was inserted by the aforesaid amendment and made effective from 01.04.2005, it was stipulated that the built-up area of the shops and other commercial establishments in the housing projects would not e

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2015 Supreme(SC) 420

Cases Referred (5)