Manan Corporation vs. ACIT (Gujarat High Court)

S. 80-IB(10)(d) ceiling on commercial area inserted w.e.f. 1.4.05 does not apply to projects approved before that date

The assessee’s housing project was commenced pre 1.4.2005 when s. 80-IB(10) did not impose any ceiling on the commercial area that could be embedded in the project. S. 80-IB(10)(d) was inserted by the Finance (No.2) Act, 2004 to impose a ceiling on the extent of commercial area that could be contained in the housing project. The Tribunal held that as the assessee’s project was completed after 1.4.2005, the question of eligibility for s. 80-IB(10) deduction had to be considered as per the law then prevailing and not at the time that the project was approved. As the commercial area exceeded the ceiling stipulated in s. 80-IB(10)(d), the claim for deduction was denied. On appeal by the assessee to the High Court, HELD reversing the Tribunal:

The judgement of the Bombay High Court in Brahma Associates 333 ITR 289 (Bom) that w.e.f. 1.4.2005, deduction u/s 80-IB(10) would be governed by the restriction on commercial area imposed by clause (d) does not mean that even projects approved prior to 1.4.2005 would be governed by the said restriction. Neither the assessee nor the local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and/or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act. The entire object of s. 80-IB(10) is to facilitate the construction of residential housing project and if at the stage of approving the project, there was no such restriction in the Act, the restriction subsequently imposed has to be necessarily construed on a prospective basis and as applying to projects approved after that date.