1. These two appeals by the assessee are directed against the common order of the CIT(A)-m, Chennai in ITA Nos. 173 and 174/2006-07 dt. 4th Oct., 2006. The assessments were framed by the Asstt. CIT, Company Circle 1(1), Chennai for the asst. yrs. 2003-04 and 2004-05 vide his both orders dt. 27th March, 2006 under Section 143(3) of the IT Act, 1961 (hereinafter called "the Act"). Since the issue is found to be common, both the appeals were elaborately heard together and for the sake of convenience and brevity, a consolidated order is passed.
2. The only issue in these two appeals of the assessee is whether the assessee is eligible for deduction under Section 80-IB(10) or not in the given facts and circumstances.
3. During the course of hearing, the Authorised Representative of the assessee submitted before the Bench that the assessee is not pressing the first ground of the appeal regarding issuance of notice under Section 143(2) and hence, he is withdrawing this ground. The learned Departmental Representative had no objection in withdrawing this ground by the assessee. Hence, this ground of the assessee is dismissed as withdrawn.
4. In the ground Nos. 2 to 4, the assessee has raised the following issues: (i) The order of the learned CIT(A) dt. 4th Oct. 2006 is contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice, equity and fair play and in any case the order of the CIT(A) is erroneous for confirming the denial of deduction under Section 80-IB. (ii) The learned CIT(A) ought to have appreciated that there was no ambiguity nor scope for interpretation in view of the clear language of the section which did not postulate any restriction regarding the extent of shops and commercial establishments under Section 80-IB(10) and such restrictions with retrospective effect imposed only by Finance Act, 2004 w.e.f. asst. yr. 2005-06 and allowed the claim of deduction under Section 80-IB of the appellant.
(iii) Without prejudice to the above ground, the learned CIT(A) erred in not allowing the deduction under Section 80-IB on pro rata basis ignoring the submissions of the appellant.
5. The briefly stated facts are that in these two years, the assessee filed return of income claiming deduction under Section 80-IB(10) in respect of project called "Raagamalika Phase-I" and "Raagamalika Phase-E" respectively. In this case, a survey operation was carried out under Section 133A of the Act on 26th Sept., 2005 to verify the claim of deduction under Section 80-03(10) of the Act. During the course of survey, the AO noticed various details. Along with this, a statement was recorded from the managing director of the assessee company, Shri P. Suresh. The AO during the course of assessment proceedings, asked the assessee regarding area constructed in these two projects i.e. the extent of commercial area built as well as the residential units constructed. The AO has gone through the facts and given findings in the light of various questions and answers posed during the survey as well as the material gathered during the survey and assessment proceedings that the assessee has developed three projects which are Raagamalika-I, Raagamalika-n and Raagamalika-m The AO has described the extent of commercial area as well as the extent of residential area constructed in these projects. He has given his findings on page Nos. 3 and 4 of the assessment order which reads as under: In the light of answers to the various questions posed during the course of survey and on the basis of the materials gathered during the said proceedings, the following picture emerges.
1. The assessee has developed three projects viz. Raagamalika-I, Raagamalika-II and Raagamalika-III. 2. Raagamalika-I: It started in the year 2000-01 and completed in the following year 2002-03 relevant to the asst. yr. 2003-04. The project was on an extent of 4922.90 sq. mtrs. of land. The assessee claimed that all the conditions prescribed for claim of deduction under Section 80-IB(10) was fully satisfied. In support thereof, the following details were furnished.
(b) Plan approval from CMDA and the Medavakkam Panchayat, the local body, has been obtained.
(c) Plinth area of each of the apartment constructed was less than 1,500 sq. ft.
3. Raagamalika-II: Since the assessee was following project completion method of recognizing revenue and since Raagamalika-n was not completed during the previous year relevant to the asst. yr.
2003-04, no claim under Section 80-IB(10) was made.
4. Raagamalika-in: At the time of survey, construction work was in progress.
During the course of subsequent hearings, it was pointed out to the assessee that the claim of deduction under Section 80-IB(10) was proposed to be disallowed for the following reasons: 1. Extent of commercial area : Even though, as per the sanctioned plan approved by CMDA and Medavakkam Panchayat, the approved commercial area was only 994 sq. ft. However, during the course of survey, it was found that in Raagamalika-I commercial establishments were found in the ground floor and first floor totalling in all to 9,790 sq. ft.
2. Sales to interested persons : The commercial area of 9,790 sq.
ft. were purchased by the managing director of the assessee company, his wife, his brother, brother's wife and one Shri Rajaji and his wife. Though, Shri Rajaji is not related, he is one of the directors of the company.
3. Extent of area exploited for commercial purposes : Even though Section 80-IB was amended w.e.f. the asst. yr. 2005-06 permitting commercial area to the extent that the built-up area of the shops and other commercial establishments does not exceed 2,000 sq. ft.
Even for argument sake, if this yardstick is applied to the assessee's case, the claim of deduction needs to be disallowed, since the built-up area far exceeds the permitted area as per the amended provisions by as much as 7,790 sq. ft., that is almost four times.
6. After that, the AO had given an opportunity to the assessee to controvert the same. The assessee pleaded that w.e.f. 1st April, 2005, an amendment has been brought out by the Finance (No. 2) Act, 2004 and the same provided Clause (d) of Section 80-IB(10), where restriction is put regarding the maximum commercial area to be built-up in view of this clause. Before the AO, it was pleaded that this clause was only brought out w.e.f. 1st April, 2005 and the AO considered this plea of the assessee. The assessee also pleaded that the provisions of Section 80-IB(10) as stood as on 1st April, 2003 and 1st April, 2004 relevant for asst. yrs. 2003-04 and 2004-05 will apply to the assessee for these two relevant assessment years. The provisions of Section 80-IB(10) did not mention about commercial area nor any ceiling has been provided and the provisions regarding ceiling of maximum area has been provided in this provision for and from asst. yr. 2005-06 only.
7. No doubt, these projects were approved by CMDA and Medavakkam Panchayat, the local body and the plinth area of each apartment constructed was less than 1,500 sq. ft. and the land area is more than one acre. These facts are undisputed. The only dispute is that the commercial area in these projects is to the extent of 9,790 sq. ft. in violation of Clause (d) of Section 80-IB(10). In view of this, the AO considered these aspects and various submissions of the assessee and given his final finding on page Nos. 7 and 8 of his order which reads as under: o It is clear that the assessee has developed the eligible project 'Raagamalika' and sold an extent of 9,790 sq. ft. as commercial area to the managing director and his relatives, as part of the project sales.
o Section 80-IB was introduced with an intention to provide housing to persons who cannot afford the luxury of a house within the city limits. Hence, to encourage housing in the outskirts of the city, which was promoted by persons, who would construct flats, not exceeding 1,500 sq. ft., so as to make such units commercially viable for the intended public.
o Of the total constructed area of 1,05,135 sq. ft., the commercial area accounts for 9.31 per cent.
o The persons, to whom such area was allotted, were none other than the managing director and his relatives.
o The assessee, being a closely-held company, cannot escape, by saying that the persons who purchased the said area, have registered the same as only residential units and thereafter utilised the same for commercial purposes.
o Normally residential flats will have partition, but what was seen in respect of the area used as commercial space was a big hall.
Hence, right from the beginning, it was clear that the said space was to be used as commercial area.
o Besides, if the said area was sold to an outsider, at least some credence could be attached to the assessee's claim. But, however, unfortunately, only the managing director of the assessee company and his relatives has purchased the said area.
o Hence, inasmuch as the provision governing the claim of deduction under Section 80-IB does not permit any commercial area, that too exceeding 2,000 sq. ft, the assessee's claim of deduction needs to be disallowed.
o When the statute gives total exemption from tax of the profits generated through certain ventures and also prescribes certain restrictions for compliance, and if the assessee wanted to take advantage of the same he must abide by the same in strict compliance thereof.
o Therefore, the assessee did not comply with the provisions of the Act so as to be eligible for the claim of deduction under Section 80-IB. o Accordingly, the claim of deduction under Section 80-IB of Rs. 1,31,58,397 in respect of Raagamalika Phase I is disallowed.
The CIT(A) more or less confirmed the action of the AO in paras 4 and 4.1 of his order which reads as under: 4. I have carefully examined the detailed reasons given by the AO in the assessment orders and various submissions of the appellant on this issue. It is an admitted fact that a part of the constructed area of the housing projects had been constructed by the appellant in the form of a commercial area and sold out to the persons having substantial interest in the appellant company. The appellant had not disputed the fact that 9.31 per cent of the total constructed area was commercial in nature. However, I am of the considered view that the said violation in the form of converting a part of the housing project into commercial area does not fully debar the appellant from availing deduction under Section 80-IB. The provisions in the form of Clause (d) to Section 80-IB(10) were brought to the statute w.e.f. 1st April, 2005 applicable for asst. yr. 2005-06 onwards. The said provisions are admittedly not retrospective in nature. The said Clause (d) is reproduced as under: 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.
4.1 From the above provisions, it can easily be inferred that the legislature has given some flexibility to the assessees claiming deduction under Section 80-IB that 5 per cent of the built-up area or 2,000 sq. ft. whichever is less can be constructed and sold out as commercial area in the approved housing projects. The said flexibility has however been permitted w.e.f. asst. yr. 2005-06 onwards only. I am further of the view that in view of the decision of the Hon'ble Supreme Court in the case of Varas International (P) Ltd. (supra), the provisions of Clause (d) of Section 80-IB(10) cannot be applied retrospectively. The important point to be noted here is that this very argument of learned Authorised Representative goes against the appellant itself because the flexibility with reference to the commercial area provided by the legislature is available from asst. yr. 2005-06 onwards only. The assessment years involved in the dispute are 2003-04 and 2004-05. For these years, appellant was required to construct only the approved housing projects for middle class segments of the society. But the facts clearly point out that the appellant had constructed substantial commercial areas also which were sold out to persons having beneficial interest in the company. I am of the humble view that deduction under Section 80-IA cannot be allowed to an assessee who does not fulfil all the conditions prescribed in the said section.
Construction of houses for the public at large in accordance with the approved plans is one of the important conditions contained in the said section. Furthermore, construction of 100 per cent residential area in the said projects is an implied condition for availing 100 per cent deduction under Section 80-IA since no flexibility was provided in the said section till asst. yr.
2004-05.1 fully agree with the contentions of the learned Authorised Representative that Clause (d) of Section 80-IA(10) is not retrospective in nature. Furthermore, in view of decision of Supreme Court in the case of Varas International (supra), that amendment cannot be applied retrospectively also.
In view of this, the CIT(A) confirmed the action of the AO and rejected the plea of the assessee. Aggrieved, the assessee came in appeal before us.
9. In view of the facts of the case and arguments from both the sides as well as the material placed before us, we have come to the conclusion that the following two issues are emerging for our decision: (1). whether the amendment brought out by the Finance (No. 2) Act, 2004. w.e.f. 1st April, 2005 will apply prospectively or retrospectively.
(2). whether, prior to amendment by the Finance (No. 2) Act, 2004 (23 of 2004) w.e.f. 1st April, 2005, there is any condition regarding limitation to commercial area in the housing project or not; These two issues are interlinked and we are discussing the whole issue at one go.
10. First of all, we have to go through the legislative history of the provision, as this provision was brought out by the Finance Bill, 1999 in substitution of new section for Section 80-IA. In the provisions of Section 80-IB, deduction in respect of profit and gains from certain industrial undertaking other than infrastructure development undertakings was granted in Sub-section (10) of Section 80-IB. The relevant provision brought out reads as under: 80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
(10) The amount of profits in case of an undertaking developing and building housing projects approved by a local authority, shall be hundred per cent of the 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 the housing project on or after the 1st day of October, 1998, and completes the same before the 31st day of March, 2Q01; (b) the project is on the size of a plot of land which has minimum area of one acre; and (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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place.
For bringing this provision, the Notes on Clauses to the Finance Bill, 1999 has explained that, "the provision also seeks to provide that for approved housing projects the profits which are fully deductible, the built-up area in regions other than outside twenty-five kms. of municipal limits of Delhi and Mumbai, the built-up area of the residential units does not exceed one thousand five hundred square feet.
11. Further, the Memo contained in Finance Bill, 1999 has explained the provisions brought by the legislature w.e.f. 1st April, 2000 and the same reads as under: Liberalisation of tax holiday to approved housing projects--Under Section 80-IA of the IT Act, profits of approved housing projects where the development and construction commences on or after 1st Oct., 1998 and is completed by 31st March, 2001 are fully deductible. The conditions necessary for claiming the benefit are that the approved housing project should be on minimum area of one acre and should have dwelling units with a maximum built-up area of 1,000 sq. ft.
It is proposed to modify the existing benefits to provide that in areas other than falling in and within 25 kms. from the municipal limits of Delhi and Mumbai, the built-up area of dwelling units may be up to a maximum limit of 1,500 sq. ft. instead of 1,000 sq. ft.
at present to make them entitled for benefit. The built-up area for areas falling in Delhi and Mumbai and within 25 kms. of the municipal limits of both, however, shall remain the same.
The proposed amendment will take effect from 1st April, 2000, and will, accordingly, apply in relation to the asst. yr. 2000-01 and subsequent years.
12. In order to be eligible undertaking, developing and building housing projects and for claiming deduction under Section 80-IB(10), Finance Act, 2000 w.e.f. 1st April, 2000 has laid down various conditions and the provisions of Section 80-IB amended by various Finance Acts as amended w.e.f. 1st April, 2000 by the Finance Act, 2000 and by the Finance Act, 2003 and as substituted by the Finance (No. 2) Act, 2004, the housing projects must be approved on or before 31st March, 2007 by the local authority. These provisions envisage further that for the eligibility of deduction under Section 80-IB(10) of profits from such housing projects, the following conditions are to be complied with: (b) Such undertaking has commenced or commences development and construction of housing projects on or after 1st Oct., 1998 and completed such construction.
(iii) for and from asst. yr. 2005-06 as amended by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005- (1) In a case where housing project has been approved by the local authority on or before 1st April, 2004, on or before 31st March, 2008.
(2) Where housing project has been approved by the local authority on or after 1st April, 2004 within four years from the end of the financial year in which housing project has been approved by that local authority.
13. Further, the Explanation as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 for the purposes of this clause reads as under: (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.
and condition (b) is that the project has to be on the size of a plot of land which has a minimum area of one acre. Further, the proviso to Section 80-IB(10) at the end of Clause (b) as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 provides as under: nothing contained in Clause (a) or Clause (b) of Section 80-IB(10) 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.
Clauses (c) and (d) as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 reads as under: (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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) (w.e.f. 1st April, 2005) 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.
14. Prior to its substitution by the Finance (No. 2) Act, 2004 w.e.f.
1st April, 2005, Sub-section (10) as amended by the Finance Act, 2000 w.e.f. 1st April, 2001 and Finance Act, 2003 w.e.f. 1st April, 2002 reads as under: (10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the 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 the housing project on or after the 1st day of October, 1998; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place.
15. The changes brought out by the substitution by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 have been explained in Notes on Clauses of the Finance (No. 2) Act, 2004 which reads as under: 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 are 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 Oct., 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 kilometers 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 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 be the date on which the completion certificate is issued by the local authority.
Further, also the same provisions were explained in the memorandum explaining the provisions in the Finance (No. 2) Act, 2004 which reads as under: Extension of the time-limit for obtaining approval of housing projects for the purpose of tax holiday under Section 80-IB, and allowing deduction for redevelopment or reconstruction of existing buildings Under the existing provisions contained in sub-section (10) of Section 80-IB, a deduction equal to one hundred per cent of the profits of an undertaking developing and building housing projects is allowed if the housing project is approved by a local authority before 31st March, 2005. The deduction is subject to the conditions that the undertaking should have commenced development of the housing project after the 1st day of October, 1988, the project should be on a size of a plot of land which has a minimum area of one acre and that the residential unit should have a maximum built-up area of one thousand square feet where such residential unit is situated in Delhi or Mumbai and one thousand and five hundred square feet at other places.
It is proposed to substitute the existing Sub-section so as to rationalize the provisions and provide additional incentives. With a view to allow more housing projects to avail of the tax holiday under this provision, it is proposed to extend the time-limit for obtaining approval from the local authority to 31st March, 2007.
However, it is also proposed to provide a time-limit for the completion of the housing project within 4 years from the end of the financial year in which the project is approved by the local authority. It is proposed to take the date of approval as the date on which the building plan is first approved by the local authority and the date of completion of the housing project as the date on which the completion certificate is issued by such authority.
It is further proposed to provide that the built-up area of the shops and other commercial establishments including in the housing project shall not exceed five per cent of the aggregate built-up area of the housing project or 2,000 sq. ft., whichever is less.
With a view to encourage the redevelopment of slum dwellings, it is proposed to relax the condition of minimum plot size of one acre 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 notified by the Board in this behalf.
It is also proposed to define the expression "built-up area" to mean the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but not including the common areas shared with other residential units.
These amendments will take effect from 1st April, 2005 and will, accordingly, apply in relation to the asst. yr. 2005-06 and subsequent years.
16. Even before us, the learned Authorised Representative for the assessee has contended that Clause (d) of Section 80-IB(10) was brought on the statute book w.e.f. 1st April, 2005 relevant to the asst. yrs.
2005-06 and subsequent years. In view of this, it was argued that Clause (d) of Section 80-IB(10) has been incorporated clearly w.e.f.
1st April, 2005 and hence these provisions cannot be applied for the relevant asst. yrs. 2003-04 and 2004-05. It is a fact that the total commercial area constructed in these residential projects was 9.31 per cent and this fact has not been disputed by either of the sides. It is seen from the orders of the lower authorities that they have relied mainly on the amended Clause (d) of Section 80-IB(10) which has been brought on the statute book w.e.f. 1st April, 2005 by the Finance (No.2) Act, 2004. Even the Memo explaining the provisions in the Finance (No. 2) Act, 2004 and Notes on Clauses in Finance (No. 2) Act, 2004 have categorically clarified the position that these amendments will take effect from 1st April, 2005 and will accordingly apply from the asst. yr. 2005-06 and subsequent years.
17. It is seen that the learned Authorised Representative of the assessee also cited a case law of Hon'ble apex Court in the case of R.Rajagopal Reddy v. Padmini Chandrasekhaian wherein the Hon'ble apex Court has held as under: As regards reason No. 3, we are of the considered view that the Act cannot be treated to be declaratory in nature. Declaratory enactment declares and clarifies the real intention of the legislature in connection with an earlier existing transaction or enactment, it does not create new rights or obligations. On the express language of Section 3, the Act cannot be said to be declaratory but in substance it is prohibitory in nature and seeks to destroy the rights of the real owner qua properties held benami and in this connection it has taken away the right of the real owner both for filing a suit or for taking such a defence in a suit by benamidar.
Such an Act which prohibits benami transactions and destroys rights flowing from such transactions as existing earlier is really not a declaratory enactment. With respect, we disagree with the line of reasoning which commended to the Division Bench. In this connection, we may refer to the following observations in 'Principles of Statutoiy Interpretation', 5th Edn., 1992, by Shri G.P. Singh, at p.
315 under the caption 'Declaratory statutes: The presumption against retrospective operation is not applicable to declaratory statutes. As stated by Crales and approved by the Supreme Court: 'For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the Constitution came into force the amending Act also will be part of the existing law.In Mithilesh Kumari v. Prem Bihari Khare, Section 4 of the Benami Transactions (Prohibition) Act, 1988 was, it is submitted, wrongly held to be an Act declaratory in nature for it was not passed to clear any doubt existing as to the common law or the meaning or effect of any statute. The conclusion, however, that Section 4 applied also to past benami transactions may be supportable on the language used in the section.
No exception can be taken to the aforesaid observations of learned author which in our view can certainly be pressed in service for judging whether the impugned section is declaratory in nature or not. Accordingly it must be held that Section 4 or for that matter the Act as a whole is not a piece of declaratory or curative legislation. It creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transactions and for whom new liabilities are created by the Act.
18. In view of the above case law of the Hon'ble apex Court, the principle laid down is regarding retrospective or prospective of the legislation depending upon its curative in nature or its explanatory or it will take effect from a particular date. Here, in the Notes on Clause and memo explaining provisions in Finance (No. 2) Act, 2004 it has been very categorically stated that these amendments will take effect from the asst. yr. 2005-06 and subsequent years. In view of this, the first issue whether Clause (d) as brought in the statute book w.e.f. 1st April, 2005 by the Finance (No. 2) Act, 2004 is only prospective and not retrospective and in view of these facts and circumstances, we decide this issue in favour of the assessee.
19. As regards second issue, the provisions of Section 80-IB(10) are very clear. The three conditions laid down in the provisions are-(1) such undertaking has commenced or commences development and construction of housing project on or after 1st day of October, 1998; (2) the project is on the size of a plot of land which has a minimum area of one acre; and (3) 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 kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Here the assessee has complied with all the three conditions as is apparent from the orders of the lower authorities. The assessee has used 9.31 per cent of the total construction area for commercial construction. The learned Authorised Representative of the assessee has already raised alternative plea in this regard that the deduction under Section 80-IB(10) on the residential units constructed by the assessee be given on pro rata basis. Here, we agree with the plea taken by the assessee and accordingly we direct the AO to allow the claim of the assessee on the residential units constructed on pro rata basis. The assessee is not eligible for deduction under Section 80-IB(10) on the commercial area constructed in the project i.e. to the extent of 9.31 per cent of the total constructed area. This fact is not in dispute. In view of this, this issue of the assessee is allowed in favour of the assessee.
20. In the result, both the appeals filed by the assessee stand allowed partly.