The High Court allowed the appeal, holding that the Tribunal erred in taxing pre-construction activities as 'development' commencing before 01.10.1998. The Court ruled that relief under section 80IB is available since actual construction commenced on 15.10.1998.
Appeal allowed. Questions of law answered in favour of the assessee. No costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.02.2016
CORAM
THE HONBLE MR.JUSTICE V.RAMASUBRAMANIAN and THE HON'BLE MR.JUSTICE N.KIRUBAKARAN
Tax Case Appeal No.96 of 2008
Ravi Appasamy
.. Appellant
Vs.
The Assistant Commissioner of Income Tax Circle II 108, Uthamar Gandhi Salai Nungambakkam Chennai 600 034.
.. Respondent
Appeal under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai Bench "C" dated 17.08.2007 in ITA No.3196/MDS/2004.
For Appellant : Mrs.Anita Sumanth For Respondent : Mr.T.Ravi Kumar Standing Counsel -----
J U D G M E N T
(Delivered by V.Ramasubramanian,J.)
The above tax case appeal was admitted on 05.02.2008, on the following substantial questions of law:
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"(1) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in holding that the appellant is not entitled to relief under section 80 IB of the Income Tax Act, in respect of the project in question and the income derived therefrom?
(2) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the development and construction of the project has commenced prior to 01.10.1998 and consequently the claim under section 80 IB of the Act is not tenable?
(3) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in coming to the aforesaid conclusion, without taking into account the various documents, evidence and submissions placed before the Tribunal?
(4) Whether on the facts and in the circumstances of the case, the order of the Income Tax Appellate Tribunal is not vitiated by an error apparent on the face of the record, in so far as it has, without applying its mind to the facts and assumption of erroneous facts, concluded that the development and construction have taken place prior to 01.10.1998?
(5) Whether on the facts and in the circumstances of the case the interpretation given by the Income Tax Appellate Tribunal to the expression 'development and construction' contained in section 80 IB of the Income Tax Act is correct and whether the Tribunal is right in law in concluding that the development and construction has taken place before 01.10.1998?"
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even the pre-construction work which would fall within the definition of the term "development", should be taken to be part of the work of construction and that therefore, the assessee's claim for deduction under Section 80IB(10) should be disallowed.
"5.6. In the background of the above discussion, it is to be
examined whether the appellant fulfills the conditions enumerated u/s.80IB(10) or not. For the sake of convenience the various events
which have been taken place in chronological order are enumerated below:-
| (i) | Signing of agreement for purchase of land | |
|---|---|---|
| with owners | 25.09.1993 | |
| (ii) | Digging of Borewell | 19.10.1996 |
| (iii) | Construction of compound wall | 14.09.1996 |
| (iv) | Appointment of Architect along with initial advance |
07.01.1997 |
| (v) | Submission of plans to statutory authorities for plan approval for construction of Ground +9 Floors and .... |
22.07.1996 |
| (vi) | Rejection of approval by statutory authorities |
21.11.1996 |
| (vii) | Filing of writ petition with Hon'ble High Court of Madras |
November 1996 |
| (viii) | Order received from the Hon'ble High Court of Madras directing the statutory |
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| authorities to reconsider their decision | 17.12.1997 | |
|---|---|---|
| (ix) | Submission of revised plan for construction of Ground +10 floors to statutory authorities for plan approval and payment of fees |
24.12.1997 |
| (x) | Clearance from various statutory | |
| authorities - Police Department | 10.02.1998 | |
| Airport Authority | 12.03.1998 | |
| (xi) | Approval received from CMDA for | |
| Ground +10 floors | 04.08.1998 | |
| (xii) | Commencement of construction at site | 15.10.1998 |
| (xiii) | Final approval from Chennai Corporation | 05.07.1999 |
Admittedly, the construction started only on 15.10.98 which is after 1.10.98. Therefore, the appellant fulfills this condition. The Assessing Officer had also not disputed this fact. Therefore, the only issue to be decided is whether or not the appellant commenced "development of the project" before 1.10.98. In case, the appellant commenced the "development of the project" before 1.10.98, the appellant would not be entitled for deduction u/s.80IB(10). In case, it is found that the appellant commenced the "development of the project" after 1.10.98, the appellant would be entitled for deduction u/s.80IB(10) since the appellant would then be fulfilling all the conditions. Therefore, essentially it boils down to finding out at what point of time, the appellant can be said to have commenced the "development of the project". As stated earlier, for "development" to take place, "the project" has to be in existence. Therefore, it is necessary to find out when "the Project"came into existence."
second appeal in ITA No.3196/Mds/2004 before the ITAT, Chennai. The ITAT
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allowed the appeal of the Revenue, by an order dated 17.8.2007, holding that the assessee should be deemed to have commenced the work of development and construction, from the time even when the preliminary works started. Therefore, the assessee is on appeal before us.
of the relevant part of Sub-section (10) of Section 80IB. It reads as follows:
"(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the 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 such construction,-
.... "
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concrete opinion that all these activities would constitute an activity of construction, the Tribunal ought to have first disallowed the findings recorded by CIT (Appeals) that the actual date of commencement of construction was 15.10.1998. But, unfortunately, the Tribunal agreed in paragraph 14 of its order that the actual date of commencement of construction was 15.10.1998. However, the Tribunal held that all pre-construction activities should be taken to be part of development, so as to pre-pone the date of development and construction. This, in our considered view, is not the correct interpretation to be offered to the composite expression "development and construction"of the housing project.
In view of the above, the appeal is allowed and the questions of law
are answered in favour of the assessee. No costs. Consequently, M.P.No.1 of
2008 is closed.
| Index | : Yes/No | (V.R.S.J.) | (N.K.K.J.) |
|---|---|---|---|
| Internet | : Yes/No | 01. | 02.2016 |
kpl
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V.RAMASUBRAMANIAN,J, and N.KIRUBAKARAN,J.
kpl
TCA No.96 of 2008.
01.02.2016.
3 issues framed by the court
Whether the Income Tax Appellate Tribunal was correct in denying relief under section 80IB by treating pre-construction activities as commencement of development prior to 01.10.1998.
Whether the expression 'development and construction' in section 80IB requires both activities to commence after 01.10.1998 independently.
Whether the Tribunal erred in relying on the Tamil Nadu Town and Country Planning Act definition to determine the commencement of development under section 80IB.
2 provisions across 1 enactments
Ravi Appasamy
The Assistant Commissioner of Income Tax
V.Ramasubramanian
N.Kirubakaran
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
