Section 80-IB(10): Notification No. 1/2011 dated 5-1-2011 restricting eligibility of section 80- IB(10) deduction to projects approved under Slum Rehabilitation scheme on or after 1-4- 2004 and before 31-3-2008 is inconsistent/ contrary to proviso to clauses (a) and (b) of section 80-IB(10)
Facts: The assessee had claimed deduction u/s. 80IB(10) in respect of profit from development of three housing projects under the Slum Rehabilitation Scheme (SRS) of the Government of Maharashtra. The details of three projects under SRS projects are as under:—
The Assessing Officer denied the claim of the assessee on the ground that the conditions prescribed under clause (b) of section 80-IB(10) regarding minimum area of 1 acre of the plot had not been satisfied by the assessee. The assessee claimed that all the three plots of land should be considered as one project for the purpose of deduction u/s. 80-IB(10). The Assessing Officer did not accept the contention of the assessee and disallowed the claim of the assessee.
On appeal, apart from merging all the plots, the assessee had also contended that the slum rehabilitation scheme had been notified by the Board vide notification dated 05- 01-2011 and, therefore, the condition of minimum area of 1 acre of land was not applicable in the case of the assessee.
The CIT(A) noted that under the notification dated 5.1.2011 the slum redevelopment scheme of the Government of Maharashtra has been notified subject to the condition that the projects approved before 01-04-2004 do not fall under the scheme notified by the CBDT and since assessee’s project was approved before 01-04-2004, he confirmed disallowance.
Held: For the assessment years 2003-04 to 2005-06, the Tribunal had considered and held that assessee had not fulfilled the conditions laid down u/s. 80-IB(10) because assessee carried out development on three different plots; each of those plots was less than one acre. These plots were not contiguous to each other. Though these plots were located at Dharavi, Mumbai, they were at different places. In other words, there were other slums in between these three slum areas which were rehabilitated by the assessee.
For the assessment year 2006-07, the Tribunal by following the earlier order of this Tribunal has decided this issue.
The issue of merger of three plots for the purpose of area of plot being 1 acre had been decided against the assessee consistently by this Tribunal. Following the earlier years order of this Tribunal, there was no error or illegality in the impugned order of Commissioner (A).
As regards the benefit of proviso to section 80-IB(10), the conditions enumerated in clauses (a) & (b) are relaxed if the housing project is carried out in accordance with the scheme framed by the Central or State Government for reconstruction/redevelopment of slum area declared therein. However, such schemes are required to be notified by the Board in this behalf. It is pertinent to note that in the earlier years when this matter came before the Tribunal this scheme was not notified by the Board and only on 5-1-2011, the Board has notified the scheme.
As per this Notification, the Board has stated that this notification shall be deemed to apply to the projects approved by the local authority under the SRS scheme on or after 1-4-2004 and before 31-3-2008. It was further clarified that the income arising from such projects was eligible for deduction u/s. 80-IB(10) from the assessment year 2005- 06 onwards. The question arises whether while notifying the scheme the Board can attach any condition for the eligibility of the project to avail the benefit of proviso to section 80-IB(10)(a) and (b).
The deduction u/s. 80-IB(10) is available to the housing project which fulfils the conditions stipulated thereunder. One of the conditions is that the project is on the size of plot of land which has a minimum area of 1 acre under clause (b) of section 80-IB(10). An exclusion has been carved out under the proviso to clauses (a) and (b) of section 80-IB(10) whereby the condition stipulated under clauses (a) and (b) shall not apply to the housing project carried out in accordance with the scheme framed by the Central Government or State Government for reconstruction or redevelopment of area declared as slum area under the law. The projects of the assessee are under the slum rehabilitation scheme framed by the State Government which has been notified by the board vide notification dated 5-1-2011. The plain reading of the proviso inserted by the Finance Act, 2004 to clauses (a) and (b) of sub-section (10) of section 80-IB clearly manifests the requirement of notification of the scheme so framed either by the Central Government or by the State Government. Also, it is relevant to see the intent of the Legislature while amending the provisions of section 80-IB(10), to relax the condition for such project under the slum rehabilitation scheme. The memorandum explaining the provisions in the Finance Bill, 2004 states that with a view to increase the redevelopment of slum dwellers, it has proposed to relax the condition of minimum plot size of 1 acre in case of housing project carried out in accordance with the scheme framed by the Central Government or State Government for reconstruction or redevelopment of existing building and notified by the board in this behalf. Thus, the intent of legislature is to exempt the condition of minimum of 1 acre plot size in the case where the housing project is carried out in accordance with the slum reconstruction scheme framed by the Central Government or State Government and such scheme is notified by the Board. Therefore, to avail the benefit of the proviso to clauses (a) and (b) of section 80-IB(10), the following requirements are to be satisfied, viz., (i) the housing project is carried out in accordance with the scheme of reconstruction or redevelopment of slum area (ii) such scheme is framed by the Central Government or State Government (iii) such scheme is notified by the Board in this behalf.
There is no dispute that the projects in question are carried out in accordance with the scheme for redevelopment of the slum area as framed by the State Government of Maharashtra and the same has been notified by the Board vide notification dated 5-1-2011. The second part of this notification contemplates a new condition which is not provided even under clause (a) of section 80- IB(10). The condition inserted in the notification says that the notification shall be deemed to apply to the projects approved by the local authority on or after 1-4-2004 and before 31-3-2008. This condition contemplated under the notification is repugnant to the conditions provided u/s. 80-IB(10). The proviso in question has been inserted to relax the condition provided under clauses (a) & (b) of section 80-IB(10) and not for adding any new condition which is otherwise not required for housing projects for availing the benefit of deduction u/s. 80-IB(10). Even otherwise the condition as stipulated in clause (a) of section 80-IB(10) with respect to sanction of the project is only for the time period of completion of the project and there is no such condition that if a project is approved prior to 1-4-2004, it is not entitled for the benefit u/s. 80-IB(10). Once the scheme is notified all projects carried out in accordance with such scheme are entitled for the benefit of the proviso whereby the conditions prescribed under clauses (a) and (b) are relaxed. Thus the second part of the notification dated 5-1-2011 is inconsistent/contrary to the proviso of clauses (a) and (b) of section 80-IB(10) as well as to the intent of the Legislature inserting the said proviso. The Board cannot insert a new condition in the provisions of a statute which is repugnant to the provisions itself as well as
against the very object and scheme of the said provision of the statute.
Accordingly the assessee was entitled for benefit of the proviso to clauses and (b) of
section 80-IB(10) and, therefore, was eligible for deduction u/s. 80-IB(10) if
the other conditions as prescribed under clauses (c) to (e) are satisfied.
