Sanjay Arora, Accountant Member - This is a set of two Appeals by the Revenue directed against the separate Orders by the Commissioner of Income Tax (Appeals)-26, Mumbai ('CIT(A)' for short) for the assessment years (A.Ys.) 2008-09 & 2009-10, allowing the assessee's appeal contesting its assessments u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the relevant years.

The Issue

2. The issue arising in the instant case is the eligibility of the assessee's (an Association of Persons (AOP) of M/s. Sankalp Developers (45%), Shri Ashok G. Mohanani (30%) and Shri Vivek A. Mohanani (25%)), a builder and developer, profits from its housing project 'Ekta Medows' at Mumbai-66, to deduction u/s.80-IB(10) of the Act.

The background facts and arguments

3. The appeals came up for hearing originally on 15.05.2014, whereat it came to light that the matter under reference is covered in the assessee's favour by the decision by the Tribunal in its' own case for the immediately preceding year, i.e., A.Y. 2007-08, being the first year for which the assessee disclosed profit, on a percentage completion basis, on the said project (in ITA No.3276/Mum(J)/2010 dated 28.09.2012/copy on record). The ld. Departmental Representative (DR) was allowed time to go through the tribunal's order and state the Revenue's stand in its respect, posting the hearing for 21/5/2014. The Revenue not raising any objection; rather, conceding to the matter being squarely covered by the tribunal's order for A.Y. 2007-08 (supra), the hearing was concluded on that basis. Subsequently, at the time of dictation, it was found that the Revenue had per its grounds of appeal (reproduced as under), invoked the decision by the hon'ble jurisdictional High Court in the case of CIT v. Brahma Associates [2011] 333 ITR 289/197 Taxman 459/9 taxmann.com 289 (Bom.) (which was in fact also noticed by the Bench at the time of hearing, only to be explained of it being on another aspect, and not relevant to the issue at hand), wherein it has been clarified that the deduction u/s. 80-IB(10) is on the project as a whole, so that there is no scope for considering a part thereof as eligible, and limiting the deduction to that attributable thereto:

The said decision, thus, has a direct bearing on the instant case, being rather in approval of the Revenue's case as made out by the Assessing Officer (A.O.). The same being binding on all parties, including this Bench, i.e., notwithstanding the order by the tribunal in the assessee's own case for the preceding year, it was considered proper that the parties be heard in the matter. Accordingly, the case was reposted for hearing on 13/6/2014, and the matter heard afresh. Both the parties reiterated their respective stands, relying on the order/s of the authorities below as favourable to them. The ld. Authorized Representative (AR) could not however furnish any satisfactory answer in rebuttal to the specific and pertinent query raised by the bench in this regard, i.e., that vide the said decision the hon'ble jurisdictional court has unequivocally clarified that it is a single project, as approved by the local authority, that would stand to be regarded as either an eligible project, or not so, i.e., in terms of section 80-IB(10).

Analysis

4. We have heard the parties, and perused the material on record.

4.1 We firstly observe that the tribunal in the assessee's own case for A.Y. 2007-08 has upheld proportionate deduction on the assessee's housing project 'Ekta Meadows', being otherwise eligible in-as-much as its stands duly approved by the local authority on 13.05.2005 and completed on 26.03.2009. The bone of contention between the parties is the satisfaction or otherwise of clause (c) of section 80-IB(10); that of other clauses, i.e., clauses (a), (b) and (d) being not in dispute, the cumulative satisfaction of all of which would make the project eligible for deduction u/s.80-IB(10), which position is again undisputed. Clause (c) enlists the condition as to the maximum built-up area of a residential unit in the housing project, being at 1000 sq. ft. for the Mumbai region, where the assessee's housing project is located. That a fair percentage of residential units, covering 35% of the total built-up area, have a built-up area in excess of the prescribed limit of 1000 sq. ft., is also not in dispute. The assessee accordingly restricts its' claim for deduction to the balance 65% of the built-up area - the entire of which is residential, i.e., to 65% of the total profits, on the basis that the profit to that extent is attributable to residential units satisfying the condition of section 80-IB(10)(c) and, thus, all the conditions of section 80-IB(10). The Revenue, on the other hand, claims that the quantum of deduction could only follow a satisfaction of each of the qualifying conditions, i.e., by a housing project as a whole. The project, 'Ekta Medows', admittedly not satisfying the condition of section 80-IB(10)(c) in-as-much as all its residential units are admittedly not within the stipulated norm regarding the maximum built-up area, the said project cannot be said to be an eligible housing project u/s.80-IB(10). This sums up the controversy and the dispute attending the instant appeals.

The order by the tribunal in the assessee's appeal for A.Y. 2007-08:

4.2 The tribunal allowed the assessee's claim for the preceding year (A.Y. 2007-08) following the decision by the co-ordinate bench in the case of Bengal Ambuja Housing Development Ltd. v. Dy. CIT [IT Appeal No. 1735 (Kol.) of 2005, dated 24-3-2006], also citing other decisions by this tribunal upholding the deduction on pro-rata basis (refer para 6 of the order). The hon'ble Calcutta high court, it further notes, has since confirmed the tribunal's decision in Bengal Ambuja Housing Development Ltd. (supra), dismissing the Revenue's appeal challenging the same (in ITA No. 458 of 2006 dated 05.01.2007) on the ground that it did not find the same as involving any substantial question of law, so that it declined to answer the question/s of law sought to be raised before it by the Revenue (refer para 14 of the tribunal's order). No binding ratio or judicial precedent thus arises out of the said decision by the hon'ble Calcutta high court for being followed; it, rather, refraining from answering the question/s of law raised by the Revenue, considering its' appeal as, in effect, incompetent. There is also reference to the tribunal's order in the case of the assessee's sister concern, Ekta Housing (P.) Ltd. [IT Appeal No. 3649 (Mum.) of 2009] at para 7 of the order, reproducing there-from, and which again follows other decisions by the tribunal, also adverting to the 'approval' afore-referred by the hon'ble Calcutta high court in Bengal Ambuja Housing Development Ltd. (supra). The tribunal also refers to the decision by the tribunal in the case of Third Member in the case of Sanghvi & Doshi Enterprises v. ITO [2011] 131 ITD 151/12 taxmann.com 240 (Chennai). The third member has again decided the matter with reference to the decision by the hon'ble high court in Bengal Ambuja Housing Development Ltd. (supra) (refer paras 8 and 19 of the tribunal's order), so that it can at best be considered as a view by a larger bench of the tribunal. Even otherwise, it is trite law that a decision is an authority on what it actually decides, and not what may remotely or even logically flow from it (refer: Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402 (SC). None of the several decisions cited before it, and which the tribunal respectfully follows in deciding the issue in the manner it does, as we observe from a reading of it's order, as also from a perusal of the order in ITO v. AIR Developers [2010] 122 ITD 125 (Nag.) - which we find to be the only reported order, bears reference to or considers the decision by the hon'ble high court in the case of Brahma Associates(supra), which is binding on us, so that the ratio of the said decision shall have to be examined for being followed.

The decision in the case of Brahma Associates (supra):

4.3 In the facts of that case, the assessment year being 2003-04, the Revenue similarly denied deduction on the ground that the assessee's housing project, which had a commercial area of 50% of the total area, was not an eligible housing project u/s.80-IB(10). The assessee had claimed deduction corresponding to 50% area covering the residential construction, which claim was upheld by the tribunal. On the Revenue carrying the matter in appeal before it, the hon'ble jurisdictional high court clarified as under:

The hon'ble jurisdictional high court has clearly held that an eligible housing project u/s.80-IB(10) is the whole project, so that it either qualifies, or not so, there-under, in terms of the relevant provision. Accordingly, either the profits derived from a project would be subject to deduction under the provision, i.e., wholly, or not so, and there is no scope for deduction on a proportionate basis, i.e., as attributable to the residential area in the facts of that case, finding the same as without basis in law. It accordingly approved the deduction qua the profits of the entire project. The ratio of the said decision is squarely applicable in the facts of the case. Each of the conditions of s. 80-IB(10) is a qualifying condition, and is to be independently satisfied. There is, accordingly, no concept of pro rata deduction where a condition is partly satisfied. The principle that quantification follows eligibility is axiomatic. We are, thus, in principle, in complete agreement with the Revenue that the prescription and mandate of the decision in Brahma Associates (supra) does not admit of proportionate deduction in-as-much as either housing project qualifies, or not so, under s.80-IB(10).

4.4 We may next consider the condition of section 80-IB(10)(c), reproducing the provision itself, which reads as under:

'Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.

80-IB. (1) Where the gross total income of an assessee, being a Developer, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special Economic Zones Act, 2005, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.

(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 (*) 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,—

[(*) '2008' by Finance (No.2) Act, 2009, w.r.e.f 01.04.2009, i.e., A.Y. 2009-10 onwards]

As would be apparent from a close reading of clause (c) to s. 80-IB, it does not, in terms, provide a condition as to the area qua 'each' or 'all' or 'every' residential unit comprised in the housing project. It does not, it may be noted, refer thereto - which is the first time the word 'residential unit' is mentioned in the provision, in plural terms. We state so as these would indicate or signify that the condition of clause (c) is to be necessarily complied by all such units. Further, correspondingly, there is, in contradistinction, i.e., to the other clauses of section 80-IB(10), no reference to the word 'project' or 'housing project' in clause (c). As its plain reading, i.e., upon giving a fair look at the provision and due regard to the language employed, conveys, the qualification stipulated thereby is not with reference to the housing project per se, but to the residential unit comprised therein. Further, the condition is a condition precedent for the deductibility of the entire profit of the relevant housing project, as is the character of each of the conditions set out per the other clauses, being clauses (a), (b) and (d) of the provision. Accordingly, where any of the conditions per the said clauses of s. 80-IB(10), i.e., other than clause (c), which are with reference to the project, is not satisfied, no part of the profit derived there-from would be eligible for deduction u/s. 80-IB(10). As regards the mandate of clause (c) of the provision, the satisfaction of the condition of s. 80-IB(10)(c) would have to be seen independently for each residential unit. As such, every individual residential unit that satisfies the prescription of s. 80-IB(10)(c), would stand to be regarded as a part of the eligible undertaking/project, and the profit of the project attributable thereto deductible u/s. 80-IB(10). That is to say, all the profits of the housing project which otherwise satisfies the conditions of section 80-IB(10), as referable to the residential units having a maximum built-up area as prescribed per clause (c), would qualify for deduction there-under, to the exclusion of other residential units. The deduction u/s.80-IB(10) would thus have to be computed or arrived at in two steps. Firstly, that derived from the eligible housing project, and then that part thereof as attributable to the residential units satisfying the condition of section 80-IB(10)(c). This is in fact what the tribunal has advocated per the several decisions referred to in its order dated 28.09.2012 supra, i.e., in the assessee's case for A.Y. 2007-08.

4.5 Before parting with our order, we may also clarify another aspect of the matter. The ld. AR, Shri S. C. Tiwari, upon being apprised that we are not inclined to treat the matter as covered in view of the decision by the hon'ble jurisdictional high court in Brahma Associates (supra), would contend that in that case the assessee would also claim deduction qua the residential units admittedly not satisfying the test of section 80-IB(10)(c), in view of the subsequent amendment to section 80-IB(10) by way of insertion of clauses (e) and (f) thereto; the restriction of its claim by the assessee in the first place being only by way of a concession. The argument presupposes that such a plea is permissible. There is we are afraid no concept of bargain plea under the Indian tax jurisprudence. Be that as it may, we shall consider the plea on its merits. Our decision on merits clearly negates such a view, i.e., as being canvassed. Rather, we consider the argument as not maintainable at the threshold. Our order being appealable, it would only be fair to state our reasons for so considering. Firstly, the assessee is not in appeal. In fact, the dispute all through was confined to the eligibility of the assessee's housing project 'Ekta Medows' to deduction u/s.80-IB(10); the Revenue itself stating that, if found to be so, the entire profits of the project would be eligible for deduction there-under (also refer para 4.1 above). Thirdly, clauses (e) and (f) of the provision stand inserted by Finance Act (No.2), 2009 w.e.f. 01.04.2010. Even as clarified by the hon'ble court in Brahma Associates (supra), with reference to the insertion of clause (d) in the provision, the same would be prospective and not retrospective. The same accordingly would have no bearing for the current year.

The decision in summation

5. We, faced with the decision by the hon'ble jurisdictional high court in the case of Brahma Associates (supra), which is even otherwise binding on us, proceeded by firstly examining the Revenue's reliance thereon, to find it as valid. The hon'ble high court, upon being called upon to examine the provision of section 80-IB(10) with reference to the ingredients of an eligible 'housing project', a term which stands not defined under the Act, clarified that the 'housing project' as contemplated is only a housing project as approved by the local authority, to which (approval) the provision refers to, so that the same, where not violative of any of the conditions listed in the provision, as with regard to the extent of commercial user (which condition did not exist in the provision as it stood at the relevant time), could not be imposed by judicial diktat. Further, the project, as approved, is a single project, which either satisfies the conditions enlisted in the provision or not. There was therefore no scope for bifurcating it's profits into that subject to deduction there-under and not so. The following words capture the decision, which follows a comprehensive discussion on the various aspects, and in harmony and agreement with it's understanding, of the matter: (refer para 31 at pgs. 302-303, also catch notes at pgs. 290-291)

'Section 80-IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to the part of the project.' [Emphasis Ours]

That the same is rendered upon examining the provision in a different context would be of no moment, which though prevailed with the tribunal in the case of Ekta Housing (P.) Ltd. (supra) (copy on record) in-as-much as it is trite law that it is the ratio of the decision which is binding and has precedent value. The said order by the tribunal, in-so-far as it does not state any legal reasons for so deviating, is, with respect, clearly inconsistent with the express and clear verdict by the hon'ble jurisdictional high court as extracted here-in-above. The other decisions by the tribunal being relied upon by the assessee, rendered without considering the decision by the hon'ble court in Brahma Associates (supra), are also thus apparently in conflict therewith in-as-much as the same opine in favour of deduction, which extends to the entire profit of the project, with reference to the profit attributable to the residential units satisfying the condition of section 80-IB(10)(c), i.e., to a part of the project. The proposition is even otherwise inconsistent with the fundamental principle that any deduction is subject to eligibility, i.e., satisfaction of each of the conditions precedent. Further, our reading of those decisions by the tribunal, did not exhibit any discussion on or an interpretation of section 80-IB(10)(c), as indeed was also the case for the judgment by the hon'ble court in Brahma Associates (supra).

The provision is accordingly examined closely, to find clause (c) as worded differently from the other clauses of section 80-IB(10), setting forth the conditions precedent for the eligibility to deduction of the profits of the project. The said clause, on a fair construction, was found to contain a condition with reference to the residential unit comprising the housing project. The condition, by necessary implication, applies to all the residential units of the housing project. The converse, however, cannot be said to hold, so that only such housing project, all the residential units comprising which satisfy the condition of section 80-IB(10)(c), is an eligible project. The word 'project', clearly mentioned in each of the other clauses, is conspicuous by its absence in clause (c). That is, s. 80-IB(10)(c) represents a condition precedent qua the residential unit comprising the housing project and not qua the project; its language not admitting of such a view. We may though at once clarify that the decision by the hon'ble court being binding, we would not have for a moment hesitated to hold otherwise if we found anything to so suggest in the decision in Brahma Associates (supra), which is sans any reference to s. 80-IB(10)(c), or if that meaning or intention was found expressed in its plain language; it being trite that there is no equity about tax and there is no room for intendment, so that one has to look fairly at the language used, even as exhorted time and again by the apex court. Also, fiscal statutes are to be strictly interpreted, and so are the exemption provisions. It is only once an entity or income, which is the subject matter of exemption, is found, on such construction, to be within the ambit of the provision, that a liberal approach is to be adopted toward effectuating the object of the provision, for which we may refer to Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480 (SC) relied upon by the tribunal in the various orders, as far as appears on a reading of their extracts as listed in the tribunal's order for A.Y. 2007-08 (supra). The interpretation is also in accord with a purposive and liberal approach, advocated by the apex court in, inter alia, Bajaj Tempo Ltd. (supra). The provision being an incentive provision, toward promoting the growth of affordable housing in the country, the construction enables the same, while at the same time operating to exclude the extension of the incentive to housing that is not covered or targeted by the provision, as sought to be included by the ld. AR. Again, it is trite law that the benefit of any ambiguity, if any, in the language of the provision, so that two reasonable views are permissible, is to go to the tax payer.

We may clarify that our decision, even as sought to be emphasized earlier, despite approving the proportionate deduction, i.e., w.r.t. section 80-IB(10)(c), is, for the reasons afore-stated, thus not in conflict with the decision by the hon'ble jurisdictional high court in Brahma Associates (supra). The deduction toward the residential units satisfying the condition of s. 80-IB(10)(c), arrived at on a proportionate basis, is therefore upheld.