LexCOMMISSIONER OF INCOME TAX-19 MUMBAI. versus M/S. SARKAR BUILDERS
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[2015] 7 S.C.R. 56 A COMMISSIONER OF INCOME TAX-19 MUMBAI. \ B v. M/S. SARKAR BUILDERS (Civil Appeal No. 44 76 Of 2015) MAY15,2015 [A. K. SIKRI AND R. F. NARIMAN, JJ.] Income Tax Act, 1961: s.8018(10) (as amended by c Finance No.2 Act, 2004 w.e.f. 1.4.2005- Deduction in case of undertaking developing and building housing projects - By Clause (d) inserted by amendment and made effective from 1.4.2005, it was stipulated that the built up area of shop and other commercial establishments in the housing projects D would not exceed 5% .'lf aggregate built up area of housing project or 2000 sq. feet whichever is less -Whether s.80/B(10)(d) applies to a housing project approved before 31.03.2005 but completed on or after 01.04.2005 - Held: This amendment is prospective and has come into effect E from 1. 4. 2005, therefore, the restriction on extent of commercial area in housing project imposed w.e.f. 1.4.2005 would not apply to housing projects which had been sanctioned and started earlier even if they finished after 1.4.2005. F Dismissing the appeals, the Court HELD: 1. Prior to 01.04.2005, the developers/ assessees who had got their projects sanctioned from G the local authorities as 'housing projects', even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100% deduction of their income from such projects under Section 8018 of the Act. Their H projects were sanctioned much before 01.04.2005. As 56 COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. 57 SARKAR BUILDERS per the permissible commercial user on which"tlie project A was sanctioned, they started the projects and the date of commencing such projects is also before 01.04.2005. All these assessees were made known of the provision by which these projects are to be completed as those dates have been specified from time to time by B successive Finance Acts in the same provision Section 8018. In these cases, completion dates were after 01.04.2005. Once they arrange their affairs in this manner, the Revenue cannot deny the benefit of this section applying the principle of retroactivity even when the C provision has no retrospectivity. [Paras 7 and 12] [75-C- F] 2. The basic objective behind Section 8018(10) is to encourage developers to undertake housing projects D for weaker section of the society, inasmuch as to qualify for deduction under this provision, it is an essential condition that the residential unit be constructed on a maximum built up area of 1000 sq.ft. where such residential unit is situated within the cities of Delhi and E Mumbai or within 25 kms. from the municipal limits of these cities and 1500 sq.ft. at any other place: It is the cardinal principle of interpretation that a construction resulting in unreasonably harsh and absurd results must F be avoided. Clause (d) makes it clear that a housing project includes shops and commercial establishments also. But from the day the said provision was inserted, they wanted to limit the built up area of shops and establishments to 5% of the aggregate built up area or G 2000 sq.ft., whichever is less. However, the Legislature itself felt that this much commercial space would not meet the requirements of the residents. Therefore, in the year 2010, the Parliament has further amended this provision by providing that it should not exceed 3% of H 58 SUPREME COURT REPORTS [2015) 7 S.C.R. A the aggregate built up area of the housing project or 5000 sq.ft., whichever is higher. This is a significant modification making complete departure from the earlier yardstick. On the one hand, the permissible built up area of the shops and other commercial shops is increased B from 2000 sq.ft. to 5000 sq.ft. On the other hand, though the aggregate built up area for such shops and establishment is reduced from 5% to 3%, what is significant is that it permits the builders to have 5000 sq.ft. or 3% of the aggregate built up area, 'whichever is C higher'. In contrast, the provision earlier was 5% or 2000 sq.ft., 'whichever is less'. From this provision, therefor, it is clear that the housing project contemplated under sub-section (10) of Section 8018 includes commercial 0 establishments or shops also. Now, by way of an amendment in the form of Clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necess
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