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Commissioner of Income Tax-19, Mumbai v. M/s Sarkar Builders

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 4476 of 2015)Decided 15 May 2015
Civil Appeal No. 4476 of 2015
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Various builders/developers (respondents in this batch of 18 connected appeals from different High Courts) had claimed a 100% profit deduction under Section 80IB(10) of the Income Tax Act for housing projects. The Revenue (Income Tax Department) contested this, relying on amendments to Section 80IB(10), including a clause (d), introduced later, imposing conditions linked to the date of approval/completion of the housing project. The various High Courts had all ruled in favour of the assessees/builders, holding they were entitled to the deduction, and the Revenue appealed all these decisions together to the Supreme Court since they raised an identical legal question.

Decision Breakdown

The Supreme Court held that clause (d) of Section 80IB(10), the later-added condition, is inseparably linked to the date of approval of the housing project and therefore cannot be applied to projects that were approved before the provision came into force (31 March 2005), even if the profits from those projects are taxed in a later year. It relied on the general principle (citing Commissioner of Income Tax, U.P. v. Shah Sadiq and Sons) that a right which has already accrued under earlier law continues to be enforceable unless a later statute expressly or by necessary implication takes it away, and found no such express removal here. Applying this reasoning, the Court concluded that all the impugned High Court judgments correctly held the assessees entitled to the Section 80IB(10) deduction, and dismissed the Revenue's appeals, explicitly noting it was not laying down any broader general rule beyond this specific point about the approval-date linkage.

Lesson Learnt

When tax law is amended to add a new condition for claiming a benefit, that new condition does not automatically apply retroactively to projects or transactions that were already approved/structured under the earlier law: a taxpayer's accrued rights under the law as it stood at the relevant time are ordinarily protected unless the amendment expressly removes them.

Official source (sci.gov.in)View Judgment (PDF)

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