COMMISSIONER OF INCOME TAX-19 MUMBAI.  versus M/S. SARKAR BUILDERS
[2015] 7 S.C.R. 56, Supreme Court of India, 2015
Outcome: Dismissed (Dismissed)
Segment: Ratio
[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 necessary implication, the 
said provision has to be read prospectively and not 
E retrospectively. As is clear from the amendment, this 
provision came into effect only from the day the provision 
was substituted. Therefore, it cannot be applied to those 
projects which were sanctioned and commenced prior 
to 01.04.2005 and completed by the stipulated date, 
F though such stipulated date is after 01.04.2005. The 
assesees were entitled to the benefit of
Section 8018(10). 
[Paras 20 and 23] [81-8-H; 82-A-E; 85-G] 
Mis. Reliance Jute and Industries Ltd. v. C.I. T, West 
G 
Bengal, Calcutta 1980 (1) SCR 906 - Distinguished. 
Commissioneroflncome Tax, UP v. Mis. Shah Sadiq 
and Sons 1987 (2) SCR 942 : (1987) 3 SCC 516 -
relied on. 
H 
C.I. Tv. Brahma Associates 333 ITR 289; Commissioner
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
.59 
SARKAR BUILDERS 
of Income Tax I, Ahmedabad v. Gold Coin Health Food 
Private Limited 2008 (12) SCR 179: (2008) 9 SCC 622; 
The Karimtharuvi Tea Estate Ltd. v. The State of.Kera/a 
AIR 1966 SC 1385: 1966 SCR 93; Commissioner of 
Income Tax v. Shah Sadiq and Sons (1987) 166 ITR 
102 (SC); Commissioner of Income Tax (Central)-/, 
New Delhi v. Vatika Township Private Limited (2015) 1 
sec 1; (1980) 1sec139- referred to. 
.::;I ··t 
Case Law Reference 
333 ITR 289 
referred to. 
Para 5 
2008 (12) SCR 179 
referred to. 
Para 7 
1966 SCR 93 
referred to. 
Para 8 
(1987) 166 ITR 102 (SC) 
referred to. 
Para 9 
(2015) 1 sec 1 
referred to. 
Para 9 
1980 (1) SCR 906 
Distinguished 
Para 13 
1987 (2) SCR 942 
relied on. 
Para 22 
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 
4476 of 2015. 
From the Judgment and Order dated 22.02.2011 of the 
High Court of Bombay in ITA No. 872 of 2010. ;>u 
WITH 
I .,.a 
" 
C.A.Nos.4477,4491,4485,4486,4479,4481,4487, 
4490,4483,4482,4489,4492,4478,4484,4493,4488and 
A 
B 
c 
D 
E 
F 
4480 of 2015. 
1r 
G 
S. Guru Krishna Kumar, Kavin Gulati, T. M. Singh, 
Rekha Pandey, D. L. Chidanand, Sadhana Sandhu, Gargi 
Khanna, Anil Katiyar, 8. V. Balaram Das, Rupesh Kumar, Arijit 
Prasad, SubhasAcharya, Kaustugh Shukla, Anita Sahni, SWA H
60 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A Qadri for the Appellant. 
J. D. Mistry, Rakesh Dwivedi, Kiran Suri, Prag Tripathi, 
Kunal Vajani, Pranaya Goyal, Bindi Girish Dave, Kirti R. 
Mishra, Dr. Vipin Gupta, Aparva Garg, S. J. Amith, Vikas Jain, 
B Salil Kapoor, Shubham Rastogi (For Kamal Mohan Gupta), 
Vinodh Kanna B., S. U. K. Sagar, Bina Madhavan, Praseena 
Elizabeth Joseph, Akanksha Mehra, Srividya K. Kaimal, 
Shrinjan Khosla, Swati Vellodi, Laksh Puri (For Lawyer S Knit 
& Co.), Rajat N., Pradeep Kumar Bakshi, Kushara Pandit, 
C Syed Shahid Hussain Rizvi for the Respondent. 
The Judgment of the Court was delivered by 
A. K. SIKRI, J. 1) Leave granted. 
D 
2) No doubt the assessees/respondents in all these 
appeals are different and even assessment years are different. 
But the question of law which is raised by the Income Tax 
Authorities (hereinafter referred to as the 'Revenue') is 
identical. The assessees are subject to the jurisdiction of the 
E different High Courts, all of whom had claimed the benefit of 
Section 801B of the Income Tax Act ('Act' for short), namely, 
deduction in respect of profits and gains on the ground that 
their cases were covered by sub-section (10) of Section 801B 
F which provides for deduction of 100% of profits in the case of 
an undertaking developing and building housing projects when 
such profits are derived in the previous year relevant to any 
assessment year from such housing projects, provided the 
conditions contained in
the said sub-section are satisfied. High 
G Courts have taken the same view holding that these assessees 
would be entitled to the deduction under Section 801B(10) of 
the Act. We may also point out at this stage itself that though 
Section 801B has been on the statute book for quite some time, 
a new Section 801B had been introduced by the Finance Act, 
H 1999 w.e.f. 01.04.2000. All these cases are covered by the
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
61 
SARKAR BUILDERS [A K. SIKRI, J.] 
said Section, as introduced. However, insofar as sub-section A 
(10) is concerned, with which we are directly concerned, there 
have been amendments in that provision from time to time. 
We are concerned with the amendment to the said sub-section 
carried out by Finance No.2Act, 2004 w.e.f. 01.04.2005. In all 
these cases, though the housing projects were sanctioned B 
much before the said amendment but have been completed 
after 01.04.2005 when amended provision has come into 
operation. It is also not in dispute that the amendment is 
prospective in nature. Interestingly, when the housing project 
was approved by a local authority, which is the requirement C 
under sub-section (10) of Section 801B, as on that date, the 
conditions stipulated in the said sub-section were met by the 
assessees. However, condition in clause (d) which was laid 
down for the first time by the amendment made effective from 0 
01.04.2005 is not fulfilled. In this scenario, the question is as 
to whether the new conditions mentioned in the amended 
provision have also to be fulfilled only because the housing 
projects in question, though started before 01.04.2005, were 
completed after the said date. The question of law, that arises E 
for discussion that needs to be answered is thus common in 
all these appeals and can be formulated as under: 
"Whether Section 801B(1 O)(d) of the Income Tax Act, 1961' 
applies to
a housing project approved before 31. 03 .2005 
but completed on or after 01.04.2005?" 
3) As pointed out above, sub-section (10) stipulates 
certain conditions which are to be satisfied in order to avail 
F 
the benefit of the said provision. Further, it is also clear that 
the benefit is available fo those undertakings which are G 
developing and building 'housing projects' approved by a local 
authority. Thus, this Section is applicable in respect of housing 
projects and not commercial projects. At the same time, we 
are conscious of the fact that even in the housing projects, H
62 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A there would be some area for commercial purposes as certain 
shc.ps and commercial establishments are needed even in a 
housing projects. That has been judicially recognised while 
interpreting the provision that existed before 01.04.2005 and 
there was no limit fixed in Section 8018(10) regarding the built-
8 up area to be used for commercial purpose in the said housing 
project. As would be noticed later, the extent to which such 
commercial area could be constructed was as per the local 
laws under which local authority gave the sanction to the 
housing project. However, vide clause (d),which was inserted 
C by the aforesaid amendment and made effective from 
01.04.2005, it was stipulated that the built-up area of the shops 
and other commercial establishments in the housing projects 
would not exceed 5% of the aggregate built-up area of the 
0 
housing project or 2000 sq. feet, whichever is less (there is a 
further amendment whereby 5% is reduced to 3% and instead 
of the words "2000 sq. feet whichever is less" the words "5000 
sq. feet, whichever is higher" have been substituted. However, 
we are not concerned with this amendment). 
E 
The question, thus, that arises for consideration is as 
to whether in respect of those housing projects which finished 
on or after 01.04.2005, though sanctioned and started much 
earlier, the aforesaid stipulation contained in clause (d) also 
F has to be satisfied. All the High Courts have
held that since 
this amendment is prospective and .has come into effect from 
01.~4.2005, this condition would not apply to those housing 
projects which had been sanctioned and started earlier even 
if they finished after01.04.2005._ 
G 
4)As there is a commonality of issue and the judgments 
of the various High Courts have spoken in one voice which 
are questioned on identical grounds by the appellant Revenue, 
all these appeals were heard analogously and by this judgment, 
H we propose to answer the question of law involved and as 
formulated above in order to give quietus to this surging debate.
COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. 
63 
SARKAR BUILDERS (A. K. SIKRI, J.] 
5) Before we come to the grip of the aforesaid central A 
issue, it would be of some relevance to mention certain other 
disputes which had arisen between the Revenue and the 
assessees/developers of the housing projects concerning 
interpretation of sub-section (10) of Section BOIS. That dispute 
primarily related to the meaning that is to be assigned to B 
'housing projects' prior to 01. 04.2005 because of the reason 
that there was no clause (d) earlier and there is no express 
provision in this sub-section deating with the consequence of 
having a commercial establishment within a housing project. 
One of the requirements contained in sub-section (10) is that C 
in order to be entitled to have the deduction under this provision, 
housing project is to be approved by a local authority. It is a 
matter of common knowledge that there are Municipal Acts of 
specific local Acts governing the construction of buildings, 0 
commercial as well as residential, in every State. For 
undertaking any such construction authority, it is necessary to 
have the building plans sanctioned from the local authorities 
in accordance with the provisions of such local acts. There 
are local laws relating to the development and building of E 
"housing projects" by the developers/builders which also need 
a sanction from the local authorities as per the law prevailing 
in that particular area where the housing
project is developed. 
Such local laws, while sanctioning the housing projects, also 
permit use of certain area in the housing projects in a specified F 
manner for shopping and commercial purposes as well. The 
question that had arisen was-whether deduction under Section 
801B(10) would be admissible when commercial establishment 
is constructed in a housing project? That is, whether it would 
still retain the character of housing project within the meaning G 
of this provision. The Bombay High Court in the case of C.I. T. 
v. Brahma Associates1 held that since the expression 
'housing project' is not defined under the Act, the intention of 
Parliament was that whatever is approved by the local authority 
1 3331TR289 
H
64 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A under the extent rules as a housing project would be treated 
as 'housing project' for the purpose of this Section, inasmuch 
as sub-section ( 10) itself mandates that housing project is to 
be approved by a local authority as such an approval is a 
necessary condition for claiming the deduction under this 
8 provision. When the local authority has approved a housing 
project, whether 'residential' or 'residential cum commercial' 
the assessee is entitled to a deduction on the entire profit 
including the commercial establishments portion. We would 
also like to point out that following this judgment of the Bombay 
C High Court, or independently, other High Courts had also taken 
similar view. Against the aforesaid judgments, special leave 
petitions were filed by the Revenue in this Court. All these 
SLPs have been disposed of by this Court vide order dated 
0 29.04.2015, we would like to reproduce the said order in 
entirety hereunder: 
E 
F 
G 
H 
"All these special leave petitions are filed by the Revenue/ 
Department of Income tax against the judgments 
rendered by various High Courts deciding identical issue 
which pertains to the deduction under Section 8018(10) 
of the Income TaxAct, as applicable prior to 01.04.2005. 
We may mention at the outset that all the High Courts 
have taken identical view in all these cases holding that 
• the deduction under the aforesaid provision would be 
admissible to a "housing project".
All the assessees had undertaken construction 
projects which were approved by the municipal 
authorities/local authorities as housing projects. On that 
basis, they claimed deduction under Section 8018(10) 
of the Act. This provision as it stood at that time, i.e., 
prior to 01.04.2005 reads as under: -
Section 8018(10) fas it stood prior to 01.04.20051
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
65 
SARKAR BUILDERS [A. K. SIKRI, J.] 
"(10) The amount of profits in case of an undertaking 
A 
developing and building housing projects approved 
before the 31st day of March, 2005 by a local authority, 
shall be hundred per cent of the profits derived in any 
previous year relevant to any assessment year from such 
housing project if, -
B 
(a) such undertaking has commenced or commences 
development and construction of the housing project on 
or after the 1st day of October, 1998; 
(b) the project is on the size of a plot of land which has a 
minimum area of one crore; and 
(c) the residential unit has a maximum built-up area of 
one thousand square feet where such residential unit is 
situated within the cities of Delhi or Mumbai or within 
twenty-five kilometres from the municipal limits of these 
cities and one thousand and five hundred square feet at 
any other place." 
However, the income tax authorities rejected the claim 
of deduction on the ground that the projects were not 
"housing project" inasmuch as some commercial activity 
was also undertaken in those projects. This contention 
of the Revenue is not accepted by the income tax 
Appellate Tribunal as well as the High Court in the 
impugned judgment. The High Court interpreted the 
expression "housing project" by giving grammatical 
meaning thereto as housing project is not defined under 
the Income Tax Act insofar as the aforesaid provision is 
concerned. Since
sub-section.( 10) of Section 801 B very 
categorically mentioned that such a project which is 
undertaken as housing project is approved by a local 
authority, once the project is approved by the local 
authority it is to be treated as the housing project. We 
c 
D 
E 
F 
G 
H
66 
A 
8 
c 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
may also point out that the High Court had made 
observations in the context of Development Control 
Regulations (hereinafter referred to as 'DCRs' in short) 
under which the local authority sanctions the housing 
projects and noted that in these DCRs itself, an element 
of commercial activity is provided but the total project is 
still treated as housing project. On the basis of this 
discussion, after modifying some of the directions given 
by the ITAT, the conclusions which are arrived at by the 
High Court are as follows: -
"30. In the result, the questions raised in the appeal are 
answered thus:-
a) Upto 31/3/2005 (subject to fulfilling other conditions}, 
D 
deduction under Section 8018(10) is allowable to housing 
projects approved by the local authority having residential 
units with commercial user to the extent permitted under 
DC Rules/Regulations framed by the respective local 
E 
F 
G 
H 
authority. 
b) In such a case, where the commercial user permitted 
by the local authority is within the limits prescribed under 
the DC Rules/ Regulation, the deduction under Section 
8018(10) upto 31/3/2005 would be allowable irrespective 
of the fact that the project is approved as 'housing project' 
or 'residential plus commercial'. 
c) In the absence of any provisions under the Income 
TaxAct, the Tribunal was not justified in holding that upto 
31/3/2005 deduction under Section 8018(10) would be 
allowable to the
projects approved by the local authority 
having residential building with commercial user upto 
10% of the total built-up area of the plot. 
d) Since deductions under Section 8018(10) is on the
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
67 
SARKAR BUILDERS [A. K. SIKRI, J.] 
profits derived from the housing projects approved by 
A 
the local authority as a whole, the Tribunal was not justified 
in restricting Section 801B(10) deduction only to a part of 
the project. However, in the present case, since the 
assessee has accepted the decision of the Tribunal in 
·~ 
allowing Section 801B(10) deduction to a part of the 
B 
project, we do not disturb the fi~dings of the Tribunal in 
that behalf. 
e) Clause (d) inserted to Section 801B(10) with effect 
from 1/4/2005 is prospective and not retrospective and 
C 
hence cannot be applied for the period prior to YJ2005." 
We are in agreement with the aforesaid answers given 
by the High Court to the various issues. We may only 
clarify that insofar as answer at para (a) is concerned, it 
o 
would mean those projects which are approved by the 
local authorities as housing projects with commercial 
elementtherein. 
There was much debate on the answer given in para (b) 
E 
above. It was argued by Mr. Gurukrishna Kumar, learned 
senior counsel, that a project which is cleared as. 
"residential plus commercial" project cannot be treated 
as housing project and therefore, this direction is contrary 
to the provisions of Section 80(1)(B)(10) of the Act. 
F 
However, reading the direction' in its entirety and 
particularly the first sentence theteof, we find that 
commercial user which is permitted is in the residential 
units
and that too, as per OCR. Examples given before 
us by the learned counsel for the assessee was that such 
G 
commercial user to some e~ent is permitted to the 
professionals like Doctors, Chartered Accountants, 
Advocates, etc., in the DCRs itself. Therefore, we clarify 
that direction (b) is to be read in that context where the 
project is predominantly housing/residential project but 
H
68 
SUPREME COURT REPORTS 
[2015) 7 S.C.R. 
A 
the commercial activity in the residential units is permitted. 
With the aforesaid clarification, we dispose of all these 
special leave petitions." 
6) The reason for recapitulating the aforesaid events 
B pertaining to the earlier litigation is that before 01.04.2005, 
the legal position was that once the project is sanctioned by 
the local authority as 'housing project', the extent of area 
sanctioned for shops and commercial establishments in the 
said housing project was immaterial and had no bearing. Thus, 
C irrespective of the said of area where shops and commercial 
establishments were permitted by the local authority in a 
housing project, it was still treated as housing project and further 
that while granting 100% deductions, the area covered by 
shops and commercial establishments was also includible. 
D This position has changed with the insertion of clause (d) to 
sub-section (10). As per the amendment carried out and made 
effective from 01.04.2005, even if the local authority had 
sanctioned larger area for shops and commercial 
establishment, the benefit of Section 8018(10) would not be 
E admissible to these assessees/developers in case the area 
utilised for shops and commercial establishment exceeded 
5% of the aggregate built-up area of the housing project or 
. 2000 sq. feet, whichever is less. 
F 
7) In the aforesaid scenario, we revert bac~ to the 
question that is to be answered. We have already pointed
out 
that the parties are ad idem that the amendment is prospective 
in nature and, therefore, it operates from 01.04.2005. We have 
also mentioned that in the instant appeals, all these assessees 
G had got the housing projects sanctioned prior to 01.04.2005 
and the construction of the said housing project also started 
before 01.04.2005. All other conditions mentioned namely the 
date by which approval was to be given and the dates by which 
H the projects were to be completed as on the date when the
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
69 
SARKAR BUILDERS [A. K. SIKRI, J.] 
project was sanctioned, are also met by the assessees. A 
Notwithstanding this position, the argument of Mr. S. 
Gurukrishna Kumar, learned senior counsel appearing for the 
Revenue is that amendment w.e.f. 01.04.2005 is retroactive 
even if not retrospective. He has, thus, endeavoured to draw 
a fine distinction between the retroactive nature of amendment B 
in contrast with retrospectivity of a provision. He argued that 
once the project is financed after 01. 04.2005 and on the 
completion of the said project, a particular assessee has 
earned the income which is shown by the assessee in a 
particular assessment year, it is that assessment year which C 
would be the determinative factor and the law prevailing on 
the date relevant to the assessment year will have to be applied. 
On that basis, it was argued that since the assessment years 
are post 01.04.2005, clause (d) of sub-section (10) of Section 0 
801B of the Act gets attracted. In support of this plea, he 
referred to the judgment of this Court in Commissioner of 
Income Tax I, Ahmedabad v. Gold Coin Health Food 
Private Limitec:P and, particularly, the discussion contained 
in paras 9 and 16 which are reproduced hereunder: 
E 
"9. In Reliance Jute and Industries Ltd. v. CIT, (1980) 1 
SCC 139, it was observed by this Court that the law to 
be applied in income tax assessments is the law in force 
in the assessment year unless
otherwise provided 
expressly or by necessary implication. 
xx 
xx 
xx 
16. The law is well settled that the applicable provision 
would be the law as it existed on the date of the filing of 
the return. It is of relevance to note that when any loss is 
returned in any return it need not necessarily be the loss 
of the previous year concerned. It may also include 
carried-forward loss which is required to be set up against 
2 (2008) s sec s22 
F 
G 
H
70 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A 
future income under Section 72 of the Act. Therefore, 
the applicable law on the date of filing of the return cannot 
be confined only to the losses of the previous accouting 
years." 
· 
B 
8) He also referred to the decision in the case of The 
Karimtharuvi Tea Estate Ltd. v. The State of Kera/a3 which 
is to the same effect. 
9) Mr. J .D. Mistry, learned senior counsel who appeared 
c on behalf of the assessees in some of these appeals 
emphatically countered the aforesaid arguments. In the first 
instance, he pointed out that this argument of retroactivity was 
not even raised by the Revenue in the High Courts or before 
the lower forum or even in the special leave petitions filed in 
D this Court. He further submitted that it was necessary to keep 
the objective of the amendment in mind which would clearly 
evince that the conditions in clause ( d) could not be applied in 
respect of those projects which had been sanctioned and 
commenced prior to 01. 04.2005. He further argued that vested 
E rights had accrued in favour of such persons which could not 
be taken away by the am~ndment. He also advanced various 
reasons, as would be noted later, necessitating the approach 
as to why the principle of tax law that the law in force in the 
Assessment Year is to be applied, insisting that it was a case 
F where departure was needed and such a departure is 
recognised in certain circumstances, by the courts. He relied 
upon the
judgments of this Court in Commissioner of Income 
Tax v. Shah Sadiq and Sons4 and Commissioner of 
Income Tax (Central)-/, New Delhi v. Vatika Township 
G Private Limited°. Senior counsel who appeared for other 
assessees argued on the same lines drawing our attention to 
the reasons which are given by the High Courts in the impugned 
3 AIR 1966 SC 1385 :: 60 ITR 262 
H 
4 (1987) 166 ITR 102 (SC) 
5(2015) 1sec1
COMMISSIONER OF INCOMETAX-19 MUMBAI v. M/S. 
71 
SARKAR BUILDERS (A.~. SIKRI, J.] 
judgments and supporting those reasons. 
A 
10) We have given our due consideration to the 
respective submissions. 
11) As pointed out above, the judgment pronounced 8 
by the Bombay High Court in Brahma Associates case has 
already been upheld by this Court on the interpretation given 
to the expression 'housing project' occurring in sub-section 
(10) of Section 8018 of the Act. Interestingly, in the batch of 
appeals decided by the High Court in that very judgment, the c 
issue with which we are concerned was also taken up. The 
Revenue had argued that clause (d) inserted with effect from 
01. 04.2005 should be applied retrospectively, which argument 
was repelled by the High Court. Therefore, for better 
understanding, we would like to begin our discussion with the D 
meaning given to 'housing project' along with the issue of 
retrospectivity of clause (d), as raised by the Revenue, which 
was dealt with by the High Court and repelled. That portion of 
the discussion contained in the High Court judgment, which 
has some bearing on the issue at hand, runs as under: 
E 
"21. Thus, on the date on which the legislature introduced 
100% deduction under the Income Tax Act, 1961 on the 
profits derived from housing projects approved by a local 
authority, it was known that the local authorities could 
F 
approve the projects as houding projects with commercial 
user to the extent permitted under
the DC Rules framed 
by the respective local authority. In other words, it was 
known that the local authorities could approve a housing 
project without or with commercial user to the extent 
G 
permitted under the Development Control Rules. If the 
legislature intended to restrict the benefit of deduction 
only to the projects approved exclusively for residential, 
purposes, then it would have stated so. However, the 
legislature has provided that Section 8018(10) deduction 
H
72 
A 
8 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
is available to all the housing projects approved by a local 
authority. Since the local authorities could approve a 
project to be a housing project with or without the 
commercial user, it is evident that the legislature intended 
to allow Section 8018(10) deduction to all the housing 
project.s approved by a local authority without or with 
commercial user to the extent permitted under the DC 
Rules. 
22. It is not in dispute that where a project is approved 
as a housing project without or with commercial user to 
the extent permitted under the Rules/Regulations, then, 
deduction under Section 8018(10) would be allowable. 
In other words, if a project could be approved as a housing 
project having residenti~I units with permissible 
commercial user, then it is not open to the income tax 
authorities to contend that the expression 'housing 
project' in Section 8018(10) is applicable to projects 
having only residential units. 
23. Once it is held that the local authorities could approve 
a project to be housing project without or with the 
commercial user to the extent permitted under the DC 
Rules, then the project approved with the permissible 
commercial user would be eligible for Section 80l8(10) 
deduction irrespective of the fact that the project is 
approved as 'housing project' or approved as 'residential 
plus commercial'. In other words, where a project fulfills 
the criteria for being approved
as a housing project, then 
deduction cannot be denied under Section 8018(10) 
merely because the project is approved as 'residential 
plus commercial'. 
24. The fact that the deduction under Section 801B(10) 
prior to 1.4.2005 was allowable on the profits derived 
from the housing projects constructed during the specified
COMMISSIONER OF INCOME TAX-19 MUMBAI v. MIS. 
SARKAR BUILDERS [A. K. SIKRI, J.] 
period, on a specified size of the plot with residential 
units of the specified size, it cannot be inferred that the 
deduction under Section 8018(10) was allowable to 
housing projects having residential units only, because, 
restriction on the size ofthe residential unit is with a view 
to make available large number of affordable houses to 
the common man and not with a view to deny commercial 
user in residential buildings. In other words, the restriction 
under Section 8018(10) regarding the size of the 
residential unit would in no way curtail the powers of the 
local authority to approve a project with commercial user 
to the extent permitted under the DC Rules/Regulations. 
Therefore, the argument of the Revenue that the restriction 
on the size of the residential unit in Section 80IB(10) as 
it stood prior to 1.4.2005 is suggestive.of the fact that 
the deduction is restricted to housing projects approved 
for residential units only cannot be accepted. 
25. The above conclusion is further fortified by Clause 
· ( d) to Section 8018(10) inserted with effect from 1.4.2005. 
Clause (d) to Section 8018(10) inserted w.e.f. 1.4.2005 
provides that even though shops and commercial 
establishments are included in the housing project, 
deduction under Section 8018(10) with effect from 
1.4.2005 would be available where such commercial user 
does not exceed five per cent of the aggregate
built-up 
area of the housing project or two thousand square feet 
whichever is lower. By Finance Act, 2010, clause (d) is 
amended to the effect that the commercial user should 
not exceed three percent of the aggregate built-up area 
of the housing project or five thousand square feet 
whichever is higher. The expression 'included' in clause 
(d) makes it amply clear that commercial user is an 
integral part of housing project. Thus, by inserting· clause 
(d) to Section 8018(10) the legislature has made it clear 
73 
A 
B 
c 
D 
E 
F 
G 
H
74 
A 
8 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
that though the housing projects approved by the local 
authorities with commercial user to the extent permissible 
under the DC Rules/Regulation were entitled to Section 
8018(10) deduction, with effect from 1.4.2005 such 
deduction would be subject to the restriction set out in 
clause (d) of Section 8018(10). Therefore, the argument 
of the revenue that with effect from 1.4.2005 the 
legislature for the first time allowed Section 8018(10) 
deduction to housing projects having commercial user 
cannot be accepted. 
xx 
xx 
xx 
29. Lastly, the argument of the revenue that Section 
8018(10) as amended by inserting clause (d) with effect 
from 1.4.2005 should be applied retrospectively is also 
without any merit, because, firstly, clause (d) specifically 
inserted with effect from 1.4.2005, and therefore, that 
clause cannot be applied forthe period prior to 1.4.2005. 
Secondly, clause (d) seeks to deny Section 8018(10) 
deduction to projects having commercial user beyond 
the limit prescribed under clause (d), even though such 
commercial user is approved by the local authority. 
Therefore, the restriction imposed under the Act for the 
first time with effect from 1.4.2005 cannot be applied 
retrospectively. Thirdly, it is not open to the revenue to 
contend on the one hand that Section 8018(10) as stood 
prior to 1.4.2005 did not permit commercial user in 
housing projects and on the other hand contend that
the 
restriction on commercial user introduced with effect from 
1.4.2005 should be applied retrospectively. The argument 
of the revenue is mutually contradictory and hence liable 
to be rejected. Thus, in our opinion, the Tribunal was 
justified in holding that clause (d) inserted to Section 
8018(10) with effect from 1.4.2005 is prospective and
COMMISSIONER OF INCOME TAX-19 MUMBAI v. MIS. 
75 
SARKAR BUILDERS [A. K. SIKRI, J.] 
not retrospective and hence cannot be applied to the 
A 
period prior to 1.4.2005." 
12) The issues dealt with from paras 21 to 25 by the 
High Court already stands approved by this Court. In para 29, 
the High Court has held that clause (d) has prospective B 
operation, viz., with effect from 01.04.2005, and.this legal 
position is not disputed by the Revenue before us. What follows 
from the above is that prior to 01. 04.2005, these developers/ 
assessees who had got their projects sanctioned from the local 
authorities as 'housing projects', even with commercial user, C 
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 
801 B of the Act. Their projects were sanctioned much before 
01.04.2005. As per the permissible commercial user on which D 
the project 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 successive Finance Acts E 
in the same provision Section 80IB. 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 F 
provision has no retrospectivity. Take for example, a case 
where under the extant DC Rules, for shops and commercial 
activity construction permitted was, say, 10% and the project 
was also sanctioned allowing a particular assessee to construct 
10% of the area for commercial purposes. The said developer G 
started with its project much prior to 01.04.2005 with the 
aforesaid permissible use and the construction was at a very 
advanced stage as on 01.04.2005. Can it be ar9ued by that 
Revenue that he is to demolish the extra coverage meant for 
commercial purpose and bring the same within the limits H
76 
SUPREME COURT REPORTS 
[2015) 7 S.C.R. 
A prescribed by the new provision if he wanted to avail the benefit 
of deduction under Section 8018( 10) of the Act, only because 
of the reason that the project was not complete as on 
01.04.2005? As in such a case he filed his return for an 
assessment year after 01.04.2005 and for the purpose of 
B assessment of the said return, law prevailing as on that date 
would be applicable? Answer has to be in the negative on the 
principle that with the aforesaid planning as per the law 
prevailing prior to 01.04.2005, these assessees acted and 
acquired vested right thereby which cannot be taken away. It 
C is ludicrous or. the part of the Revenue authorities to expect 
the assessees to do something which is almost impossible 
13) In Mis. Reliance Jute and Industries Ltd. v. C./. T., 
West Bengal, Calcutta6, this Court had, no doubt, pointed 
D out the cardinal principle of tax law that the law to be applied 
has to be the law in force in the assessment year. However, 
this is qualified by the exception when it is provided otherwise 
expressly or by necessary implication, as is clear from the 
following observations: 
E 
F 
G 
"6. The assessee claims a vested right under Section 
24(2)(iii), as it stood before its amendment in 1957, to 
have the unabsorbed loss of 1950-51 carried forward 
from year to year until the loss is completely absorbed. 
The claim is based on a misconception of the 
fundamental basis underlying every income tax
assessment. It is a cardinal principle of the tax law that 
the law to be applied i.s that in force in the assessment 
year unless otherwise provided expressly or by 
necessary implication ... " 
14) 
In the same paragraph, the Court also remarked 
that 'a right claimed by an assessee under the law in force in a 
particular assessment year is ordinarily available only in 
H 
6 (1980) 1 sec 13959
COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. 
77 
SARKAR BUILDERS [AK. SIKRI, J.] 
relation to a proceeding pertaining to that year'. Thus, it clearly A 
follows that though normally the law which is in force in the 
assessment year would prevail, but this is not an absoluta 
principle as the Court itself carved out i:lxceptions thereto by 
making it clear that such exception can be either express or 
implied by necessary implication. Even the principle which is B 
mentioned is qualified with the words 'ordinarily available'. 
15) On examining the scheme of sub-section (1) of 
Section 801B of the Act, its historical turn around by 
amendments from time to time and keeping in view of the real C 
purpose behind such a provision, we are of the view that in the 
peculiar scenario as projected in this provision, the aforesaid 
cardinal principle of tax law is not to be applied as, by 
necessary implication, application thereof stands excluded. 
We have already narrated the essence of this provision. For D 
the purpose of discussing this particular issue, it is required to 
be noted that with effect from 01.04.2001, Section 801B(10) 
stipulated that any housing project approved by the local 
authority before 31.03.2001 was entitled to a deduction of 100 
per cent of the profits derived in any previous year relevant to E 
any assessment year from such housing project, provided - (i) · 
the construction/development of the said housing project 
commenced on or after 1.10.1998 and
was completed before 
31.03.2003; (ii) the housing project was on a si:re of a plot of F 
land which had a minimum area of one acre; and (iii) each 
individual residential unit had a maximum built-up area of 1000 
sq.ft., where such housing project was situated within the cities 
of Delhi or Mumbai or within 25 kms. from the municipal limits 
of these cities, and a maximum built-up area of 1500 sq.ft. at G 
any other place. Therefore, for the first time, a stipulation was 
added with reference to the date of approval, namely, that 
approval had to be accorded to the housing project by the local 
authority before 31.03.2001. Before this amendment there 
was no date prescribed for the approval being granted by the H
78 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A local authority to the housing project. Prior to this amendment, 
as long as the developmenUconstruction commenced on or 
after 1.10.1998 and was completed before 31.03.2001, the 
assessee was entitled to the deduction. Also by this 
amendment, the date of completion was changed from 
B 31.03.2001 to 31.03.2003. Everything else remained 
untouched. 
Thereafter, by Finance Act, 2003, further 
amendments were made to Section 8018(10), which read as 
under: 
C 
"(10) The amount of profits in case of an undertaking 
developing and, building housing projects approved 
before the 31st day of March 2005 by a local authority, 
shall be hundred per cent of the profits derived in any 
previous year relevant to any assessment year from such 
D 
housing project if -
E 
F 
G 
(a) such undertaking has commenced or commences 
development and construction of the housing project on 
or after the 1st day of October 1998; 
(b) the project is on the size of a plot of land which has a 
minimum area of one acre; and 
(c) the residential unit has a maximum built-up area of 
one thousand square feet where such residential unit is 
situated within the cities of Delhi or Mumbai or within 
twenty-five kilometres from the municipal limits of these 
cities and one thousand and five hundred square feet at 
any other place." 
16) As can be seen from the aforesaid provision, now 
the only changes that were.brought about were that with effect 
from 1.4.2002: (i)
the housing project had to be approved 
before 31.03.2005; and (ii) there was no time limit prescribed 
H for completion of the said project. Though these changes were
COMMISSIONER OF INCOME TAX -19 MUMBAI v. M/S. 
79 
SARKAR BUILDERS [A. K. SIKRI, J.] 
brought about by the Finance Act, 2003, the Legislature thQ~ght A 
it fit that these changes be deemed to have been brought into 
effect.from 1.4.2002. All the remaining provisions of Section 
801B(10) remained unchanged . 
. r. -. 
17) Thereafter, significant amendment, with which we B 
are directly concerned, was carrie9_put by Finance (No.2) Act, 
2004 with effectfrom 1.4.2005. This amendment has already 
been noted above. The Legislature made substantial changes 
in sub-section (10). Several new conditions were incorporated 
for the first time, including the condition mentioned in clause C 
(d). This condition/restriction was not on the statute book 
earlier when all these projects were sanctioned. Another 
important amendment was made by this Act to sub-section 
(14) of Section 801B with effect from 1.4.2005 and for the first 
time under clause (a) thereof the words 'built-up area' were D 
defined. Section 801B(14)(a) reads as under: 
"(14) For the purposes of this section-
(a) "built-up area" means the inner measurements of the 
E 
residential unit at the floor level, including the projections 
and balconies, as increased by the thickness of the walls 
but does not include the common areas shared with other 
residential units;" 
F 
18) Prior to insertion of Section 801B(14)(a), in many of 
. 
the rules and regulations of the local authority approving the 
housing project "built-up
area" did not include projections and 
balconies. Probably, taking advantage of this fact, builders 
provided large balconies and projections making the G 
residential units far bigger than as stipulated in Section 
801B(10), and yet claimed th'eC)aeduction under the said 
provision. To plug this lacuna, clause (a) was inserted in 
Section 801B(14) defining the words "built-up area" to mean 
the inner measurements of the residential unit at the floor level, H
80 
SUPREME COURT REPORTS 
[2015) 7 S.C.R. 
A including the projections and balconies, as increased by the 
thickness of the walls, but did not include the common areas 
shared with other residential units. 
19) Can it be said that in order to avail the benefit in the 
B assessment years after 1.4.2005, balconies should be 
removed though these were permitted earlier? Holding so 
would lead to absurd results as one cannot expect an assessee 
to comply with a condition that was not a part of the statute 
when the housing project was approved. We, thus, find that 
C the only way to resolve the issue would be to hold that clause 
(d) is to be treated as inextricably linked with the approval and 
construction of the housing project and an assessee cannot 
be called upon to comply with the said condition when it was 
not in contemplation either of the assessee or even the 
D Legislature, when the housing project was accorded approval 
by the local authorities. 
E 
F 
G 
H 
20) Having regard to the above, let us take note of the 
special features which appear in these cases: 
(a) 
In the present case, the approval of the housing project, 
its scope, definition and conditions, all are decided and 
dependent by the provisions of the relevant DC Rules. 
In contrast, the judgment in Mis. Reliance Jute and 
Industries Ltd. was concerned with income tax only. 
(b) , The position of law and the rights accrued prior to 
enactment of Finance Act, 2004 have to be taken into 
account,
particularly when the positiun becomes 
irreversible. 
(c) 
The provisions of Section 8018(10) mention not only a 
particular date before which such a housing project is 
to be approved by the local authority, even a date by 
which the housing project is to be completed, is fixed. 
These dates have a specific purpose which gives time
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
81 
SARKAR BUILDERS [A. K. SIKRI, J.] 
to the developers to arrange their affairs in such a A 
manner that the housing project is started and finished 
within those stipulated dates. This planning, in the 
context of facts in these appeals, had to be much before 
01.04.2005. 
B 
(d) 
The basic objective behi!ld Section 801B(10) is to 
encourage developers to undertake housing projects 
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 c 
maximum built up area of 1000 sq.ft. where such 
residential unit is situated within the cities of Delhi and 
Mumbai or within 25 kms. from the municipal limits of 
these cities and 1500 sq.ft. at any other place. 
D 
(e) 
It is the cardinal principle of interpretation that a 
construction resulting in unreasonably harsh and absurd 
results must be avoided. 
(f) 
Clause ( d) makes it clear that a housing project includes E 
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 2000 sq.ft., 
whichever is less. However, the Legislature itself felt F 
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 the 
aggregate built up area of the housing project or 5000 G 
sq.ft., whichever is higher. This is a significant 
....... 1 .. J~ 
modification making complete departure from the earlier 
yardstick. On the one hl:lnd. the permissible built up 
area of the shops and other commercial shops is 
increased from 2000 sq.ft. to 5000 sq.ft. On the other H
82 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
A 
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 higher' .. In contrast, the provision earlier was 5% or 
B 
2000 sq.ft., 'whichever is less'. 
c 
D 
E 
(g) 
-
From this provision, therefor, it is clear that the housing 
project contemplated under sub-section ( 10) of Section 
8018 includes commercial 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 necessary implication, the said provision has to be 
read prospectively and not retrospectively. As is clear 
from the amendment, this provision came into effect only 
from the day the provision was substituted. Therefore, 
it cannot be applied to those projects which were 
sanctioned and commenced prior to 01.04.2005 and 
completed by the stipulated date, though such stipulated 
date is after 01.04.2005. 
21) These aspects are dealt with by various High Courts 
elaborately and convincingly in their judgments. It is not 
necessary to go into the detailed reasoning given by these 
F High Courts. However, we would like to extract the following 
discussion from the judgmentaated 25.07.2014 of the Bombay 
High__ ~ourt in ITA Nos. 201 ard 308 of 2012, where this very
aspect is answered in the following manner: 
G 
"36. There is yet another reason for coming to the 
aforesaid conclusion. Take a scenario where an 
Assessee, following the project completion method of 
accounting, has completed the housing project approved 
by the local authority complying with all the conditions as 
H 
set out in section 80-18(10) as it stood prior to 1stApril,
COMMISSIONER OF INCOME TAX-19 MUMBAI v. M/S. 
SARKAR BUILDERS [A. K. SIKRI, J.] 
2005. If we were to accept the argument of the Revenue, 
then in that event, despite having completed the entire 
construction prior to 1stApril, 2095 and complying with 
all the conditions of section 80-IB(10) as it stood then, 
the Assessee would be disentitl~d1o the entire deduction 
claimed in respect of such housing project merely 
because he offered his profits to tax in theA.Y 2005-06. 
In contrast, if the same Assessee had followed the work-
in-progress method of accounting, he would have been 
entitled to the deduction under section 80-IB(10) upto 
the A. Y. 2004-05, and denied the same from A. Y. 2005-
06 and thereafter. It could never have been the intention 
of the Legislature that the deduction under section 80-
IB(10) available to a particular Assessee would be 
determined on the basis of the accounting method 
followed. This, to our mind and as rightly submitted by 
Mr. Mistry, would lead to startling results. We therefore 
have no hesitation in holding that section 80-IB(10) is 
prospective in nature and can have no application to a 
housing project that is approved before 31st March, 
2005. As the deduction sought to be claimed under 
section 80-18(10) is inseparably linked with the date of 
approval of the housing project, it would make no 
difference if the construction of the said project was 
completed on or after 1st April, 2005 or that the profits 
were offered to tax
after 1stApri, 2005 i.e. inA.Y. 2005-
06 or thereafter. We therefore find no substance in the 
argument of the Revenue that notwithstanding the fact 
thatthe housing project was approved prior to 31st March 
2005, if the construction was completed on or after 1st 
April, 2005 or if the profits are brought to tax in the A.Y. 
2005-06 or thereafter, the said housing project would 
have to comply with the provisiqlJS of clause (d of section 
80-18( 10). To our mind, we do notthink that the condition/ 
restriction laid down in clause (d) of section 80-18(10) 
83 
A 
B 
c 
D 
E 
F 
G 
H
84 
A 
8 
c 
D 
E 
F 
G 
SUPREME COURT REPORTS 
[2015] 7 S.C.R. 
has to be revisited and/or looked at and complied with in 
the assessment year in which the profits are offered to 
tax by the Assessee. When the Assessee claims a 
deduction under section 80-18(10), the Assessee is 
required to comply with such a condition only if it is on 
the statute-book on the date of the approval of the housing 
project and it has nothing to do with the year in which the 
profits are brought to tax by the Assessee. We have 
come to this conclusion only because we find that clause 
( d) of section 80-18( 10) is inextricably finked to the date 
of the approval of the housing project and the subsequent 
development/construction of the same, and has nothing 
to do with the profits derived therefrom. We may hasten 
to add that if a particular condition is not inseparably 
finked to the date of approval of the housing project, 
different considerations would arise. However, we are 
not called upon to decide any such condition and hence 
we are not faying down any general proposition of law, 
save and except that clause (d) of section 80-18(10), 
being a condition linked to the date of the approval of the 
housing project, WO'.Jfd not apply to any housing project 
that was approved prior to 31st March, 200!.> irrespective 
of the fact that the profits of the said housing project are 
brought to tax after the said provision was brought into 
force." 
22) At this juncture, we would like to quote
the following 
passage from Commissioner of Income Tax, U.P. v. Mis. 
Shah Sadiq and Sons7: 
"14. Under the Income Tax Act of 1922, the assessee 
was entitled to carryforward the losses of the speculation 
business and set off such losses against profits made 
from that business in future years. The right of carrying 
H 
7 (1987) 3 sec 516
COMMISSIONER OF INCOME TAX -19 MUMBAI v. MIS. 
85 
SARKAR BUILDERS [A. K. SIKRI, J.] 
forward and set off accrued to the assesee under the Act 
A 
of 1922. A right which had accrued and had become 
vested continued to be capable of being enforced 
notwithstanding the repeal of the statute under which that 
right accrued unless the repealing statute took away such 
right expressly or by necessary implication. This is the 
B 
effect of Section 6 of the General Clauses Act, 1897. 
15. In this case the 'savings' provision in the repealing 
statute is not exhaustive of the rights which are saved or 
which survive the repeal of the statute under which such 
rights had accrued. In other words, whatever rights are 
expressly saved by the 'savings' provision stand saved. 
But, that does not mean that rights which are not saved 
by the 'savings' provision are extinguished or stand ipso 
facto terminated by the mere fact that a new statute 
repealing the old statute is enacted. Rights which have 
accrued are saved unless they are taken away expressly. 
This is the principle behind Section 6(c) of the General 
Clauses Act, 1897. The right to carry forward losses 
which had accrued under the repealed Income Tax Act of 
1922 is not saved expressly by Section 297 of the Income 
Tax Act, 1961. But, it is not necessary to save a right 
expressly in order to keep it alive after the repeal of the 
old Act of 192.2. Section 6(2) saves accrued rights unless 
they are taken away by the repealing
statute. We do not 
find any such taking away of the rights by Section 297 
either expressly or by implication." 
c 
D 
E 
F· 
23) The aforesaid discussion persuades us to conclude 
that the judgments of the High Courts, which are impugned in G 
these appeals, take correct view that the assesees were 
entitled to the benefit of Section 801B(10). As a result, these 
appeals fail and are hereby dismissed. 
Devika Gujral 
Appeals dismissed. 
H