DCIT CIR 1, MUMBAI V. SAI RADHA DEVELOPERS, MUMBAI

ITA 1004/MUM/2010

• Counselvise Citation: 100419914 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H S RAHEJA
• Keywords: Revised return
• Section: 80IB

Judgement Text

SAI RADHA DEVELOPERS IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E EE E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B RAMAKOTAIAH B RAMAKOTAIAH B RAMAKOTAIAH B RAMAKOTAIAH AM AM AM AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 1004/MUM/2010 1004/MUM/2010 1004/MUM/2010 1004/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2006 2006 2006 2006- -- -07 0707 07) )) ) THE DY COMMR OF INCOME TAX CIR 1 MUMBAI VS SAI RADHA DEVELOPERS C J COMPLEX 3 RD FLOOR SUPER BAZAR K M MARG UDUPI 576 101, KARNATAKA (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AAYFS8343M AAYFS8343M AAYFS8343M AAYFS8343M ASSESSEE BY SH H S RAHEJA REVENUE BY SH B JAYAKUMAR DT.OF HEARING 16 TH DEC 2011 DT OF PRONOUNCEMENT 20 TH JAN 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.12.2009 OF THE CIT(A) FOR THE AY 2006-07. 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GR OUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB (1O) CLAIMED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE SHOULD HAVE FILED THE AUDIT REPORT IN THE PRESCRIBED FORM NO.1OCCB AL ONG WITH THE RETURN OF INCOME AS REQUIRED UNDER SECTION 80IA(7) READ WITH SECTION 801B(13) OF THE IT. ACT, 1961, WHICH STIPULATES THAT THE DEDUCT ION SHALL NOT BE ADMISSIBLE UNLESS ASSESSEE FURNISHES ALONG WITH HIS RETURN OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.801B (1O) CLAIMED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE DID NOT OWN ONE ACRE OF LAND AT THE TIME OF COMMENCEMENT OF PROJECT AND ALSO AT THE TIME OF APPROVAL OF THE PROJECT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION ULS.801B (1O) CLAIMED BY THE SAI RADHA DEVELOPERS 2 ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE IS NOT THE FULL FLEDGED OWNER IN RESPECT OF AN AREA OF ONE ACRE WHI CH IS THE MINIMUM REQUIREMENT FOR ELIGIBILITY FOR DEDUCTION ULS.801B( 1O) AS THE ASSESSEE HAS SOLD UNDIVIDED INTEREST OVER THE LAND HELD BY ENTER ING INTO AGREEMENTS WITH INDIVIDUALS FOR TRANSFER OF UNDIVIDED SHARE OF INTEREST IN LAND AND INTO CONTRACTS FOR CONSTRUCTION OF RESIDENTIAL UNITS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF IN TEREST OF RS.75,750/- WITHOUT APPRECIATING THE FACT THAT THE INTEREST BEA RING FUNDS WERE DIVERTED BY THE ASSESSEE FOR GIVING INTEREST FREE ADVANCES T O ASSESSEES SISTER CONCERN . 3 GROUND NO.1 IS LATE FILING OF THE AUDIT REPORT IN FORM 10CCB. 3.1 THE ASSESSING OFFICER NOTICED THAT THE AUDIT RE PORT IN FORM 10CCB FOR THE AY UNDER CONSIDERATION WAS NOT FILED ALONG WITH THE ORIGINAL RETURN OF INCOME BUT WAS FILED WITH THE REVISED RETURN IN RESPONSE TO TH E NOTICE U/S 148. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE AUDIT REPORT FILE D ON 8.12.2008 IS DEFECTIVE AS CLAUSE 23 IN FORM 10CCB HAS BEEN LEFT BLANK. ACCOR DINGLY, THE ASSESSING OFFICER CONSIDERED THE BELATED AUDIT REPORT FILED BY THE AS SESSEE AS NOT VALID REPORT. 3.2 ON APPEAL, THE CIT(A) HAS HELD THAT THE ASSESSI NG OFFICER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB ON THE GROUND THAT THE AUDIT REPORT WAS NOT SUBMITTED IN TIME OR WAS DEFEC TIVE. WHILE HOLDING SO, THE CIT(A) HAS FOLLOWED THE FOLLOWING DECISIONS: CIT VS. CONTIMETERS ELECTRICAL (P.) LTD. [2009] 178 TAXMAN 422 (DEL) CIT VS. BERGER PAINTS (INDIA) LTD. (NO. 2)(2003) 12 6 TAXMAN 435 (CAL) CIT VS. GUJARAT OIL & ALLIED INDUSTRIES (1993) 201 LTR 325 (GUJ) CIT VS. A.N. ARUNACHALAM (1994) 122 CTR 87 (MAD) 4 BEFORE US, THE LD DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER ON THIS POINT AND SUBMITTED THAT THE AUDIT REPORT IN F ORM 10CCB IS MANDATORY AND SHOULD HAVE BEEN FILED ALONG WITH THE ORIGINAL RETU RN OF INCOME. 4.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S RELIED UPON THE DECISION OF THE CIT(A) AND SUBMITTED THAT FILING OF THE AUDI T REPORT IS MANDATORY FOR SAI RADHA DEVELOPERS 3 CLAIMING OF DEDUCTION U/S 80IB BUT IT IS NOT MANDAT ORY TO FILE ALONG WITH THE RETURN OF INCOME, IF IT IS FILED DURING THE ASSESSM ENT PROCEEDINGS AND THEREFORE, WHEN THE ASSESSEE HAS ALREADY FILED THE AUDIT REPO RT, THEN THE CONDITIONS PRESCRIBED U/S 80IB(7) IS COMPLIED WITH. HE HAS FU RTHER SUBMITTED THAT AS FAR AS THE DEFECT IN THE REPORT AS POINTED OUT BY THE ASSE SSING OFFICER IS ONLY REGARDING COLUMN, WHICH WAS NOT RELEVANT AND WERE REQUIRED T O BE CONSIDERED NOT APPLICABLE, WHICH WERE LEFT BLANK. THEREFORE, IT WOULD NOT EFFECT THE RELEVANT INFORMATION REQUIRED TO BE GIVEN IN THE AUDIT REPOR T. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE FILED THE AUDIT REPORT IN FORM 10CCB BELATED AND NOT ALONG WITH THE RETURN OF INCOME. FURTHER, THE AUDI T REPORT IN FORM 10CCB, THOUGH FILED, BUT THE ASSESSING OFFICER FOUND THAT TWO COL UMNS OF THE REPORT WERE LEFT BLANK BY THE ASSESSEE AND THEREFORE, IN VIEW OF THE ASSESSING OFFICER, IT WAS DEFECTIVE. THE LD CIT(A) DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE BY FOLLOWING THE DECISIONS AS RELIED UPON BY THE ASSESSEE (SUPRA ) IN PARS 26 TO 28 AS UNDER: 26. AS FOR THE FIRST TWO REASONS, THE FOLLOWING DEC ISIONS CITED BY THE APPELLANT ARE RELEVANT. IN CIT VS. CONTIMETERS ELEC TRICALS (P.) LTD. [2009] 178 TAXMANN 422, THE HONBLE HIGH COURT OF DELHI HA S HELD THAT, THE PROVISIONS OF SECTION 80-IA(7) REQUIRING FILING OF AUDIT REPORT ALONG WITH RETURN WERE NOT MANDATORY BUT DIRECTORY. IF THE AUD IT REPORT WAS FILED AT ANY TIME BEFORE FRAMING OF ASSESSMENT, THEN THE REQ UIREMENT OF SECTION 80-LA(7) WOULD BE MET. IN CIT VS. BERGER PAINTS (IN DIA) LTD. (NO. 2)(2003) 126 TAXMAN 435, THE HONBLE HIGH COURT OF CALCUTTA HAS HELD THAT, FURNISHING OF AUDITORS REPORT ON DATE OF FILING OF RETURN WAS NOT MANDATORY, BUT ONLY DIRECTORY IN NATURE, AND, THEREFORE, THE A SSESSEE COULD NOT BE DENIED INVESTMENT ALLOWANCE MERELY ON THE GROUND TH AT IT FAILED TO TENDER THE AUDITORS REPORT ON THE DATE OF FILING OF RETUR N. 27. IN CIT VS. GUJARAT OIL & ALLIED INDUSTRIES (199 3) 201 LTR 325, THE HONBLE HIGH COURT OF GUJARAT HAS HELD THAT, WHERE AN ASSESSEE COULD RIOT FILE AUDIT REPORT ALONG WITH RETURN, BUT FILED IT L ATER BEFORE COMPLETION OF ASSESSMENT BY ITO, HE WAS ENTITLED TO DEDUCTION UND ER SECTION 80J. IN CIT VS. A.N. ARUNACHALAM (1994) 122 CTR 87, THE HONBLE HIGH COURT OF MADRAS HAS HELD. THAT WHERE THE RETURN FILED BY ASS ESSEE WAS NOT ACCOMPANIED BY THE AUDIT REPORT AS REQUIRED BY SECT ION 8OJ(6A), THE SAI RADHA DEVELOPERS 4 ASSESSEE COULD STILL CLAIM DEDUCTION UNDER SECTION 80J. IN ITO VS. VIJAYADURGA OFFSET PRINTERS (1988) 30 TTJ173, THE H ONBLE HYDERABAD BENCH OF ITAT HAS HELD THAT, THE REQUIREMENT TO FIL E THE AUDIT REPORT ALONG WITH THE RETURN UNDER SECTION 80I(6A) WAS ONLY DIRE CTORY AND RIOT MANDATORY. 28. FOLLOWING THE RATIO OF THE ABOVE JUDGMENTS, WHI CH IS SQUARELY APPLICABLE TO THE PRESENT CASE, I HOLD THAT THE ASS ESSING OFFICER WAS NOT RIGHT IN REJECTING THE APPELLANTS CLAIM FOR DEDUCT ION UNDER SECTION 80- 18(10) ON THE GROUND THAT THE AUDIT REPORT WAS NOT SUBMITTED IN TIME OR WAS DEFECTIVE. 5.1 AS IT HAS BEEN SETTLED BY SERIES OF DECISIONS O F THE HONBLE HIGH COURTS AS REFERRED BY THE CIT(A), THE REQUIREMENT OF FILING T HE AUDIT REPORT ALONG WITH THE RETURN IS DIRECTORY AND NOT MANDATORY. THEREFORE, W E DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD CIT(A) ON THIS PO INT. 6 GROUND NO.2 IS REGARDING THE SIZE OF THE LAND IS LESS THAN ONE ACRE. 6.1 THE ASSESSING OFFICER AFTER VERIFYING THE DOCUM ENTS PRODUCED BY THE ASSESSEE FOUND THAT THE PROJECT IN QUESTION WAS ON THE SIZE OF PLOT OF LAND WHICH IS LESS THAN THE MINIMUM AREA OF ONE ACRE AS PRESCR IBED U/S 80IB(10) (B). THE ASSESSING OFFICER NOTED THAT THE PLAN OF THE PROJEC T WAS APPROVED ON 29.1.2003 AND ON THAT DATE, THE ASSESSEE WAS HAVING LAND TO T HE EXTENT OF ONLY 68 CENTS. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW TH AT AT THE TIME OF COMMENCEMENT OF THE PROJECT, THE ASSESSEE WAS HAVIN G LESS THAN ONE ACRE OF LAND AND SUBSEQUENTLY ADDITIONAL LAND WAS BROUGHT A ND THE PLAN WAS REVISED. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTI ON U/S 80IB AS THE CONDITIONS AS PRESCRIBED U/S 80IB (10) IS NOT FULFILLED. SAI RADHA DEVELOPERS 5 6.2 ON APPEAL, THE CIT(A), THOUGH ALLOWED THE CLAIM OF THE ASSESSEE BUT NO SPECIFIC FINDING HAS BEEN GIVEN REGARDING THE SIZE OF THE PLOT BEING LESS THAN ONE ACRE OR MORE THAN ONE ACRE. 7 BEFORE US, THE LD DR HAS SUBMITTED THAT THE ASSES SING OFFICER HAS GIVEN A FINDING OF FACT THAT AT THE TIME OF APPROVAL OF THE PLAN ON 29.1.2003 THE ASSESSEE WAS HAVING LESS THAN ONE AREA OF LAND AS CLEAR FROM THE TABLE GIVEN BY THE ASSESSING OFFICER AT PAGE 10 OF HIS ORDER. HE HAS FURTHER SUBMITTED THAT AT THE TIME OF APPROVAL OF THE PLAN WHEN THE PROJECT WAS H AVING THE PLOT SIZE OF LESS THAN ONE ACRE AS PRESCRIBED U/S 801B(10)(A), THE AS SESSEE HAS NOT FULFILLED THE CONDITIONS AND THEREFORE, THE ASSESSEE IS NOT ENTI TLED FOR DEDUCTION U/S 80IB OF THE ACT. HE HAS RELIED UPON THE ORDER OF THE ASSES SING OFFICER. 7.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE PROJECT HAS BEEN COMPLETED ON THE LAND OF MORE THAN ONE ACRE AND THEREFORE, THE CONDITIONS PRESCRIBED U/S 80IB(10) IS FULFILLED. HE HAS REFERRED THE SITE PLAN SANCTIONED ON 9.2.2005 AND SUBMITTED THAT THE SIZE OF THE PLOT IS MORE THAN ONE ACRE AND THE PROJECT PLAN HAS BEEN SANCTIONED BY TH E LOCAL AUTHORITIES. THE LD AR HAS FURTHER SUBMITTED THAT THE REQUIREMENT OF THE P ROVISIONS IS THAT THE PROJECT SHOULD BE ON THE PLOT OF LAND HAVING MINIMUM AREA O F ONE ACRE AND THEREFORE, WHEN THE PROJECT, WHICH IS COMPLETED BY THE ASSESSE E IS ADMITTEDLY ON THE PLOT OF LAND HAVING SIZE OF MORE THAN ONE ACRE THEN THE SAI D CONDITION IS FULFILLED. THE LD AR HAS SUBMITTED THAT THE ASSESSEE HELD 0.96 ACRES AND 0.5 ACRE WAS HELD BY THE PARTNER OF THE FIRM. IT WAS FURTHER SUBMITTED THAT THE SECTION DOES NOT REQUIRE THAT THE LAND SHOULD BE ONE ACRE AT THE STARTING OF THE PROJECT. THE ASSESSEE HOWEVER HAS A TOTAL ONE ACRE OF LAND AT THE TIME OF COMPLETION.. 7.2 HE HAS FURTHER SUBMITTED THAT THE PROJECT WAS COMPLETED ON 28.6.2005 AS PER THE OCCUPANCY CERTIFICATE ISSUED BY THE LOCAL A UTHORITIES AND THE COMPLETION SAI RADHA DEVELOPERS 6 OF THE PROJECT IS AS PER THE REVISED PLAN SANCTIONE D BY THE LOCAL AUTHORITIES ON 9.2.2005 HAVING MORE THAN ONE ACRE OF LAND. 8 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE FIRST PLAN OF THE PROJECT WAS APPROVED ON 27.1.2003. THE COMMENCEMENT CERTIFICATE WAS ALSO ISSUED BY LOCAL AUTHORITIES ON 29.1.2003. AS PER THE PLAN APPROVED ON 27.1.2003 THE AREA OF THE PLOT OF LAND WAS LESS THAN ONE ACRE. SUBSEQUENTLY, THE PLAN WAS REVISED ON 1.3.2004, THEN ON 25.3.204 AND FINALLY ON 9.2.2005. THE APPROVAL OF THE PROJECT IS RELEVANT FOR THE DURATION OF COMPLETION OF THE PROJECT AS PROVID ED UNDER CLAUSE (A) OF SEC. 80IB(10) AND TO CLARIFY THE SITUATION, WHERE MORE T HAN ONE APPROVAL HAS BEEN OBTAINED BY THE ASSESSEE, EXPLANATION TO CLAUSE (A) HAS BEEN INSERTED AND AS PER THE SAID EXPLANATION, THE DATE ON WHICH THE FIRST A PPROVAL HAS BEEN GRANTED TO THE BUILDING PLAN OF THE HOUSING PROJECT SHALL BE DEEMED TO BE THE DATE OF APPROVAL. THEREFORE, THE DATE OF APPROVAL OF THE PROJECT IS RELEVANT ONLY FOR ASCERTAINING THE FACT THAT THE PROJECT HAS BEEN COM PLETED WITHIN THE TIME PERIOD AS PROVIDED UNDER CLAUSE (A) OF SEC 80IB(10). THER E IS NO DISPUTE IN THE CASE IN HAND THAT THE PROJECT WAS FINALLY COMPLETED ON THE PLOT OF LAND HAVING AREA OF MORE THAN ONE ACRE. THEREFORE, THE AREA OF PLOT OF LAND AT THE TIME OF APPROVAL OF THE FIRST PLAN HAS A LIMITED WHEN IT WAS REVISED A FTER ADDING THE DEFICIT AREA IN THE AREA OF PLOT AND FINALLY THE PROJECT WAS COMPLE TED ON THE PLOT OF LAND HAVING MORE THAN ONE ACRE AS REQUIRED UNDER CLAUSE (B) OF SEC. 80IB(10). IN VIEW OF THE FACT THAT WHEN THE PROJECT WAS COMPLETED ON THE PL OT OF LAND HAVING MORE THAN ONE ACRE, THEN THE CONDITION AS PRESCRIBED U/S 80I B(10)(B), IN OUR OPINION, IS FULFILLED BECAUSE THE PLAN WAS SANCTIONED AND OCCU PANCY CERTIFICATE WAS ISSUED BY THE LOCAL AUTHORITIES TO THE PROJECT ON MORE THA N ONE ACRE OF LAND. SAI RADHA DEVELOPERS 7 9 AT THE COST OF REPUTATION, WE FURTHER CLARIFY THA T THE APPROVAL OF THE PROJECT HAS PER CLAUSE (A) OF SEC. 80IB IS RELEVANT FOR COM PLETION OF THE PROJECT WITHIN THE PRESCRIBED TIME PERIOD. THEREFORE, WE ARE OF THE CO NSIDERED OPINION THAT THE ASSESSEE HAS COMPLIED WITH THE REQUIREMENT OF HAVIN G THE PROJECT ON THE AREA OF PLOT OF LAND MINIMUM OF ONE ACRE. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 10 GROUND NO.3 IS REGARDING THE OWNERSHIP OF LAND. 10.1 THE ASSESSING OFFICER WAS OF THE VIEW THAT SIN CE THE ASSESSEE HAS EXECUTED THE SALE DEED FOR SALE OF UNDIVIDED INTERE ST IN THE LAND AND ENTERED INTO SEPARATE AGREEMENTS FOR CONSTRUCTION OF BUILDING; T HEREFORE, WHAT WAS DONE BY THE ASSESSEE FOR EXECUTION OF CONTRACT FOR CONSTRUC TION OF THE BUILDING ON BEHALF OF THE PERSONS TO WHOM THE UNDIVIDED INTEREST IN LA ND HAS BEEN TRANSFERRED. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE AS SESSEE WAS NOT THE OWNER OF THE LAND BUT HAS CONSTRUCTED THE PROJECT ON BEHALF OF THE INDIVIDUAL AND THEREFORE, THE ASSESSEE IS A CONTRACTOR NOT ELIGIBL E FOR DEDUCTION U/S 80IB AS PER EXPLANATION TO SEC. 80IA. 10.2 ON APPEAL, THE CIT(A) HAS HELD THAT THERE IS NO REQUIREMENT OF THE ASSESSEE MUST BE THE OWNER OF THE LAND ON WHICH THE HOUSING PROJECT WAS CONSTRUCTED. THE CIT(A) RELIED UPON THE DECISION O F THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF RADHE DEVELOPERS REPORTED I N 113 TTJ 300 AND HELD THAT THE ASSESSEE NEED NOT TO BE THE OWNER OF THE LAND T O BE ELIGIBLE FOR DEDUCTION. 10.3 AS REGARD THE ASSESSEE HAS CONSTRUCTED THE BUI LDING AS A CONTRACTOR, THE CIT(A) HAS HELD THAT THE TRANSFER OF UNDIVIDED SHAR ES IN THE LAND TO THE SAI RADHA DEVELOPERS 8 PROSPECTIVE OWNERS OF RESIDENTIAL UNITS IS ONLY A M ETHOD OF SALE OF THE PROJECT AND THEREFORE, IT IS NOT A WORK CONTRACT AWARDED BY AN Y PERSON OR INDIVIDUAL. 11 BEFORE US, THE LD DR HAS RELIED UPON THE ORDER O F THE ASSESSING OFFICER AND SUBMITTED THAT BEFORE COMPLETING THE PROJECT THE AS SESSEE HAS ALREADY TRANSFERRED THE UNDIVIDED SHARES IN THE LAND TO THE INDIVIDUALS, THEREFORE, CONSTRUCTION OF THE PROJECT BY THE ASSESSEE IS ONL Y ON BEHALF OF THE LAND OWNERS AND NOT AS A DEVELOPER OF THE PROJECT. THEREFORE, T HE ASSESSEE IS NOT ENTITLED FOR DEDUCTION AS PER EXPLANATION TO SEC 80IA AS APPLICA BLE TO SEC. 80IB. 11.1 THE LD AR OF THE ASSESSEE HAS SUBMITTED THE AS SESSEE HAS FORMED A SCHEME TO SELL THE UNDIVIDED INTEREST IN THE LAND A ND SIMULTANEOUSLY EXECUTE A CONSTRUCTION AGREEMENT TO HELP POTENTIAL BUYERS OBT AIN FACILITIES FROM BANKS. THE ASSESSEE HAS INVESTED RS. 40,40,000 IN PURCHASE OF LAND AND RS. 6,05,41,798 IN CONSTRUCTION. UNLIKE IN THE CASE OF A PURE CONTRACT OR WHO HAS NO INVESTMENT OR RISK, THE LD AR HAS SUBMITTED THAT THE ASSESSEE HAS TAKEN PERMISSION, PROCURED MATERIAL, APPOINTED ARCHITECTS AND CONSULTANT ETC., FOR THE PROJECT. 12 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HA S FIRST ACQUIRED THE LAND IN QUESTION FOR CONSTRUCTION OF THE HOUSING PROJECT. T HE ONLY REQUIREMENT UNDER THE PROVISIONS OF SEC. 80IB(10) IS EXISTENCE OF UNDERTA KING MUST DEVELOP AND BUILD THE BUILDING OF THE HOUSE PROJECT DULY APPROVED BY THE LOCAL AUTHORITIES. THE ASSESSEE HAS DEVELOPED THE PROJECT IN ITS OWN NAME; THEREFORE, TRANSFER OF UNDIVIDED SHARE IN THE LAND TO THE IDENTIFIED BUYER S OF THE CONSTRUCTED RESIDENTIAL UNITS IS ONLY A MODUS-OPERANDI BY THE A SSESSEE TO TRANSFER THE PROJECT IN TWO PARTS VIZ CONSTRUCTED UNITS AND INTEREST IN THE LAND SEPARATELY. THIS SAI RADHA DEVELOPERS 9 METHOD APPEARS TO BE ADOPTED BY THE ASSESSEE TO SAV E THE STAMP DUTY AS DIFFERENT RATE IS APPLICABLE IF THE RESIDENTIAL UNI T ALONG WITH THE UNDIVIDED INTEREST IS SOLD TOGETHER IN COMPARISON OF THE RATE APPLICAB LE ON SEPARATE SALE OF LAND AND BUILDING. FURTHER, THIS ARRANGEMENT WAS TO FACILITA TE THE FINANCE FROM BANKS. THEREFORE, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE GROUND RAISED BY THE REVENUE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), QUA THIS ISSUE. 13 THE LAST GROUND IS REGARDING DISALLOWANCE OF INT EREST OF RS. 75,750/-. 13.1 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM HAD ADVANCED A PEAK INTEREST FREE LOAN OF RS. 16 LACS TO THE SISTER CON CERN AND AN AMOUNT OF RS. 10 LACS WAS OUTSTANDING AT THE END OF THE YEAR. THE AS SESSING OFFICER HELD THAT THERE WAS DIVERSION OF INTEREST BEARING FUNDS FOR NON BUS INESS AND ACCORDINGLY DISALLOWED A SUM OF RS. 75,750/-. 13.2 ON APPEAL, THE CIT(A) DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS SUFFICIENT CREDIT BALA NCE IN THE BANK ACCOUNT OF THE ASSESSEE ON EACH OCCASION WHEN THE ADVANCE WAS GIVE N TO THE SISTER CONCERN. FURTHER, SUBSTANTIAL AMOUNT OF INTEREST FREE ADVANC ES WERE RECEIVED FROM THE CUSTOMERS; THEREFORE, IN THE ABSENCE OF DIRECT NEXU S, DISALLOWANCE IS NOT JUSTIFIED. 14 WE HAVE HEARD THE RIVAL CONTENTION AS WELL AS TH E RELEVANT MATERIAL ON RECORD. NOTHING HAS BEEN BROUGHT BEFORE US BY THE REVENUE TO CONTROVERT THE FACTUAL FINDING OF THE CIT(A) THAT THE ASSESSEE WA S HAVING SUFFICIENT CREDIT BALANCE IN THE BANK ACCOUNT AS WELL AS ADVANCES REC EIVED FROM THE CUSTOMERS SAI RADHA DEVELOPERS 10 WHEN THE ADVANCE WAS GIVEN TO THE SISTER CONCERN. T HEREFORE, IN THE ABSENCE OF DIRECT NEXUS BETWEEN THE INTEREST BEARING FUNDS AND ADVANCE GIVEN TO THE SISTER CONCERN, THE DISALLOWANCE IS NOT JUSTIFIED. ACCORDI NGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A), QUA, THIS IS SUE. 15 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THE 20 TH , DAY OF JAN 2012. SD/ SD/- ( (( ( B RAMAKOTAIAH B RAMAKOTAIAH B RAMAKOTAIAH B RAMAKOTAIAH ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:20 TH , JAN 2012 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI