M/s. Chitrakut Corporation, Anand V. The Income tax Officer, Ward-1, Anand

ITA 1048/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8765 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C

Judgement Text

ITA.1048-07-DCA. IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M M/S.CHITRAKUT CORPORATION, 7/8 THAKKAR ARCADE, SARDARGANJ, ANAND. V/S . INCOME TAX OFFICER, WARD-1, INCOME TAX OFFICE, ANAND. PAN NO.AACFC 6983 E (APPELLANT) .. (RESPONDENT) APPELLANT BY :- MS. URVASHI SHODHAN RESPONDENT BY:- MR. M.C. PANDIT, SR.D.R. O R D E R PER SHRI D.C. AGRAWAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. C.I.T.(A) WHERE HE HAS CONFIRMED THE ACTION OF THE A.O. IN DISALLOWING THE CLAIM OF DEDUCTION U/S. 80IB(10) OF THE ACT AT RS.28,57,757/-. IN ADDITION TO THIS OTHER GROUND RAISED IS ABOUT CHARG ING OF INTEREST U/S. 234A/B/C/D. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PAR TNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION OF HOUSING PROJECTS . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FIRM CONSTRUCTED ONE CHA ITANYA TOWNSHIP ON WHICH DEDUCTION U/S. 80IB(10) WAS CLAIMED BY THE AS SESSEE ON THE GROUND THAT IT IS A DEVELOPER, IS DEVELOPING HOUSING PROJE CTS AND FULFILLS THE CONDITIONS LAID DOWN UNDER SECTION 80IB(10). ITA NO. 1048/AHD/2007 ASST. YEAR :2003-04 2 3. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON TH E GROUND THAT ASSESSEE FIRM DID NOT FULFILL BASIC CONDITION THAT IT SHOULD BE THE OWNER OF THE LAND. NO DOCUMENTS IN RESPECT OF THE LAND CLAIM ED TO BE OWNED BY THE FIRM WHERE THE PROJECT WAS CONSTRUCTED WAS FILED EX CEPT COPY OF AGREEMENT FOR SALE OF LAND. THERE BEING NO PLAN APP ROVED BY THE AUTHORITIES IN THE NAME OF THE ASSESSEE. THE A.O. A LSO FOUND THAT ASSESSEE IS ONLY ACTING AS AN AGENT ON BEHALF OF THE ACTUAL LAND OWNER WHO HAS NEGOTIATED THE PROJECTS WITH OTHER PARTIES.THE ASSE SSEE HAD FILED A DOCUMENT SHOWING THAT PERMISSION FROM ANAND URBAN D EVELOPMENT AUTHORITY FOR CONSTRUCTION OF BUILDING WAS GRANTED TO GUNVANTRAI R. RAJA & OTHERS ON 9.8.2001. IT CLEARLY INDICATED AS PER A .O. THAT PERMISSION IS GRANTED FOR CONSTRUCTION ON THE LAND NOT OWNED BY T HE ASSESSEE. 4. THE LD. CIT (A) EXAMINED THE PROVISIONS OF SECTI ON 80IB(10) AND GAVE THE FOLLOWING FINDING:- (I) THE LAND IS AN INTRINSIC AND INALIENABLE PART O F THE HOUSING PROJECT. WITHOUT LAND BEING OWNED, A PERSON CANNOT BE SAID T O BE IN THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECT. IF HE C ARRIES OUT CONSTRUCTION ON THE LAND NOT OWNED BY HIM THEN HE WOULD ONLY BE A CONTRACTOR OR AN AGENT OF THE LAND OWNER. (II) IF THE ASSESSEE DOES NOT POSSESS THE LAND THEN TITLE OVER THE CONSTRUCTION BASED ON THE PORTION OF THE LAND TO BE TRANSFERRED TO THE END USER WILL NOT BE COMPLETE. (III) THE OBJECT OF SECTION 80IB(10) IS TO PROVIDE LOW COST HOUSINGS TO MIDDLE CLASS PEOPLE AND THE SAME CANNOT BE SERVED I F ASSESSEE IS NOT LEGALLY COMPETENT TO TRANSFER THE HOUSES TO THE BEN EFICIARIES. HE CAN ONLY TRANSFER THE CONSTRUCTED BUILDING TO THE LAND OWNER ON WHOSE BEHALF THE BUILDING IS CONSTRUCTED. THE APPROVAL FOR HOUSING P ROJECT IS GRANTED TO THE LAND OWNER AND NOT TO THE ASSESSEE. 3 (IV) ONCE LAND IS NOT OWNED BY THE ASSESSEE HOUSING PROJECTS CANNOT BE UNDERTAKEN BY HIM THEREFORE, IT HAS NOT SATISFIED T HE PROVISIONS OF RULE 18BBB(2). (V) IT IS NOT CORRECT TO SAY THAT LAND IS TRANSFERR ED FOR PRACTICAL PURPOSES TO THE ASSESSEE FOR DEVELOPING HOUSING PROJECT. THE APPROVAL FOR CONSTRUCTION BY AUDA IS NOT GRANTED TO THE ASSESSEE . THE AGREEMENT WITH LAND OWNERS IS FOR CONSTRUCTION AND NOT FOR TRANSFE R OF OWNERSHIP MUCH LESS TRANSFER OF APPROVAL. THE AGREEMENT ONLY TRANS FERS THE POSSESSION FOR THE LIMITED PURPOSES FOR CARRYING OUT CONSTRUCTION. IT DOES NOT TRANSFER THE OBLIGATIONS ATTACHED TO THE APPROVAL. THE LOCAL AUT HORITY CANNOT TAKE ANY COGNIZANCE OF PERSONS OTHER THAN OWNER AS PER ITS L AND RECORD. OWNERSHIP IS NOT TRANSFERRED TO THE DEVELOPER TO AVOID STAMP DUTY. THE STAMP DUTY IS ULTIMATELY PAID BY END USER WHEN ITS PURCHASES DWEL LING UNITS AND TRANSFER TAKES PLACE BETWEEN LAND OWNER WHO IS VEST ED WITH THE RIGHT OF DEVELOPMENT AND CONSTRUCTION AS APPROVED BY THE LOC AL AUTHORITY AND WITH THE END-USER ON OTHER SIDE. 5. ACCORDINGLY FINALLY OBSERVING AS UNDER, THE LD. C.I.T.(A) CONFIRMED THE ORDER OF THE A.O. AS UNDER :- THEREFORE, THE DEDUCTION U/S. 80IB(10) READ WITH S ECTION 80IB(1) AND RULE 18BBB IS ADMISSIBLE ONLY TO SUCH ASSESSEES AS ARE DERIVING PROFITS FROM AN UNDERTAKING OF BUILDING AN D HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY, AND FOR S UCH APPROVAL, THE ASSESSEE MUST LEGALLY OWN THE LAND WHICH IS AN INAL IENABLE CONSTITUENT OF ANY HOUSING PROJECT. THE PERSON DOIN G ONLY THE WORK OF DEVELOPING AND CONSTRUCTING THE BUILDING STRUCTU RE ON THE AUTHORITY OF THE APPROVAL GRANTED TO THE LANDOWNER CANNOT BE SAID TO BE IN THE BUSINESS OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, NOT ONLY ON ACCOUNT OF NOT BEING T HE OWNER OF THE LAND, A NECESSARY CONSTITUENT IF THE HOUSING PROJEC T, BUT ALSO ON 4 ACCOUNT OF NOT HAVING BEEN GRANTED THE APPROVAL TO EXECUTE THE PROJECT IN HIS OWN RIGHT, BECAUSE THAT INVOLVES OBL IGATIONS THAT CAN BE DISCHARGED ONLY BY THE PERSON TO WHOM THE APPROV AL IS GRANTED. THE CASE LAWS RELIED UPON ARE ALL DISTINGUISHABLE O N FACTS AND HENCE ARE NOT APPLICABLE TO THE PRESENT CASE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW WHAT IS TO BE EXAMINED IS AS TO WHAT EXTENT AND RIGHTS TO THE ASSESSEE HAS BEEN GIVEN WHILE CONSTRUCTING THE PROJECT ON THE LAND PRIMA-FACIE OW NED BY OTHERS. WHETHER SUCH RIGHTS ARE EQUIVALENT TO OWNERSHIP OR NOT WITHIN THE MEANING OF SECTION 53A OF T.P. ACT IS REQUIRED TO B E EXAMINED. FOR THAT PURPOSE AGREEMENT BETWEEN THE LAND OWNER AND THE AS SESSEE IS REQUIRED TO BE EXAMINED IN DETAIL. 7. SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT IN ITO V S. SHREENATHJI ASSOCIATES (ITA NO.2159/AHD./05 A.Y. 2002-03 PRONOU NCED ON 30-9- 2009 WHICH READS AS UNDER :- DURING THE COURSE OF HEARING, IT WAS POINTED OUT B Y THE BENCH THAT A SIMILAR ISSUE HAS BEEN HEARD BY THE TRIBUNAL IN T HE CASE OF SHAKTI CORPORATION, IN ITA NO.1503/AHD/2008, ITA 1361/AHD/ 06 AND 1769/AHD/08 THAT, RECENTLY, THE HONBLE SUPREME COU RT IN THE CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT.LTD., VID E ORDER DATED 7.8.2008, IN CIVIL APPEAL NO.3302/2005, HAS LAID DO WN THE DEFINITION OF A DEVELOPER, CONTRACTOR AND JOINT VEN TURE AND TO FOLLOW WHATEVER DECISION THE TRIBUNAL TAKES IN THAT CASE A FTER CONSIDERING THE DECISION OF THE SUPREME COURT IN THIS APPEAL. W E FIND THAT THE 5 TRIBUNAL IN THE CASE OF SHAKTI CORPORATION (SUPRA), VIDE ITS ORDER DATED 7.11.2008, HAS DECIDED THE APPEALS BY OBSERVI NG AS UNDER :- 16. THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) A ND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED T HE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED HEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CASE HERE TH E ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJ ECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT C ASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED HEREIN WILL VEST WITH TH E LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ON LY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SE RVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HA S NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI COR PORATION SINCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGRE EMENT AND CRUX OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THERE FORE, WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U/S. 80IB(10). THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF FAKIRCHAND GULATI (SUPRA) WILL NOT ASSIST THE RE VENUE, AS THE AGREEMENT IS NOT SHARING OF THE CONSTRUCTED AREA. I N OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFO RE US,IF 6 SUBMITTED THE TERMS AND CONDITIONS OF THE AGREEMENT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE P ARTIES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO T HE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LAND OWNER AND DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED T HE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVE LOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEE N BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OV ER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN AND RISKS, TH E AO SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S. 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDOWNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE S HOULD NOT BE ALLOWED DEDUCTION U/S. 80IB(10) TO THE ASSESSEE. IT CAN BE OBSERVED THAT THE DISTINCTION BETWEEN THE CONTRACTOR AND THE DEVELOPER AS LAID DOWN IN THE AFORESAID DECISIO NS WERE NOT TAKEN INTO CONSIDERATION BY EITHER OF THE LOWER AUT HORITIES FOR ARRIVING AT THE CONCLUSIONS. IN THE CIRCUMSTANCES, IN OUR OPINION, IT SHALL BE JUST AND FAIR TO ALLOW THE A.O. AN OPPORTU NITY TO EXAMINE THE FACTS OF THE CASE IN THE LIGHT OF THE AFORESAID DECISION. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF A.O. FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION QUOTED AB OVE AS PER LAW AND AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARIN G TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOW ED FORSTATISTICAL PURPOSES. 7 8. IN VIEW OF THE ABOVE, WE RESTORE THE MATTER TO T HE FILE OF THE A.O. FOR EXAMINING THE AGREEMENT AND ARRIVE AT A CONCLUS ION WHETHER THE RIGHTS TO THE ASSESSEE ARE TRANSFERRED TO THE EXTENT THAT IT PARTAKES THE CHARACTER OF OWNERSHIP. IF SO DEDUCTION U/S. 80IB(10) WOULD B E ALLOWED AND IF NOT SUCH DEDUCTION WILL NOT BE ALLOWED. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED BUT FO R STATISTICAL PURPOSES. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRA WAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 22 -03- 2010 PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 22 -03-2010