The ACIT,(OSD)Circle-9, Ahmedabad V. M/s. Sukun Infrastructure, Ahmedabad

ITA 1116/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0247 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] I.T.A. NO . 1116/AHD/2012 ASSESSMENT YEAR : 2007 - 08 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 9, AHMEDABAD .APPELLANT VS. SUKU N INFRASTRUCTURE . . RESPONDENT 9, GAYATRI FLATS, BEHIND CIRCUIT HOUSE SHAHIBAGH, AHMEDABAD 380 004 [PAN: ABGFS0974C] APPEARANCES BY: PRASOON KABRA FOR THE A PPELLANT NONE FOR THE RE SPONDEN T DATE OF CONCLUDING THE HEARING : 18/10 /2016 DATE OF P RONOUNCING THE ORDER : 19 /10/2016 O R D E R PER PRAMOD KUMAR AM : 1. BY WAY OF THIS APPEAL, DIRECTED AGAINST THE ORDER DATED 26 TH MARCH 2012 BY THE CIT(A) FOR THE ASSESSMENT YEAR 2007 - 08 , THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE: 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE S CLAIM FOR DEDUCTION OF RS 80,64,654 UNDER SECTION 80IB(10) OF THE ACT. 2. THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE FULFILS THE CONDITIONS LAID DOWN FOR CLAIMING DEDUCTION UNDER SECTION 80IB(10) EVEN WHEN THE LAND WAS IN THE NAME OF SHRI BOPONCHANDRA CHIMANBH AI PATEL AND SHRI HARSHADBHAI D HANJI PATEL, WHO ARE SEPARATE LEGAL ENTITIES IN THE E YES OF LAW AND ASSE SSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THEM. THE ENTIRE RESPONSIBILITY TO EXECUTE THE HOUSING PROJECT AND ABIDE BY THE TERMS AND CONDITIONS RIGHT FROM THE INCEPTION OF THE PROJECT TILL THE COMPLETION RESTS WITH THEM. THE LOCAL AUTHOR ITY I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 2 OF 8 HAD GRANTED PERMISSION FOR DEVELOPMENT TO THEM. ASSESSEE WAS JUST A CONTRACTOR OF THE LANDOWNERS CONSTRUCTING RESIDENTIAL UNITS AND NOT A DEVELOPER. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURS E OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT, WHILE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) AMOUNTING TO RS 80,64,657, THE ASSESSEE IS NOT OWNER OF THE LAND ON WHICH THE RESIDENTIAL UNITS ARE DEVELOPED AND THE A PPROVAL, BY THE MUNICIPAL AUTHORITIES, IS ALSO NOT IN THE NAME OF THE ASSESSEE. IT WAS ALSO NOTED THAT THE ASSESSEE HAS EXECUTED BANAKHET CUM DEVELOPMENT AGREEMENT WITH THE ACTUAL OWNERS OF THE LAND AND THE SALE DEEDS WERE DIRECTLY EXECUTED BY THESE LANDO WNERS IN THE FAVOUR OF END BUYERS. ON THESE FACTS, THE DEDUCTION UNDER SECTION 80IB(10) WAS DECLINED. HOWEVER, WHEN THE MATTER TRAVELLED IN APPEAL BEFORE THE CIT(A), LEARNED CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFICER, AND HELD THAT THAT AS THE ASS ESSEE HAS DOMINANT CONTROL OVER THE LAND, AND THE LIMITED INTEREST OF THE LANDOWNER IS FIXED AGREED PRICE OF THE LAND, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10). IN COMING TO THIS CONCLUSION, THE CIT(A) WAS, INTER ALIA, FOLLOWING HON BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RADHE DEVELOPERS [(2012) 341 ITR 403(GUJ)] . THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE BUT N ONE APPEARED FOR THE ASSESSEE EVEN T HOUGH THE NOTICE OF HEARING WAS DULY SERVED UPON THE ASSESSEE BY AFFIXTURE. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 3 OF 8 AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 4. WE FIND THAT THE ISSUE IN APPEAL IS DIRECTLY C OVERED BY A COORDINATE BENCH DECISION, IN THE CASE OF SHRI UMEYA CORPORATION VS ITO (ITA NO. 21/AHD/ 2010; ORDER DATED 7 TH JULY 2015), WHICH HAS, SUMMING UP THE LEGAL POSITION IN THE LIGHT OF THE LAW LAID DOWN BY HON BLE JURISDICTIONAL HIGH COURT S DECISIO N IN THE CASE OF RADHE DEVELOPERS (SUPRA) , OBSERVED AS FOLLOWS: 6 . WE FIND THAT, IN THE CASE OF CIT VS R ADHE DEVELOPERS [(2012) 341 ITR 403 (GUJ)], HON BLE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO CONSIDER THE ISSUE OF OWNERSHIP OF LAND, ON WHICH HOUSI NG PROJECT IS DEVELOPED, IN THE CONTEXT OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10). HON BLE JURISDICTIONAL HIGH COURT HAS, IN THIS CONTEXT, INTER ALIA OBSERVED AS FOLLOWS: 32. SEC. 80 - IB(10) OF THE ACT THUS PROVIDES FOR DEDUCTIONS TO AN UNDERTAK ING ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS UNDER CERTAIN CIRCUMSTANCES NOTED ABOVE. IT DOES NOT PROVIDE THAT THE LAND MUST BE OWNED BY THE ASSESSEE SEEKING SUCH DEDUCTIONS. 33. IT IS WELL SETTLED THAT WHILE INTERPRETING TH E STATUTE, PARTICULARLY, THE TAXING STATUTE, NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS NOT BEEN PROVIDED BY THE LEGISLATURE. THE CONDITION WHICH IS NOT MADE PART OF S. 80 - IB(10) OF THE ACT, NAMELY THAT OF OWNING THE LAND, WHICH THE ASSESSEE DEVELOP S, CANNOT BE SUPPLIED BY ANY PURPORTED LEGISLATIVE INTENT. I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 4 OF 8 34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPMENT AGREEMENTS IN BOTH THE SETS OF CASES. IT CAN BE SEEN FROM THE TERMS AND CONDITIONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUT ION OF THE DEVELOPMENT PROJECTS. UNDER THE AGREEMENTS, THE ASSESSEE HAD FULL AUTHORITY TO DEVELOP THE LAND AS PER HIS DISCRETION. THE ASSESSEE COULD ENGAGE PROFESSIONAL HELP FOR DESIGNING AND ARCHITECTURAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CH ARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT CAN THUS BE SEEN THAT THE ASSESSEE HAD DEVELOPED THE HOUSING PROJECT. THE FACT THAT THE ASSESSEE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUEN CE. 7. IN OUR HUMBLE UNDERSTANDING, THEREFORE, IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSIN G PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAK ING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREPRENEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVEL OPING AND BUILDING HOUSING PROJECTS BY BUYING, ON OUTRIGHT BASIS, AND CONSTRUCTING RESIDENTIAL UNITS THEREON COULD PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE OF ACTIVITY, BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BEC AUSE THE ASSESSE HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSING PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 5 OF 8 RE WARDS OF DEVELOPING THE HOUSING PROJECT, IN SUBSTA NCE, REMAIN WITH THE ASSESSE. IT IS DIFFICULT, IF NOT ALTOGETHER IMPOSSIBLE, TO VISUALIZE ALL THE BUSINESS MODELS THAT AN ASSESSE E MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS, IN SUBSTANCE, THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME, B UT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY FOR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOPING AND BUILDING A HOUSING PROJECT . THERE IS NO JUSTIFICATION, CONCEPTUAL OR LEGAL, IN RESTRICTING E LIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINESS MODEL THAT AN ENTREPRENEUR ADOPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HOUSING PROJECT. 8. AS REGARDS LEARNED CIT(A) S RELIANCE ON THE DECISION OF A LARGER BENCH OF THIS TR IBUNAL, IN THE CASE OF B T PATIL & SONS (BELGAUM) CONSTRUCTIONS PVT LTD VS ACIT [(2010) 1 ITR (TRIBUNAL) 703 (MUM)], WHAT HAS BEEN REFERRED TO BY HER IS THE VIEW OF THE THREE MEMBER BENCH RESOLVING THE POINT OF DIFFERENCE BETWEEN THE MEMBERS OF THE DIVISIO N BENCH. HOWEVER, THIS VIEW WAS STILLBORN, AND ITS RELEVANCE IS CONFINED TO ACADEMIC SIGNIFICANCE, FOR THE REASON THAT THAT WHILE GIVING EFFECT TO THE MAJORITY VIEW, VIDE ORDER DATED 28TH FEBRUARY, 2013 AND ON SOMEWHAT PECULIAR FACT SITUATION IN THIS CASE, THE FINAL ORDER OF THE TRIBUNAL DID NOT ENDORSE THESE VIEWS. QUITE TO THE CONTRARY, FOLLOWING HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD AND ORS [(2010) 322 ITR 323 (BOM)] AND UPON BY TAKING INTO ACCOUNT HON BLE BOMB AY HIGH COURT S SPECIFIC DIRECTIONS IN THE CASE BEFORE THE TRIBUNAL, THE TRIBUNAL S FINAL ORDER HAD, IN TER ALIA, CONCLUDED AS FOLLOW .WHILE GIVING EFFECT TO THE OPINION OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JUR ISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 6 OF 8 OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY I NDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEARS. 9. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT A SSUME THE ENTREPRENEURSHIP RISKS OF THE HOUSING PROJECT. THE FORMAT OF ARRANGEMENTS FOR TRANSFER OF BUILT UP UNIT, AND BUSINESS MODEL OF THE ASSESSEE FOR THAT PURPOSE, IS NOT DECISIVE FACTOR FOR DETERMINING ELIGIBILITY OF DEDUCTION UNDER SECTION 80 IB (10) , BUT THAT IS ALL THAT THE AUTHORITIES BELOW HAVE FOUND FAULT WITH. THE OBJECTIONS OF THE AUTHORITIES BELOW ARE THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AUTHORITIES BELOW, IN DECLINING DEDUCTION UNDER SECTION 80IB (10) AND ON THE FACTS OF THIS CASE, IS INCORRECT. WE VACATE THE SAME AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 5. WE HAVE NO REASONS TO TAKE ANY OTH ER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US, AS EXTRACTED ABOVE. 6. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIE D INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAKING I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 7 OF 8 THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREP RENEURSHIP RISK IS NOT DEPE NDENT ON OWNERSHIP OF THE LAND . AS REGARDS LEARNED DEPARTMENTAL REPRESENTATIVE S CONTENTION TO THE EFFECT THAT THE ASSESSEE HAS NOT EVEN BOTHERED TO APPEAR BEFORE US AND IT IS NOT CLEAR WHETHER THE FACTUAL ELEMENTS EMBEDDED IN TH E LEGAL POSITION AS ABOVE ARE BORNE OUT OF MATERIAL ON RECORD, WE FIND THAT THE CIT(A) HAD CALLED FOR A REMAND REPORT AND THIS ASPECT OF THE MATTER WAS NOT EVEN IN DISPUTE. IT WAS NOT THE CASE OF THE ASSESSING OFFICER, DIRECTLY OR EVEN BY IMPLICATION, THAT ENTREPRENEURIAL RISK WAS NOT BEING CARRIED BY THE ASSESSEE. THE CASE OF THE REVENUE PRIMARILY RESTS ON THE FACT THAT LAND WAS IN THE NAME OF THE ORIGINAL OWNER AND DIRECTLY TRANSFERRED TO THE END BUYER, WHILE CONSTRUCTION WAS SHOWN AS HAVING BEEN DONE IN THE CONTRACTUAL CAPACITY. THAT IS A QUESTION OF WHAT BUSINESS MODEL IS EMPLOYED BY THE ASSESSEE, AND, IN THE LIGHT OF DISCUSSIONS ABOVE, THAT ASPECT OF THE MATTER IS NOT REALLY RELEVANT. IN THIS VIEW OF THE MATTER, WE SEE NO USEFUL PURPOSE BEING SERVED BY THE MATTER BEING REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICATION. THE MATTER MUST REACH FINALITY NOW. WE, THEREFORE, DEEM IT FIT AND PROPER TO UPHOLD THE RELIEF GRANTED BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMI SSED. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER, 2016. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDI CIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 19 TH DAY OF OCTOBER , 2016 . I.T.A. NO. 1116/AHD/2012 ASSESSMENT YEAR: 2007 - 08 PAGE 8 OF 8 COPIES TO : (1) THE APP ELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD