The ITO, Ward-9(1), Ahmedabad V. M/s. Rachna Corporation, Ahmedabad

ITA 1178/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1335 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL BRAHMKSHATRIYA
• Keywords: Retrospective amendment; Question of law
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1178/AHD/2012 ( / ASSESSMENT YEAR : 2008-09) THE ITO WARD-9(1) AHMEDABAD / VS. M/S.RACHNA CORPORATION LAXMI BUNGLOWS NR.SARJAN BUNGLOWS KRISHNA NAGAR NAVA NARODA AHMEDABAD ./ ./ PAN/GIR NO. : AAIFR 8531 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJDEEP SINGH, SR.DR / RESPONDENT BY : SHRI ANIL BRAHMKSHATRIYA, AR / DATE OF HEARING 28/06/2016 !'# / DATE OF PRONOUNCEMENT 29/06/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XV, AHMEDABAD D ATED 29/03/2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 2 - 2.2. ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE EN GAGED IN THE BUSINESS OF CONSTRUCTION. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 05/07/2008 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING DEDUCTION OF RS.88,72,527/- U/S.80IB(10) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 02/11/2010 AND THE TOTAL INCOME WAS DETERMIN ED AT RS.88,72,527/- BY DENYING THE CLAIM OF DEDUCTION U/S.80IB(10) OF T HE ACT. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO), ASSESSEE C ARRIED THE MATTER BEFORE THE LD.CIT(A), WHO DECIDED THE APPEAL IN FA VOUR OF ASSESSEE VIDE ORDER DATED 29/03/2012 (IN APPEAL NO. CIT(A)-XV/IT O/9(1)202/10-11). AGGRIEVED BY THE ORDER OF THE LD.CIT(A), REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1). THE LD. COMMISSIONER OF INCOME-TAX (APPEAL S)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSE SSING OFFICER TO ALLOW THE ASSESSEE'S CLAIM FOR DEDUCTION OF RS.88,72,527/ - U/S. 80IB(10) OF THE I.T. ACT. 2). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS )-XV, AHMEDABAD HAS ERRED IN HOLDING THAT THE ASSESSEE FULFILLS THE CONDITIONS LAID DOWN FOR CLAIMING DEDUCTION U/S.80IB(10) EVEN WHEN THE L AND WAS IN THE NAME OF SHAILBHADRA (SATELLITE) CO.-OPERATIVE HOUSI NG SOCIETY LTD., WHICH IS A SEPARATE LEGAL ENTITY IN THE EYE OF LAW AND THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE SOCIETY. THE ENTIRE RESPONSIBILITY TO EXECUTE THE HOUSING PR OJECT AND ABIDE BY THE TERMS AND CONDITIONS OF ITS APPROVAL RIGHT FROM THE INCEPTION OF THE PROJECT TILL ITS COMPLETION RESTS WITH THE SOCIETY. THE LOCAL AUTHORITY HAD GRANTED PERMISSION FOR DEVELOPMENT TO THE SOCIETY. ASSESSEE WAS JUST A ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 3 - CONTRACTOR OF THE LAND OWNERS CONSTRUCTING RESIDENT IAL UNITS AND NOT A DEVELOPER. 3. BEFORE US, IT IS SUBMITTED THAT THE SOLITARY ISS UE IS WITH RESPECT TO DEDUCTION U/S.80IB(10) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD CONSTRUCTED THE HOUSING PROJECT AND IS STATED TO HAVE EARNED NET PROFIT OF RS.88,72,527/- WHICH WAS CLAIMED AS D EDUCTION U/S.80IB(10) OF THE ACT. AO AFTER PERUSING THE DET AILS FILED BY THE ASSESSEE CONCLUDED THAT ASSESSEE IS NOT ELIGIBLE FO R DEDUCTION U/S.80IB(10) OF THE ACT AS ASSESSEE IS NOT A DEVEL OPER BECAUSE HE DID NOT CONCEPTUALIZE THE PROJECT, WAS NOT THE OWNER OF THE LAND AND THE APPROVAL OF CONSTRUCTION WAS NOT ISSUED TO HIM BY T HE LOCAL AUTHORITIES. HE ALSO NOTICED THAT ASSESSEE HAD ENTERED INTO A DE VELOPMENT AGREEMENT WITH THE LAND OWNERS AND THE CONSTRUCTION WAS DONE AS PER THE AGREEMENT AND THUS THE ASSESSEE WAS MERELY A CONTRACTOR FOR THE PURPOSE OF CONSTRUCTION OF PROJECT. AO ALSO NOTICED THAT ASSE SSEE HAD NOT SOLD ANY UNIT TO THE PURCHASERS, BUT SOCIETY HAD EXECUTED TH E SALE-DEED AS A SELLER AND ASSESSEE HAD JOINED AS A CONFIRMING PARTY TO TH E TRANSACTION. HE THEREFORE CONCLUDED THAT ASSESSEE HAD FAILED TO SAT ISFY THE CONDITIONS LAID DOWN U/S.80IB(10) OF THE ACT AND THEREFORE NOT ELIG IBLE FOR DEDUCTION AND ACCORDINGLY DENIED THE CLAIM OF DEDUCTION U/S.80IB( 10) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSESSEE C ARRIED THE MATTER ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 4 - BEFORE THE LD.CIT(A), WHO DECIDED THE APPEAL IN FAV OUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 13. I HAVE CONSIDERED THE FACTS AND CONTENTIONS OF BOTH A.O. AS WELL AS OF APPELLANT AND I HAVE PERUSED VARIOUS DETAILS SO SUBMITTED BY THE APPELLANT TO SUPPORT THE CONTENTION. CONSIDERING T HE FACTS AND RELIANCE BY THE APPELLANT ON THE JUDGEMENT OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS, I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE APPELLANT. 14. (A) HON'BLE GUJARAT HIGH COURT IN ITS LANDMARK JUDGEMENT DATED 13.12.2011 IN THE CASE OF RADHE DEVELOPERS, SHAKTI CORPORATION AND OTHERS VS. CIT AT PARA 4 AND PARA 5 ILLUSTRATE THE BASIC FACTS OF THE CASE OF M/S. RADHE DEVELOPERS. AT PARA 7, HON'BLE ITAT'S ORDER DATED 29.6.2007 WAS SUMMARIZED WHEREIN IT WAS HELD THAT F IRSTLY FOR DEDUCTION U/S.80IB(10) OF THE ACT IT IS NOT NECESSARY THAT TH E ASSESSEE MUST BE THE OWNER OF THE LAND AND SECONDLY LOOKING TO THE PROVI SIONS CONTAINED IN SECTION 2(47) OF THE ACT READ WITH SECTION 53A OF T HE TRANSFER OF PROPERTY ACT, BY VIRTUE OF THE DEVELOPMENT AGREEMEN T AND THE AGREEMENT TO SELL, THE ASSESSEE HAD, FOR THE PURPOSE OF INCOME TAX, BECOME THE OWNER OF THE LAND. (B) AT PARA 8.3 & 8.4., IT CONSIDERED HON'BLE ITAT ORDER DATED 7.11.2008 IN THE CASE OF M/S.SHAKTI CORPORATION WHE REIN HON'BLE ITAT DIFFERENTLY (DIFFERENT THAN M/S.RADHE DEVELOPERS CA SE) HELD THAT CONSIDERING THE TERMS AND CONDITIONS OF DEVELOPMENT AGREEMENT AND OTHER DOCUMENTS ON RECORD, THE ASSESSEE HAD ACQUIRE D DOMINION OVER THE LAND, WHICH HE HAD DEVELOPED BY CONSTRUCTING HO USING PROJECT INCURRING EXPENSES AND ALSO TAKING RISKS. IT WAS HE LD FURTHER BY HON'BLE ITAT THAT DEDUCTION U/S.80IB(10) OF THE ACT ARE NOT TO BE GRANTED FOLLOWING RATIO OF ORDER OF M/S.RADHE DEVELOPERS WH ERE THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERAT ION AND WORKED MERELY AS CONTRACTOR TO CONSTRUCT THE HOUSING PROJE CT ON BEHALF OF THE LAND OWNER. ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 5 - (C) ON THE BASIS OF FACTS OF ABOVE TWO CASES AND OT HER SIMILAR CASES, THE HON'BLE GUJARAT HIGH COURT FRAMED FOLLOWING SUBSTAN TIAL QUESTION OF LAW: 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN LAW IN ALLOWING DED UCTION U/S.80IB(10) R.W.S. 80IB(1) TO THE ASSESSEE WHEN TH E APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COMPLETION CERTIFICA TE WAS NOT GRANTED TO THE ASSESSEE BUT TO THE LANDOWNER AND TH E RIGHTS AND THE OBLIGATIONS UNDER THE SAID APPROVAL WERE NOT TR ANSFERABLE, AND WHEN THE TRANSFER OF DWELLING UNITS IN FAVOUR O F THE END-USERS WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE?' (D) AT PARA 25, HON'BLE HIGH COURT CONSIDERED VARIO US PROVISIONS OF THE TRIPARTITE AGREEMENT DATED 18.5.2000 IN THE CAS E OF M/S.RADHE DEVELOPERS. OUT OF SUCH PROVISIONS, FOLLOWING CLAUS ES OF THE AGREEMENT ARE IMPORTANT: CLAUSE-4. WITH THE CONSENT OF THE PARTY OF THE FIRS T (I.E. LAND OWNER) AND SECOND PART (I.E. SOCIETY) THE PARTY OF THE THI RD PART (I.E. ASSESSEE) AS A DEVELOPER AND BUILDER WANTS TO DO A PROJECT /S CHEME OF CONSTRUCTING RESIDENTIAL HOUSES HAVING AREA LESS TH AN 1500 SQ.FT. FOR THE MIDDLE CLASS SOCIETY. CLAUSE-5. THE PARTY OF THE FIRST AND THE PARTY OF T HE THIRD PART HAVE EXECUTED ONE AGREEMENT OF SALE ON 18-05-2000 ACCORD INGLY ON THAT BASIS THE RIGHTS OF AGREEMENT OF SALE DATED 7-9-91 AT THE RATE OF RS.100/- PER SQ.FT. SUBJECT TO OTHER CONDITIONS WRITTEN THER EIN ARE DECIDED TO BE PURCHASED BY THE PARTY OF THE THIRD PART. CLAUSE-6. IN FACT IN THE PARTY OF THE FIRST AND SEC OND PART CONFIRMING PARTY HAVE NO NECESSARY TECHNICAL KNOWLEDGE AND SKI LL PASS THROUGH THE SAID SCHEME TO ARRANGE FOR CONSTRUCTING RESIDENTIAL HOUSES HAVING AREA LESS THAN 1500 SQ.FT. FOR THE MIDDLE CLASS SOCIETY AND ALSO HAVE NO FINANCE TO INVEST AS PER THE SIZE OF SCHEME AND TO REGISTER THE MEMBERS FOR THAT REQUIRED ALERTNESS AND SKILL BEING ABSENT THEY THEMSELVES ARE NOT IN A POSITION TO PLACE A PROJECT OR SCHEME ON T HE LAND MENTIONED IN ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 6 - SCHEDULE IN SUCH CIRCUMSTANCES TO THE PARTY OF THE THIRD PART OVER AND ABOVE THE RIGHT TO PURCHASE THE RIGHTS OF AGREEMENT OF SALE ON DT. 18-05-2000 THEY HAVE ALSO DECIDED TO GIVE ALL RIGHT S ALONG WITH CONSTRUCTING AND DEVELOPING ON THE SAID LAND MENTIO NED IN SCHEDULE BY THIS AGREEMENT DT. 18-05-2000. CLAUSE 11(3) : THE SAID DEVELOPER CUM BUILDING CON TRACTOR IS AUTHORIZED TO ADMIT THE PERSONS WHO ARE WILLING TO JOIN IN THE SCHEME TO GET THE HOUSES OF FIXED AREA AND IN THIS MANNER TO ADMIT THE RESPECTIVE MEMBER IN THE SCHEME OR AT THE TIME OF ADMISSION OF SUCH MEMBER AS PER THE SCHEME THE FIXED AMOUNT OF CONTRIBUTION OF CONSTRUCTION AND OTHER AMOUNTS AND INCIDENTAL EXPENSES THAT THE ADMITTING MEMBERS SHALL HAVE TO PAY AS ADMISSION FEES THE RECEIPT OF DEPOSIT OR A CLEAR RECEIPT OF AMOUNT CONTRIBUTION SHALL HAVE TO BE GIVEN, MOREOVER THE DEVELOPER CUM BUILDING CONTRACTOR HAS GIVEN FULL RIGHT AND AUTHORITY ALSO TO DECIDE THE PRICE OF HOUSES OF THI S SCHEME AND TO EXECUTE NECESSARY AGREEMENTS WITH THE PURCHASERS OF HOUSES. CLAUSE 11(11): THAT THE SAID DEVELOPER CUM BUILDING CONTRACTOR AS PER THIS SCHEME, WHATEVER CONSTRUCTION HE SHALL DO ON THE LAND DESCRIBED IN SCHEDULE SHALL BE AUTHORIZED TO ALLOT TO THE RESPECTIVE MEMBER AND ALSO OUT OF THIS LAND DEDUCTING THE CONSTRUCTED LAN D AND DEDUCTING THE LAND OF MARGIN AND PASSAGE WHATEVER EXCESS LAND THAT SHALL REMAIN THEN DEVELOPER CUM BUILDING CONTRACTOR SHALL HAVE RIGHT TO ALLOT THAT LAND. CLAUSE 11(13): AS PER THIS SCHEME DEVELOPER CUM BUI LDING CONTRACTOR HAS GIVEN INCIDENTAL LUMP SUM ESTIMATE OF PRICE FOR THE RESIDENTIAL HOUSES TO BE CONSTRUCT ED BUT AS PER THE STEP-STAGE WISE DEVELOPMENT OF THE SCHEME AND AS PER THE CHANGES DEVELOPER CUM ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 7 - BUILDING CONTRACTOR IS AUTHORIZED TO REVISE THE ESTIMATE AND THAT SHALL ALWAYS BE AGREEABLE AND BINDING TO THE MEMBERS. CLAUSE 11(16): THE PARTY OF THE FIRST AND SECOND P ART HAVE HANDED OVER ALL THE RESPONSIBILITIES OF THE SCHEME TO THE DEVELOPER CUM BUILDING CONTRACTOR SO AT PRESENT TO THE PARTY OF THE FIRST PART AS PER RULES AND REGULATIONS HE IS GETTING F.S.I, BUT IN FUTURE IF CHANGES TAKE PLACE IN RULES AND REGULATION OF F.S.I IN SUCH CIRCUMSTANCES OTHER THAN THE PRESENT SCHEME ON THE LAND IF SPECIAL CONSTRUCTION IS ALLOWED THEN FOR SUCH ADDITIONAL WORK OTHER THAN TOTAL CONSTRUCTION MADE, AS PER RULES AND REGULATIONS BY GETTING PASSED THE PLANS FROM VMC. VADODARA TO DO THE CONSTRUCTION ALL THE RIGHTS AND AUTHORITIES SHALL BE WITH DEVELOPER CUM BUILDING CONTRACTOR AND THEREAFTER ALSO WHATEVER F.S.I. RIGHTS SHALL REMAIN THAT ALSO AS PER THIS AGREEMENT SHALL BE WITH THE PARTY OF THE THIRD PART. (E) AT PARA 27 HON'BLE HIGH COURT CONSIDERED VARIOU S PROVISIONS OF DEVELOPMENT AGREEMENT IN THE CASE OF M/S.SHAKTI COR PORATION. OUT OF SUCH PROVISIONS, FOLLOWING CLAUSES OF THE AGREEMENT ARE IMPORTANT: 'CLAUSE -1: THAT THE PARTY OF THE SECOND PART ( ASS ESSEE) SHALL UPON OBTAINING ALL NECESSARY PERMISSIONS OVER THE SAID LAND SUCH A S NA, NOC, DEVELOPMENT PERMISSION, RAJACHITHTHI, PERMISSION FOR PASSING PL ANS, TITLE CLEARANCE, ETC. FOR MAKING THE CONSTRUCTION AND ERECT AN APARTMENT IN THE SAME, CAN ORGANIZE SHOPS, OFFICES, FLATS AND TENEMENT SOCIETY AND CAN ENGAGE ARCHITECT IF REQUIRED, CAN PREPARE PLANS AND OBTAIN THE OCCUPATION CERTIFI CATE, COMPLETION CERTIFICATE, CAN GET THE REVISED MAPS PREPARED AND FOR WHICH THE COMPLETE POWERS ARE GIVEN TO THE PARTY OF THE SECOND PART. CLAUSE-4: THE PARTY OF THE SECOND PART DEVELOPERS C AN REGISTER THE MEMBERS FOR THE NEW CONSTRUCTION THAT MAY BE MADE OVER THE SAID LAND/PROPERTY, CAN ISSUE RECEIPT TO THE MEMBERS, CAN ISSUE ALLOTMENT L ETTER TO THE MEMBERS, CAN EXECUTE THE AGREEMENT TO SALE, CAN HAND OVER THE PO SSESSION, CAN EXECUTE ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 8 - TRIPARTITE AGREEMENT, BUT THE ENTIRE RESPONSIBILITY FOR THE SAME SHALL BE THAT OF THE PARTY OF THE SECOND PART. CLUASE-7: THAT FOR THE HOUSES, SHOPS FLATS, ETC. TH AT ARE TO BE CONSTRUCTED OVER THE SAID LAND FOR WHICH THE PARTY OF THE SECOND PAR T IS TO REGISTER THEM AS MEMBERS AND CAN UPON EXECUTING AGREEMENT TO SALE ET C. ACCEPT THE MONEY AND ISSUE RECEIPTS TO THE MEMBERS. SAME WAY, YOU CA N REMOVE ALL OBSTRUCTIONS THAT MAY COME DURING THE PERIOD OF MAKING THE DEVEL OP IT. CLAUSE-10: FROM THE DATE OF THIS AGREEMENT, YOU, TH E PARTY OF THE SECOND PART IS BOUND TO PAY TAX, LAND REVENUE, SPECIAL CES S ETC. IN THE OFFICES OF THE VADODARA MUNICIPAL CORPORATION, GOVERNMENT, SEMI GO VERNMENT AND WHATEVER TAX, LAND REVENUE, EDUCATION CESS, SPECIAL CESS, ETC. ARE OUTSTANDING PRIOR TO BE THE DATE OF THIS AGREEMENT, THE SAME AR E AND SHALL BE PAID BY US, THE PARTY OF THE FIRST PART AS A LAND OWNER. (F) AFTER CONSIDERING THE PROVISIONS OF SECTION 80I B(1) AND 80IB(10) IN RESPECT OF QUESTION OF OWNERSHIP OF LAND BEING AN ESSENTIAL CONDITION FOR DEDUCTION U/S.80IB(10) OF THE ACT, HON'BLE GUJARAT HIGH COURT AT PARA 30 HELD THAT - '30. THE ESSENCE OF SUB-SECTION (10) OF SECTION 80I B, THEREFORE, REQUIRES INVOLVEMENT OF AN UNDERTAKING IN DEVELOPING AND BUI LDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY. APPARENTLY, SUCH P ROVISION WOULD BE AIMED AT GIVING ENCOURAGEMENT TO PROVIDING HOUSING UNITS IN THE URBAN AND SEMIURBAN AREAS, WHERE THERE IS PERENNIAL AND ACUTE SHORTAGE OF HOUSING, PARTICULARLY, FOR THE MIDDLE INCOME GROUP CITIZENS. TO ENSURE THAT THE BENEFIT REACHES THE PEOPLE, CERTAIN CONDITIONS WERE PROVIDE D IN SUB-SECTION(L0) SUCH AS SPECIFYING DATE BY WHICH THE UNDERTAKING MUST CO MMENCE THE DEVELOPING AND CONSTRUCTION WORK AS ALSO PROVIDING FOR THE MIN IMUM AREA OF PLOT OF LAND ON WHICH SUCH PROJECT WOULD BE PUT UP AS WELL AS MA XIMUM BUILT UP AREA OF EACH OF THE RESIDENTIAL UNITS TO BE LOCATED THEREON . THE PROVISIONS NOWHERE REQUIRED THAT ONLY THOSE DEVELOPERS WHO THEMSELVES OWN THE LAND WOULD RECEIVE THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT.' (G) FURTHER CONSIDERING VARIOUS CLAUSES, TERMS AND CONDITIONS OF DEVELOPMENT AGREEMENT IN BOTH THE LEADING CASES VIZ. M/S.RADHE DEVELOPERS AND M/S.SHAKTI CORPORATION, HON'BLE GUJARAT HIGH COURT AT PARA 34 HELD THAT- ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 9 - '34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPME NT AGREEMENTS IN BOTH THE SETS OF CASES. IT CAN BE SEEN FROM THE TERMS AND CONDITI ONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUTION OF THE DEVELOPMENT P ROJECTS. 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 AR CHITECTURAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CHARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT C AN THUS BE SEEN THAT THE ASSESSEE HAD DEVELOPED THE HOUSING PROJECT. THE FACT THAT THE AS SESSEE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUENCE.' (H) AT PARA 36, THE HON'BLE HIGH COURT EXAMINED THE EFFECT OF EXPLANATION OF SECTION 80IB(10) INTRODUCED WITH RETROSPECTIVE EFFE CT FROM 1.4.2001 AND HELD THAT- '36. WE HAVE NOTED AT SOME LENGTH, THE RELEVANT TER MS AND CONDITIONS OF THE DEVELOPMENT AGREEMENTS BETWEEN THE ASSESSEES AND TH E LAND OWNERS IN CASE OF RADHE DEVELOPERS. WE ALSO NOTED THE TERMS OF THE AGREEMEN T OF SALE ENTERED INTO BETWEEN THE PARTIES. SUCH CONDITIONS WOULD IMMEDIATELY REVE AL THAT THE OWNER OF THE LAND HAD RECEIVED PART OF SALE CONSIDERATION. IN LIEU THEREO F HE HAD GRANTED DEVELOPMENT PERMISSION TO THE ASSESSEE. HE HAD ALSO PARTED WITH THE POSSESSION OF THE LAND. THE DEVELOPMENT OF THE LAND WAS TO BE DONE ENTIRELY BY THE ASSESSEE BY CONSTRUCTING RESIDENTIAL UNITS THEREON AS PER THE PLANS APPROVED BY THE LOCAL AUTHORITY. IT WAS SPECIFIED THAT THE ASSESSEE WOULD BRING IN TECHNICA L KNOWLEDGE AND SKILL REQUIRED FOR EXECUTION OF SUCH PROJECT. THE ASSESSEE HAD TO PAY THE FEES TO THE ARCHITECTS AND ENGINEERS. ADDITIONALLY, ASSESSEE WAS ALSO AUTHORIZ ED TO APPOINT ANY OTHER ARCHITECT OR ENGINEER, LEGAL ADVISER AND OTHER PROFESSIONALS. HE WOULD APPOINT SUB-CONTRACTOR OR LABOUR CONTRACTOR FOR EXECUTION OF THE WORK. THE ASSESSEE WAS AUTHORIZED TO ADMIT THE PERSONS WILLING TO JOIN THE SCHEME. THE ASSESSE E WAS AUTHORISED TO RECEIVE THE CONTRIBUTIONS AND OTHER DEPOSITS AND ALSO RAISE DEM ANDS FROM THE MEMBERS FOR DUES AND EXECUTE SUCH DEMANDS THROUGH LEGAL PROCEDURE. I N CASE, FOR SOME REASON, THE MEMBER ALREADY ADMITTED IS DELETED, THE ASSESSEE WO ULD HAVE THE FULL RIGHT TO INCLUDE NEW MEMBER IN PLACE OF OUTGOING MEMBER. HE HAD TO M AKE NECESSARY FINANCIAL ARRANGEMENTS FOR WHICH PURPOSE HE COULD RAISE FUNDS FROM THE FINANCIAL INSTITUTIONS, BANKS ETC. THE LAND OWNERS AGREED TO GIVE NECESSARY SIGNATURES, AGREEMENTS, AND EVEN POWER OF ATTORNEY TO FACILITATE THE WORK OF THE DEVELOPER. IN SHORT, THE ASSESSEE HAD UNDERTAKEN THE ENTIRE TASK OF DEVELO PMENT, CONSTRUCTION AND SALE OF THE HOUSING UNITS TO BE LOCATED ON THE LAND BELONGING T O THE ORIGINAL LAND OWNERS. IT WAS ALSO AGREED BETWEEN THE PARTIES THAT THE ASSESSEE W OULD BE ENTITLED TO USE THE FULL FSI AS PER THE EXISTING RULES AND REGULATIONS. HOWEVER, IN FUTURE, RULES BE AMENDED AND ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 10 - ADDITIONAL FSI BE AVAILABLE, THE ASSESSEE WOULD HAV E THE FULL RIGHT TO USE THE SAME ALSO. THE SALE PROCEEDS OF THE UNITS ALLOTTED BY TH E ASSESSEE IN FAVOUR OF THE MEMBERS ENROLLED WOULD BE APPROPRIATED TOWARDS THE LAND PRI CE. EVENTUALLY AFTER PAYING OFF THE LAND OWNER AND THE ERSTWHILE PROPOSED PURCHASER S, THE SURPLUS AMOUNT WOULD REMAIN WITH THE ASSESSEE. SUCH TERMS AND CONDITIONS UNDER WHICH THE ASSESSEE UNDERTOOK THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FROM THE ORIGINAL OWNER, LEAVES LITTLE DOUBT IN OUR MIND THA T THE ASSESSEE HAD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. THE ASS ESSEE COULD PUT THE LAND TO USE AS AGREED BETWEEN THE PARTIES. THE ASSESSEE HAD FULL A UTHORITY AND ALSO RESPONSIBILITY TO DEVELOP THE HOUSING PROJECT BY NOT ONLY PUTTING UP THE CONSTRUCTION BUT BY CARRYING OUT VARIOUS OTHER ACTIVITIES INC LUDING ENROLLING MEMBERS, ACCEPTING MEMBERS, CARRYING OUT MODIFICATIONS ENGAGING PROFESSIONAL AGENCIES AND SO ON. MOST SIGNIFICANTLY, THE RISK ELEMENT WAS ENTIRELY T HAT OF THE ASSESSEE. THE LAND OWNER AGREED TO ACCEPT ONLY A FIXED PRICE FOR THE LAND IN QUESTION. THE ASSESSEE AGREED TO PAY OFF THE LAND OWNER FIRST BEFORE APPROPRIATING A NY PART OF THE SALE CONSIDERATION OF THE HOUSING UNITS FOR HIS BENEFIT. IN SHORT, ASSESS EE TOOK THE FULL RISK OF EXECUTING THE HOUSING PROJECT AND THEREBY MAKING PROFIT OR LOSS A S THE CASE MAY BE. THE ASSESSEE INVESTED ITS OWN FUNDS IN THE COST OF CONSTRUCTION AND ENGAGEMENT OF SEVERAL AGENCIES. LAND OWNER WOULD RECEIVE A FIX PREDETERMINED AMOUNT TOWARDS THE PRICE OF LAND AND WAS THUS INSULATED AGAINST ANY RISK.' (I) AFTER CONSIDERING THE HON'BLE BOMBAY HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. GLENMARK PHARMACEUTICAL LTD. (2010) 324 ITR 199 UNDER THE HEAD 'CONTRACT OF WORK OR A CONTRACT OF SALE' AND HON'BL E SUPREME COURT JUDGEMENT IN THE CASE OF STATE OF ANDHRA PRADESH VS . M/S. KONE ELEVATORS (L)LTD. AIR 2005 SC 1581, THE HON'BLE GUJARAT HIGH COURT AT PARA 38 HELD THAT- '38. IN THE PRESENT CASE, AS ALREADY HELD THE ASSES SEE HAD UNDERTAKEN THE DEVELOPMENT OF HOUSING PROJECT AT ITS OWN RISK AND COST. THE LAND OWNER HAD ACCEPTED ONLY THE FULL PRICE OF THE LAND AND NOTHING FURTHER . THE ENTIRE RISK OF INVESTMENT AND EXPENDITURE WAS THAT OF THE ASSESSEE. RESULTANTLY, PROFIT AND LOSS ALSO WOULD ACCRUE TO THE ASSESSEE ALONE. IN THAT VIEW OF THE MATTER, THE ADDITION OF THE EXPLANATION TO SECTION 80IB WITH RETROSPECTIVE EFFECT OF 1.4.2001 WOULD HAVE NO MATERIAL BEARING IN THE CASES ON HAND. WE MAY RECALL THAT THE SAID EXPL ANATION INTRODUCED BY FINANCE (NO.2)ACT, 2009 PROVIDED AS UNDER:- [EXPLANATION- FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 11 - AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDIN G THE CENTRAL OR STATE GOVERNMENT)].' (J) FINALLY AFTER CONSIDERING THE RATIO OF VARIOUS CASE LAWS RELIED ON BY REVENUE, AT PARA 45 AND 46 HON'BLE GUJARAT HIGH COU RT CONCLUDED THAT- '45. UNDER THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR IN HOLDING THAT THE ASSESSEES WERE ENTITLED T O THE BENEFIT UNDER SECTION 80IB(10) OF THE ACT EVEN WHERE THE TITLE OF THE LANDS HAD NO T PASSED ON TO THE ASSESSEES AND IN SOME CASES, THE DEVELOPMENT PERMISSIONS MAY ALSO HA VE BEEN OBTAINED IN THE NAME OF THE ORIGINAL LAND OWNERS. 46. WE FIND THAT IT IS NOT EVEN THE CASE OF THE REV ENUE THAT OTHER CONDITIONS OF SECTION 80IB OF THE ACT WERE NOT FULFILLED. WE, THEREFORE, ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND DISPOSE OF ALL APPEALS ACCORDINGLY.' 15. THE FACTS OF THE APPELLANT ARE IDENTICAL WITH T HE CASES DEALT BY HON'BLE GUJARAT HIGH COURT. EVEN THE CONTENTION RAISED BY T HE AO ALONG WITH RELIANCE OF VARIOUS JUDICIAL AUTHORITIES ARE IDENTICAL. THER EFORE FOLLOWING THE RATIO OF HON'BLE GUJARAT HIGH COURT IN THIS CASE, THE DISALL OWANCE AND THEREBY ADDITIONS MADE BY THE AO IN THE CASE OF THE APPELLA NT ARE NOT JUSTIFIED AND DIRECTED TO BE DELETED. APPELLANT GETS RELIEF OF RS . 88,72,527. 5. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND THE LD.CIT(A) AND SUBMITTED THAT THE LD.CIT(A) AFTER CO NSIDERING THE DECISION RENDERED BY THE HONBLE GUJART HIGH COURT IN THE CA SE OF CIT VS. RADHE DEVELOPERS (TAX APPEAL NO.546 OF 2008) AND SHAKTI C ORPORATION AND OTHERS VS. CIT, HAS ALLOWED THE CLAIM OF ASSESSEE. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 12 - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DE DUCTION U/S.80IB(10) OF THE ACT. AO DENIED THE CLAIM OF DEDUCTION U/S.80IB (10) OF THE ACT FOR THE REASON THAT ASSESSEE WAS NOT THE OWNER OF THE L AND, THE PERMISSION WAS NOT RECEIVED BY THE ASSESSEE AND ACCORDING TO A O ASSESSEE WAS MERE A CONTRACTOR WHO HAD ENTERED INTO A DEVELOPMENT A GREEMENT WITH THE LAND OWNERS FOR THE CONSTRUCTION OF THE HOUSING PRO JECT. WE FIND THAT THE LD.CIT(A) AFTER CONSIDERING THE DEVELOPMENT AGREEME NT AND THE DECISIONS RENDERED IN THE CASE OF RADHE DEVELOPERS (SUPRA) HA S GIVEN A FINDING THAT THE FACTS IN THE PRESENT CASE OF THE ASSESSEE ARE I DENTICAL TO THE CASE DEALT WITH BY THE HONBLE GUJARAT HIGH COURT AND HE THERE FORE RELYING ON THE DECISION CITED IN HIS ORDER HAS ALLOWED THE CLAIM O F ASSESSEE. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISIO N IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE SEE NO REASON TO IN TERFERE WITH THE ORDER OF THE LD.CIT(A) AND THUS THE GROUND OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 29 /0 6 /2016 SD/- SD/- ( KUL BHARAT ) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 29/ 06 /2016 &.., .(../ T.C. NAIR, SR. PS ITA NO.1178/;AH D/2012 ITO VS. M/S.RACHNA CORPORATION ASST.YEAR 2008-09 - 13 - !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-XV, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 28.6.16 (DICTATION-PAD 9+ PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.6.16/29.6.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.29.6.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.6.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER