ACIT, CHENNAI V. M/s. Navin Housing & Properties (P) Ltd., CHENNAI

ITA 1189/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64211 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SHUKLA
• Assessee Lawyers: T VASU
• Section: 153A; 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1187 TO 1189/MDS/2012 (ASSESSMENT YEARS: 2006-07, 2007-08 & 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(5), CHENNAI-600 034. VS. M/S. NAVIN HOUSING & PROPERTIES P. LTD., NAVINS BRINDHAVAN, NO.88, BRINDAVAN STREET, WEST MAMBALAM, CHENNAI-600 033. PAN: AAACN9269M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. ANUPAMA SHUKLA, CIT DR RESPONDENT BY : SHRI T. VASU, ADVOCATE DATE OF HEARING : 28 TH AUGUST, 2012 DATE OF PRONOUNCEMENT : 28 TH AUGUST, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT THREE APPEALS RELEVANT TO THE ASSESSMEN T YEARS 2006-07, 2007-08 AND 2008-09 HAVE BEEN FILED BY THE DEPARTMENT AGAINST THE COMMON ORDER OF THE CIT(A)-I , CHENNAI DATED 29.03.2012 FOR ALL THE AFOREMENTIONED ASSESSMENT YEARS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY REGISTERED UNDER COMPANIES ACT AND IS ENGAG ED IN THE BUSINESS OF DEVELOPING AND BUILDING OF HOUSING PROJECTS. ITA NO. 1187 TO 1189/MDS/2012 2 A SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT, 1 961 WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 11.9.2 008. NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 27.04.2010. IN RESPONSE THERETO THE ASS ESSEE FILED A COPY OF THE RETURN OF INCOME ALREADY FILED ON 25.11.2006 ADMITTING TOTAL INCOME OF ` 1,99,23,640/- FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 31.12.2010 RELEVANT TO THE ASSESSMENT YEAR 2006-07 DISALLOWED THE DEDUCTION CL AIMED BY THE ASSESSEE UNDER SECTION 80IB ON FOLLOWING COU NTS:- 1) THE ASSESSEE IS NOT A DEVELOPER BUT A WORK CONTRACTOR. THE DEDUCTION IS AVAILABLE TO THE DEVEL OPER AND NOT TO THE CONTRACTOR EXECUTING THE WORKS CONTR ACT. 2) THE ASSESSEE IS EXECUTING PROMOTERS AGREEMENT WITH THE PURCHASERS OF FLATS FOR THE SALE OF FLATS AND SEPARATE SALE DEED IS EXECUTED FOR SALE OF UNDIVIDE D SHARE OF LAND . IN THE PROCESS THE ASSESSEES SHARE IN THE LAND GETS REDUCED. AT CERTAIN POINT OF TIME TH E ASSESSEES SHARE OF LAND BECOMES LESS THAN ONE ACR E. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO THE DEDU CTION ITA NO. 1187 TO 1189/MDS/2012 3 AS THE CRITERIA OF MINIMUM AREA OF ONE ACRE IS NOT COMPLIED. 3. THE ASSESSEE HAS BUILT CERTAIN FLATS (FOUR) IN EXCESS OF 1500 SQ.FT., THEREFORE THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 80IB OF THE ACT. 3. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A) IMPUGNING THE ORDER OF THE ASSESSING OFFICER. SIMILARLY FOR THE SUBSEQUENT ASSESSMENT YEARS I.E 2007-08 AND 2008-09, THE ASSES SING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80IB VIDE SEPARATE ASSESSMENT ORDERS OF THE EVEN DA TE. THE CIT(A) VIDE COMMON ORDER DATED 29.03.2012 PARTLY A LLOWED THE APPEALS OF THE ASSESSEE HOLDING THAT THE ASSESS EE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB AS THE AS SESSEE IS A BUILDER AND DEVELOPER OF THE PROJECT AND NOT A CONT RACTOR. THE CIT(A) FURTHER HELD THAT THE ASSESSEE IS ELIGI BLE FOR DEDUCTION UNDER SECTION 80IB ON THE FLATS EXCLUDIN G THE FLATS WHICH HAVE BUILT UP AREA IN EXCESS OF 1500 SQ.FT. THE CIT(A) FURTHER REJECTED THE UNFOUNDED OBJECTIONS OF THE AS SESSING ITA NO. 1187 TO 1189/MDS/2012 4 OFFICER THAT THE TOTAL AREA OF THE LAND IS REDUCED BY MINIMUM CRITERIA LAID DOWN UNDER SECTION 80IB I.E. ONE ACRE . 4. THE REVENUE AGGRIEVED AGAINST THE ORDER OF THE C IT(A) DATED 29.03.2012 HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS:- I) THE CIT(A) HAS ERRED IN ALLOWING DEDUCTION UNDER SECTION 80IB AFTER EXCLUDING THE INCOME COMPONENT RELATING TO THE FLAT HAVING BUILT UP AREA IN EXCESS OF 1500 SQ.FT. II) THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSIO N THAT ASSESSEE IS NOT A CONTRACTOR BUT A DEVELOPER AND THUS IS ENTITLED TO DEDUCTION UNDER SECTION 80IB. III) THE LAND IS NOT OWNED BY THE ASSESSEE/DEVELO PER. SINCE THE DEVELOPER DOES NOT POSSESS THE LAND, IT CANNOT SELL THE DWELLING UNIT TO THE END USER. DEVELOPMENT OF LAND AND CONSTRUCTION OF BUILDING WITHOUT POSSESSION OF LAND HAS TO BE CONSIDERED AS WORKS CONTRACT. ITA NO. 1187 TO 1189/MDS/2012 5 5. SMT. ANUPAMA SHUKLA, APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB(10) AS THE ASSESSEE IS NOT A TITLEHOLDER OF THE LAND ON WHICH THE ASSESSEE IS AL LEGED TO HAVE DEVELOPED THE HOUSING PROJECT. THE DR FURTHER CONTENDED THAT A PERUSAL OF THE AGREEMENT ENTERED W ITH THE PURCHASERS OF THE FLAT CLEARLY SHOWS THAT THERE ARE TWO COMPONENTS IN THE AGREEMENT RELATING TO (I) SALE O F UNDIVIDED SHARE OF LAND TO THE BUYERS; AND (II) EXECUTION OF CONSTRUCTION OF CONTRACT OF THE FLAT BY THE CONTRACTOR/ PROMOTER . THIS SHOWS THAT THE ASSESSEE WAS NOT IN A POSSESSION OF THE LA ND AND WAS CONSTRUCTING FLATS FOR THE PROSPECTIVE PURCHASE RS ON WORK CONTRACT BASIS. THE DR FURTHER SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB(10) O N THE GROUND THAT SOME OF THE FLATS (4) HAVE BUILT UP AR EA IN EXCESS OF 1500 SQ.FT. WHICH IS IN CONTRAVENTION TO THE PRO VISIONS OF SECTION 80IB. THE CIT(A) HAS ALLOWED THE DEDUCTION TO THE ASSESSEE WITHOUT TAKING INTO CONSIDERATION THE JUDG EMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F VISWAS PROMOTERS (P) LTD., VS. ITAT., REPORTED AS 323 ITR 114(MAD). ITA NO. 1187 TO 1189/MDS/2012 6 6. ON THE OTHER HAND, SHRI T.VASU, ADVOCATE APPEARI NG ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HA S PASSED A WELL REASONED AND DETAILED ORDER AND NO INTERFERE NCE IN THE ORDER PASSED BY THE CIT(A) IS CALLED FOR. HE SUBMIT TED THAT THE FACTS AS DETAILED IN PARA 14 OF THE CIT(A)S ORDER HAS NOT BEEN DISPUTED BY THE DEPARTMENT. IN VIEW OF THE FACTUAL POSITION ADMITTED BY THE REVENUE, THE CONTENTIONS OF THE DEP ARTMENT DO NOT HOLD GOOD WITH REGARD TO TREATING THE ASSESS EE AS WORKS CONTRACTOR. THEREFORE, THE APPEAL OF THE RE VENUE IS LIABLE TO BE DISMISSED. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS PASSED BY THE A UTHORITIES BELOW. THE CIT(A) HAS CULLED OUT THE FACTS OF THE C ASE IN PARA 14 OF HIS ORDER FROM THE DOCUMENTS ON RECORD AND T HE SUBMISSIONS MADE BY THE PARTIES, WHICH ARE REPRODUC ED AS UNDER:- 1. THE APPELLANT BUYS THE WHOLE OF THE LAND WITH IT S OWN MONEY. 2. THE APPELLANT HAS CONCEIVED IT AS A PROJECT, AT THE COMMENCEMENT OF WHICH THERE WAS NO CUSTOMER. 3. THE PURCHASER OF THE FLAT HAS NO TITLE OVER THE FLAT TILL IT IS DELIVERED. ITA NO. 1187 TO 1189/MDS/2012 7 4. THE PURCHASER HAS NO SAY IN DESIGN, EXECUTION OR MONITORING OF THE PROJECT. 5. THE EXECUTION OF THE PROJECT IS NOT DEPENDENT ON THE PURCHASER. 6. ALL ACTS FOR THE PROJECT HAVE BEEN TAKEN BY THE APPELLANT FROM OBTAINING OF PLANNING APPROVAL TILL COMPLETION OF THE PROJECT. 7. THE ENTIRE DEVELOPMENT RISK IS BORNE BY THE APPE LLANT. THESE FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE. THE D.R. HAS MADE A SUBMISSION THAT THE ASSESSEE IS A W ORKS CONTRACTOR AND IS NOT A DEVELOPER AS ENVISAGED IN T HE PROVISIONS OF SECTION 80IB TO BE ELIGIBLE FOR BENEF IT OF DEDUCTION UNDER THE SAID SECTION. THE LEARNED DR H AS FURTHER CONTENDED THAT TO BE ELIGIBLE FOR DEDUCTION THE ASS ESSEE SHOULD HAVE BEEN OWNER OF THE LAND DEVELOPED BY HIM . WE DO NOT AGREE WITH THE SUBMISSIONS MADE BY THE D.R. THE ONLY REQUIREMENT AS PER THE PROVISIONS OF SECTION 80IB(1 0) OF THE ACT IS THAT THE ASSESSEE UNDERTAKING SHOULD IN THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B Y THE LOCAL AUTHORITY. NOWHERE IT IS MENTIONED THAT THE LAND ON WHICH THE HOUSING PROJECT IS BEING DEVELOPED OR BUI LT HAS TO BE OWNED BY THE UNDERTAKING DEVELOPING OR BUILDING HOUSING PROJECT. ADMITTEDLY, THE ASSESSEE HAS PURCHASED THE WHOLE ITA NO. 1187 TO 1189/MDS/2012 8 LAND WITH ITS OWN MONEY. THE PROJECT HAS BEEN CONCE IVED BY THE ASSESSEE. THE PURCHASER HAS NO TITLE OVER THE F LATS TILL THE POSSESSION OF THE FLAT IS DELIVERED TO HIM. MORE S O, THE PURCHASER OF THE FLAT HAS NO SAY IN THE DESIGN, EXE CUTION OR FOR DEVELOPMENT OF THE PROJECT. THE ENTIRE RISK FOR DEV ELOPING THE PROJECT IS BEING BORNE BY THE ASSESSEE. IT IS THE ASSESSEE WHO HAD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION AND THE HOUSING PROJECT BEING DEVELOPED THEREON. TH EREFORE, THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS ONLY A WORKS CONTRACTOR AND NOT A DEVELOPER OF THE PROJECT IS UNFOUNDED. THE TITLE OF OWNERSHIP OF THE LAND DOES NOT DETERMINE WHETHER THE ASSESSEE IS A CONTRACTOR OR D EVELOPER. OUR VIEW IS FURTHER FORTIFIED BY THE DIVISION BENCH JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. RADHE DEVELOPERS REPORTED AS 341 ITR 403, WHEREIN THE HONBLE HIGH COURT HAS HELD THAT: THE PROVISIONS NOWHERE REQUIRE THAT ONLY THOSE DEVELOPERS WHO THEMSELVES OWN THE LAND WOULD RECEIVE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. NEITHER THE PROVISIONS OF SECTION OF 80IB NOR ANY OTHER PROVISIONS CONTAINED IN OTHER RELATED STATUTES DEMO NSTRATE ITA NO. 1187 TO 1189/MDS/2012 9 THAT OWNERSHIP OF THE LAND WOULD BE A CONDITION PR ECEDENT FOR DEVELOPING A HOUSING PROJECT. SUCH REQUIREMENT CAN NOT BE READ INTO THE STATUTE BECAUSE THERE IS NOTHING IN S ECTION 80IB(10) OF THE ACT REQUIRING THAT OWNERSHIP OF THE LAND MUST VEST IN THE DEVELOPER FOR HIM TO BE ABLE TO QUALIFY FOR SUCH DEDUCTION. MOREOVER THE TERM DEVELOPER HAS BEEN UNDERSTOOD IN COMMON PARLANCE AS WELL AS IN THE LEG AL SENSE AS CARRYING A MUCH WIDER CONNOTATION. 8. IN VIEW OF THE ABOVE FINDINGS AND THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT, WE HOLD THAT THE ASSESS EE IS A DEVELOPER OF THE HOUSING PROJECT IN QUESTION AND NO T A CONTRACTOR, THEREFORE, THE ASSESSEE IS ENTITLED FOR CLAIM OF BENEFIT UNDER THE PROVISIONS OF SECTION 80IB OF THE ACT. 9. THE SECOND CONTENTION OF THE REVENUE IS WITH REG ARD TO CONSTRUCTION OF SOME FLATS WHICH HAVE BUILT UP ARE A IN EXCESS OF 1500 SQ.FT, RENDERING THE PROJECT INELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 80IB OF THE ACT. IT IS NOW A WELL SETTLED PROPOSITION THAT WHERE SOME OF THE FLATS EX CEED THE LIMIT OF 1500 SQ.FT. IN HOUSING PROJECT DEVELOPED BY AN UNDERTAKING AND SUBSTANTIAL NUMBER OF FLATS ARE WIT HIN ITA NO. 1187 TO 1189/MDS/2012 10 MAXIMUM LIMIT AS PRESCRIBED UNDER THE ACT, EXEMPTIO N CAN BE GRANTED ON PRO-RATA BASIS. IN THE INSTANT CASE, ONL Y FOUR FLATS WERE HELD TO BE IN EXCESS OF THE MAXIMUM BUILT UP A REA OF 1500 SQ.FT. THE ASSESSEE IS NOT ELIGIBLE TO CLAIM D EDUCTION UNDER SECTION 80IB OF THE ACT ON THE SAID FOUR FLAT S. HOWEVER, THE ASSESSEE CAN CLAIM DEDUCTION ON THE REMAINING F LATS BEING DEVELOPED AND BUILT BY IT ON PRO-RATA BASIS. OUR VIEW IS FORTIFIED BY THE VIEW TAKEN BY THE CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. SHETH DEVELOPERS P.LTD., REPORTED AS 33 SOT 277(MUMBAI) AND SJR BUILDERS VS. ACIT., REPORTED AS 3 ITR (TRIB) 569 (BANG). THE LEARNED DR ON THIS ISSUE H AS RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF VISWAS PROMOTERS (P) LTD., (SUPRA). WE ARE OF THE OPINION THAT THE AFOREMENTIONED JUDGEMENT OF THE JURISDICTIONAL HIGH COURT RELATES TO THE PRINCIPLE OF JUDICIAL PRECEDENTS. THE HONBLE HIGH COURT HAS NOT ADJUDIC ATED ANY CONTROVERSY RELATING TO ELIGIBILITY OF CLAIMING DED UCTION UNDER SECTION 80IB(10) OF THE ACT OR IN PARTICULAR ON THE INSTANT ISSUE IN HAND. WE, THEREFORE, DO NOT FIND ANY INFIRMITY I N THE ITA NO. 1187 TO 1189/MDS/2012 11 IMPUGNED ORDER DATED 29.3.2012 PASSED BY THE CIT(A ) AND UPHOLD THE SAME. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE R EVENUE ARE DISMISSED BEING DEVOID OF MERITS ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 28 TH DAY OF AUGUST, 2012 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 28 TH AUGUST, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.