M/s Sobha Developers Limited , Bangalore V. The Deputy Commissioner of Income Tax Central Circle-2(4), Bangalore

ITA 1206/BANG/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1776 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Assessee Lawyers: MUZAFFAR HUSSAIN
• Keywords: Business income; Retrospective amendment; Question of law; Rule 8D; Set aside
• Section: 143(3); 153A; 14A; 115JB; 80IB; 80G; 143(2); 13; 22; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B, BANGALORE BEFORE SHRI CHANDRA POOJARI, AM &SHRI GEORGE GEORGE K, JM ITA NO.1436/BANG/2018 : ASST.YEAR2007-2008 ITA NO.1437/BANG/2018 : ASST.YEAR 2008-2009 ITA NO.2172/BANG/2018 : ASST.YEAR 2009-2010 ITA NO.2173/BANG/2018 : ASST.YEAR 2010-2011 THE ASST.COMMISSIONER OF INCOME- TAX, CIRCLE 1(4) BENGALURU. V. M/S.SOBHA DEVELOPERS LIMITED MARATHALLI, OUTER RING ROAD DEVARABEESANAHALLI, BELLANDUR BANGALORE 560 103. PAN : AABCS7723E. (APPELLANT) (RESPONDENT) ITA NO.1204/BANG/2018 : ASST.YEAR 2009-2010 ITA NO.1205/BANG/2018 : ASST.YEAR 2009-2010 ITA NO.1206/BANG/2018 : ASST.YEAR 2010-2011 ITA NO.1207/BANG/2018 : ASST.YEAR 2010-2011 M/S.SOBHA DEVELOPERS LIMITED MARATHALLI, OUTER RING ROAD DEVARABEESANAHALLI, BELLANDUR BANGALORE 560 103. V. THE ASST.COMMISSIONER OF INCOME-TAX, CIRCLE 1(4) DY.COMMISSIONER OF INCOME- TAX, LTU, BENGALURU. (APPELLANT) (RESPONDENT) APPELLANT BY :SRI.MUZAFFAR HUSSAIN, CIT-DR RESPONDENT BY :SRI.V.SRINIVASAN, ADVOCATE DATE OF HEARING : 01.04.2021 DATE OF PRONOUNCEMENT : 18.06.2021 O R D E R PER GEORGE GEORGE K, JM : THESE APPEALS AT THE INSTANCE OF ASSESSEE AND REVENUE ARE DIRECTED AGAINST VARIOUS ORDERS OF THE CIT(A). THE RELEVANT ASSESSMENT YEARS ARE 2007-2008 TO 2010-2011. THERE ARE SOME COMMON ISSUES IN THESE APPEALS, HENCE, ALL APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 2 WE SHALL FIRST ADJUDICATE THE REVENUES APPEALS. ITA NOS.1436/BANG/2018, 1437/BANG/2018, 2172/BANG/ 2018 & 2173/BANG/2018 (ASST.YEARS 2007-2008 TO 2010- 2011) 2. THE SOLITARY ISSUE RAISED IN THE REVENUES APPEALS IS WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 80IB(10) OF THE I.T.ACT. IDENTICAL GROUNDS ARE RAISED IN ALL THE APPEALS EXCEPT FOR VARIANCE IN FIGURES. HENCE, THE GROUNDS PERTAINING TO ASSESSMENT YEAR 2007-2008 ARE REPRODUCED:- 1. THE LD.CIT(A) HAS ERRED IN FACTS AND IN LAW IN DELETING THE ADDITION OF RS.116,41,44,106/- BEING DISALLOWANCE MADE UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961 HOLDING THAT THE ASSESSEE IS A BUILDER AND NOT A DEVELOPER AND BUILDER AS PER THE PROVISIONS OF SECTION 80IB(10) OF THE INCOME TAX ACT, 1961. 2. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN INFERRING THAT THE ASSESSEE CANNOT BE CONSIDERED MERELY AS A BUILDER, BASED ON SUBMISSIONS MADE BY THE ASSESSEE REGARDING ITS SISTER CONCERN AND IGNORING THE FACT THAT THE ASSESSEE HAS NOT MADE ANY ATTEMPT TO BRING OUT ANY CLEAR EVIDENCE OF UNDERTAKING DEVELOPMENT WORK OF THE PROJECTS TO QUALIFY AS A DEVELOPER. 3. THE LD.CIT(A) HAS ERRED IN RELYING ON THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF RADHE DEVELOPERS (341 ITR 403), WHEREIN THE FACTS OF THE CASE ARE DISTINCT FROM THE PRESENT CASE. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE ORDERS OF LD.CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED. 2.1 THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSING OFFICER FOR ASSESSMENT YEARS 2007-2008 TO 2010-2011 HAD DENIED PART OF CLAIM OF DEDUCTION U/S 80IB OF ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 3 THE I.T.ACT, PRIMARILY FOR THE REASON THAT THE ASSESSEE IS ONLY A BUILDER / CONTRACTOR AND NOT A DEVELOPER OF HOUSING PROJECT. THE AFORESAID VIEW HAS BEEN TAKEN HAVING REGARD TO THE EXPLANATION INTRODUCED TO SECTION 80IB(10) OF THE I.T.ACT BY FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2009. FOR ARRIVING AT THE AFORESAID CONCLUSION THAT THE ASSESSEE IS ONLY A CONTRACTOR AND NOT DEVELOPER / BUILDER OF HOUSING PROJECT, THE A.O. HAS MENTIONED VARIOUS REASONS THAT THE LAND BEING OWNED BY THE SISTER-CONCERN OF THE ASSESSEE, PERMISSIONS FOR DEVELOPMENT IS STANDING IN THE NAME OF SISTER- CONCERN. IN THE VARIOUS DOCUMENTS FILED AND OFFERED AS SECURITIES, THE SISTER CONCERN OF THE ASSESSEE WAS SHOWN AS OWNER OF THE LAND. THE A.O. FINALLY SUMMED UP HIS FINDING IN ASSESSMENT ORDER DATED 31.03.2016 PASSED U/S 143(3) R.W.S. 254 OF THE I.T.ACT FOR THE ASSESSMENT YEAR 2007-2008 (PARA 3.26), WHICH READS AS FOLLOW:- A. THE LAND WERE PROCURED BY SOBHAINNERCITY TECHNOPOLIS PVT. LTD., WHICH NEVER GOT REGISTERED IN THE ASSESSEE'S NAME? B. THE AGREEMENT FOR SALE IS BETWEEN THE ULTIMATE CUSTOMER AND SOBHAINNERCITYTECHNOPOLIS PVT. LTD. C. THE AGREEMENT FOR CONSTRUCTION OF APARTMENT IS BETWEEN THE ASSESSEE AND THE ULTIMATE BUYERS. THE SALE AND CONSTRUCTION AGREEMENTS WITH THE ULTIMATE BUYER SHOW THE ASSESSEE'S SISTER CONCERNS AS THE OWNER NOT THE ASSESSEE. D. THE ASSESSEE ONLY BUILDS APARTMENTS ON THE LAND BELONGING TO THE SISTER CONCERNS. THE COMPANY HAS ACTED ONLY AS A BUILDER OF THE HOUSING PROJECT. E. CONSIDERING THE FACT THAT THE ASSESSEE IS ONLY A BUILDER AND NOT A DEVELOPER, THE QUESTION THAT NEEDS TO BE ADDRESSED IS, WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB AT ALL. SECTION 80IB (1O) PROVIDES :- 'THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 4 DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST OF MARCH, 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED PERCENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY AY FROM SUCH HOUSING PROJECT'. F. SECTION 80IB(1O) SAYS VERY CLEARLY THAT THE DEDUCTION IS AVAILABLE TO THE UNDERTAKING 'DEVELOPING AND [EMPHASIS SUPPLIED] BUILDING HOUSING PROJECTS'. DEVELOPING AND BUILDING OF HOUSING PROJECTS ARE TWIN CONDITION THAT HAVE TO BE SATISFIED SIMULTANEOUSLY IN ORDER TO OBTAIN DEDUCTION U/S.80IB(10). IN OTHER WORDS, UNLESS THE UNDERTAKING CARRIES OUT BOTH DEVELOPING AS WELL AS BUILDING ACTIVITIES, IT IS NOT ENTITLED TO THE DEDUCTION. IN THEPRESENT CASE, THE ASSESSEE HAS NOT DONE ANY DEVELOPMENT WORK BUT HAS ONLY HAD THE CONSTRUCTIVE RISK. THE ASSESSEE HAS NOT ONLY BEEN A BUILDER IN RESPECT OF THE PROJECTS AS IS EVIDENT FROM THE CONSTRUCTION AGREEMENTS WITH THE CUSTOMER. THE DEVELOPMENT OF LAND WAS DONE BY THE ACTUAL SELLERS OF THE LAND TO THE SISTER CONCERNS AND NOT BY THE ASSESSEE AND SDL ONLY BUILT / CONSTRUCTED THE SUPERSTRUCTURE. WHILE THE ASSESSEE HAS SHOWN THE INCOME FROM SALE OF FLATS AS BUSINESS INCOME, THE SAME HOWEVER DOES NOT QUALIFY FOR DEDUCTION U/S.80IB SINCE THIS INCOME HAS NOT ACCRUED TO THE ASSESSEE DUE TO DEVELOPMENT AND BUILDING BUT ONLY DUE TO THE RISK TAKEN AS A BUILDER. G. THE ASSESSEE HAS DERIVED THIS INCOME, NOT BY OWNING AND DEVELOPING, BUT BY ADVANCING BUSINESS LOANS TO THE SISTER CONCERN, COLLECTING THE CONSIDERATION FOR LAND TRANSFER ON THEIR BEHALF FROM THE CUSTOMERS AND BUILDING THE APARTMENT WITH A CONSTRUCTIVE RISK. SINCE THE COMPANY WAS ONLY A BUILDER AND NOT A DEVELOPER AND BUILDER, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION IN RESPECT OF PROFIT AS IT DID NOT CARRYON ANY DEVELOPMENT AND THEREFORE DEDUCTION UNDER SEC.80IB IS NOT ALLOWABLE INN VIEW OF THE SPECIFIC PROVISIONS OF 80IB(10)'. 2.3 FOR SIMILAR REASONS, THE ASSESSMENT ORDERS RELATING TO ASSESSMENT YEARS 2008-2009 TO 2010-2011 WERE COMPLETED BY PARTLY DENYING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE I.T.ACT. 2.4 AGGRIEVED BY THE ORDERS OF THE ASSESSING OFFICER FOR ASSESSMENT YEARS 2007-2008 TO 2010-2011 FOR PARTLY DENYING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEALS TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) HELD THAT THE ASSESSEE IS THE ACTUAL DEVELOPER OF ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 5 HOUSING PROJECT AS IT HAD UNDERTAKEN THE ENTIRE RISK AND REWARD FOR DEVELOPMENT ACTIVITIES. THEREFORE, IT WAS CONCLUDED THAT THE ASSESSEE ALONE AND NOT ITS SISTER-CONCERN WAS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80IB(10) OF THE I.T.ACT. THE RELEVANT FINDING OF THE CIT(A), FOR READY REFERENCE, IS REPRODUCED BELOW:- 5.9 IN MY CONSIDERED VIEW, THE NATURE OF ACTIVITY PERFORMED BY THE APPELLANT HAS TO BE EXAMINED TO FIND OUT WHETHER THE APPELLANT CAN BE CONSIDERED AS MERE BUILDER OR HAS TO BE REGARDED AS A DEVELOPER. IT IS SEEN FROM THE ASSESSMENT ORDER THE APPELLANT HAS FILED A DETAILED NOTE DATED 25.01.2016 POINTING OUT THAT THE NATURE OF ACTIVITY IT HAD CARRIED ON WITH REGARD TO THE HOUSING PROJECTS, WHICH THE A.O. HAS NOT DISPUTED OR CONTROVERTED IN THE ASSESSMENT ORDER. A LOOK AT THE NATURE OF ACTIVITIES SHOWS THAT THE APPELLANT CANNOT BE CONSIDERED AS A MERE BUILDER SINCE IT HAS UNDERTAKEN THE COMPLEX SCHEME OF DEVELOPING THE HOUSING PROJECT. IT IS ALSO SEEN THAT THE APPELLANT ALONE IS ENTITLED TO THE ENTIRE REVENUE FROM THE SALE OF APARTMENTSINCLUDING THE PROFITS THAT ARISE FROM THE SALE OF UNDIVIDED INTEREST IN LAND TO THE CUSTOMERS AND THAT THIS PROFIT FROM SALE OF THE UNDIVIDED INTEREST IN THE LAND WAS ALSO CONSIDERED AS PART OF THE ALLOWABLE DEDUCTION U/S. 80IB[10] OF THE ACT, BY THE HON'BLE ITAT IN ITA NO. 1027/BANG/2010 DATED 16/12/2011, BEFORE THE VIEW TAKEN IN THE PROCEEDINGS U/S. 263 OF THE ACT AS TO THE NATURE OF THE APPELLANT'S ROLE IN THE SCHEME OF DEVELOPMENT. 5.10 I ALSO FIND THAT THE APPELLANT'S SISTER CONCERN IS ONLY ENTITLED TO THE CONSIDERATION AS MENTIONED IN THE AGREEMENT TO SELL ENTERED INTO BETWEEN THE APPELLANT AND ITS SISTER CONCERN. EVEN THE PROFIT SHOWN BY THE APPELLANT'S SISTER CONCERN FROM SALE OF LAND TO APPELLANT HAS BEEN OFFERED TO TAX BY THE SAID SISTER CONCERN AND THESE FACTS ARE NOT DISPUTED. THE APPELLANT HAS PRODUCED THE FINANCIALS OF THE SISTER CONCERN BEFORE THE A.O. TO ESTABLISH THAT THE SAID SISTER CONCERN DID NOT CARRY OUT ANY ACTIVITY FOR DEVELOPMENT AND HAD NOT INCURRED ANY EXPENDITURE, DID NOT HAVE ANY EMPLOYEES ON ITS ROLLS. ALL THESE FACTORS POINT OUT TO THE INESCAPABLE CONCLUSION THAT THE APPELLANT ALONE HAS TO PERFORMED THE ROLE OF THE DEVELOPER AND HENCE, CANNOT BE CONSIDERED AS MERE BUILDER SIMPLY BECAUSE THE LAND DID NOT BELONG TO THE APPELLANT. INFACT, THE A.O. HAS ALLOWED DEDUCTION U/S.80IB(10) FOR THIS YEAR IN RESPECT OF OTHER PROJECTS WHERE THE LANDS ARE OWNED BY THE APPELLANT AND HAS DENIED DEDUCTION FOR FEW PROJECTS WHERE LAND WAS OWNED BY THE SISTER CONCERN. CONSIDERING THE TOTALITY OF FACTS ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 6 AND CIRCUMSTANCES AND THE POSITION OF LAW, I HOLD THAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S.80IB(10) OF THE ACT AND THE DISALLOWANCE MADE BY THE A.O. IS DELETED. 2.5 THE REVENUE BEING AGGRIEVED, HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT PROVIDED WITH EVIDENCES THAT IT QUALIFIES AS A DEVELOPER. IT WAS SUBMITTED THAT THE ASSESSEES SISTER-CONCERN IS THE ACTUAL DEVELOPER OF THE HOUSING PROJECT AND NOT THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S.RADHE DEVELOPERS REPORTED IN 241 ITR 403 (GUJ.) RELIED ON BY THE CIT(A) FOR ALLOWING THE ISSUE IN FAVOUR OF THE ASSESSEE IS DISTINGUISHABLE ON FACTS. THE LEARNED DR HAS FILED A BRIEF WRITTEN SUBMISSION, THE RELEVANT PORTION OF THE WHICH IS REPRODUCED BELOW:- THE DEPARTMENT HAS AGGRIEVED WITH THE FACT THE ASSESSEE HAS NOT PROVED WITH EVIDENCE THAT IT QUALIFIES AS A DEVELOPER. IN THIS REGARD THE ASSESSING OFFICER HAS REFERRED TO THE AGREEMENTS DATED 03.01.2005, 09.02.2005 & 31.03.2005 BETWEEN THE ASSESSEE, M/S. SOBHA DEVELOPERS LTD & ITS SISTER CONCERN M/S. SOBHAINNERCITY TECHNOPOLIS PVT LTD. SOME RELEVANT PORTIONS OF THE ABOVE AGREEMENTS ARE REPRODUCED BELOW: (A) FROM THE AGREEMENT DATED 03.01.2005: 1) SALE PRICE 1.1) THE PRICE PAYABLE BY THE PURCHASER TO THE VENDORS FOR THE SCHEDULE PROPERTY SHALL BE RS.3,24,09,902/-(RUPEES THREE CRORES TWENTY FOUR LAKHS NINE THOUSAND NINE HUNDRED AND TWO ONLY) 1.2) THE PURCHASED HAS ALREADY PAID A SUM OF RS.3,23,09,902/-(RUPEES THREE CRORES TWENTY THREE LAKHS NINE THOUSAND NINE HUNDRED AND TWO ONLY)TO THE VENDOR, THE RECEIPT OF WHICH THE VENDOR HEREBY ACCEPTS AND ACKNOWLEDGES; 1.3) THE BALANCE OF THE SALE PRICE OF RS.1,00,000/-(RUPEES ONE LAKH ONLY) SHALL BE PAID BY THE PURCHASER TO THE VENDOR AT ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 7 THE TIME OF EXECUTION OF DEED OF SALE; 5) POSSESSION THE VENDOR SHALL DELIVER POSSESSION TO THE PURCHASER OR THEIR NOMINEE AT THE TIME OF EXECUTION OF THE DEED OF SALE: (B) FROM THE AGREEMENT DATED 09.02.2005: 1) SALE PRICE 1.1) THE PRICE PAYABLE BY THE PURCHASER TO THE VENDORS FOR THE SCHEDULE PROPERTY SHALL BE RS.21,32,18,942/-(RUPEES TWENTY ONE CRORES THIRTY TWO LAKHS EIGHTEEN THOUSAND NINE HUNDRED AND FORTY TWO ONLY) 1.2) THE PURCHASED HAS ALREADY PAID A SUM OF RS.21,27,18,942/-(RUPEES TWENTY ONE CRORES TWENTY SEVEN LAKHS EIGHTEEN THOUSAND NINE HUNDRED AND TWO ONLY)TO THE VENDOR, THE RECEIPT OF WHICH THE VENDOR HEREBY ACCEPTS AND ACKNOWLEDGES; 1.3) THE BALANCE OF THE SALE PRICE OF RS.5,00,000/-(RUPEES FIVE LAKHS ONLY) SHALL BE PAID BY THE PURCHASER TO THE VENDOR AT THE TIME OF EXECUTION OF DEED OF SALE; 5) POSSESSION THE VENDOR SHALL DELIVER POSSESSION TO THE PURCHASER OR THEIR NOMINEE AT THE TIME OF EXECUTION OF THE DEED OF SALE: (C) FROM THE AGREEMENT DATED 31.03.2005: 1) SALE PRICE 1.1) THE PRICE PAYABLE BY THE PURCHASER TO THE VENDORS FOR THE SCHEDULE PROPERTY SHALL BE RS.12,39,60,117/-(RUPEES TWELVE CRORES THIRTY NINE LAKHS SIXTY THOUSAND ONE HUNDRED AND SEVENTEEN ONLY) 1.2) THE PURCHASED HAS ALREADY PAID A SUM OF RS.12,38,60,117/-(RUPEES TWELVE CRORES THIRTY EIGHT LAKHS SIXTY THOUSAND ONE HUNDRED AND SEVENTEEN ONLY)TO THE VENDOR, THE RECEIPT OF WHICH THE VENDOR HEREBY ACCEPTS AND ACKNOWLEDGES; 1.3) THE BALANCE OF THE SALE PRICE OF RS.1,00,000/-(RUPEES ONE LAKH ONLY} SHALL BE PAID BY THE PURCHASER TO THE VENDOR AT THE TIME OF EXECUTION OF DEED OF SALE; 5) POSSESSION THE VENDOR SHALL DELIVER POSSESSION TO THE PURCHASER OR THEIR NOMINEE AT THE TIME OF EXECUTION OF THE DEED OF SALE: ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 8 3. FROM THE ABOVE AGREEMENTS IT IS CLEAR THAT M/S. SOBHAINNERCITY TECHNOPOLIS PVT LTD., WAS SUPPOSED TO HAND OVER POSSESSION OF THE PROPERTY TO THE ASSESSEE AT THE TIME OF EXECUTION OF THE DEED OF SALE WHICH IMPLIES THAT THE POSSESSION OF THE PROPERTY WAS NEVER HANDED OVER TO THE ASSESSEE AND HENCE THERE IS NO QUESTION OF DEVELOPING THE SAME. IT HAS BEEN FOUND BY THE ASSESSING OFFICER THAT SUCH SALE DEED WAS NEVER EXECUTED (PAGE NO.12,PARA 6 OF ASSESSMENT ORDER FOR AY 2009-10, CORRESPONDING TO ITA NO.2172/B/18). FURTHER FROM VARIOUS PAGES OF THE ASSESSMENT ORDER FOR THE AY 2009-10 IT IS PROVED THAT THE ASSESSEE HAS ONLY UNDERTAKEN CERTAIN CONSTRUCTION WORK ON BEHALF OF THE CUSTOMERS TO WHOM FLATS WERE SOLD BY THE ASSESSEE'S SISTER CONCERN, M/S. SOBHAINNERCITY TECHNOPOLIS PVT LTD. 4. THE ASSESSING OFFICER HAS FURTHER FOUND THAT APPROVAL FOR DEVELOPMENT PLANS FOR THE PROJECT HAS BEEN OBTAINED FROM THE COMMISSIONER, BANGALORE DEVELOPMENT AUTHORITY BY M/S. SOBHAINNERCITY TECHNOPOLIS PVT LTD. COMMENCEMENT CERTIFICATE AS WELL AS OCCUPANCY CERTIFICATES OF THE PROJECTS WERE ALSO ISSUED IN THE NAME OF THE ASSESSEE'S SISTER CONCERN, M/S. SOBHA INNERCITY TECHNOPOLIS PVT LTD.(REFERENCE - PAGE NO.L0, PARA5.2 OF THE ASSESSMENT ORDER FOR THE AY 2009-10) . 5. IT HAS ALSO BEEN FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE'S SISTER CONCERN HAS EXTENDED COLLATERAL SECURITY IN RESPECT OF THE TERM LOAN AND CASH CREDIT LOAN AVAILED BY THE ASSESSEE AS PER THE FOLLOWING DETAILS. NATURE OF LOAN DESCRIPTION OF PROPERTY OFFERED AS SECURITY BANK LOAN FACILITY GRANTED BALANCE (IN CR.) AS ON 31.03.2009 CASH CREDIT SOBHA DAHLIA ANDHRA BANK 500 MN 485.33 MN TERM LOAN DAFFODIL CARNATION PROJECTS CORP BANK 500 MN DAFFODIL & 400MN CARNATION 516.05 MN SO, THE ASSESSING OFFICER HAS RIGHTLY ARRIVED AT THE CONCLUSION THAT IF THE PROJECT DID NOT BELONG TO M/S.SOBHAINNERCITY TECHNOPOLIS PVT LTD., HOW IT COULD OFFER COLLATERAL SECURITY TO A BANK. 6. SO, FROM VARIOUS OBSERVATIONS OF THE ASSESSING OFFICER THE FOLLOWING FACTS EMERGE: (I) THE ASSESSEE IS NOT THE OWNER OF THE LAND OF THE PROJECTS. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 9 (II) THE PROPERTY IN QUESTION WAS NEVER HANDED OVER TO THE ASSESSEE, WHICH MEANS THAT THE ASSESSEE DID NOT HAVE ANY RIGHT TO DEVELOP THE SAID PROJECTS. (III) THE SALE DEED WAS NEVER EXECUTED IMPLYING THEREBY, THAT THE POSSESSION OF LAND WAS NEVER GIVEN TO THE ASSESSEE. (IV) THE ASSESSEE'S SISTER CONCERN M/S. SOBHAINNERCITY TECHNOPOLIS PVT LTD.HAS GIVEN COLLATERAL SECURITY TO BANK FOR THE PROJECTS WHICH ARE NOW CLAIMED TO BE BELONGING TO THE ASSESSEE. (V) THE SALE DEED IS EXECUTED BETWEEN THE ASSESSEE'S SISTER CONCERN M/S.SOBHAINNERCITY TECHNOPOLIS PVT LTD., AND THE ULTIMATE BUYERS. (VI) THE ASSESSEE HAS NOT TAKEN ANY RISK EXCEPT THE RISK OF CONSTRUCTION. IF CERTAIN DEFECTS WERE NOTICED IN THE CONSTRUCTION UNDERTAKEN BY THE ASSESSEE, IT WAS RESPONSIBILITY OF THE ASSESSEE TO RECTIFY IT. BEYOND THIS, THE ASSESSEE DID NOT HAVE ANY OTHER RISK. 7. IN VIEW OF THE ABOVE, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE IS NOT A DEVELOPER BUT ONLY A BUILDER WHICH HAS UNDERTAKEN A WORK CONTRACT. IT IS REITERATED THAT THE DECISIONS IN CASE OF M/S. SANGHVI & DOSHI ENTERPRISE AND M/S. RADHE DEVELOPERS ARE NOT APPLICABLE TO THE ASSESSEE CASE BECAUSE THESE JUDGEMENTS WERE DELIVERED IN THE CONTEXT THAT FOR CLAIMS OF DEDUCTION U/S. 80-IB(10) THE ASSESSEE NEED NOT BE THE OWNER OF THE LAND. HOWEVER, THERE IS A FINE DISTINCTION BETWEEN THE CASE OF M/S. SANGHVI & DOSHI ENTERPRISE AND THAT OF THE ASSESSEE (SOBHA DEVELOPERS LTD.) THAT IN THE ASSESSEE'S CASE IT IS NOT PROVED THAT IT HAS RECEIVED POSSESSION OF THE LAND FROM ITS SISTER CONCERN FOR THE PURPOSE OF DEVELOPING THE SAME. 8. IT IS THEREFORE, PRAYED THAT THE ORDERS PASSED BY THE ASSESSING OFFICER MAY KINDLY BE UPHELD. 2.6 THE LEARNED AR FOR THE RELEVANT ISSUE HAS FILED A PAPER BOOK COMPRISING OF 423 PAGES ENCLOSING THEREIN THE RETURN OF INCOME, STATEMENT OF COMPUTATION OF INCOME, WORKING SHEET IN RESPECT OF DEDUCTION U/S 80IB(10) OF THE I.T.ACT, ASSESSMENT ORDERS FOR A.YS 2007-2008 TO 2010-2011, COPIES OF SALE AGREEMENT AND CONSTRUCTION AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND VARIOUS CUSTOMERS, ETC. THE LEARNED AR HAS ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 10 ALSO FILED A BRIEF WRITTEN SUBMISSION REITERATING THE SUBMISSIONS MADE BEFORE THE AO AND THE CIT(A). 2.7 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FOR THE ASSESSMENT YEARS 2007-2008 AND 2008-2009, THE ASSESSMENT ORDERS ARE PASSED CONSEQUENT TO PROCEEDINGS TAKEN U/S 263 OF THE I.T.ACT AS MODIFIED BY THE ITATS ORDER DATED 30.04.2014 IN ITA NO.1395/BANG/2012. FOR ASSESSMENT YEARS 2009-2010 AND 2010-2011, THESE APPEALS ARISE OUT OF REGULAR ASSESSMENT PROCEEDINGS U/S 143(2) OF THE I.T.ACT. THE ITAT IN ITS ORDER DATED 30.04.2014 DIRECTED THE A.O. TO EXAMINE THE FOLLOWING ASPECTS TO ARRIVE AT THE CONCLUSION AS TO WHETHER THE ASSESSEE CAN BE REGARDED AS A DEVELOPER AND ENTITLED TO DEDUCTION U/S 80IB(10) OF THE I.T.ACT. (I) THE COPIES OF THE AGREEMENT FOR PURCHASE OF LAND BY THE ASSESSEE FROM THE SISTER CONCERN AND, AS TO HOW THE SEVERAL ASPECT OF DEVELOPMENT OF A HOUSING PROJECT WERE DONE ONLY BY THE ASSESSEE; (II) WHAT IS THE ROLE OF SISTER CONCERN OF ASSESSEE IN SO FAR AS IT RELATES TO SALE OF LAND IS CONCERNED; AND (III) HOW DESPITE BEING NOT OWNER OF THE LAND PURSUANT TO A REGISTERED SALE DEED WAS IN FACT ENTITLED TO ALL OWNERSHIP RIGHTS AS ENVISAGED U/S 2(47)(V) OF THE ACT. (IV) AFTER SCRUTINY OF THE RELEVANT DOCUMENTS, TO COME TO A CONCLUSION AS TO WHETHER THE ASSESSEE WAS ONLY A ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 11 BUILDER OR A DEVELOPER AND BUILDER OF HOUSING PROJECTS FOR WHICH DEDUCTION U/S 80IB(10) OF THE ACT IS CLAIMED IN THE LIGHT OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS REPORTED IN 341 ITR 403 (GUJARAT). (V) TO GO INTO THE QUESTION AS TO WHO CONCEPTUALIZES THE SCHEME AND ULTIMATELY EXECUTES THE SCHEME AND CONVEYS THE FLATS TO THE PROSPECTIVE BUYERS. 2.7.1 THE A.O. AFTER EXAMINING THE AFORESAID ISSUES, THE FIRST GROUND ON WHICH THE ASSESSEE HAS BEEN CONSIDERED AS A BUILDER AND NOT A DEVELOPER WAS DUE TO THE FACT THAT THE LAND ON WHICH 5 PROJECTS VIZ., SOBHA CARNATION, SOBHA PRIMROSE, SOBHA DAHLIA,SOBHA DAISY AND SOBHA DAFFODIL, BELONGED TO THE SISTER CONCERN OF THE ASSESSEE CALLED SOBHAINNERCITY TECHNOPOLIS PRIVATE LIMITED AND NOT THE ASSESSEE. THE A.O. HAS REJECTED THE CLAIM OF THE ASSESSEE THAT IT WAS THE OWNER OF THESE LANDS AS PER THE AGREEMENT TO SELL VIDE VARIOUS DATES, ENTERED INTO WITH THE SISTER CONCERNS FOR PURCHASE OF THESE LANDS ON WHICH THE PROJECTS WERE BEING DEVELOPED. THE A.O. HAS OBSERVED THAT THE ASSESSEE CANNOT CLAIM TO HAVE TAKEN POSSESSION OF THESE LANDS AS PER THE AGREEMENT TO SELL, ENTERED INTO BY THE ASSESSEE WITH ITS SISTER CONCERN SINCE THE ASSESSEE DID NOT GET THE REGISTERED SALE DEED IN ITS FAVOUR. THE A.O. OBSERVED THAT DOCUMENTATION SHOWED THAT THE ASSESSEE NEVER HAD POSSESSION OF THE PROPERTY SINCE THE REGISTERED SALE DEED CONVEYING THE TITLE WERE BEING EXECUTED BY THE ASSESSEES ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 12 SISTER CONCERN, WHO WAS REQUIRED TO DELIVER POSSESSION ONLY AT THE TIME OF EXECUTING THE SALE DEED TO THE ASSESSEE. THE A.O. HAS FURTHER OBSERVED THAT THE SAID SISTER CONCERN OF THE ASSESSEE HAD ENTERED INTO SALE AGREEMENTS TO CONVEY THE UNDIVIDED INTEREST IN LAND TO THE CUSTOMERS OF THE ASSESSEE WHO HAD PURCHASED THE FLATS. THE A.O. NOTED THAT THE PLAN APPROVAL FOR THESE PROJECTS WAS ALSO IN THE NAME OF THE SAID SISTER CONCERN AND NOT THE ASSESSEE. THE A.O. ALSO FOUND THAT THE SAID SISTER CONCERN HAD PLEDGED THESE LANDS FOR CREDIT FACILITIES TAKEN BY THE ASSESSEE FROM ITS BANKERS AND HENCE, THESE HOUSING PROJECTS BELONGED TO THE SAID SISTER CONCERN AND NOT THE ASSESSEE. FOR THESE REASONS, THE A.O. TOOK THE VIEW THAT THE ASSESSEE CANNOT BE REGARDED AS THE LANDOWNER OR DEVELOPER TO BE ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT. SECONDLY, AS DIRECTED BY THE ITAT, THE A.O. HAS ALSO CONSIDERED AND DISTINGUISHED THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS REPORTED IN 341 ITR 403 (GUJ) OBSERVING THAT THE DOCUMENTATION EXECUTED BY THE PARTIES IN THE SAID CASE DIFFERED FROM THE CASE OF THE ASSESSEE. THE A.O. HAS HELD THAT THE RATIO OF THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT WAS LIMITED TO THE EXTENT THAT THE OWNERSHIP OF LAND WAS NOT A CONDITION PRECEDENT TO OBTAIN EXEMPTION U/S 80IB(10) OF THE ACT. THE A.O. HAS OBSERVED THAT THE DECISION RENDERED BY THE HONBLE GUJARAT HIGH COURT WAS FOR THE ASSESSMENT YEARS BEFORE THE INSERTION OF THE EXPLANATION TO SEC.80IB(10) OF THE ACT THAT DEBARS DEDUCTION TO BE GIVEN TO CONTRACTORS. FINALLY, AS DIRECTED BY THE ITAT, THE A.O. HAS ALSO GONE INTO THE QUESTION OF WHO CONCEPTUALIZES THE SCHEME AND HAS TAKEN THE VIEW ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 13 THAT THE CONCEPTUALIZATION IS DONE BY INDIVIDUALS CONSISTING OF THE TOP MANAGEMENT OF BOTH THE ASSESSEE AND ITS SISTER CONCERN. THE A.O. HAS OBSERVED THAT THE TOP MANAGEMENT OF BOTH COMPANIES HAVE THE SAME COMMON INDIVIDUALS AND IT CANNOT BE SAID THAT THE ASSESSEE ALONE HAS THE CONCEPTUALIZED SUCH SCHEME. IT HAS BEEN HELD BY THE A.O. THAT THE CONCEPTUALIZATION AND EXECUTION OF THESE HOUSING PROJECTS IS A JOINT EXERCISE IN CASE OF THE ASSESSEE AND SISTER CONCERNS, WHO ARE WORKING IN CONSONANCE WITH EACH OTHER. FOR THESE REASONS, THE A.O. HAS DENIED THE DEDUCTION CLAIMED HOLDING THAT THE ASSESSEE WAS MERELY A BUILDER AND NOT A DEVELOPER. 2.7.2 IN OTHER WORDS, THE MAJOR THRUST OF REVENUE FOR HOLDING THAT THE ASSESSEE IS A BUILDER/CONTRACTOR AND NOT A DEVELOPER IS BASED ON THE FACT THAT THE LAND ON WHICH THE AFORESAID PROJECTS WERE DEVELOPED BELONGED TO THE SISTER- CONCERN SOBHAINNERCITY TECHNOPOLIS PRIVATE LIMITED (SITPL). THE A.O. HAS ALSO EXAMINED THE CONSTRUCTION AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CUSTOMERS AND HAS HELD THAT THE ASSESSEE IS ONLY A CONTRACTOR. THAT APART, THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE PROJECT PERMISSION LIKE COMMENCEMENT CERTIFICATE, PLAN SANCTIONS AND OCCUPANCY CERTIFICATE ARE IN THE NAME OF THE SISTER CONCERN, SITPL. HE FURTHER OBSERVED THAT SITPL HAS PROVIDED THE AFORESAID LANDS AS SECURITY FOR LOANS RAISED BY THE ASSESSEE. THE ABOVE VIEW OF THE A.O. HAS BEEN OVERTURNED BY THE CIT(A) BY HOLDING THAT THE ASSESSEE IS NOT MERELY A BUILDER / CONTRACTOR BUT A DEVELOPER OF HOUSING PROJECT. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 14 2.7.3 DURING THE ASSESSMENT PROCEEDINGS, IT WAS CLAIMED BY THE ASSESSEE THAT IT HAD ENTERED INTO AGREEMENTS OF SALE FOR PURCHASE OF THE LANDS FROM SITPL AND THUS, THE ASSESSEE WAS THE OWNER OF THE LANDS ON WHICH THE HOUSING PROJECTS WERE DEVELOPED. THERE ARE 3 AGREEMENTS FOR SALE DATED 03.01./2005, 09/0212005 AND 31/0312005 THAT HAVE BEEN ENTERED INTO BY THE ASSESSEE WITH SITPL FOR PURCHASE OF LANDS ON WHICH THE HOUSING PROJECTS HAVE BEEN DEVELOPED. THESE AGREEMENTS HAVE BEEN PLACED ON RECORD BY THE LEARNED DR DURING THE COURSE OF HEARING ON 24.03.2021. HOWEVER, THE ASSESSING OFFICER HAS REFUSED TO GIVE ANY CREDENCE TO THE AGREEMENT OF SALE ENTERED INTO BY THE ASSESSEE WITH SITPL FOR PURCHASE OF THE LAND ON THE GROUND THAT THE ASSESSEE DID NOT OBTAIN A REGISTERED SALE DEED. THE SITPL WAS MERELY THE LANDOWNER AND IT HAD OFFERED TO TAX THE PROFITS ON SALE OF LAND TO THE ASSESSEE. IN SUPPORT THEREOF, THE FOLLOWING DOCUMENTS RELATING TO SITPL ARE PLACED ON RECORD (ANNEXURE-2A TO 2D OF THE PAPER BOOK FILED BY THE ASSESSEE) AND IT IS RELEVANT TO MENTION THAT ALL THESE DOCUMENTS WERE FILED IN THE ORIGINAL COURSE OF ASSESSMENT PROCEEDINGS AS WELL AND DISCUSSION ON THE SAME IS ALSO FOUND AT PARA [3.9] IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-2010 :- (1) COPY OF THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2005-06 ALONGWITH INTIMATION U/S.143[1] OF THE ACT, AS ANNEXURE-2A; (2) COPY OF THE ASSESSMENT ORDER PASSED FOR THE ASSESSMENT YEAR 2005-06 AS ANNEXURE-2B; (3) COPIES OF THE RETURN OF INCOME FILED FOR THE ASSESSMENT ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 15 YEARS 2006-07, 2007-08,2008-09 AND 2009-10 AS ANNEXURE-2C; AND (4) COPIES OF THE ASSESSMENT ORDERS PASSED FOR THE ASSESSMENT YEARS 2006-07 AND 2009-10 AS ANNEXURE- 2D; 2.7.4 IT CAN BE SEEN FROM THE ABOVE INCOME TAX RETURNS FILED BY SITPL THAT IT HAS OFFERED BUSINESS INCOME FROM SALE OF LANDS IN ASSESSMENT YEARS 2005-06 AND 2006-07, WHICH ALSO INCLUDES THE LANDS SOLD TO THE ASSESSEE IN TERMS OF THE SALE AGREEMENTS MENTIONED ABOVE. THE SAME HAS ALSO BEEN ASSESSED TO TAX FOR THE ASSESSMENT YEAR 2005-06 AND 2006- 07. THEREAFTER, IT IS IMPORTANT TO NOTE THAT FROM THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10, THERE ARE NO SALE OF LANDS SHOWN BY SITPL AND THE ONLY INCOME REPORTED RELATES TO INTEREST INCOME EARNED. NO DEDUCTION HAS BEEN CLAIMED U/S. 801B(10) OF THE ACT, BY SITPL FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-2011 IN AS MUCH AS, SITPL DOES NOT HAVE ANY INCOME FROM ANY DEVELOPMENT ACTIVITY FOR THESE YEARS AND THEREFORE, THE QUESTION OF CLAIMING DEDUCTION DOES NOT ARISE.FURTHER, IT CAN BE SEEN FROM THE FINANCIALS THAT SITPL HAS NEITHER INCURRED ANY EXPENDITURE NOR HAS IT ANY EMPLOYEES ETC., FOR UNDERTAKING DEVELOPMENT WORK. 2.7.5 FROM THE ABOVE, IT IS CLEAR THAT THE ROLE OF SITPL WAS A LIMITED ONE. THEY WERE TITLE HOLDERS IN RESPECT OF THE LANDS ON WHICH THE HOUSING PROJECT WAS DEVELOPED BY THE ASSESSEE. THEY WERE REQUIRED TO MERELY JOIN IN THE DOCUMENTATION FOR SALE OF APARTMENTS DEVELOPED BY THE ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 16 ASSESSEE. THE ASSESSEE HAS ENGAGED ARCHITECTS FOR DRAWING UP THE PLANS. THE ASSESSEE HAS UNDERTAKEN THE CONSTRUCTION ACTIVITIES. THE ASSESSEE HAS IDENTIFIED THE CUSTOMERS TO WHOM THE APARTMENTS ARE SOLD. THE ASSESSEE HAS COLLECTED THE ENTIRE CONSIDERATION FOR SALE OF APARTMENT FROM THE CUSTOMERS. THE PROFIT OR LOSS FROM THE HOUSING PROJECT ACCRUES TO THE ASSESSEE ALONE AND SITPL HAS ALREADY RECEIVED THE FIXED PRICE FOR THE SALE OF LANDS TO THE ASSESSEE. THUS, ALL ACTIVITIES RELATING TO DEVELOPMENT OF THE HOUSING PROJECT ARE UNDERTAKEN BY THE ASSESSEE ALONE AND THERE CANNOT BE ANY MANNER OF DOUBT IN THIS REGARD. 2.7.6 WE HAVE TO ALSO ADDRESS THE ISSUE RELATING TO THE MANNER OF DOCUMENTATION FOR SALE OF APARTMENTS. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS MERELY ENTERED INTO A CONSTRUCTION AGREEMENT FOR CONSTRUCTION OF THE APARTMENT WITH ITS CUSTOMERS. HE HAS DESCRIBED A FEW OF THE AGREEMENTS AND THE RECITALS THEREIN THAT SHOW THAT SITPL IS THE OWNER OF THE LANDS. THE ASSESSEE HAS ENCLOSED THE FOLLOWING DOCUMENTS EXECUTED BY IT ALONG WITH SITPL FOR SALE OF APARTMENT TO ITS CUSTOMERS IN RESPECT OF VARIOUS HOUSING PROJECTS:- (I) SOBHA ROSE : - AGREEMENT FOR SALE DATED 05/09/2012 AND CONSTRUCTION AGREEMENT DATED 05/09/2012 WITH CUSTOMER MR. HITENDRA RAWAL AS ANNEXURE-3A AND 3B. SIMILARLY, IN RESPECT OF THE SAME PROJECT ANOTHER AGREEMENT FOR SALE DATED 07/06/2005 AND CONSTRUCTION AGREEMENT DATED 07/06/2005 WITH CUSTOMER CAPT. MANOJ AIRON, AS ANNEXURE- 3C AND 3D. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 17 (II) SOBHA CARNATION:- AGREEMENT FOR SALE DATED 09/06/2006AND CONSTRUCTION AGREEMENT DATED 09/0612006 WITH CUSTOMER MR. ARYAN SHARMA AND MR. MANISH SHARMA AS ANNEXURE-4A AND 4B. SIMILARLY, IN RESPECT OF THE SAME PROJECT ANOTHER AGREEMENT FOR SALE DATED 02/02/2006 AND CONSTRUCTION AGREEMENT DATED 02/02/2006 WITH CUSTOMER MR. GURUDATTANAGARAJA AND NIKHILASIMHACAPT. MANOJ AIRON, AS ANNEXURE-4C AND 40. (III) SOBHA DALIA : - AGREEMENT FOR SALE DATED 28/05/2007 AND CONSTRUCTION AGREEMENT DATED 28/05/2007 WITH CUSTOMER MRS. VIMALABEN K. PATEL AS ANNEXURE-5A AND 5B. SIMILARLY, IN RESPECT OF THE SAME PROJECT ANOTHER AGREEMENT FOR SALE DATED 14/10/2006 AND CONSTRUCTION AGREEMENT DATED 14/1012006 WITH CUSTOMER MRS. ASHA DINESH AND MR. DINESH KRISHNASWAMY AS ANNEXURE-5C AND 50. (IV) SOBHA DAISY : - AGREEMENT FOR SALE DATED 16/09/2008 AND CONSTRUCTION AGREEMENT DATED 16/09/2008 WITH CUSTOMER MR. SUBRAMANIAM SHANKARAN AND MRS. GIRIJASUBRAMANIAH AS ANNEXURE-6A AND 6B. SIMILARLY, IN RESPECT OF THE SAME PROJECT ANOTHER AGREEMENT FOR SALE DATED 28/01/2006 AND CONSTRUCTION AGREEMENT DATED 28/01/2006 WITH CUSTOMER MS. PADMINI NISTALA, AS ANNEXURE-6C AND 60. (V) SOBHA MAY FLOWER:- AGREEMENT FOR SALE DATED 10/01/2005 AND CONSTRUCTION AGREEMENT DATED 10101/2005 WITH CUSTOMER MRS. DEBBANI KUNDU NASKAR AND MR. DEBANKURNASKAR AS ANNEXURE-7 A AND 7B. SIMILARLY, IN ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 18 RESPECT OF THE SAME PROJECT ANOTHER AGREEMENT FOR SALE DATED 12/04/2005 AND CONSTRUCTION AGREEMENT DATED 12/04/2005 WITH CUSTOMER MR.RAVINDRA VERMA, AS ANNEXURE-7C AND 70. (VI) SOBHADAFODDIL:- AGREEMENT FOR SALE DATED 04/03/2006AND CONSTRUCTION AGREEMENT DATED 04/03/2006 WITH CUSTOMER MR.ASHOK VARMA AS ANNEXURE-SA AND SB. SIMILARLY, IN RESPECT OF THE SAMEPROJECT ANOTHER AGREEMENT FOR SALE DATED 19/07/2008 AND CONSTRUCTION AGREEMENT DATED 19/07/2008 WITH CUSTOMER MR. KUNAL KAPUR AND MS. MONEESHAKAPUR, AS ANNEXURE-BC AND BD. 2.7.7 THE A.O. HAD EXAMINED SOME OF THE ABOVE AGREEMENTS ESPECIALLY, THE ANNEXURES 5C, 5D, 6A AND 6B APART FROM A FEW OTHERS MENTIONED IN THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICER, IN THE CONSTRUCTION AGREEMENT IT WAS MENTIONED THAT SITPL IS THE LANDOWNER. HOWEVER, THE ASSESSING OFFICER FAILED TO APPRECIATE AND READ THE CONSTRUCTION AGREEMENT IN ENTIRETY, WHICH CLEARLY BRINGS OUT THAT THE ASSESSEE IS SHOWN AS THE DEVELOPER, WHO HAS FORMULATED A SCHEME FOR CONSTRUCTION OF RESIDENTIAL APARTMENTS. FURTHER, THE RELATED AGREEMENT FOR SALE ENTERED INTO WITH THE CUSTOMER ALSO CLEARLY BRINGS OUT THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SITPL FOR PURCHASE OF LAND AND THAT THE ASSESSEE IS DEVELOPING THE PROPERTY INTO AN APARTMENT COMPLEX FOR WHICH THE ENTIRE CONSIDERATION IS PAYABLE TO THE ASSESSEE. THUS, MERELY RELYING ON A SINGLE LINE THAT DESCRIBE SITPL AS 'OWNER' IN THE CONSTRUCTION AGREEMENTS, WHICH IS NECESSARY FOR CONVEYING ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 19 TITLE TO THE CUSTOMER, IT CANNOT BE SAID THAT THE ASSESSEE IS MERELY A CONTRACTOR AND SITPL HAS TO BE REGARDED AS THE DEVELOPER OF THE HOUSING PROJECT. 2.7.8 IN VIEW OF THE ABOVE FACTUAL MATRIX, WE ARE OF THE VIEW THAT THE CIT [APPEALS] HAS RIGHTLYRELIED UPON THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS REPORTED IN 349 ITR 403 [GUJ]. THE RATIO OF THE SAID JUDGEMENT IS SQUARELY APPLICABLE IN THE PRESENT CASE IN AS MUCH AS, IT HAS BEEN HELD BY THE HON'BLE GUJARAT HIGH COURT THAT THE OWNERSHIP OF A LAND IS NOT A PRE-CONDITION FOR CLAIMING DEDUCTION U/S.80IB[10] OF THE ACT. THE KEY FACTORS THAT REQUIRE TO BE EXAMINED ARE THE NATURE OF ACTIVITIES CARRIED OUT, THE RISK ASSUMED AND ULTIMATELY THE REWARDS THAT ACCRUE FROM THE ACTIVITY. GENERALLY, A CONTRACTOR IS A PERSON WHO UNDERTAKES EXECUTION OF A CONTRACT FOR A PRICE AND HE CANNOT BE CALLED A DEVELOPER SINCE, HE HAS NOT FORMULATED THESCHEME OF DEVELOPMENT OR ENGAGED IN ANY ACTIVITIES THAT ARE NORMALLY DONE BY THE DEVELOPERS. THE DOCUMENTARY EVIDENCE ON RECORDS CLEARLY SHOWS THAT THE ASSESSEE HAS FORMULATED THE SCHEME OF DEVELOPMENT. IT HAS INCURRED ALL THE COSTS FOR DEVELOPMENT AND HAS RECEIVED THE SALE PROCEEDS FROM THE CUSTOMERS. THE SISTER CONCERN SITPL HAS MERELY SOLD LAND TO THE ASSESSEE AND OFFERED INCOME THEREFROM FOR THE ASSESSMENT YEAR 2005-06 AND IT HAS NOT PARTICIPATED IN THE DEVELOPMENT OF THE HOUSING PROJECTS THEREAFTER EXCEPT TO JOIN IN THE EXECUTION OF DOCUMENTS TO CONVEY TITLE TO THE CUSTOMERS. IT HAS NOT RECEIVED ANY PROFITS OR INCOME FROM THE DEVELOPMENT ACTIVITY AND IT HAS NOT CLAIMED ANY DEDUCTION U/S 80IB(10) OF THE ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 20 I.T.ACT. THE SISTER CONCERN(SITPL) NEITHER HAS EMPLOYEES NOR ANY INFRASTRUCTURE FOR CARRYING OUT THE DEVELOPMENT OF THE HOUSING PROJECTS. THUS, MERELY ON ACCOUNT OF CERTAIN FACTORS LIKE SANCTION PLAN BEING IN THE NAME OF SITPL, WHICH IS THE REGISTERED TITLE OWNER OF THE LAND, AN INFERENCE CANNOT BE DRAWN THAT THE PROJECTS BELONGED TO SITPL AND NOT TO THE ASSESSEE. THE HON'BLE CHENNAI BENCH IN THE CASE OF M/S.SANGHVI& DOSHI ENTERPRISES REPORTED IN (2013) TXMANN.COM 386 HAS CATEGORICALLY NOTED THE MEANING OF THE WORDS 'BUILDER', 'CONTRACTOR' AND 'DEVELOPER' FROM LAW LEXICON BY SRI P.RAMANATHAIYER. THEREAFTER THE CHENNAI BENCH IN THE CASE CITED SUPRA, HAS DISCUSSED ABOUT THE PROCESS OF DEVELOPMENT INCLUDING THE INVESTMENT AND RISK ELEMENT ASSUMED AND FINALLY CONCLUDED THAT A DEVELOPER IS A PERSON, WHO UNDERTAKES THE DEVELOPMENT OF THE PROJECT ALONGWITH THE ASSOCIATED RISKS AND REWARDS THEREFROM. THE ABOVE ORDER OF THE CHENNAI BENCH OF THE TRIBUNAL SQUARELY APPLIES THE FACTS OF THE INSTANT CASE AS ALREADY SET-OUT ABOVE. 2.7.9 THE LEARNED DR IN HIS WRITTEN SUBMISSIONS HAS MENTIONED THAT THE ASSESSEE HAS NOT PROVED POSSESSION OF THE LAND SINCE, THE POSSESSION WAS TO BE DELIVERED AT THE TIME OF THE EXECUTION OF THE SALE DEEDS AS PER THE 3 AGREEMENTS OF SALE BETWEEN THE ASSESSEE AND SITPL. NOTHING TURNS MUCH ON THIS ASPECT OF THE MATTER AS OWNERSHIP OF LAND IS NOT A PRE- CONDITION FOR CLAIMING DEDUCTION U/S.80IB[10] OF THE ACT. FURTHERMORE, WITHOUT PHYSICAL POSSESSION THE ASSESSEE CANNOT ENTER INTO THE PROPERTY FOR UNDERTAKING THE CONSTRUCTION ACTIVITY. THERE IS NO DISPUTE THAT THE ASSESSEE ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 21 HAS CONSTRUCTED THE HOUSING PROJECT AND HAS ENTERED INTO THE CONSTRUCTION AGREEMENT AS WELL AS IT IS A PARTY TO THE SALE AGREEMENT FOR SALE OF UNDIVIDED INTEREST IN LAND. THUS,WHETHER POSSESSION IN LAW IS WITH THE ASSESSEE OR NOT IS IMMATERIAL AS THE ASSESSEE HAS RECEIVED THE ENTIRE CONSIDERATION FROM THE CUSTOMERS AND IT HAS ALREADY DISCHARGED THE CONSIDERATION PAYABLE TO SITPL IN TERMS OF THE AGREEMENTS ENTERED INTO EARLIER. THE LEARNED DR HAS ALSO COMMENTED ON THE FACT THAT THE COMMENCEMENT CERTIFICATE AND OCCUPANCY CERTIFICATE WAS STANDING IN THE NAME OF SITPL AND THAT SITPL HAD PROVIDED THE LAND AS SECURITY FOR LOANS AVAILED BY THE ASSESSEE. HERE AGAIN, THE MERE NAME OF SITPL IN THE SANCTIONED PLANS, COMMENCEMENT AND OCCUPANCY CERTIFICATES CANNOT CONVERT THE SAID COMPANY AS DEVELOPER. THIS IS BECAUSE THE SAID SITPL HAS NOT CARRIED OUT ANY DEVELOPMENT ACTIVITY AT ALL, WHICH IS EVIDENT FROM THE FINANCIALS OF SITPL, WHICH IS ON RECORD. THE ASSESSEES SISTER CONCERN, SITPL IS THE TITLE HOLDER OF THE LANDS AND THE COMMENCEMENT AND OCCUPANCY CERTIFICATES ARE ISSUED IN THE NAME OF THE TITLE HOLDERS AS PER THE RELEVANT GUIDELINES. NEVERTHELESS, THE QUESTION OF WHETHER THE ASSESSEE IS A DEVELOPER OR A MERE CONTRACTOR CANNOT BE JUDGED SOLELY ON THE BASIS OF THE SAID CERTIFICATES. THE NATURE OF ACTIVITIES CARRIED OUT HAVE TO BE EXAMINED. THE CUSTOMERS OF THE ASSESSEE HAVE PURCHASED THE PROPERTY LOOKING AT THE BRAND 'SOBHA' WHICH BELONGS TO THE ASSESSEE. IT IS THE ASSESSEE WHICH HAS FORMULATED THE SCHEME OF DEVELOPMENT IN WHICH THE SISTER CONCERN SITPL HAS NO ROLE EXCEPT FOR CONVEYING TITLE IN RESPECT OF THELAND TO THE CUSTOMERS OF THE ASSESSEE. SO ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 22 ALSO, THE PROVISION OF THE PROPERTIES AS SECURITY FOR THE LOANS RAISED BY THE ASSESSEE ACTUALLY GOES TO SHOW THAT THE ASSESSEE IS ACTIVELY ENGAGED IN RAISING FINANCE FOR THE PROJECT AND THE SISTER CONCERN HAS NO ROLE TO PLAY OTHER THAN CONVEYING TITLE. NOTHING TURNS MUCH ON THESE ASPECTS OF THE MATTER POINTED OUT BY THE LEARNED DR IN THE SUBMISSIONS FILED BEFORE US. 2.7.10 TO SUM UP, WE ARE OF THE VIEW THAT THE ASSESSEE HAS ESTABLISHED THAT IT WAS CARRYING OUT THE ACTIVITIES THAT ARE DONE FOR DEVELOPING THE HOUSING PROJECT AND VARIOUS FACTORS POINTED OUT BY THE ASSESSING OFFICER ARE NEITHER DETERMINATIVE OF THE ISSUE NOR THEY ARE RELEVANT TO JUDGE THE CHARACTER AND STATUS OF THE ASSESSEE WITH REGARD TO THE HOUSING PROJECTS EXECUTED. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A)S ORDER ON THIS ISSUE IS CORRECT AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ITA NOS.1204/BANG/2018 & 1206/BANG/2018 (ASSESSMENT YEARS2009-2010 &2010-2011) (ASSESSEES APPEAL) 3. THE ABOVE APPEALS AT THE INSTANCE OF THE ASSESSEE ARE DIRECTED AGAINST CONSOLIDATED ORDER OF THE CIT(A) DATED 06.02.2018. THE CIT(A)S ORDER ARISES OUT OF THE ORDERS PASSED BY THE A.O. U/S 143(3) R.W.S. 153A OF THE I.T.ACT. THE RELEVANT ASSESSMENT YEARS ARE 2009-2010 AND 2010-2011. 3.1 IDENTICAL GROUNDS ARE RAISED IN THESE APPEALS, EXCEPT VARIANCE IN FIGURES. THERE ARE SIX GROUNDS RAISED IN EACH OF THE APPEALS, HOWEVER, THE AR DID NOT PRESS GROUND NOS.1, 2, 5 ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 23 & 6, HENCE, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. THE SURVIVING GROUNDS, NAMELY, GROUND NOS.3 AND 4 PERTAINING TO ASSESSMENT YEAR 2009-2010 READ AS FOLLOWS:- 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ASSESSMENT MADE BY THE LEARNED AO IN ADOPTING THE TOTAL INCOME OF THE APPELLANT AS PER THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) DATED 29.12.2011 AT RS.38,64,29,895/- AND THEREAFTER MAKING THE ADDITION OF RS.4,00,00,000/- DISCLOSED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE DISALLOWANCE COMPUTED U/S 14A OF THE ACT IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT IS ERRONEOUS AND THE SAME OUGHT NOT TO BE RELIED UPON FOR COMPUTING THE INCOME ASSESSABLE U/S 153A OF THE ACT, UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. GROUND NO.3 3.2 THE ISSUE RAISED IN GROUND NO.3 WAS DECIDED BY THE CIT(A) BY DIRECTING THE A.O. TO MODIFY THE ASSESSMENT ORDER PASSED U/S 153A OF THE I.T.ACT, BY ADOPTING INCOME FINALLY ASSESSED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AFTER APPEAL EFFECT IS GIVEN. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 6.2 AFTER CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT, I AM OF THE VIEW THAT THERE IS NO GRIEVANCE OF THE APPELLANT BEFORE ME. IT IS SEEN THAT IN BOTH THE ASSESSMENT ORDERS, THE A.O. HAS ACCEPTED THE ADDITIONAL INCOME OFFERED BY THE APPELLANT IN RESPONSE TO THE NOTICE ISSUED U/S 153A OF THE ACT. THE ONLY VARIATION MADE BY THE A.O. IS THE ADOPTION OF THE INCOME ASSESSED IN THE ORIGINAL ORDER U/S 143(3) OF THE ACT. NO FAULT CAN BE FOUND WITH THE A.O. FOR MAKING AN ASSESSMENT ON THE SAID BASIS BECAUSE THE INCOME ULTIMATELY DETERMINED IN THE ORIGINAL ASSESSMENT AFTER APPEAL EFFECT WILL HAVE TO BE THE BASIS ON WHICH THE INCOME IS COMPUTED IN THE ORDER PASSED U/S 153A OF THE ACT. HENCE, THE INTEREST OF JUSTICE WILL BE TAKEN CARE OF, IF THE A.O. IS DIRECTED TO MODIFY THE ASSESSMENT ORDER PASSED U/S 153A OF THE ACT BY ADOPTING THE INCOME FINALLY ASSESSED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AFTER APPEAL ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 24 EFFECT IS GIVEN. THESE GROUNDS ARE DISPOSED OFF WITH THE AFORESAID DIRECTIONS. 3.3 THE CIT(A) HAS CLEARLY DIRECTED THE A.O. TO MODIFY THE ASSESSMENT ORDER U/S 153A OF THE I.T.ACT, BY ADOPTING THE INCOME FINALLY ASSESSED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AFTER APPEAL EFFECT IS GIVEN. IN VIEW OF THE ABOVE DIRECTION OF THE CIT(A), WE SEE NO GRIEVANCE IN THE ORDER OF THE CIT(A). THEREFORE, GROUND NO.3 IN ITA NO.1204/BANG/2018 & ITA NO.1206/ BANG/2018, ARE DISMISSED. GROUND NO.4 3.4 THE BRIEF FACTS IN RELATION TO THE ABOVE GROUND ARE AS FOLLOWS:- FOR THE ASSESSMENT YEAR 2009-2010 AND 2010-2011, THE ASSESSEE HAD FILED ORIGINAL RETURNS OF INCOME ON 27.09.2009 AND 08.10.2012, RESPECTIVELY. THE ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE I.T.ACTON 29.12.2011 AND 30.03.2013 FOR ASSESSMENT YEARS 2009-2010 AND 2010-2011, RESPECTIVELY. IN THE ASSESSMENT ORDER COMPLETED U/S 143(3) OF THE I.T.ACT FOR ASSESSMENT YEAR 2009-2010, THE A.O. HAD MADE ADDITION U/S 14A OF THE I.T.ACT AMOUNTING TO RS.1,28,13,850 INSTEAD OF RS.26,55,305 OFFERED FOR DISALLOWANCE BY THE ASSESSEE. SIMILARLY FOR ASSESSMENT YEAR 2010-2011, THE TOTAL DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE I.T.ACT WAS RS.93,08,935 INSTEAD OF RS.40,96,467 OFFERED FOR DISALLOWANCE BY THE ASSESSEE. AGAINST THE ORIGINAL ASSESSMENT ORDERS, WHEREIN THE DISALLOWANCES ARE MADE U/S 14A OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEALS TO THE FIRST APPELLATE AUTHORITY. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 25 3.5 SUBSEQUENTLY, THERE WAS A SEARCH U/S 132 OF THE I.T.ACT. CONSEQUENT TO THE SEARCH, RETURNS WERE FILED PURSUANT TO NOTICE ISSUED U/S 153A OF THE I.T.ACT. IT IS STATED THAT IN THE RETURNS FILED PURSUANT TO NOTICE ISSUED U/S 153A OF THE I.T.ACT, THE ASSESSEE BY MISTAKE AND SHEER INADVERTENT, ERRONEOUSLY ADOPTED THE DISALLOWANCE U/S 14A OF THE I.T.ACT MADE IN THE ORIGINAL ASSESSMENT. 3.6 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISALLOWANCE U/S 14A OF THE I.T.ACT IN THE ORIGINAL ASSESSMENT ORDER ARE SUBJECT MATTER OF APPEAL IN REGULAR ASSESSMENT. DEPENDING UPON THE FINAL OUTCOME IN THE REGULAR ASSESSMENT AS REGARDS THE DISALLOWANCE U/S 14A OF THE I.T.ACT, THE SAME SHALL BE ADOPTED IN THE ASSESSMENT ORDERS U/S 153A OF THE I.T.ACT. THEREFORE, WITH THE ABOVE DIRECTIONS, GROUND NO.4 IN ITA NOS.1204/BANG/2018 & 1206/BANG/2018, ARE DISPOSED OF. 3.7 IN THE RESULT, THE ASSESSEES APPEALS ARE DISMISSED. ITA NO.1205/BANG/2018 (ASSESSMENT YEAR 2009-2010) (ASSESSEES APPEAL) 4. THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 18.12.2017. THE CIT(A)S ORDER ARISES OUT OF THE ASSESSMENT ORDER DATED 29.12.2011 PASSED U/S 143(3) OF THE I.T.ACT. THE RELEVANT ASSESSMENT YEAR IS 2009-2010. 4.1 FIVE GROUNDS ARE RAISED IN THIS APPEAL. GROUND NO.1 AND 5 ARE GENERAL IN NATURE, HENCE, NO ADJUDICATION IS REQUIRED. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 26 THE EFFECTIVE GROUNDS, NAMELY, GROUND NOS. 2, 3 AND 4 READS AS FOLLOW:- 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.1,28,13,850/- U/S 14A OF THE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. SHE FURTHER FAILED TO APPRECIATE THAT THE DISALLOWANCE COMPUTED U/S 14A OF THE ACT WAS HIGHLY EXCESSIVE, OPPOSED TO LAW AND FACTS OF THE APPELLANTS CASE AND THEREFORE, THE SAME DESERVES TO BE DELETED. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE RESTRICTING THE DEDUCTION CLAIMED U/S 80G OF THE ACT HOLDING THAT THE APPELLANT HAS NOT FURNISHED THE RECEIPTS FOR CERTAIN DONATIONS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE INCOME DETERMINED U/S 115JB OF THE ACT AT RS.1,39,52,78,779/-, BY MAKING AN ADDITION OF RS.1,28,13,850/- BEING THE DISALLOWANCE DETERMINED U/S 14A OF THE ACT AND A FURTHER SUM OF RS.7,28,594/- BEING THE WEALTH TAX PAID UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. GROUND NO.2 4.2 THE ASSESSEE HAD VOLUNTARILY DISALLOWED U/S 14A OF THE I.T.ACT A SUM OF RS.26,55,305. LATER, VIDE LETTER DATED 28.12.2011, IT WAS CLAIMED THAT DISALLOWANCE U/S 14A OF THE I.T.ACT SHOULD BE RESTRICTED TO RS.21,51,043. THE A.O. MADE A DISALLOWANCE OF RS.1,28,13,850 AS PER ANNEXURE-1 OF THE ASSESSMENT ORDER, BOTH UNDER RULE 8D(2)(II) AND 8D(2)(III) OF I.T.RULES AT RS.1,11,75,330 AND RS.16,38,520, RESPECTIVELY. 4.3 AGGRIEVED, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 27 12. DISALLOWANCE OF RS.1,28,13,850 U/S 14A : THE A.O. HAS BROUGHT OUT THE FACT THAT THE COMPANY HAD NOT DISALLOWED ANY EXPENDITURE WITH RESPECT OF INCOME NOT INCLUDIBLE IN TOTAL INCOME. IT MAY BE NOTED THAT IT IS GROSS EXPENDITURE THAT NEEDS TO BE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D AND NOT NET INTEREST AFTER REDUCTION OF INTEREST RECEIVED ON BANK MARGIN. IT IS NOTED THAT AO HAD CONSIDERED SUBMISSIONS MADE BY APPELLANT DURING ASSESSMENT PROCEEDINGS. THEREAFTER DISALLOWANCE WAS MADE IN ACCORDANCE WITH RULE 8D. THEREFORE, NO INTERFERENCE IN AOS ORDER IS CALLED FOR SINCE NO INFIRMITY AROSE. THE GROUND FAILS. 4.4 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED ARS LIMITED PRAYER IS THAT NO DISALLOWANCE CAN BE MADE UNDER RULE 8D(2)(II), SINCE OWN FUNDS ARE MUCH MORE THAN TAX EXEMPTED INVESTMENT. IN THIS CONTEXT, THE LEARNED AR RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT&ANR. V. MICROLABS REPORTED IN (2016) 383 ITR 490 (KAR.) 4.5 THE LEARNED DR SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 4.6 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE RELEVANT ASSESSMENT YEAR 2009-2010 IS PLACED ON RECORD AT PAGES 7 AND 8 OF THE PAPER BOOK FILED BY THE ASSESSEE. ON PERUSAL OF THE BALANCE SHEET, IT IS SEEN THAT FOR THE YEAR ENDING 31.03.2009, THE ASSESSEE HAS SHARE CAPITAL, RESERVE AND SURPLUS TO THE TUNE OF RS.108.94 CRORE WHEREAS THE TOTAL INVESTMENT FOR THE YEAR ENDING IS RS.36.16 CRORE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA) HAD HELD THAT WHEN INVESTMENTS ARE MADE OUT OF COMMON POOL OF FUNDS AND NON-INTEREST BEARING FUNDS ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 28 ARE MUCH MORE THAN THE INVESTMENT IN TAX FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A OF THE I.T.ACTCAN BE MADE. THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS FOLLOW:- WE HAVE HEARD THE RIVAL SUBMISSIONS. A COPY OF THE AVAILABILITY OF FUNDS AND INVESTMENTS MADE WAS FILED BEFORE US WHICH IS AT PAGES 38 TO 42 OF THE ASSESSEE'S PAPER BOOK AND THE SAME IS ENCLOSED AS ANNEXURE-III TO THIS ORDER. IT IS CLEAR FROM THE SAID STATEMENT THAT THE AVAILABILITY OF PROFIT, SHARE CAPITAL AND RESERVES AND SURPLUS WAS MUCH MORE THAN INVESTMENTS MADE BY THE ASSESSEE WHICH COULD YIELD TAX- FREE INCOME. THE HON'BLE BOMBAY HIGH COURT IN CIT V. RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM) HAS HELD THAT WHERE THE INTER EST-FREE FUNDS FAR EXCEED THE VALUE OF INVESTMENTS, IT SHOULD BE CONSIDERED THAT INVESTMENTS HAVE BEEN MADE OUT OF INTEREST-FREE FUNDS AND NO DISALLOWANCE UNDER SECTION 14A TOWARDS ANY INTEREST EXPENDITURE CAN BE MADE. THIS VIEW WAS AGAIN CONFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN CIT V. HDFC BANK LTD., I. T. A. NO. 330 OF 2012, JUDGMENT DATED JULY 23, 2014 [2014] 366 ITR 505 (BOM) WHEREIN IT WAS HELD THAT WHEN INVESTMENTS ARE MADE OUT OF COMMON POOL OF FUNDS AND NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENTS IN TAX-FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 14A CAN BE MADE. IN THE LIGHT OF THE ABOVESAID DECISIONS, WE ARE OF THE VIEW THAT DISALLOWANCE OF INTEREST EXPENSES IN THE PRESENT CASE OF RS. 49,42,473 MADE UNDER RULE 8D(2)(II) OF THE INCOME-TAX RULES SHOULD BE DELETED. WE ORDER ACCORDINGLY.' THE AFORESAID SHOWS THAT THE TRIBUNAL HAS FOLLOWED A DECISION OF THE BOM BAY HIGH COURT IN THE CASE OF CIT V. HDFC BANK LTD., I. T. A. NO. 330 OF 2012, JUDGMENT DATED JULY 23, 2014 [2014] 366 ITR 505 (BOM)). WHENTHE ISSUE IS ALREADY COVERED BY A DECISION OF THE HIGH COURT OF BOMBAY WITH WHICH WE CONCUR, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW WOULD ARISE FOR CONSIDERATION AS CANVASSED. 4.7 IN THE INSTANT CASE, THIS SPECIFIC PLEA WAS NOT RAISED BEFORE THE A.O. THEREFORE, IN THE LIGHT OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA), WE RESTORE THE CASE TO THE A.O. THE A.O. SHALL RE-COMPUTE THE DISALLOWANCE U/S 14A OF THE I.T.ACTREAD ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 29 WITH RULE 8D(2)(II) OF THE I.T.RULESFOLLOWING THE DICTUM LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA). 4.8 THEREFORE, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.3 4.9 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS NOT PRODUCED RECEIPT FOR DONATION PAID TO THE TUNE OF RS.61,20,000. HENCE, HE HELD THAT THE TOTAL DONATION PAID BY THE ASSESSEE TO THE PRIVATE ENTITIES COMES TO ONLY RS.6,86,15,000. 4.10 THE VIEW TAKEN BY THE A.O. WAS AFFIRMED BY THE CIT(A), SINCE NO DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE, IN SUPPORT OF THE CLAIM OF DEDUCTION U/S 80G OF THE I.T.ACT TO THE EXTENT OF RS.61,20,000. 4.11 THE ASSESSEE BEING AGGRIEVED HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LIMITED PRAYER OF THE AR BEFORE THE TRIBUNAL IS THAT THE A.O. HAS RESTRICTED THE CLAIM TO 50% OF GROSS QUALIFYING AMOUNT AFTER ARRIVING AT THE CAP OF 10% OF ADJUSTED GROSS TOTAL INCOME WHEREAS THE TOTAL DEDUCTION ALLOWABLE IS 10% OF ADJUSTED GROSS TOTAL INCOME AS PER THE PROVISIONS OF SECTION 80G(4) OF THE I.T.ACT. 4.12 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. SECTION 80G(4) OF THE I.T.ACT READS AS FOLLOW:- ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 30 (4) WHERE THE AGGREGATE OF THE SUMS REFERRED TO IN SUB-CLAUSES (IV), (V), (VI), (VIA) AND (VII) OF CLAUSE (A) AND IN 4CLAUSES (B) AND (C) OF SUB-SECTION (2) EXCEEDS TEN PER CENT. OF THE GROSS TOTAL INCOME (AS REDUCED BY ANY PORTION THEREOF ON WHICH INCOME-TAX IS NOT PAYABLE UNDER ANY PROVISION OF THIS ACT AND BY ANY AMOUNT IN RESPECT OF WHICH THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER ANY OTHER PROVISION OF THIS CHAPTER), THEN THE AMOUNT IN EXCESS OF TEN PER CENT. OF THE GROSS TOTAL INCOME SHALL BE IGNORED FOR THE PURPOSE OF COMPUTING THE AGGREGATE OF THE SUMS IN RESPECT OF WHICH DEDUCTION IS TO BE ALLOWED UNDER SUB-SECTION (1). 4.12.1 FROM THE ABOVE, IT IS CLEAR THAT IF THE AGGREGATE OF SUMS REFERRED TO IN SUB-CLAUSE (V), (VI), (VIA) AND (VII) OF CLAUSE (A) AND CLAUSE (B) AND (C) OF SUB-SECTION (2), EXCEEDS 10% OF THE GROSS TOTAL INCOME THEN THE AMOUNT IN EXCESS OF 10% SHALL BE IGNORED FOR PURPOSES OF COMPUTING THE AGGREGATE OF SUMS ON WHICH DEDUCTION IS ALLOWED U/S 80G(1) OF THE I.T.ACT. IT IS PROVIDED IN SECTION 80G(1) OF THE I.T.ACT THAT, FOR CERTAIN SUMS CONTRIBUTED, THE WHOLE OF THE SUM WILL BE TAKEN AND IN OTHER CASES 50% OF THE AGGREGATE OF THE SUMS SPECIFIED IN SUB- SECTION (2) AND THE AGGREGATE OF THE SAME WILL BE ALLOWED AS DEDUCTION. IN OTHER WORDS, SECTION 80G(1) OF THE I.T.ACT STATES THAT THE QUANTUM OF DEDUCTION SHALL BE EQUAL TO AGGREGATE OF 100% IN SOME CASES AND 50% IN OTHER CASES. HENCE, THERE IS A RESTRICTION ON THE QUANTUM OF DEDUCTION WHICH CANNOT EXCEED 10% OF THE GROSS TOTAL INCOME. THE LEARNED A.O. HAS ALLOWED 50% OUT OF THE QUALIFYING AMOUNT INSTEAD OF RESTRICTING THE QUALIFYING AMOUNT TO 10% OF THE GROSS TOTAL INCOME. SINCE THE SAME IS OPPOSED THE PLAIN LANGUAGE OF SECTION 80G(1) OF THE I.T.ACT, THE A.O. IS DIRECTED TO ALLOW THE DEDUCTION U/S 80G(1) OF THE I.T.ACTBY RESTRICTING THE AGGREGATE OF THE SUMS TO 10% OF THE GROSS TOTAL INCOME. IT IS ORDERED ACCORDINGLY. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 31 4.12.2 IN THE RESULT, GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.4 4.13 THE ABOVE GROUND RELATES TO RE-COMPUTATION OF BOOK PROFIT U/S 115JB OF THE I.T.ACT. THE A.O. HAD MADE TWO ADDITIONS TO THE BOOK PROFITS. FIRST, THE A.O. MADE ADDITION OF DISALLOWANCE U/S 14A OF THE I.T.ACT. THE SECOND ADDITION IS WITH REGARD TO WEALTH-TAX OF RS.7,28,594. THE CIT(A) CONFIRMED THE COMPUTATION MADE U/S 115JB OF THE I.T.ACT. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 15. DETERMINING INCOME OF APPELLANT U/S 115JB AT RS.1,39,52,78,779/-. IT MAY BE NOTED THAT UNDER SECTION 115JB AMOUNT OF DEFERRED TAX OR PROVISION THEREOF IS TO BE ADDED. IT IS NOTED AO HAD FOLLOWED THE SECTION. THEREFORE, NO INTERFERENCE IN AOS ORDER IS CALLED FOR SINCE NO INFIRMITY AROSE. 4.14 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED AR SUBMITTED THAT NO DISALLOWANCE U/S 14A OF THE I.T.ACT CAN BE MADE WHILE COMPUTING INCOME U/S 115JB OF THE I.T.ACT AS PER SPECIAL BENCH ORDER IN THE CASE OF VIREET INVESTMENTS PVT. LTD. 154 DTR 241. FURTHER IT WAS SUBMITTED THAT THE WEALTH-TAX IS PAID IS NOT ONE OF THE ITEMS MENTIONED IN EXPLANATION 1 TO SECTION 115JB OF THE I.T.ACT AND HENCE, THE SAME CANNOT BE ADDED BACK. 4.15 THE LEARNED DR SUPPORTED THE ORDER OF THE A.O. AND THE CIT(A). 4.16 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE SPECIAL BENCH OF ITAT ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 32 IN THE CASE OF VIREET INVESTMENTS PVT. LTD. REPORTED IN 154 DTR 241 HAS EXPRESSED THE VIEW THAT THE AMOUNT DISALLOWED U/S 14A OF THE I.T.ACT CANNOT BE ADOPTED FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S 115JB OF THE I.T.ACT AND THE DISALLOWANCE TO BE MADE UNDER CLAUSE (F) TO EXPLANATION 1 HAS TO BE COMPUTED INDEPENDENTLY WITHOUT HAVING REGARD TO THE PROVISIONS OF SECTION 14A OF THE ACT. IN VIEW OF THE ABOVE, WE ARE UNABLE TO SUSTAIN THE ADDITION MADE BY THE A.O. SINCE THE ADDITION REQUIRED TO BE MADE UNDER CLAUSE (F) TO EXPLANATION 1 IS REQUIRED TO BE COMPUTED INDEPENDENTLY, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR EXAMINING IT AFRESH. IT IS ORDERED ACCORDINGLY. 4.17 THEREFORE, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1207/BANG/2018 : ASST.YEAR 2010-2011 (ASSESSEES APPEAL) 5. THE ABOVE APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 18.12.2017. THE CIT(A)S ORDER ARISES OUT OF THE ASSESSMENT ORDER DATED 30.03.2013 PASSED U/S 143(3) OF THE I.T.ACT. THE RELEVANT ASSESSMENT YEAR IS 2010-2011. 5.1 THE ASSESSEE HAS RAISED SIX GROUNDS. THE EFFECTIVE GROUNDS, NAMELY, GROUND NO.2A, 2B, 2C AND 3 READ AS FOLLOWS:- 2A. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE VIEW TAKEN BY THE A.O. THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THE PROJECTS ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 33 SOBHA RUBY (BASIL) & SOBHA SUNBEAM-2 AMOUNTING TO RS.11,57,09,500/- ON THE GROUND THAT THE APPELLANT HAD VIOLATED THE CONDITIONS MENTIONED U/S 80IB(10(F) OF THE ACT, UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 2B. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 80IB(10)(F) OF THE ACT, PROHIBIT THE ALLOTMENT OF MULTIPLE APARTMENTS TO THE SAME INDIVIDUAL OR OTHER CONNECTED PERSONS AND THERE IS NO PROHIBITION THAT, THE APPELLANT COULD NOT ALLOT THE APARTMENT TO NON-INDIVIDUALS AND THEREFORE, THE DENIAL OF DEDUCTION IN RESPECT OF THESE PROJECTS IS UNJUSTIFIED. 2C. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 80IB(10)(F) OF THE ACT, CAME INTO EFFECT FROM 01/04/2010 AND THEREFORE, THE SAID PROVISIONS OF THE ACT, WERE INAPPLICABLE TO THE ALLOTMENT OF RESIDENTIAL UNITS MADE BY THE APPELLANT IN RESPECT OF THE PROJECTS AND FROM THIS VIEW OF THE MATTER, THERE IS NO JUSTIFICATION FOR DENYING THE DEDUCTION CLAIMED IN RESPECT OF THE PROFITS DERIVED FROM THE AFORESAID PROJECTS, WHICH REQUIRES TO BE VACATED. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE U/S 14A OF THE ACT AMOUNTING TO RS.52,12,468/- UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. SHE FAILED TO APPRECIATE THAT THE DISALLOWANCE COMPUTED U/S 14A OF THE ACT WAS HIGHLY EXCESSIVE, OPPOSED TO LAW AND FACTS OF THE APPELLANTS CASE AND THEREFORE, THE SAME DESERVES TO BE DELETED. GROUND NO.2A, 2B AND 2C 5.2 THE A.O. CONCLUDED THE ASSESSMENT BY DENYING A PART CLAIM OF DEDUCTION U/S 80IB(10)OF THE I.T.ACT AMOUNTING TO RS.11,57,09,500 FOR THE REASON THAT THE ASSESSEE HAS VIOLATED THE CONDITIONS MANDATED U/S 80IB(10)(F) OF THE I.T.ACT. THE A.O. HELD THAT THE ASSESSEE CANNOT SELL ANY FLAT IN THE HOUSING PROJECT TO NON-INDIVIDUALS. 5.3 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE DISALLOWANCE OF SECTION 80IB OF THE I.T.ACT, IN RESPECT OF SOBHA RUBY (BASIL) ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 34 AND SOBHA SUNBEAM-2. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 9. DISALLOWANCE OF DEDUCTION U/S 80IB(10)(F) IN RESPECT OF SHOBA BASIL & SHOBHA SUNBEAM PERUSAL OF ASSESSMENT ORDER SHOWS THAT APPELLANT COMPANY HAD ALLOCATED RESIDENTIAL UNITS TO PRIVATE LIMITED COMPANIES WHICH WAS IN VIOLATION OF SECTION 80IB(10)(F). THE AO HAS BROUGHT OUT IN DETAIL THE PRIVATE COMPANIES ALLOTTED RESIDENTIAL UNITS BY APPELLANT. IT MAY BE NOTED THAT NO EXPLANATION WAS OFFERED BEFORE AO. EVEN DURING APPELLATE PROCEEDINGS, NO EXPLANATION HAS BEEN FURNISHED. THEREFORE, NO INTERFERENCE IN ASSESSMENT ORDER IS CALLED FOR ON THE ISSUE SINCE NO INFIRMITY AROSE. THE DISALLOWANCE U/S 80IB(10)(F) IS UPHELD AND SUSTAINED. 5.4 AGGRIEVED, THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A.O. AND THE CIT(A) HAVE MISCONSTRUED SECTION 80IB(10)(F) OF THE I.T.ACT AND HAS TAKEN A VIEW THAT THE ASSESSEE CANNOT SELL ANY FLAT IN HOUSING PROJECT TO NON- INDIVIDUALS, WHICH IS ERRONEOUS UNDERSTANDING OF STATUTORY PROVISION. 5.5 THE LEARNED DR SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 5.6 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE TWO PROJECTS OF THE ASSESSEE, SOBHA RUBY (BASIL) AND SOBHA SUNBEAM-2, THE A.O. REFERRED TO THE PROVISIONS OF SECTION 80IB(10)(F) OF THE I.T.ACT AND TOOK THE VIEW THAT PROVISIONS OF THE ACT MANDATES THAT THE RESIDENTIAL FLATS MUST BE SOLD TO INDIVIDUALS ONLY AND SELLING THE FLAT TO A PRIVATE LIMITED COMPANY VIOLATES ONE OF THE CONDITIONS PRESCRIBED FOR CLAIMING DEDUCTION U/S 80IB(10) OF ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 35 THE I.T.ACT. HENCE, HE HELD THAT THE ASSESSEE WAS DISENTITLED TO THE CLAIM OF DEDUCTION IN RESPECT OF THESE TWO PROJECTS ON THIS COUNT. ACCORDINGLY, THE A.O. DISALLOWED DEDUCTION U/S 80IB(10)(F) OF THE I.T.ACT IN RESPECT OF SOBHA RUBY (BASIL) AMOUNTING TO RS.10,80,35,511 AND SOBHA SUNBEAM-2 AMOUNTING TO RS.76,73,989, RESPECTIVELY, AGGREGATING TO RS.11,57,09,500. 5.6.1 THE RELEVANT SECTION NAMELY, SECTION 80IB(10)(F) OF THE I.T.ACT READS AS FOLLOW:- (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY :- (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA, (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA; 5.6.2 IT IS CLEAR FROM READING OF ABOVE PROVISION, THAT THERE IS NO RESTRICTION FOR THE ASSESSEE TO SELL A FLAT TO A COMPANY. THEREFORE, THE A.O. AND THE CIT(A) HAS MISCONSTRUED SECTION 80IB(10)(F) OF THE I.T.ACT AND TAKEN A VIEW THAT THE ASSESSEE CANNOT SELL ANY FLAT IN THE HOUSING PROJECT TO NON-INDIVIDUALS, WHICH IS ERRONEOUS UNDERSTANDING OF STATUTORY PROVISIONS. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE A.O. AND THE CIT(A) ON THIS COUNT. THE A.O. IS DIRECTED TO RECOMPUTE DEDUCTION U/S 80IB(10)(F) OF THE I.T.ACT KEEPING IN VIEW THE ABOVE DIRECTION. GROUND NO.3 ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 36 5.7 THE ASSESSEE HAD COMPUTED DISALLOWANCE U/S 14A OF THE I.T.ACT AMOUNTING TO RS.40,96,467 AS PER THE RETURN OF INCOME FILED. THE A.O. COMPUTED THE TOTAL DISALLOWANCE IN ANNEXURE-1 OF THE ASSESSMENT ORDER AT RS.93,08,935, BOTH UNDER RULE 80D(2)(II) AND 80D(2)(III) OF THE I.T.RULES. THUS, THE A.O. MADE A FURTHER DISALLOWANCE OF RS.52,12,468. ON FURTHER APPEAL, THE CIT(A) CONFIRMED THE VIEW OF THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 10. DISALLOWANCE U/S 14A AMOUNTING TO RS.52,12,468/-. THE A.O. HAS BROUGHT OUT THE FACT THAT THE COMPANY HAD NOT DISALLOWED ANY EXPENDITURE WITH RESPECT TO INCOME NOT INCLUDIBLE IN TOTAL INCOME. THE AO REJECTED THE APPELLANTS ARGUMENT THAT NO EXPENDITURE WAS INCURRED ON INVESTMENT SINCE INVESTMENTS FLOW FROM A COMMON POOL OF FUNDS I.E. CURRENT OR CASH CREDIT OR OVERDRAFT ACCOUNTS. SINCE BUSINESS RECEIPTS AND PAYMENTS AS WELL AS INVESTMENTS ARE MADE FROM THESE ACCOUNTS, IT CANNOT BE SAID WITH CERTAINTY THAT INVESTMENTS WERE MADE EXCLUSIVELY OUT OF NON INTEREST BEARING OR SURPLUS FUNDS. EVEN IF APPELLANT HAD NOT UTILIZED ANY BORROWED FUNDS TO MAKE INVESTMENTS, SECTION 14A OUGHT TO BE INVOKED TO DISALLOW ALL INDIRECT EXPENSES. THEREFORE, AO NOTED HIS SATISFACTION AND INVOKED PROVISION OF SECTION 14A R.W. RULE 8D IN VIEW OF THE ABOVE FACTS, OBJECTION OF APPELLANT IN RESPECT OF DISALLOWANCE U/S 14A IS FOUND TO BE UNTENABLE AND THE SAME IS REJECTED. HENCE DISALLOWANCE IS UPHELD AND CONFIRMED. 5.8 AGGRIEVED, THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE UNDER RULE 8D(2)(II) OF I.T.RULESCAN BE MADE IN THE FACTS OF THE CASE SINCE OWN FUNDS ARE MUCH MORE THAN TAX EXEMPTED INVESTMENT AS PER THE BALANCE SHEET. IN THIS CONTEXT, THE LEARNED AR RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS REPORTED IN (2016) 383 ITR 490 (KAR.). ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 37 5.9 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE BALANCE SHEET, PROFIT AND LOSS ACCOUNT FOR THE RELEVANT ASSESSMENT YEAR 2010-2011 IS PLACED ON RECORD AT PAGES 7 AND 8 OF THE PAPER BOOK FILED BY THE ASSESSEE. ON PERUSAL OF THE BALANCE SHEET, IT IS SEEN THAT FOR THE YEAR ENDING 31.03.2010, THE ASSESSEE HAS SHARE CAPITAL, RESERVE AND SURPLUS THE TUNE OF RS.170.84 CRORE WHEREAS THE TOTAL INVESTMENT FOR THE YEAR ENDING IS RS.42.93 CRORE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA) HAD HELD THAT WHEN INVESTMENTS ARE MADE OUT OF COMMON POOL OF FUNDS AND NON-INTEREST BEARING FUNDS ARE MUCH MORE THAN THE INVESTMENT IN TAX FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A OF THE I.T.ACT CAN BE MADE. THE RELEVANT FUNDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS FOLLOW:- WE HAVE HEARD THE RIVAL SUBMISSIONS. A COPY OF THE AVAILABILITY OF FUNDS AND INVESTMENTS MADE WAS FILED BEFORE US WHICH IS AT PAGES 38 TO 42 OF THE ASSESSEE'S PAPER BOOK AND THE SAME IS ENCLOSED AS ANNEXURE-III TO THIS ORDER. IT IS CLEAR FROM THE SAID STATEMENT THAT THE AVAIL ABILITY OF PROFIT, SHARE CAPITAL AND RESERVES AND SURPLUS WAS MUCH MORE THAN INVESTMENTS MADE BY THE ASSESSEE WHICH COULD YIELD TAX- FREE INCOME. THE HON'BLE BOMBAY HIGH COURT IN CIT V. RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM) HAS HELD THAT WHERE THE INTER EST-FREE FUNDS FAR EXCEED THE VALUE OF INVESTMENTS, IT SHOULD BE CONSIDERED THAT INVESTMENTS HAVE BEEN MADE OUT OF INTEREST-FREE FUNDS AND NO DISALLOWANCE UNDER SECTION 14A TOWARDS ANY INTEREST EXPENDITURE CAN BE MADE. THIS VIEW WAS AGAIN CONFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN CIT V. HDFC BANK LTD., I. T. A. NO. 330 OF 2012, JUDGMENT DATED JULY 23, 2014 [2014] 366 ITR 505 (BOM) WHEREIN IT WAS HELD THAT WHEN INVESTMENTS ARE MADE OUT OF COMMON POOL OF FUNDS AND NON-INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENTS IN TAX-FREE SECURITIES, NO DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 14A CAN BE MADE. IN THE LIGHT OF THE ABOVESAID DECISIONS, WE ARE OF THE VIEW THAT DISALLOWANCE OF INTEREST EXPENSES IN THE PRESENT CASE OF RS. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 38 49,42,473 MADE UNDER RULE 8D(2)(II) OF THE INCOME-TAX RULES SHOULD BE DELETED. WE ORDER ACCORDINGLY.' THE AFORESAID SHOWS THAT THE TRIBUNAL HAS FOLLOWED A DECISION OF THE BOM BAY HIGH COURT IN THE CASE OF CIT V. HDFC BANK LTD., I. T. A. NO. 330 OF 2012, JUDGMENT DATED JULY 23, 2014 [2014] 366 ITR 505 (BOM)). WHENTHE ISSUE IS ALREADY COVERED BY A DECISION OF THE HIGH COURT OF BOMBAY WITH WHICH WE CONCUR, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW WOULD ARISE FOR CONSIDERATION AS CANVASSED. 5.10 IN THE INSTANT CASE, THIS SPECIFIC PLEA WAS NOT RAISED BEFORE THE A.O. THEREFORE, IN THE LIGHT OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA), WE RESTORE THE CASE TO THE A.O. THE A.O. SHALL RE-COMPUTE THE DISALLOWANCE U/S 14A OF THE I.T.ACT READ WITH RULE 8D(2)(II) OF THE I.R.RULES, FOLLOWING THE DICTUM LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT &ANR. V. MICROLABS (SUPRA). 5.11 THEREFORE, GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. TO SUM UP (I) APPEALS FILED BY THE REVENUE ARE DISMISSED. (II) ASSESSEES APPEAL IN ITA NO.1204/BANG/2018 AND 1206/BANG/2018, ARE DISMISSED. (III) ASSESSEES APPEAL IN ITA NO.1205/BANG/2018 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1436/BANG/2018 &ORS. M/S.SOBHA DEVELOPERS LIMITED. . 39 (IV) ASSESSEES APPEAL IN ITA NO.1207/BANG/2018 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF JUNE, 2021. SD/- SD/- ( CHANDRA POOJARI ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE; DATED : 18 TH JUNE, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-11, BANGALORE. 4. THE PR.CIT (CENTRAL), BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE