The ITO, Ward-5(1), Baroda V. M/s. Shree Krishna Enterprise, Baroda

ITA 1318/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63218 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Keywords: Competent authority
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER I.T.A. NO.1317/AHD/2010 A.Y.2006-07 WITH I.T.A. NO.1318/AHD/2010 A.Y.2007-08 THE INCOME TAX OFFICER, WARD-5(1), BARODA APPELLANTS VS. M/S SHREE KRISHNA ENTERPRISE, OPP. M.M. VORAS SHOWROOM, B/H VAISHNAV PARK, DABHOI ROAD, BARODA PAN-ABBFS4487P RESPONDENTS DEPARTMENT BY : SHRI Y.P. VERMA, SR. D.R. ASSESSEE BY : SHRI MUKUND BAKSHI, A.R. DATE OF HEARING : 29.11.2012 DATE OF PRONOUNCEMENT : 14.12.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE ARE REVENUES APPEAL AGAINST THE SEPARATE ORD ERS OF LD. CIT(A)-V, BARODA DATED 19.02.2010. 2. SINCE BOTH THE APPEALS BELONG TO THE SAME ASSES SEE AND FACTS ARE SIMILAR, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER BY TAKING THE FACTS OF A.Y. 2006-07. 3. REVENUE HAS TAKEN FOLLOWING EFFECTIVE COMMON GRO UND IN BOTH THE APPEALS, EXCEPT THE AMOUNT:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING TO VERIFY WHETHER THE DEVELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND IF SO THE DEDUCTION U/S 80IB(10) OF RS.5,87,025 /- (RS.42,39,070/- I.T.A. NO.1317/AHD/2010, A.Y.2006-07 WITH I.T.A. NO.1318/AHD/2010, A.Y.2007-08 2 IN ITA NO.1318/AHD/2010) AS CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. 4. ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPME NT AND CONSTRUCTION OF RESIDENTIAL HOUSES. DURING THE COURSE OF ASSESSMEN T PROCEEDING IT WAS OBSERVED BY THE A.O. THAT IN THE PROPOSED LAY OUT PLAN, DEVE LOPMENT PERMISSION FOR VADODARA MUNICIPAL CORPORATION AND THE DEVELOPMENT AGREEMENT, THE ASSESSEE WAS NOT THE ACTUAL OWNER OF THE LAND ON WHICH THE P ROJECT CALLED VAISHNAV VATIKA IS BUILT. AS PER THE ENTITLEMENT FOR A DEDUCTION U /S 80IB(10), THE APPROVAL OF THE PROJECT IS NOT GRANTED TO THE FIRM CALLED SHREE KRI SHNA ENTERPRISE. THE PERMISSION IS GRANTED BY THE V.M.C. ON THE APPLICATION MADE BY THE APPLICANT SHRI HITESH K. SHAH AND OTHERS, THE SAME PERMISSION FROM THE V.M.C . IS GRANTED ON 27.06.2005. FURTHER, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10 ) OF THE ACT OF RS.5,87,025/-. AFTER GOING THROUGH THE RETURN OF INCOME OF THE ASS ESSEE AS WELL AS SUBMISSION, IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE FIRM IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. DISALLOWANCE ON ASSESSEES CL AIM U/S 80IB(10) WAS MADE ON FOLLOWING GROUNDS:- (I) THE LAND IS NOT IN THE NAME OF THE FIRM. OWNER SHIP OF LAND IS AN ESSENTIAL ELEMENT WHICH CARRIES WITH IT THE RIGHT T O DEVELOP THE LAND AND BUILD HOUSING PROJECTS THEREON. AO SAYS THAT T HE DEVELOPER FIRST SHOULD PURCHASE THE LAND AND THEN TAKEN NECESSARY P ERMISSION TO CONSTRUCT. (II) APPELLANT IN THE INSTANT CASE HAS ACTED MEREL Y AS AN AGENT FOR COLLECTION OF THE LAND CONSIDERATION ON BEHALF OF THE LAND OWN ER AND A CONTRACTOR FOR THE CONSTRUCTION OF THE HOUSE ON BEHALF OF THE UNIT HOLDERS. (III) THE APPROVAL FOR THE PROJECT IS GRANTED BY TH E COMPETENT AUTHORITY IN THE NAME OF THE LAND OWNER ONLY. (IV) THE APPELLANT IS NOT A BUILDER OR DEVELOPER BU T A CONTRACTOR AND THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. I.T.A. NO.1317/AHD/2010, A.Y.2006-07 WITH I.T.A. NO.1318/AHD/2010, A.Y.2007-08 3 5. BEFORE LD. CIT(A) RELIANCE WAS PLACED BY THE ASS ESSEE ON THE DECISION OF JURISDICTIONAL ITAT IN THE CASE OF M/S RADHE DEVELO PERS VS. ITO, 23 SOT 420(2008). IT WAS ALSO POINTED OUT THAT THE ASSESS EE HAD INCURRED ALL EXPENSES IN RESPECT OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT AND ALL THE EXPENSES RELATING TO PAYMENT TO V.M.C. AND G.E.B. FOR OBTAIN ING DRAINAGE AND ELECTRICITY CONNECTION WERE BORN BY THE ASSESSEE AND THAT THE L AND OWNERS RECEIVED ONLY THE CONSIDERATION FOR PURCHASE OF LAND AND ALL RISKS AN D REWARDS WERE VESTED IN THE DEVELOPERS. 6. LD. CIT(A) DIRECTED THE A.O. TO ALLOW THE DEDUCT ION U/S 80IB(10) OF THE ACT TO THE ASSESSEE BY OBSERVING AS UNDER:- I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE, S UB MISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSESSIN G OFFICER. ON THE MAIN ISSUE OF DEDUCTION U/S 80IB(10), IT IS SEEN TH AT ALTHOUGH, THE ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT AND AG AINST REVENUE BY THE ORDER OF THE JURISDICTIONAL ITAT, IN THE CASE O F RADHE DEVELOPERS VS. ITO WARD 3(2) BARODA NO.2482/AHD/2006 A BENCH AHMEDABAD, HOWEVER THE DECISION WAS PARTLY MODIFIED BY THE SUBSEQUENT DECISION IN THE CASE OF ITO VS. M/S SHAK TI CORPORATION ITA NO.1503/AHD/2008 DATED 07/11/2008 WHEREIN, THE HON BLE ITAT HAS INDICATED THAT THE BENEFIT UNDER 80IB(10) WOULD BE AVAILABLE IF THE DEVELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND THE BENEFIT W OULD BE DENIED IF THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERATION AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE PROJECT ON B EHALF OF THE LAND OWNER. FURTHER, HONBLE APEX COURT IN THE CASE OF FAQIR CHAND GULATI VS. UPPAL AGENCIES PVT. LTD. & ANR. (CIVIL APPEAL N O.3302 OF 2005) DATED 10/07/2008 HAS HELD AS UNDER: I) A DEVELOPMENT AGREEMENT IS ONE WHERE THE LAND HOLDE R PROVIDES THE LAND. THE BUILDER PUTS UP A BUILDING. THEREAF TER, THE LAND OWNER AND BUILDER SHARE THE CONSTRUCTED AREA. THE BUILDER DELIVERS THE OWNERS SHARE TO THE LAND HOLDER AND R ETAINS THE BUILDERS SHARE. THE LAND HOLDER SELLS/TRANSFERS U NDIVIDED SHARE/S IN THE LAND CORRESPONDING TO THE BUILDERS SHARE OF THE BUILDING TO THE BUILDER OR HIS NOMINEES. THE LAND HOLDER WILL HAVE NO SAY OR CONTROL IN THE CONSTRUCTION OF HAVE ANY SAY AS TO I.T.A. NO.1317/AHD/2010, A.Y.2006-07 WITH I.T.A. NO.1318/AHD/2010, A.Y.2007-08 4 WHOM AND WHAT COST THE BUILDERS SHARE OF APARTMENT S ARE TO BE DEALT WITH OR DISPOSED OF. SUCH AN AGREEMENT IS NO T A JOINT VENTURE IN THE LEGAL SENSE. IT IS A CONTRACT FOR SERVICES. II) ON THE OTHER HAND, AN AGREEMENT BETWEEN THE OWNER O F A LAND AND A BUILDER, FOR CONSTRUCTION OF APARTMENTS AND S ALE OF THOSE APARTMENTS SO AS TO SHARE THE PROFITS IN A PARTICUL AR RATIO MAY BE A JOINT VENTURE, IF THE AGREEMENT DISCLOSES AN INTE NT THAT BOTH PARTIES SHALL EXERCISE JOINT CONTROL OVER THE CONSTRUCTION/DEVELOPMENT AND BE ACCOUNTABLE TO EACH OTHER FOR THEIR RESPECTIVE ACTS WITH REFERENCE TO THE PROJECT . III) THE TITLE OF THE DOCUMENTS IS NOT DETERMINATIVE OF THE NATURE AND CHARACTER OF THE DOCUMENTS, THOUGH THE NAME MAY USU ALLY GIVE SOME INDICATION OF THE NATURE OF THE DOCUMENT. THE USE OF THE WORDS JOINT VENTURE OR COLLABORATION IN THE AGR EEMENT WILL NOT MAKE THE TRANSACTION A JOINT VENTURE, IF THERE ARE NO PROVISIONS FOR SHARED CONTROL AND LOSSES. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW THE REVEN UE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE A.O. AND SUBMITTED THAT SINCE THE LAND IS NOT IN TH E NAME OF ASSESSEE FIRM AND ASSESSEE IS NOT A BUILDER OR DEVELOPER BUT A CONTRA CTOR, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. CONCLUDING HIS ARGUMENT LD . D.R. SUBMITTED THAT THE ORDER PASSED BY LD. CIT(A) ALLOWING THE DEDUCTION U/S 80I B MAY KINDLY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. LD. COUNSEL OF THE A SSESSEE, ON THE OTHER HAND, PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL I TAT IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND HONBLE APEX COURT DECISION IN THE CASE OF FAQIR CHAND GULATI (SUPRA) AND SUBMITTED THAT SINCE THE ASSESSE E WAS HAVING DOMINANT CONTROL OVER THE PROJECT AND DEVELOPED THE PROJECT ON ITS O WN COST, LD. CIT(A) HAS RIGHTLY ALLOWED THE DEDUCTION U/S 80IB OF THE ACT. THEREFO RE, THE ORDER PASSED BY HIM MAY KINDLY BE UPHELD. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THE A.O. HAS DENIED THE DEDUCTION U/S 80IB OF THE ACT ON THE GROUND THAT ASSESSEE IS NOT I.T.A. NO.1317/AHD/2010, A.Y.2006-07 WITH I.T.A. NO.1318/AHD/2010, A.Y.2007-08 5 THE OWNER OF THE LAND AND HE WAS MERELY A CONTRACTO R FOR CONSTRUCTION OF THE PROJECT. LD. CIT(A), ON THE OTHER HAND, AFTER EXAM INING THE DEVELOPMENT AGREEMENT DATED 14.03.2005 FOUND THAT ASSESSEE HAD DOMINANT CONTROL OVER THE PROJECT AND FOR DEVELOPMENT OF THE ENTIRE PROJECT T HE ASSESSEE HAD UNDERTAKEN THE ENTIRE RISKS AND REWARD AND STOOD IN A POSITION AS THAT OF A DEVELOPER. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT LD. CIT(A ) HAD RIGHTLY PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL ITAT IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF FA QIR CHAND GULATI (SUPRA) WHILE ALLOWING DEDUCTION U/S 80IB(10) OF THE ACT FOR RS.5 ,87,025/-. THE ORDER PASSED BY LD. CIT(A), DOES NOT REQUIRE ANY INTERFERENCE ON OU R PART AND THE SAME IS HEREBY UPHELD. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14.12.2012 SD/- SD/- (T.R. MEENA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD