The ITO, Ward-9(1), Ahmedabad V. M/s. Pranami Builders, Ahmedabad

ITA 1376/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1341 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R REWAR
• Assessee Lawyers: A C BRAHMAKSHATRIYA
• Keywords: Capital asset; Retrospective amendment
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM, & SHRI MANISH BORAD , AM. ITA NO.1376/AHD/2012 ASST. YEAR: 2008-09 ITO, WARD-9(1), AHMEDABAD VS. M/S PRANAMI BUILDERS, 120/4 RADHE CHEMBERS, PRANAMI NAGAR, VASTRAL ROAD, VASTRAL, AHMEDABAD. APPELLANT RESPONDENT PAN AAJFP 3275F APPELLANT BY SHRI A. R. REWAR, SR.DR RESPONDENT BY SHRI A. C. BRAHMAKSHATRIYA, AR DATE OF HEARING: 31.5.2016 DATE OF PRONOUNCEMENT: 2/6/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XV, AHMEDABAD, DATED 23 RD APRIL, 2012 IN APPEAL NO.CIT(A)- XV/9(1)/231/10-11 PASSED AGAINST ORDER U/S 143(3) O F THE IT ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2008-09 ON 2 3.11.2010 BY ITO, WD-9(1), AHMEDABAD. THE REVENUE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE'S CLAIM FOR DEDUCTION OF RS.1,77,38,316/- U/S. 80IB(1 0) OF THE IT. ACT. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 2 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN HOLDING THAT THE ASSESSEE FULFILLS THE CONDITION S LAID DOWN FOR CLAIMING DEDUCTION U/S.80IB(10) EVEN WHEN THE LAND WAS IN TH E NAME OF MADHUSUDAN CO.-OP. HOUSING SOCIETY LTD., WHICH IS A SEPARATE LEGAL ENTITY IN THE EYES OF LAW AND THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE SOCIETY. THE ENTIRE RESPONSIBILITY TO EXEC UTE THE HOUSING PROJECT AND ABIDE BY THE TERMS AND CONDITIONS OF ITS APPROVAL R IGHT FROM THE INCEPTION OF THE PROJECT TILL ITS COMPLETION RESTS WITH THE SOCI ETY. THE LOCAL AUTHORITY HAD GRANTED PERMISSION FOR DEVELOPMENT AND CONSTRUCTION OF THE PROJECT TO THE SOCIETY. ASSESSEE WAS JUST A CONTRACTOR OF THE LAND OWNER CONSTRUCTING RESIDENTIAL UNITS AND NOT A DEVELOPER. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD OUGHT TO HAVE UP HELD THE ORDER OF THE ASSESSING OFFICER. 4) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C OMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD MAY BE SET-ASIDE AND THAT O F THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECTS. E -RETURN OF INCOME WAS FILED ON 22.09.2008 DECLARING INCOME AT RS.NIL AFTER CLAIMING DEDUCTION OF RS.1,77,38,316/- U/S 80IB(10) OF THE A CT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT WAS ISSUED ON 23.9.2009. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT THE IMPUGNED PR OJECT, THE INCOME OF WHICH ASSESSEE HAS CLAIMED AS DEDUCTION U/S 80IB (10) OF THE ACT, THE LAND ON WHICH THE PROJECT WAS CONSTRUCTED WAS N OT OWNED BY THE ASSESSEE NOR ANY APPROVAL FROM THE LOCAL AUTHORITIE S FOR DEVELOPMENT AND CONSTRUCTION OF THE SAID PROJECT WAS ACCORDED I N THE NAME OF ASSESSEE AND ACCORDINGLY DENIED THE DEDUCTION U/S 8 0IB(10) OF THE ACT ON THE BASIS OF FOLLOWING REASONS :- ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 3 1 THE ASSESSEE IS NOT BOTH DEVELOPER AND BUILDER AS REQUIRED BY THE PROVISIONS OF SECTION 80IB(10). ASSESSEE IS NOT A D EVELOPER BECAUSE THE ASSESSEE DID NOT CONCEPTUALISE AND OWN THE PROJECT IN AS MUCH AS THE ASSESSEE IS NOT THE OWNER OF THE LAND AND THE APPRO VAL WAS NOT ISSUED TO IT BY THE LOCAL AUTHORITY. 2 THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVE LOPMENT AGREEMENT WITH THE LAND OWNER AND CONSTRUCTION WAS DONE AS PER THE AGREEMENT AND HENCE THE ASSESSEE IS MERELY A CONTRACTOR FOR THE P URPOSES OF CONSTRUCTION OF THE PROJECT. 3 THE ASSESSEE HAS NOT SOLD ANY UNIT TO THE PURCHAS ER BUT THE SOCIETY HAS EXECUTED THE SALE DEEDS AS A SELLER AND THE ASSESSE E JOINED ONLY AS A CONFIRMING PARTY TO THE TRANSACTION. THIS ALSO PROV ES THAT THE ASSESSEE WAS MERELY A CONTRACTOR/ AGENT OF THE SOCIETY. 4. ASSESSEE HAS ALSO FAILED TO PRODUCE BU PERMISSI ON. 5. AS PER THE AMENDMENT TO SECTION 80IB BY THE FIN ANCE ACT 2009, A WORKS CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PER SON IS NOT ELIGIBLE FOR THE DEDUCTION U/S 80IB. ANY PERSON INCLUDES THE MADHUSUDAN CO- OP..HSG. SOCIETY LTD.,, WHICH IS A LEGAL ENTITY. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) BEFORE WHOM ASSESSEE MADE VARIOUS SUBMISSIONS AND ALSO REL IED ON THE DECISION OF HON. JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. RADHE DEVELOPERS 341 ITR 403 (2012). LD. CIT(A) ACC EPTED THE CONTENTIONS OF ASSESSEE AND DELETED THE DISALLOWANC E MADE BY LD. ASSESSING OFFICER BY ALLOWING DEDUCTION U/S 80IB(10 ) OF THE ACT BY RELYING ON THE JUDGMENT OF HON. JURISDICTIONAL HIGH CURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPRA) BY OBSERVING AS UN DER :- 14.3. THE FACTS OF THE APPELLANT ARE IDENTICAL WITH THE 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. THEREFO RE FOLLOWING THE RATIO OF HON'BLE GUJARAT HIGH COURT IN THIS CASE, THE DISALLOWANCE A ND THEREBY ADDITIONS MADE BY THE AO IN THE CASE OF THE APPELLANT ARE NOT JUSTIFI ED AND DIRECTED TO BE DELETED. APPELLANT GETS RELIEF OF RS.1,77,38,320. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 4 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. LD. AR REITERATED THE SUBMISSIONS MADE BEFORE TH E LD. CIT(A) WHICH ARE REPRODUCED BELOW :- WE HAVE UNDERTAKEN THE HOUSING PROJECT AS A DEVELOPER AND BUILDER AND CLAIMED THE DEDUCTION U/S 80-18(10). WE HAVE CLAIMED DEDUCTION PR OPERLY AND CORRECTLY AND AS PER THE PROVISIONS OF THE ACT. THE LEGITIMACY AND GENUINENESS OF THE CLAIM IS BASED ON THE FOLLOWING GROUNDS: 1 OURS IS AN UNDERTAKING DEVELOPING AND BUILDING HOUSIN G PROJECTS APPROVED BY THE LOCAL AUTHORITIES. 2. WE HAVE COMPLIED WITH ALL CONDITIONS PRESCRIBED IN SECTION 80-18(10) OF THE INCOME TAX ACT, 1961 FOR CLAIM OF DEDUCTION U/S 80-18(10) N AMELY APPROVAL, COMMENCEMENT PERIOD, COMPLETION PERIOD, MINIMUM AREA OF PLOT, MAXIMUM AREA OF UNIT ETC. 3. OUR UNDERTAKING FALLS UNDER THE CATEGORY OF DEVELOPE R AND BUILDER AND DOES NOT FALL UNDER THE CATEGORY OF WORKS CONTRACTOR AS PER EXPLAN ATION TO SECTION 80-18(10) DUE TO FOLLOWING REASONS AND CONTENTIONS: A. THE DEVELOPER IS THAT WHO IS INVOLVED IN OVERAL L ACTIVITIES OF THE PROJECT AND ALSO MAKE INVESTMENT IN THE PROJECT WHILE THE WORKS CONTRA CTOR IS ASSIGNED PARTICULAR TASK AND HE IS NEITHER CONCERNED WITH OTHER ACTIVITIES A ND OVERALL DEVELOPMENT NOR HE MAKES INVESTMENT IN THE PROJECT. OUR UNDERTAKING IS F ULLY INVOLVED IN OVERALL ACTIVITIES SINCE INCEPTION TO COMPLETION OF THE PROJECT AND ALSO M ADE INVESTMENT IN PURCHASE OF LAND AND CONSTRUCTION OF BUILDING UNITS HENCE THE CATE GORY OF OURS IS A DEVELOPER/BUILDER AND NOT AS A WORKS CONTRACTOR. B. WE HAVE MADE INVESTMENT IN PURCHASE OF LAND, PUR CHASE OF MATERIALS, IN STOCK OF MATERIALS AND WORK IN PROGRESS, OUTSTANDING TO DEBTOR SOCIETY ETC.. C. THE LAND WAS PURCHASED BY THE PARTNERS AND TH EIR RELATIVES FROM THE ORIGINAL OWNERS OF THE LAND AND TOTAL INVESTMENT WAS MADE BY T HEM AND LATER ON THE SAME WAS TRANSFERRED TO THE SOCIETY FOR CONVENIENCE SAKE. THE INVESTMENT WAS OF PARTNERS AND RELATIVES OF THEM TILL DATE AS THE SAME WAS RECEI VABLE FROM THE SOCIETY AND RECEIVED PARTLY IN 3-4 YEARS. THIS IS VERY DEAR FROM T HE PURCHASE DEED AND ACCOUNT COPY OF THE SOCIETY FROM THE BOOKS OF PARTNERS AND THEIR RELATIVES SHOWING SALE OF LAND, INVESTMENT HELD, OUTSTANDING AMOUNT AGAINST LAND TILL DATE. HENCE IT IS VERY CLEAR THAT THE PROJECT INCLUDING THE LAND WAS FUNDED BY THE PARTNERS OF THE FIRM AND THERE IS NO QUESTION OF TREATING THEM AS WORKS CONTR ACTOR RATHER THAN DEVELOPER/BUILDER, D. THE APPROVAL OF THE PLAN WAS ALSO GOT APPROVED B Y THE PARTNER OF THE FIRM AS POWER OF ATTORNEY HOLDER OF OWNERS OF THE LAND. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 5 E. THE UNDERTAKING AND ITS PARTNERS WERE INVOLVED IN FLOATING THE PROJECT, GETTING NECESSARY APPROVALS FOR DEVELOPMENT AND CONSTRUCTION, PROCURING THE BUILDING MATERIALS, BRINGING MATERIALS TO SITE, CONSTRUCTION A CTIVITY INVOLVING LABOUR AND MACHINERY, GETTING THE BUILDING USE PERMISSION, SELLING UNITS TO THE PROSPECTIVE BUYERS. THE TASKS STATED HEREINABOVE ARE NOT OF THE WORKS CONTRACTOR BUT OF THE DEVELOPER AND BUILDER HENCE THE UNDERTAKING IS DEVELO PER/BUILDER AS REQUIRED BY THE EXPLANATION TO SECTION 80-18(10} OF THE ACT. F. THE SOCIETY ENTERED INTO AN AGREEMENT WITH TH E UNDERTAKING OF DEVELOPMENT OF THE PROJECT ASSIGNING OVERALL ACTIVITIES. THE AGREEME NT WAS NOT OF THE NATURE OF A WORKS CONTRACT. THIS IS VERY CLEAR FROM THE COPY OF D EVELOPMENT AGREEMENT ENCLOSED. G. AS PER CLAUSES OF DEVELOPMENT AGREEMENT, IT IS DEAR THAT THE ASSIGNMENT WAS OF DEVELOPER/ BUILDER NOT AS WORKS CONTRACTOR. THE CLA USES ARE AS UNDER: 1. CLAUSE NO.3 - SOCIETY HAS HANDED OVER THE LAND TO THE FIRM FOR CO NSTRUCTION AS PER APPROVED PLAN AFTER LAND LEVELING AND DEVELOPMENT OF COMMON AMINITIES A ND TO REGISTER THE MEMBERS FOR ALLOTMENT OF UNITS UNDER THE AGREED TERMS AND CONDI TIONS. THE ABSTRACT OF TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT IS AS UNDER : A. TO PLAN FOR DEVELOPMENT OF WHOLE PLOT OF LAND INCLUDING COMMON FACILITIES B. TO REGISTER MEMBERS OF THE SOCIETY AND TO MAKE FINANCIAL TRANSACTIONS WITH THEM AND ISSUE RECEIPTS THEREOF. C. TO COLLECT THE OUTSTANDING AMOUNT FROM MEMBERS , TO HAND OVER THE POSSESSION OF THE UNIT TO THE MEMBERS AND TO CONSTRUCT AS PER APPROVE D PLAN, D. TO PURCHASE MATERIALS IN THE NAME OF FIRM AND TO MAKE PAYMENT THEREOF E. TO MAKE FINANCIAL ARRANGEMENT WITH BANKERS, SHROFFS, FINANCIAL INSTITUTIONS OR OTHER PERSONS IF NEED OF FINANCE ARISES AND TO DO A LL LEGAL PROCEEDINGS FOR THIS PURPOSE AND THE FIRM SHALL BE LIABLE FOR REPAYMENT OF THE LOANS TAKEN F. TO REVISE THE PLAN IF NEED ARISES AND GET AP PROVAL THEREOF 4. THUS WE WERE ASSIGNED THE OVERALL ACTIVITIES OF DEVELOPMENT AND BUILDING THE UNITS OF THE PROJECT AND WE HAVE FULFILLED ALL SUCH ASSIGNMENTS. WHAT ELSE ACTIVITIES ARE LEFT WHICH ARE REQUIRED TO BE DONE TO FALL IN THE CATEGORY OF DEVE LOPER OF THE HOUSING PROJECT. HENCE THE REQUIREMENT OF THE EXPLANATION ADDED VIDE AMENDMENT MADE IN FINANCE 3111,2009 TO SECT/ON 80-13(10) IS FULLY SATISFIED. AS PER AFORES AID EXPLANATION IT IS NOT REQUIRED THAT THERE SHOULD BE LAND IN OWN NAME BUT THERE SHOULD B E THE NATURE OF DEVELOPER AND ALSO INVESTMENT IN PROJECT FULLY JUSTIFIES THE NATURE OF DEVELOPER. HENCE WE HAVE ACTED AS BUILDER AND DEVELOPER AND NOT AS WORKS CONTRACTOR. 5. THE ABOVE CLAUSES CLEARLY PROVES THAT THE UNDER TAKING WAS DEVELOPER AND NOT AS WORKS CONTRACTOR BECAUSE THE UNDERTAKING EXECUTED OVERALL ACTIVITIES OF THE PROJECT AND ALSO MADE INVESTMENT IN LAND AND IN CONSTRUCTION. THE DE VELOPMENT AGREEMENT CLARIFIES THE SCOPE STATING THE DEVELOPMENT WITH INVESTMENT. 6. WE FURNISH HEREWITH FOLLOWING DOCUMENTS IN SUPP ORT OF OUR CLAIM FOR YOUR PERUSAL: 1. COPY OF LAND PURCHASE DEED 2. COPY OF DEVELOPMENT AGREEMENT 3. COPY OF ACCOUNT COPIES OF SOCIETY IN THE BOOKS OF PARTNERS AND THEIR RELATIVES WHO HAS ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 6 INVESTED IN LAND OF THE PROJECT 7. UNDER THE CIRCUMSTANCES WE REQUEST YOUR HONOUR TO ALLOW US THE CLAIM OF DEDUCTION U/S 80-18(10) OF THE INCOME TAX ACT, 1961 AS OUR CLAIM IS GENUINE AND AS PER THE PROVISIONS OF THE ACT' 6. LD. AR FURTHER SUBMITTED THAT ON ONE HAND LD. AS SESSING OFFICER DENIED THE DEDUCTION U/S 80IB(10) OF THE ACT FOR AS ST. YEAR 2008-09 AND ON THE OTHER HAND, THE CLAIM OF ASSESSEE U/S 80 IB(10) OF THE ACT ON THE SAME PROJECT HAS BEEN ALLOWED FOR ASST. YEAR 2009-10 AND ASST. YEAR 2010-11. HOWEVER, LD. AR MENTIONED THAT FOR ASST. YEAR 2009-10 THE CASE OF ASSESSEE WAS NOT SELECTED FOR S CRUTINY ASSESSMENT BUT FOR ASST. YEAR 2010-11 ASSESSMENT WA S COMPLETED U/S 143(3) OF THE ACT AND DEDUCTION U/S 80IB(10) OF THE ACT WAS ALLOWED AT RS.64551443/-. 7. THE LD. AR FURTHER SUBMITTED THAT THE FACTS OF T HE PRESENT CASE ARE IDENTICAL TO THE FACTS ADJUDICATED BY THE HON. TRIBUNAL IN ITA NO.3152/AHD/2011 FOR AY 2008-09 IN THE CASE OF ITO- WD-9(2) AHMEDABAD VS. M/S HARIOM CORPORATION VIDE ORDER DAT ED 10/5/2016. FURTHER TO STRENGTHEN HIS CONTENTIONS, HE PLACED ON RECORD A COMPARATIVE CHART SHOWING THE FACTS OF M/S HARION C ORPORATION AND THE FACTS OF THE CASE OF ASSESSEE WHICH ARE REPRODU CED BELOW :- A COMPARATIVE CHART SHOWING THE FACTS OF M/S. HARIO M CORPORATION AND THE FACTS OF THE RESPONDENT PARTNERSHIP FIRM: THE RESPONDENT PARTNERSHIP FIRM M/S. PRANAMI BUILDERS [OBSERVATION OF THE A.O. IN THE ASSESSMENT ORDER- PARA 2.24 ON PAGE NO.15] M/S. HARIOM CORPORATION. [OBSERVATION OF THE A.O. IRUTHE ASSESSMENT ORDER- PARA 7.10 ON PAGE NO.18 ] REMARKS THE ASSESSEE IS NOT BOTH THE DEVELOPER AND BUILDER AS THE ASSESSEE IS NOT BOTH THE DEVELOPER AND BUILDER AS NIL ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 7 REQUIRED BY THE PROVISIONS OF SECTION 80 IB(10). ASSESSEE IS NOT A DEVELOPER BECAUSE THE ASSESSEE DID NOT CONCEPTUALISE AND OWN THE PROJECT IS AS MUCH AS THE ASSESSEE IS NOT THE OWNER OF THE LAND AND THE APPROVAL WAS NOT ISSUED TO IT BY THE LOCAL AUTHORITY. REQUIRED BY THE PROVISIONS OF SECTION 80 IB(10). ASSESSEE IS NOT A DEVELOPER BECAUSE THE ASSESSEE DID NOT CONCEPTUALISE AND OWN THE PROJECT IS AS MUCH AS THE ASSESSEE IS NOT THE OWNER OF THE LAND AND THE APPROVAL WAS NOT ISSUED TO IT BY THE LOCAL AUTHORITY. THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE LANDOWNER AND THE CONSTRUCTION WAS DONE AS PER THE AGREEMENT AND HENCE THE ASSESSEE IS MERELY CONTRACTOR FOR THE PURPOSES OF CONSTRUCTION OF THE PROJECT THE ASSESSEE HAS NOT TAKEN ANY INVESTMENT RISK IN THE PROJECT. THE RISK TAKEN IS PRINCIPALLY BY THE SOCIETY. THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE LANDOWNER AND THE CONSTRUCTION WAS DONE AS PER THE AGREEMENT AND HENCE THE ASSESSEE IS MERELY CONTRACTOR FOR THE PURPOSES OF CONSTRUCTION OF THE PROJECT. NIL THE ASSESSEE HAS NOT SOLD ANY UNIT TO THE PURCHASER BUT THE SOCIETY HAS EXECUTED THE SALE- DEED AS A SELLER AND THE ASSESSEE JOINED ONLY AS A CONFIRMING PARTY TO THE TRANSACTION. THESE ALSO PROVES THAT THE ASSESSEE WAS MERELY A CONTRACTOR/AGENT OF THE SOCIETY. THE ASSESSEE HAS NOT SOLD ANY UNIT TO THE PURCHASER BUT THE SOCIETY HAS EXECUTED THE SALE- DEED AS A SELLER AND THE ASSESSEE JOINED ONLY AS A CONFIRMING PARTY TO THE TRANSACTION. THESE ALSO PROVES THAT THE ASSESSEE WAS MERELY A CONTRACTOR/AGENT OF THE SOCIETY NIL ASSESSEE -AS ALSO FAILED TO PRODUCE BU PERMISSION. NA DEALT WITH AT PARA-12 ON PAGE NO.9 OF THE APPELLATE ORDER OF CIT(A) AS PER THE AMENDMENT TO SECTION 80 IB BY THE FINANCE ACT 2009, IT WORKS CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PERSON IS NOT ELIGIBLE FOR THE, DEDUCTION UNDER SECTION 80 IB. ANY PERSON INCLUDES THE SOCIETY WHICH IS A LEGAL ENTITY. AS PER THE AMENDMENT TO SECTION 80 IB BY THE FINANCE ACT 2009, IT WORKS CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PERSON IS NOT ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80 IB. ANY PERSON INCLUDES THE SOCIETY WHICH IS A LEGAL ENTITY. NA ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 8 7A. THE LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFFICER AND DID NOT OBJECT TO THIS EXTENT THAT THE FACTS OF THE CAS E OF RESPONDENT AND THAT OF M/S HARIOM CORPORATION ARE IDENTICAL. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY GRIEVANCE OF THE REVENUE TH ROUGH THIS GROUND OF APPEAL IS AGAINST THE ACTION OF LD. CIT(A) DIREC TING THE ASSESSING OFFICER TO ALLOW ASSESSEES CLAIM FOR DEDUCTION OF RS.1,77,38,316/- U/S 80IB(10) OF THE ACT BY COMPLETELY IGNORING THE FACT THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN FOR CLAIMING U/S 80IB(10) OF THE ACT, EVEN WHEN THE LAND ON WHICH TH E PROJECT HAS BEEN CONSTRUCTED WAS IN THE NAME OF MADHUSUDAN CO-O P. HOUSING SOCIETY LTD. WHICH IS A SEPARATE LEGAL ENTITY. 9. WE OSERVE THAT THE FACTS OF THE CASE OF ASSESSEE ARE SIMILAR TO THE FACTS OF THE CASE OF HARIOM CORPORATION (SUPRA) AND THE ASSESSEE HAS BEEN ABLE TO PROVE THAT EXCEPT THE FACT THAT TH E ASSESSEE WAS NOT THE OWNER OF THE LAND AND PERMISSION WAS NOT ACCORD ED FOR DEVELOPMENT OF THE PROJECT BY LOCAL AUTHORITIES IN ITS NAME BUT ALL OTHER ACTIVITIES RELATING TO DEVELOPMENT OF THE PRO JECT INCLUDING APPOINTMENT OF VARIOUS AGENCIES FOR CONSTRUCTION OF THE PROJECT, BOOKING OF THE UNITS ALONG WITH RECOVERY OF PURCHAS E CONSIDERATION AND TAKING ALONE ALL OTHER RISKS RELATING TO THE DE VELOPMENT AND COMPLETION OF THE PROJECT. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 9 10. WE FURTHER OBSERVE THAT CO-ORDINATE BENCH IN TH E CASE OF ITO- WD-9(2) AHMEDABAD VS. M/S HARIOM CORPORATION (SUPRA ) IN ITA NO.3152/AHD/2011 FOR AY 2008-09 VIDE ITS ORDER DATE D 10.5.2016 HAS DISMISSED THE APPEAL OF REVENUE BY OBSERVING AS UND ER :- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. REVENUE HAS RAISED VARIOUS GROUNDS OF AP PEAL BUT THE SOLITARY GRIEVANCE REVOLVES ROUND THE SINGLE ISSUE THAT LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW A SSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT AT RS.95,56,579/- , EVEN WHEN THE LAND ON WHICH THE PROJECT NAMELY PARTH BUNGLOWS CO- OP. HOUSING SOCIETY LTD. WAS NOT OWNED BY ASSESSEE AND THE ENTI RE RESPONSIBILITY TO EXECUTE THE HOUSING PROJECT AND ABIDE BY THE TER MS AND CONDITIONS OF ITS APPROVAL RIGHT FROM THE INCEPTION OF THE PRO JECT TILL ITS COMPLETION RESTS WITH THE SOCIETY AND ASSESSEE IS MERELY A CON TRACTOR AND NOT A DEVELOPER. FROM GOING THROUGH THE RECORD, WE OBSERV E THAT THE LAND BEARING PLOT NO.7/TP SCHEME NO.99 NANA CHILODA HA VING AN AREA OF 8,317 SQ. MTRS. WAS PURCHASED BY PARTH BUNGLOWS (NANA CHILODA) CO-OP. HOUSING SOCIETY LTD. AND ON THIS LAND PREVIO US OWNER WAS ACCORDED PERMISSION BY LOCAL AUTHORITY FOR DEVELOPM ENT AND CONSTRUCTION OF THE PROJECT DURING FINANCIAL YEAR 2 005-06 ON 2 ND JUNE, 2005 AND THEREAFTER THE ASSESSEE ENTERED INTO A DEV ELOPMENT AGREEMENT WITH PARTH BUNGLOWS CO-OP. HOUSING SOCIET Y LTD. WE OBSERVE THAT FOLLOWING EXPLANATION BELOW SECTION 80 IB(10) OF THE ACT WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 1.4.200 1 :- EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARE D THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY T O ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). NOW IN ORDER TO EXAMINE AS TO WHETHER THE ASSESSEE IS A DEVELOPER, WE OBSERVE THAT ASSESSEE HAS CARRIED OUT VARIOUS AC TIVITIES RIGHT FROM THE INCEPTION OF THE PROJECT TILL THE SALE OF LAST RESIDENTIAL UNIT AND THE SAME ARE ENUMERATED BELOW :- ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 10 SR.NO. TITLE AS A DEVELOPER 1. INITIATION CONCEPTION THE PARTNERS OF THE ASSESSEE FIRM HAVE TAKEN INITIATIVE AND HAD DESIGNED & CONCEIVED THE HOUSING PROJECT AND FLOATED IT. 2 FORMATION CO-OP. HSG. SO, FORMED FOR SMOOTH ADMINI STRATION SUBSEQUENTLY ON COMPLETION OF THE HOUSING PROJECT. 3 RELATIONSHIP THE OFFICER-BEARERS OF THE SOCIETY ARE NEAR RELATIVES OF THE PARTNERS OF THE FIRM. 4 INVESTMENT THE INVESTMENT OF LAND (BY THE PARTNERS OF THE FIRM) N.A. CHARGES + PLAN PASSING EXPENSES + ALL OTHER INCIDENTAL EXPENSES OF THE HOUSING PROJECT BORNE BORNE BY THE ASSESSEE-FIRM. 5. OWNERSHIP DEEMED OWNER BY VIRTUE OF RIGHT OF POSSES SION OVER THE LAND & STRUCTURE DEVELOPED ON IT AS PER DEVELOPMENT AGREEMENT PARA -5. 6 BROCHURE NAME/ADDRESSES/TELE NO. OF THE ASSESSEE FI RM IS VERY WELL APPEARED IN THE BROCHURE FOR BOOKING OR INFORMATION OF THE HOUSING PROJECT IS FLOATED. 7 PREPARATION OF PLANS THE ASSESSEE FIRM HAS PREPARED THE PLAN/GOT IT APPROVED FROM LOCAL AUTHORITY, ENGAGED ARCHITECT/STRUCTURAL ENGINEERS AND MADE FOLLOW UPS TO COMPLETE THE HOUSING PROJECT IN A FAIR WAY. 8 APPROVAL OF THE PLANS SOLELY RESPONSIBLE TO GET THE CONSTRUCTION LAY OUT PLANS APPROVED AS DESIGNED BY IT. 9 EXECUTION OF CIVIL WORK SOLELY RESPONSIBLE AS PER DEVELOPMENT AGREEMENT 10 ADVERTISEMENT THE ASSESSEE-FIRM HAS ADVERTISED THE PROJECT AND GOT BOOKING OF THE RESIDENTIAL UNITS. 11 ACCEPTANCE OF BOOKING/SELLING PRICE AS PER AGREEMENT THE ASSESSEE FIRM HAS ISSUED RECEIPTS, ALLOTMENT LETTERS, POSSESSION LETTERS & A LL OTHER LEGAL DOCUMENTS. 12 RESPONSIBILITY THE ASSESSEE FIRM IS RESPONSIBLE OF EVERY WORK OF THE HOUSING PROJECT. 13 AUTHORITY AS PER AGREEMENT, THE ASSESSEE HAS ISSUE D RECEIPTS, ALLOTMENT LETTERS, POSSESSION LETTERS & A LL OTHER LEGAL DOCUMENTS/TO CANCEL THE BOOKING/REPAY THE ADVANCE MONEY RECEIVED FROM THE PROPOSED BUYER/ BOOKER/TO ENROLL AS SUBSEQUENT MEMBER OF THE HOUSING PROJECT. 14 AGREEMENT DEVELOPMENT AGREEMENT PROVED THAT IT HAS ENTERED INTO TO DEVELOP THE HOUSING PROJECT, AS A WHOLE INCLUDING ALL NECESSARY AMENITIES/ROADS/STREETLIGHT S /MAINTENANCE OF THE DEVELOPMENT SITE UP TO POSSESSION OF THE HOUSING PROJECT AS A WHOLE TO ALL THE RESIDENTIAL UNIT BUYERS/CUSTOMERS. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 11 15 CONTROL DOMAIN CONTROL ON THE WHOLE OF THE LAND OF THE PROJECT. 16 PRICE FIXATION THE ASSESSEE FIRM HAS FIXED THE CON SIDERATION/PRICE WITH PROPOSED BUYERS/ CUSTOMERS/ACTUAL USERS AND NOT WITH THE LAND OWNER SOCIETY. EVEN THE SOCIETY HAS NO AUTHORITY TO INTERFERE IN PRICE FIXATION WITH THE BUYER/MEMBER. 17 FLUCTUATION IN MARKET THE VARIATION IN SELLING PRICE OF THE RESIDENTIAL U NITS AFFECT THE PROFIT/LOSS OF THE ASSESSEE FIRM. 18 RISK INVOLVED IN WHOLE OF THE DEVELOPMENT OF TH E PROJECT/IF PROJECT FAILS, THE CHANCES OF LOSS WAS V ERY HIGH. BUT FORTUNATELY, THE PROJECT SUCCEEDS. 19 WORK THE ASSESSEE FIRMS DEVELOPMENTAL WORK INCLUD ES CIVIL CONSTRUCTION WORK. 20 MEANING DEVELOPER IS WIDER TERMS. MEANS DEVELOPER CAN BE SAID TO BE A CONTRACTOR BUT CANNOT VICE A VERSA 21 CONNECTION THE ASSESSEE FIRM WAS DIRECTLY CONNECTE D TO THE ACTUAL USERS/CUSTOMERS/MEMBERS/ BROKERS. THEY DO NOT KNOW THE LAND OWNER SOCIETY. 22 KEEPING BOOKS OF ACCOUNT ETC. THE ASSESSEE FIRM HAS KEPT THE BOOKS OF ACCOUNT/GETTING IT AUDITED/FILED RETURN OF INCOME REGULARLY. 23 POSSESSION ON COMPLETION OF THE HOUSING PROJECT, TH E POSSESSION OF EACH RESIDENTIAL UNIT IS GIVEN TO THE MEMBERS/BUYERS BY THE ASSESSEE FIRM. 24 MAINTENANCE THE ASSESSEE FIRM HAS MAINTAINED THE HO USING PROJECT UPTO COMPLETION OF THE HOUSING PROJECT, I.E . UPTO LAST SALE OF RESIDENTIAL UNIT. 8. FURTHER WE OBSERVE FROM THE DEVELOPMENT AGREEMEN T THAT ASSESSEE FIRM WAS HAVING CONTROL ON THE PROJEC T IN THE CAPACITY OF DEVELOPER WHICH IS JUSTIFIABLE ON THE B ASIS OF BELOW MENTIONED CLAUSES OF THE DEVELOPMENT AGREEMEN T BY VIRTUE OF WHICH ASSESSEE WAS APPOINTED AS A BUILDER FIRM :- 3. IT IS AGREED BY BOTH THE PARTIES THAT THE CONSTRU CTION AND DEVELOPMENT WORK SHALL BE IN ACCORDANCE WITH THE APPROVED PLAN. HOWEVER, A S EPARATE AGREEMENT BETWEEN THE PROPOSED/PROSPECTIVE BUYERS/PURCHASER/CUSTOMER A ND THE BUILDER-FIRM SHALL BE EXECUTED. THE PARTY OF THE FIRST PART SHALL NOT BE H ELD RESPONSIBLE FOR ANY DELAY IN WORK AND / OR QUALITY OF THE WORK. EACH BUYER WILT FREE TO INSPECT THE QUALITY OF THE WORK AND ON SATISFACTION ONLY, THE BUILDER-FIRM SHALL BE ENTITLED FOR THE CONSIDERATION OF THE WORK EXECUTED. ALT THE RISK AND CONTROL OVER TH E HOUSING PROJECT WOULD BE THAT OF M/S. HARIOM ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 12 5. EXCEPT AS PROVIDED IN THIS AGREEMENT, M/S. HARIOM CORPORATION IS AND AT ALL TIMES WILL BE INDEPENDENT BUILDER CUM DEVELOPER. M/S. HARI OM CORPORATION, THE PARTY OF THE OTHER PART HAS TO RAISE FUND FOR TH E DEVELOPMENT AND CONSTRUCTION WORK ON THEIR OWN. THE NECESSARY DEVELOPMENTAL EXPEN SES SHALL ALSO BE BORNE BY THE PARTNERSHIP FIRM. ANY PROFIT/LOSS ARISE ON THE DE VELOPMENTAL WORK OF THE HOUSING PROJECT SHALL BELONG TO M/S. HARIOM CORPORATION. 6. THE PARTY OF THE FIRST PART DOES NOT RETAIN THE R IGHT TO TERMINATE THIS AGREEMENT PRIOR TO THE SATISFACTION OF THE TERMS HEREOF. UPON THE OCCU RRENCE OF ANY BREACH OR DEFAULT BY M/S. HARIOM CORPORATION OF ANY TYPE OF THE TERMS, O BLIGATIONS AND COVENANT CONTAINED IN THIS AGREEMENT, IF IT OCCURS, IT SHOULD BE RESOLVED BY MUTUAL DISCUSSION ONLY. THE PARTY OF THE OTHER PART WILL FREE IN SELECTING THE ARCHITECT FOR ASSISTANCE AND TECHNICAL INFORMATION TO ASSIST M/S. HARIOM CORPORATIO N FOR COMPLETING THE CONSTRUCTION WORK. 9. M/S. HARIOM CORPORATION AGREES TO CARRY OUT THE CONSTRUCTION CUM DEVELOPER WORK ON THE LAND AS PER THE APPROVED PLAN AND FREE TO USE ANY ADVERTISEMENT OR OTHER MATERIALS OR OTHER INFORMATION FOR THE PURPOSE OF ADVERTISING, PROMOTING OR OTHERWISE FOR PUBLISHING THE HOUSE ACCOMMODATION. . 9. WE FURTHER OBSERVE THAT LD. CIT(A) WHILE ALLOWIN G THE ASSESSEES APPEAL OBSERVED AS UNDER :- 6. THE AO HAS NOT DISPUTED ANY OF THE CONDITIONS S TIPULATED FROM CLAUSE (A) TO CLAUSE (D) OF SECTION 80IB(10) W ITH RESPECT TO TIME LIMIT OF PERMISSIONS, TIME LIMIT OF COMPLETION, AREA OF L AND, BUILT-UP AREA LIMIT PRESCRIBED FOR THE RESIDENTIAL UNITS, AND PERCENTAGE OF COMMERCIAL CONSTRUCTION WHICH CAN BE UNDERTAKEN. HIS OBJECTION IS THAT THE APPELLANT IS NOT A DEVELO PER BECAUSE IT IS NOT THE OWNER OF THE LAND ON WHICH THE RESIDENTIAL UNITS WERE CONSTRUCTED. ACCORDING TO HIM THE APPELLANT IS A WO RKS CONTRACTOR EXECUTING CONSTRUCTION AUTHORIZED BY THE COOPERATIV E HOUSING SOCIETY AND IS THUS NOT ELIGIBLE FOR DEDUCTION BECA USE IT IS HIT BY THE EXPLANATION INSERTED IN THE ACT BY FINANCE ACT 2009 ACCORDING TO WHICH A WORKS CONTRACTOR WHO EXECUTES THE WORK AWAR DED BY ANY PERSON IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB. THE APPELLANT ACCORDING TO THE AO WORKED AS CONTRACTOR FOR CONSTR UCTING THE RESIDENTIAL UNITS AS AUTHORIZED BY THE COOPERATIVE HOUSING SOCIETY THROUGH THE DEVELOPMENT AGREEMENT. THIS OBJECTION OF THE AO HAS TO BE SEEN IN THE LIGH T OF THE TESTS LAID DOWN BY HON'BLE ITAT BENCH A AHMEDABAD DECISION DAT ED ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 13 7.11.2008 IN THE CASE OF M/S. SHAKTI CORPORATION, BARODA IN ITA NO.I503/AHD/2008 IN AY 2005-06 WHEREIN HON'BLE ITAT HAS HELD THAT WHERE THE APPELLANT IS FOUND HAVING PRACTICALL Y PURCHASED THE LAND AND HAS BORNE THE RISK OF DEVELOPMENT DEDUCTIO N SHOULD BE ALLOWED. 7. THE SUBMISSION OF THE APPELLANT DATED 2.5.2011 IN W HICH IT RATED THAT THE FUNDS TO THE COOPERATIVE HOUSING SOC IETY WERE MADE AVAILABLE BY THE APPELLANT WAS SENT TO THE AO FOR REMAND REPORT. REMAND REPORT OF THE AO WAS RECEIVED VIDE L ETTER DATED 7.9.2011. COUNTER COMMENTS OF THE APPELLANT ON REMA ND REPORT WERE RECEIVED VIDE LETTER DATED 17.10.2011. 8. THE AO IN HIS REPORT DATED 7.9.2011 STATED AS UN DER: *AS DIRECTED BY YOUR HONOUR THE AR OF THE ASSESSEE SUBMITTED THE COPY OF MGER ACCOUNT OF THE SOCIETY APPEARING IN THE BOOKS OF PARTNERS. ON PERUSAL OF THE SAME, IT IS NOTICED THAT PARTNERS HAVE PAID CAS H OF RS.52,000 ON 1Z4.2005 AND RS.3,50,000 (RS.1,50,000 + RS.1,50,000) ON 11.5 .2005 I.E. THE DATE OF PURCHASE OF LAND ON WHICH PROJECT IS DEVELOPED.' AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEEN TH AT IN THE REMAND REPORT THE AO HAS NOT DISPUTED THE LAND FUNDING ARG UMENT OF THE APPELLANT THEREFORE THE APPELLANT IS FOUND MEETING THE TEST OF HAVING PRACTICALLY PURCHASED THE LAND, SET FORTH IN HON'BLE ITAT DECISION IN THE CASE OF SHAKTI CORPORATION. 9. FURTHER IN THE REMAND REPORT THE AO HAS REITERAT ED THE ARGUMENTS MADE IN THE ASSESSMENT ORDER THAT THE APP ELLANT IS NOT THE OWNER OF THE LAND BECAUSE THE LAND OWNER HAS AP PLIED FOR HOUSING PLAN APPROVAL AND GOT THE PERMISSION TO DEV ELOP IN THEIR NAMES. TO EXAMINE THESE ARGUMENTS THE DEVELOPMENT A GREEMENT HAS TO BE REFERRED TO AS STATED BY HON'BLE ITAT 'A 1 BENCH AHMEDABAD IN THE CASE OF SHAKTI CORPORATION WHEREIN IN PARA 16 OF THE ORDER IT HAS BEEN DIRECTED THAT THE DEVELOPM ENT AGREEMENT SHOULD BE REFERRED TO FOR CONCLUDING WHETHER THE AP PELLANT IS IN THE DOMINANT CONTROL OF THE LAND OR NOT AND WHETHER THE PROJECT IS DEVELOPED AT ITS COST AND RISK. HON'BLE ITAT HAS HE LD THAT WHERE ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 14 THE APPELLANT IS FOUND HAVING PRACTICALLY PURCHASED THE LAND AND HAS BORNE THE RISK OF DEVELOPMENT DEDUCTION SHOULD BE ALLOWED . IN THIS CASE FOLLOWING CLAUSES OF THE DEVELOPMENT A GREEMENT DATED 2.6.2005 SHOW DOMINANT CONTROL OF THE APPELL ANT. (2) PARTH BUNGLOWS (NANA CHILODA) CO.OP. HSG. SOCIE TY LTD. THE PARTY OF THE FIRST PART HEREBY APPOINTS THE PARTNERSHIP FIRM M/S HARIOM CORPORATION AND THE FIRM M/S. HARIOM CORPORATION AGREE TO ACT AS B UILDER CUM DEVELOPER TO DEVELOP THE AND BUILD THE HOUSING PROJECT THEREO N ON ITS OWN RISK AND COST. (3) IT IS AGREED BY BOTH THE PARTIES THAT THE CONST RUCTION AND DEVELOPMENT WORK SAII BE IN ACCORDANCE WITH THE APPROVED PLAN. HOWEVER, A SEPARATE AGREEMENT BETWEEN THE PROPOSED/PROSPECTIVE BUYERS/P URCHASER/CUSTOMER AND THE BUILDER-FIRM SHALL BE EXECUTED. THE PARTY OF TH E FIRST PART SHALL NOT BE HELD RESPONSIBLE FOR ANY DELAY IN WORK AND/OR QUALITY OF THE WORK. EACH BUYER WILL FREE TO INSPECT THE QUALITY OF TFIE WORK AND ON SATISFAC TION ONLY, THE BUILDER-FIRM SHALL BE ENTITLED FOR THE CONSIDERATION OF THE WORK EXECUTED . ALL THE RISK AND CONTROL OVER THE HOUSING PROJECT WOULD BE THAT OF M/S HARIOM COR PORATION. (5) EXCEPT, AS PROVIDED IN THIS AGREEMENT, M/S HARI OM CORPORATION IS AND AT ALL TIMES WILL BE INDEPENDENT BUILDER CUM DE VELOPER. M/S HARIOM CORPORATION, THE PARTY OF THE OTHER PART HAS TO RAI SE FUND FOR THE DEVELOPMENT AND CONSTRUCTION WORK ON THEIR OWN. THE NECESSARY DEVELOPMENT EXPENSES SHALL ALSO BE BORNE BY THE PARTNERSHIP FIR M. ANY PROFIT/LOSS ARISE ON THE DEVELOPMENT WORK OF THE HOUSING PROJECT SHALL B ELONG TO M/S HARIOM CORPORATION. (7) THE PARTY OF THE FIRST WOULD NOT HAVE ANY AUTH ORITY IN INTERFERING IN FIXING UP THE REMUNERATION/CHARGES BY M/S HARIOM CORPORATION IN ACCORDANCE WITH THE PREVAILING RATES REASONABLY AS PER THE PROGRESS OF EH CONSTRUCTION WORK CARRIED OUT FOR THE PROSPECTIVE BUYERS. A SEPARATE AGREEMENT SHALL BE EXECUTED BETWEEN THE APPOINTEE BUILDER-FIRM AND THE PROPOSED /PROSPECTIVE BUYERS CONTAINING THE CHARGES/RATE OF CONSTRUCTION TO BE P AID TO THE BUILDER-FIRM. ' 10. VIOLATION BY THE APPELLANT OF ANY OF THE CONDIT IONS OF SECTION 80IB(10) STIPULATED FROM CLAUSE (A) TO CLAUSE (D) I S NOT UNDER DISPUTE AND THE APPELLANT HAS BEEN FOUND FULFILLING THE TESTS LAID DOWN BY HONBLE ITAT BENCH A AHMEDABAD DECISION DAT ED 7.11.2008 IN THE CASE OF M/S.SHAKTI CORPORATION. BARODA IN ITA NO.1503/AHD/2008 IN AY 2005-06 HAVING PRACTICALLY P URCHASED THE LAND AND POSSESSING DOMINANT CONTROL OVER THE PROJECT, THEREFORE IN MY VIEW THERE IS NO JUSTIFICATION IN DENYING THE DE DUCTION TO THE ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 15 APPELLANT. THE CASE LAWS CITED BY THE AO ARE NOT AP PLICABLE IN THIS CASE BECAUSE THE APPELLANT ACTUAL CONCEIVED AND DEV ELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISK AND IS NOT MERELY A CONTRACTOR EXECUTING THE SPECIFICATIONS GIVEN. THE AO IS DIRECTED TO DELETE THE ADDITION MADE U/S.80IB(10). 10. FROM GOING THROUGH THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT ASSESSEE HAS CARRIED ON ACTIVITIES AS A DEVELO PER AND NOT A MERELY WORKS CONTRACTOR. HOWEVER, AS REGARDS THE QU ESTION THAT THE ASSESSEE WAS NOT THE OWNER OF THE LAND THEN HOW HE WILL BE ELIGIBLE TO CLAIM DEDUCTION U/S 80IB(10) OF THE ACT. THE RE PLY TO THIS QUESTION SPECIFICALLY LIES IN THE DECISION OF THE CO-ORDINAT E BENCH IN THE CASE OF SHAKTI CORPORATION, BARODA (SUPRA). IT WAS FURTHER TAKEN UP BEFORE THE JURISDICTIONAL HIGH COURT BY THE REVENUE AND WAS DE ALT IN THE COMBINED ORDER IN THE CASE OF CIT VS. RADHE DEVELOP ERS IN TAX APPEAL NO.546 OF 2008 PRONOUNCED ON 13.12.2011 WHER EIN THEIR LORDSHIPS HAVE ELABORATELY DEALT WITH THIS ISSUE AN D HELD THAT EVE IF AN ASSESSEE IS NOT THE OWNER OF THE LAND BUT HAS CARRI ED OUT ACTIVITIES AS DEVELOPER-CUM-BUILDING CONTRACTOR THEN ALSO HE IS E LIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. IN DECIDING SO H ON. HIGH COURT HAS OBSERVED AS UNDER :- 39. WE MAY NOW MOVE ON TO THE QUESTION OF OWNERSHIP OF THE LAND. 40. RELEVANT PORTION OF SECTION 2(47) READS AS UNDE R:- 2(47): TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDES,- (V) ANY TRANSACTION INVOL VING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN P ART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT, 1882(4 OF 1882); OR SECTION 53A OF THE TRANSFER OF PROPERTY ACT READS A S UNDER:- 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVAB LE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRAN SFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY P ART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN P ART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND T HE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN N OTWITHSTANDING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, TH E TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF W HICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 16 CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHA LL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 41. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAD, IN PART PERFORMANCE OF THE AGREEMENT TO SELL THE LAND IN QUESTION, WAS GIVEN P OSSESSION THEREOF AND HAD ALSO CARRIED OUT THE CONSTRUCTION WORK FOR DEVELOPMENT OF THE HO USING PROJECT. COMBINED READING OF SECTION 2(47)(V) AND SECTION 53A OF THE HC-NIC PAGE 37 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 38/42 JUDGMENT TRA NSFER OF PROPERTY ACT WOULD LEAD TO A SITUATION WHERE THE LAND WOULD BE F OR THE PURPOSE OF INCOME TAX ACT DEEMED TO HAVE BEEN TRANSFERRED TO THE ASSESSEE. IN THAT VIEW OF THE MATTER, FOR THE PURPOSE OF INCOME DERIVED FROM SUCH PROPERTY, THE A SSESSEE WOULD BE THE OWNER OF THE LAND FOR THE PURPOSE OF THE SAID ACT. IT IS TRUE TH AT THE TITLE IN THE LAND HAD NOT YET PASSED ON TO THE ASSESSEE. IT IS EQUALLY TRUE THAT SUCH TI TLE WOULD PASS ONLY UPON EXECUTION OF A DULY REGISTERED SALE DEED. HOWEVER, WE ARE, FOR THE LIMITED PURPOSE OF THESE PROCEEDINGS, NOT CONCERNED WITH THE QUESTION OF PASSING OF THE T ITLE OF THE PROPERTY, BUT ARE ONLY EXAMINING WHETHER FOR THE PURPOSE OF BENEFIT UNDER SECTION 80IB (10) OF THE ACT, THE ASSESSEE COULD BE CONSIDERED AS THE OWNER OF THE LA ND IN QUESTION. AS HELD BY THE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. VS. COMMI SSIONER OF INCOME TAX (SUPRA), AND IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. PODAR CEMENT PVT. LTD. AND OTHERS (SUPRA), THE OWNERSHIP HAS BEEN UNDERSTOOD DIFFEREN TLY IN DIFFERENT CONTEXT. FOR THE LIMITED PURPOSE OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT, THE ASSESSEE HAD SATISFIED THE CONDITION OF OWNERSHIP ALSO; EVEN IF IT WAS NECESSARY. 42. IN THE CASE OF SHAKTI CORPORATION SIMILARLY THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE LAND OWNERS ON SIMIL AR TERMS AND CONDITIONS. IT IS TRUE THAT THERE HC-NIC PAGE 38 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 39/42 JUDGMENT WERE CERTAIN MINOR DI FFERENCES, HOWEVER, IN SO FAR AS ALL MATERIAL ASPECTS ARE CONCERNED, WE SEE NO SI GNIFICANT OR MATERIAL DIFFERENCE. HERE ALSO ASSESSEE WAS GIVEN FULL RIGHTS TO DEVELOP THE LAND BY PUTTING UP THE HOUSING PROJECT AT ITS OWN RISK AND COST. ENTIRE PROFIT FLOWING THEREF ROM WAS TO BE RECEIVED BY THE ASSESSEE. IT IS TRUE THAT THE AGREEMENT PROVIDED THAT THE ASS ESSEE WOULD RECEIVE REMUNERATION. HOWEVER, SUCH ONE WORD USED IN THE AGREEMENT CANNOT BE INTERPRETED IN ISOLATION OUT OF CONTEXT. WHEN WE READ THE ENTIRE DOCUMENT, AND ALSO CONSIDER THAT IN FORM OF REMUNERATION THE ASSESSEE HAD TO BEAR THE LOSS OR AS THE CASE MAY BE TAKE HOME THE PROFITS, IT BECOMES ABUNDANTLY CLEAR THAT THE PROJE CT WAS BEING DEVELOPED BY HIM AT HIS OWN RISK AND COST AND NOT THAT OF THE LAND OWNERS. ASSESSEE THUS WAS NOT WORKING AS A WORKS CONTRACT. INTRODUCTION OF THE EXPLANATION TO SECTION 80IB(10) THEREFORE IN THIS GROUP OF CASES ALSO WILL HAVE NO EFFECT. 43. WE MAY AT THIS STAGE EXAMINE THE RATIO OF DIFFE RENT JUDGMENTS CITED BY THE REVENUE. THE DECISION IN CASE OF FAQIR CHAND GULATI VS. UPPA L AGENCIES PRIVATE LIMITED AND ANOTHER (SUPRA) WAS RENDERED IN THE BACKGROUND OF T HE PROVISIONS OF THE CONSUMER PROTECTION ACT. IN THE CASE BEFORE THE APEX COURT, THE LAND OWNER HAD ENTERED INTO AN AGREEMENT WITH THE BUILDER REQUIRING HIM TO CONSTRU CT APARTMENT BUILDING ON THE LAND IN HC-NIC PAGE 39 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 17 40/42 JUDGMENT QUESTION. PART OF THE CONSTRUCTED AR EA WAS TO BE RETAINED BY THE OWNER OF THE LAND. IN CONSIDERATION OF THE LAND PRICE REM AINING AREA WAS FREE FOR THE BUILDER TO SELL. WHEN THE LAND OWNER FOUND SERIES OF DEFECTS I N THE CONSTRUCTION, HE APPROACHED THE CONSUMER PROTECTION FORUM. IT WAS IN THIS BACKGROUN D THE APEX COURT WAS CONSIDERING WHETHER THE LAND OWNER CAN BE STATED TO BE A CONSUM ER AND THE BUILDER A SERVICE PROVIDER. IT WAS IN THIS BACKGROUND THAT THE APEX COURT MADE CERTAIN OBSERVATIONS. SUCH OBSERVATIONS CANNOT BE SEEN OUT OF CONTEXT NOR CAN THE SAME BE APPLIED IN THE PRESENT CASE WHERE WE ARE CONCERNED WITH THE DEDUCTION UNDER SEC TION 80IB(10) OF THE ACT. 44. IN THE CASE K. RAHEJA DEVELOPMENT CORPORATION V S. STATE OF KARNATAKA (SUPRA), THE APEX COURT CONSIDERED WHETHER THE BUILDER, WHO WAS ENGAGED IN THE DEVELOPMENT OF PROPERTY AND FOR SUCH PURPOSE HAD ENTERED INTO AN A GREEMENT WITH THE LAND OWNER, CAN BE STATED TO HAVE EXECUTED WORKS CONTRACT. SUCH INTERP RETATION WAS RENDERED IN THE BACKGROUND OF THE TERM WORKS CONTRACT DEFINED IN SECTION 2(1)(V-I) OF THE KARNATAKA SALES TAX ACT, WHICH READS AS UNDER:- 12. SECTION 2(1)(V-I) IS RELEVANT. IT DEFINES A WORKS CONTRACT AS FOLLOWS: 2.(1)(V-I) 'WORKS CON TRACT' INCLUDES ANY AGREEMENT FOR CARRYING OUT FOR CASH, DEFERRED PAYMENT OR OTHER VA LUABLE CONSIDERATION, HC-NIC PAGE 40 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP /546/2008 41/42 JUDGMENT THE BUILDING, CONSTRUCTION, MANUFACTURE, PROCESSING , FABRICATION, ERECTION, INSTALLATION, FITTING OUT, IMPROVEMENT, MODIFICATION, REPAIR OR C OMMISSIONING OF ANY MOVABLE OR IMMOVABLE PROPERTY; IT IS THUS TO BE SEEN THAT UND ER THE KARNATAKA SALES TAX ACT THE DEFINITION OF THE WORDS WORKS CONTRACT IS VERY WI DE. IT IS NOT RESTRICTED TO A WORKS CONTRACT AS COMMONLY UNDERSTOOD I.E. A CONTRACT TO DO SOME WORK ON BEHALF OF SOMEBODY ELSE. IT ALSO INCLUDES ANY AGREEMENT FOR CARRYING OUT EITHER FOR CASH OR FOR DEFERRED PAYMENT OR FOR ANY OTHER VALUABLE CONSIDERATION, TH E BUILDING AND CONSTRUCTION OF ANY MOVABLE AND IMMOVABLE PROPERTY. (EMPHASIS SUPPLIED ) THE DEFINITION WOULD THEREFORE TAKE WITHIN ITS AMBIT ANY TYPE OF AGREEMENT WHEREIN CONSTRUCTION OF A BUILDING TAKES PLACE EITHER FOR CASH OR DEFERRED PAYMENT, OR VALUA BLE CONSIDERATION. TO BE ALSO NOTED THAT THE DEFINITION DOES NOT LAY DOWN THAT THE CONSTRUCT ION MUST BE ON BEHALF OF AN OWNER OF THE PROPERTY OR THAT THE CONSTRUCTION CANNOT BE BY THE OWNER OF THE PROPERTY. THUS EVEN IF AN OWNER OF PROPERTY ENTERS INTO AN AGREEMENT TO CO NSTRUCT FOR CASH, DEFERRED PAYMENT OR VALUABLE CONSIDERATION A BUILDING OR FLATS ON BEHAL F OF ANYBODY ELSE, IT WOULD BE A WORKS CONTRACT WITHIN THE MEANING OF THE TERM AS USED UND ER THE SAID ACT. IT WAS IN BACKGROUND OF THIS DEFINITION PROVIDED BY THE STATUTE THAT THE APEX COURT CONCLUDED THAT THE AGREEMENT WAS ONE OF WORKS CONTRACT. THE APEX COURT OBSERVED THAT THE TERM WORKS CONTRACT CONTAINED IN THE ACT IS INCLUSIVE DEFINITI ON AND INCLUDES NOT MERELY THE WORKS CONTRACT AS NORMALLY UNDERSTOOD BUT IT IS A WIDE DE FINITION WHICH INCLUDES ANY AGREEMENT FOR CARRYING OUT BUILDING OR CONSTRUCTION ACTIVITY FOR CASH, DEFERRED PAYMENT OR OTHER VALUABLE CONSIDERATION. THUS THE INTERPRETATION REN DERED BY THE APEX COURT IN THE SAID DECISION WAS BASED ON NOT THE NORMAL MEANING OF TER M WORKS CONTRACT BUT ON THE SPECIAL MEANING ASSIGNED TO IT UNDER THE ACT ITSELF , WHICH PROVIDED FOR A DEFINITION OF THE INCLUSIVE NATURE. HC-NIC PAGE 41 OF 42 CREATED ON T UE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 42/42 JUDGMENT ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 18 45. UNDER THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR IN HOLDING THAT THE ASSESSEES WERE ENTITLED TO THE BENEFIT UNDER SECTION 80IB(10) OF THE ACT EVEN WHERE THE TITLE OF THE LANDS HAD NOT PASSE D ON TO THE ASSESSEES AND IN SOME CASES, THE DEVELOPMENT PERMISSIONS MAY ALSO HAVE BE EN OBTAINED IN THE NAME OF THE ORIGINAL LAND OWNERS. 46. WE FIND THAT IT IS NOT EV EN THE CASE OF THE REVENUE THAT OTHER CONDITIONS OF SECTION 80IB OF THE ACT WERE NOT FULF ILLED. WE, THEREFORE, ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND DISPOSE OF ALL APPEALS ACCORDINGLY. 11. RESPECTFULLY FOLLOWING THE DECISION OF HON. JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPR A) AND APPLYING THE RATIO OF THE DECISION TO THE FACTS OF THE CASE BEFORE US, WE ARE OF THE CONSIDERED OPINION THAT ASSESSEE IS A DEVELOPER OF THE PROJECT AND NOT MERELY A WORKS CONTRACTOR AND IS ELIGIBLE F OR DEDUCTION U/S 80IB(10) OF THE ACT AT RS.95,56,579/-. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D UPHOLD THE SAME. THE GROUND NOS. 1 & 2 RAISED BY THE REVENUE ARE DIS MISSED. 11. AS THE FACTS OF THE PRESENT CASE AND THOSE OF T HE CASE OF HARIOM CORPORATION (SUPRA) ARE IDENTICAL, RESPECTFU LLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH AND ALSO LOOKING TO THE FACT THAT ASSESSEE HAS BEEN ALLOWED DEDUCTION U/S 80IB(10) OF THE ACT ON THE PROFIT FROM THE SAME PROJECT FOR ASST. YEAR 2009-10 AND 2010-11 AND MORE SO FOR ASST. YEAR 2010-11 AS PER THE ORDER OF LD. ASSESSING OFFICER U/S 143(3) OF THE ACT, WE ARE OF THE VIEW T HAT LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80IB(10) OF THE ACT AT RS.1,77,38,316/-. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. ACCORD INGLY THIS GROUND OF THE REVENUE IS DISMISSED. 12. OTHER GROUNDS ARE OF GENERAL NATURE, HENCE NEED NO ADJUDICATION. ITA NO.1376/AHD/2012 ASST. YEAR 2008-09 19 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JUNE, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 2/6/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 1/06/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 1/06/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 2/6/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: