The ITO, Ward-3(1), Surat V. M/s. R.P. Corporation, Surat

ITA 1428/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1144 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-05-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IRA R KAPOOR

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1428 AND 1429/AHD/2012 /BLOCK ASSTT. YEAR: 2004-05 ITO, WARD - 3(1) SURAT. VS M/S.R.P. CORPORATION T.P.S.NO.5, UMRA NORTH F.P.NO.29-30 ATHWALINES, SURAT PAN : AAFFR 4379 G %& / (APPELLANT) '( %& / (RESPONDENT) REVENUE BY : SHRI JAMESH KURIAN, SR.DR ASSESSEE BY : IRA R. KAPOOR, AR / DATE OF HEARING : 02/05/2016 / DATE OF PRONOUNCEMENT: 11/07/2016 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTAN CE OF THE REVENUE AGAINST SEPARATE ORDERS OF THE LD.CIT(A) DA TED 5.4.2012 AND 17.4.2012 PASSED IN THE ASSTT.YEAR 2004-05 AND 2005 -06 RESPECTIVELY. 2. SOLITARY GRIEVANCE OF THE REVENUE IN BOTH THE YE ARS IS THAT THE LD.CIT(A) HAS ERRED IN GRANTING DELETION OF RS.17,0 8,263/- AND RS.30,99,640/- UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961 IN THE ASSTT.YEARS 2004-05 AND 2005-06 RESPECTIVELY. T HE LD.AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE IN THESE YEARS . 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVE, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES FROM THE RECORD THAT THIS DISPUTE EARLIER TRAVELLED TO THE TRIBUNAL VIDE ITA NO.3686/AHD/2007 AND ITA NO.1428/AHD/2012 (2 APPEALS) 2 2371/AHD/2008 FOR THE ASSTT.YEARS 2004-05 AND 2005- 06. THE TRIBUNAL HAS DECIDED BOTH THE APPEALS VIDE ORDER DATED 1.2.2 011. THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR R E-ADJUDICATION. THE RELEVANT PART OF THE TRIBUNALS ORDER READS AS UNDE R: 'SINCE BOTH THE PARTIES AGREED THAT THE MATTER NEED S TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE C ASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 , IN THE INTEREST OF JUSTICE, WE VACATE THE FINDINGS OF THE ID. CIT(A) AN D RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO ANALYSE TH E RELEVANT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE AS SESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN VIEW THE AFORESAID DECISIONS OF THE ITAT AS ALSO AFTER, ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSES SEE AND THEREAFTER, DECIDE AS TO WHETHER THE UNDERTAKING OF THE ASSESSEE HAS I NDEED PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER A ND LAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURCHASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINANT CONTROL OVER THE PROJECT AND DEVELOPED THE LAND AT THEIR OWN COST AND RISKS, THE - AO SHOULD ALLOW THE DEDUCTION U/S. 80IB(10)OF THE ACT, IN ACCORDANCE WI TH LAW. IN CASE THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTE D ON BEHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATI ON FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECT, THE ASS ESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S. 80IB(10)OF THE ACT,' 4. IT APPEARS THAT THE LD.AO HAD ISSUED NOTICE ON 3 .11.2011, AND THEREAFTER PASSED ASSESSMENT ORDER ON 30.12.2011. THE ASSESSEE HAS SUBMITTED VARIOUS DETAILS. THE AO REPRODUCED THEM IN THE ASSESSMENT ORDER AND SOME OF THE FIGURES REPRODUCED AT PAGE NO .11 AND 12 OF THE ASSESSMENT ARE TOTALLY ILLEGIBLE. THE AO DID NOT M AKE ANY ELABORATE ANALYSIS OF THE DETAILS AS PER THE DIRECTIONS OF TH E TRIBUNAL, RATHER, ARRIVED AT SOME CONCLUSION WHICH HAD ARRIVED IN THE ORIGINAL ASSESSMENT ORDERS. HIS STAND IS THAT AS PER CLAUSE-9 OF THE A GREEMENT, THE ASSESSEE WAS TO RECEIVE FIXED PERCENTAGE OF REMUNER ATION. IT IS NOT THE OWNER OF THE LAND, AND THEREFORE, CANNOT BE TERMED AS DEVELOPER. ACCORDINGLY, THE LD.AO DISALLOWED DEDUCTION TO THE ASSESSEE. ITA NO.1428/AHD/2012 (2 APPEALS) 3 5. ON APPEAL, THE LD.CIT(A) HAS GONE THROUGH THE DE VELOPMENT AGREEMENT, AND THEREAFTER HELD THAT THE ASSESSEE HA S FULFILLED ALL THE CONDITIONS LAID DOWN BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF M/S.SHAKTI CORPORATION AND RADHE DEVELOPERS AND OTH ERS. IN ORDER TO APPRECIATE THE CORRECTNESS OF THE CONCLUSIONS DRAWN BY THE LD.CIT(A), IT IS PERTINENT TO TAKE NOTE OF THE DEVELOPMENT AGREEM ENT REPRODUCED BY THE LD.CIT(A) WHICH READS AS UNDER: 1. THE PARTY OF SECOND PART (ASSESSEE) WILL BE TO TALLY RESPONSIBLE FOR THE DEVELOPMENT OF PROPERTY TO BE CONSTRUCTED A T T.P.ANO.5, P.P.NO.29/30, VILLAGE - UMRA BELONGING TO PARTY OF THE FIRST PART AND THE PARTY OF THE SECOND PART WILL BE KNOWN AS D EVELOPERS OF THE SAID PROJECT. 2. THE PARTY OF SECOND PART WILL HAVE TO CONSTRUC T ACCORDING TO PLANS. FOR THE PURPOSE OF CONSTRUCT/ON, THE PARTY O F SECOND PART W/71 BE ABLE TO ENTER INTO AGREEMENT WITH THE FIRMS OF CONTRACTOR/SUB-CONTRACTOR, LABOUR CONTRACTOR, ARCHI TECT, ENGINEER AND LEGAL ADVISOR. TO PROCURE MATERIAL IN TIME THEY WILL BE ABLE TO ENTER INTO AGREEMENT WITH SUPPLIERS. THEY WILL BE A BLE TO PURCHASE MATERIALS FOR CONSTRUCTION WORK & TO MAKE PAYMENT F OR SAME. THEY WILL BE ABLE TO TAKE ALL STEPS NECESSARY FOR C ONSTRUCTION AND THE DECISIONS TAKEN BY THE PARTY OF THE SECOND PART IN THE INTEREST OF PARTY OF THE PARTY OF THE FIRST PART WILL BE FIN AL. WHILE TAKING DECISIONS, INTEREST OF THE PARTY OF THE FIRST PART SHOULD BE KEPT. 3. THE PARTY OF SECOND PART SHALL COLLECT CONTRIB UTION FOR CONSTRUCTION, LAND AND OTHER EXPENSES FROM (HE MEMB ERS OF THE SOCIETY TO MEET FINANCIAL REQUIREMENT. THEY WILL BE ALSO ABLE TO BORROW FUNDS ON INTEREST FROM OUTSIDE PARTIES, FINA NCIAL INSTITUTIONS, BANKS AND FOR THAT THEY WILL BE ABLE TO SIGN ANY PROMISSORY NOTE, RECEIPTS, HUNDI, MORTGAGE, LEASE O R ANY OTHER NEGOTIABLE INSTRUMENTS. 4. THE PARTY OF SECOND PART SHALL HAVE RIGHT TO R EGISTER THE INDIVIDUAL, FIRMS, COMPANIES AND JOINT PERSONS WHO ARE WILLING TO BE MEMBERS OF THE SOCIETY AND DETERMINE THE PRICE F OR' UNITS REGISTERED FOR THEM. THE PARTY OF THE SECOND PART W ILL BE ABLE TO ENTER INTO SETTLEMENT WITH THE MEMBERS FOR COLLECTI ON OF CONTRIBUTION FROM TIME TO TIME, TO GIVE THEM ACKNOW LEDGEMENT RECEIPT FOR CONTRIBUTION RECEIVED FROM THEM. FOR TH E SMOOTH COMPLETION OF PROJECT, THE PARTY OF THE SECOND PART WILL BE ABLE TO ITA NO.1428/AHD/2012 (2 APPEALS) 4 DETERMINE THE TERMS AND CONDITION ACCORDING TO ITS WILL. THE PARTY OF THE SECOND PART WILL BE ABLE TO TAKE NECESSARY A CTION AND CANCELLED THE REGISTRATION OF THE MEMBERS WHO FAIL TO FULFILL THE TERMS AND CONDITIONS. IN SUCH CASE, THE PARTY OF TH E SECOND PART ALSO ABLE TO FORFEIT THE CONTRIBUTION PAID BY ANY O F THE MEMBER. THEY WILL ALSO BE ABLE TO RE-REGISTER THE SAID FLAT AND ALLOT THE SAME TO ANY OTHER PERSON. 5. ..... 6. ..... 7. BY THIS AGREEMENT, ALL THE RIGHTS OF DEVELOPME NT OF LAND BELONGING TO SOCIETY ARE GIVEN TO THE PARTY OF THE SECOND PART. ANY LOSS OR PROFIT ARISING IN RESPECT OF THE DEVELOPMEN T OF THE PROJECT OVER AND ABOVE, THE REMUNERATION AGREED IN SERIAL N O. 9 OF THIS AGREEMENT SHALL BE BORNE BY THE DEVELOPERS. IN OTHE R WORDS, ANY PROFIT OR LOSS ARISING AFTER THIS DATE SHALL BE OF DEVELOPERS AND SOCIETY OR ITS MEMBERS WILL NOT BE RESPONSIBLE FOR ANY SUCH PROFIT OR LOSS EITHER IN FULL OR PART. 8. ACCORDING TO THIS AGREEMENT, THE PARTY OF THE SECOND PART WILL BE TOTALLY RESPONSIBLE FOR ANY ACT DONE BY IT AS BU ILDER, ORGANIZER OR DEVELOPER. DURING THE COURSE OF CONTINUATION OF PROJECT, IF DUE TO BREACH ANY RULES AND REGULATION OF MUNICIPALITY, STATE OR CENTRAL GOVERNMENT, ANY ADDITIONAL LIABILITY ARISES IN RESPECT OF MUNICIPALITY, POLICE DEPARTMENT, INCOME-TAX, SALES- TAX, AND CONSUMER ACT THAN THE PARTY OF THE SECOND PART WILL BE RESPONSIBLE AND PARTY OF THE FIRST PART OR ITS MEMB ERS SHALL NOT BE RESPONSIBLE. IN SHORT, THE PARTY OF THE SECOND PART SHALL BE TOTALLY RESPONSIBLE FOR ANY ACT AND THE PARTY OF THE FIRST PART WILL NOT BE RESPONSIBLE FOR ANY ADDITIONAL FINANCIAL OR ANY OTH ER LIABILITY OR LOSS. THE PARTY OF THE SECOND PART SHALL NOT CLAIM ANY COMPENSATION FROM THE PARTY OF SECOND PART SHALL F OR ANY ADDITIONAL FINANCIAL OR OTHER RESPONSIBILITY. ACCOR DINGLY, THE PARTY OF THE SECOND PART SHALL HAVE ALL THE RIGHTS AND RE SPONSIBILITY FOR THE DEVELOPMENT. 9. FOR RESPONSIBILITY CARRIED OUT BY THE PARTY OF THE SECOND PART FOR THE DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL UNITS ON THE LAND BELONGING TO THE PARTY OF THE FIRST PART FOR I TS MEMBERS, IT WILL GET REMUNERATION @ 15% ON THE CONTRIBUTION COLLECTE D. IN SHORT, IF PARTY OF THE SECOND PART COLLECTS RS.100/- AS CONTR IBUTION FROM MEMBERS OF THE SOCIETY, IT WILL GET RS.15 AS REMUNE RATION. IN THIS MANNER, RS.115/- COLLECTED FROM THE MEMBERS WILL IN CLUDE REMUNERATION AS DEVELOPERS AMOUNTING TO RS.15/-. AT THE END OF 31ST MARCH OF EACH YEAR, THE PARTY OF THE SECOND PA RT SHALL DETERMINE DEVELOPMENT FEES AS SAID ABOVE ON COLLECT ION OF ITA NO.1428/AHD/2012 (2 APPEALS) 5 CONTRIBUTION MADE BY IT, I.E. ITS REMUNERATION WILL BE RS.15 X RS.100/RS.115 ON TOTAL COLLECTION OF CONTRIBUTION. THE PARTY OF THE SECOND PART SHALL KEPT A RECORD OF THE SAME AND THE PARTY OF THE FIRST PART SHALL PAY OR GIVE CREDIT OF THE SAME TO THE PARTY OF THE SECOND PART. 6. A BARE READING OF THE AGREEMENT WOULD SUGGEST TH AT THE ASSESSEE HAD BORNE THE RISK AND ALSO ENTITLED FOR THE REWARD . CLAUSE-4 OF THE AGREEMENT DULY AUTHORIZES THE ASSESSEE TO REGISTER INDIVIDUALS, FIRMS OR COMPANIES AS A MEMBER OF THE SOCIETY AND DETERMINE THE PRICE FOR UNIT REGISTERED FOR THEM. THE EMPHASIS OF THE LD.AO TOW ARDS CLAUSE-9 OF THE AGREEMENT IS CONCERNED, IT CONTEMPLATES REMUNERATIO N AT THE RATE OF 15% ON THE CONTRIBUTION COLLECTED FROM THE MEMBERS. THE LD.CIT(A) HAS CONSIDERED THIS ASPECT AND HELD THAT IT IS NOT A VERY SUBSTANTIAL ASPECT FOR DETERMINING CHARACTER OF ASSESSEE AS A C ONTRACTOR OR DEVELOPER. IT IS PERTINENT TO MENTION HERE THAT CL AUSE (4) AUTHORIZES THE ASSESSEE TO REGISTER NEW MEMBER AND SETTLE PRICE FO R UNITS REGISTERED FOR THEM. THIS AUTHORITY TO THE ASSESSEE IS IN ADD ITION TO ALREADY EXISTING MEMBERS. THEREFORE, IF WE LOOK THE DETAIL S IN THE LIGHT OF THE ABOVE AGREEMENT, THEN, IT WOULD REVEAL THAT THE CIT (A) HAS RIGHTLY TREATED THE ASSESSEE AS DEVELOPER AND RIGHTLY ALLOW ED THE DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT. WE D O NOT FIND ANY MERIT IN THESE APPEALS OF THE REVENUE. THEY ARE DI SMISSED. 7. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 11 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/07/2016