The ITO, Ward-5(2), Baroda V. M/s. Om Developers, Baroda

ITA 1528/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73141 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: K K PARIKH
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER INCOME-TAX OFFICER, WARD-5(2), 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BORODA (APPELLANT) VS M/S. OM DEVELOPERS 300, VAIKUNTH-II, NEW VIP ROAD, NEAR AIR PORT, BARODA PAN: AABFO04011A (RESPONDENT) REVENUE BY: SRI D.K. MISHRA, D.R. ASSESSEE BY: SRI K.K. PARIKH, A.R. DATE OF HEARING : 06-03-2014 DATE OF PRONOUNCEMENT : 21-03-20 14 . / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-V BARODA DATED 10-03-2010. ITA NO. 1528/AHD/2010 ASSESSMENT YEAR 2007-08 I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 2 2. REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. 1(I). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S. 80IB(10 ) OF RS 22,18,380/- AS CLAIMED BY THE ASSESSEE. 1(II). THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE APPROVAL FOR DEVELOPING AND BUILDING HOUSING PROJECTS WAS GRANTE D TO THE ORIGINAL OWNERS OF THE LAND AND NOT TO THE ASSESSEE, WHO ACT ED ONLY AS AN AGENT FOR EXECUTION OF THE PROJECT, WHICH RIGHTS WERE OBT AINED BY THE ASSESSEE FIRM FROM THE ORIGINAL OWNERS. 1(III). THE LEARNED CIT(A) ALSO FAILED TO APPRECIAT E THAT THE LAND BEING AN ESSENTIAL AND INTRINSIC PART OF DEVELOPING AND B UILDING OF A HOUSING PROJECT, APPROVAL IS GRANTED BY THE LOCAL AUTHORITY TO THE OWNER OF THE LAND FOR DEVELOPING AND BUILDING HOUSING PROJECTS T HEREON, AND ANY OTHER PERSON, TO WHOM HE ENTRUSTS THE WORKS CONNECT ED WITH THE EXECUTION OF THE PROJECT INSTEAD OF TAKING IT UP HI MSELF, CANNOT BE SAID TO BE AN 'UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY' WITHIN THE MEANING OF SECTI ON 80IB(10) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO FROM THE PROPOSED LAY OUT PLA N, DEVELOPMENT PERMISSION TO VADODRA MUNICIPAL CORPORATION AND THE DEVELOPMENT AGREEMENT THAT ASSESSEE WAS NOT THE ACTUAL OWNER OF THE LAND ON WHICH THE PROJECT NAMELY AMRAPALI SOCIETY WAS BUILT. AS PE R THE ENTITLEMENT FOR DEDUCTION U/S. 80IB(10), THE APPROVAL OF THE PROJEC T WAS NOT GRANTED TO THE ASSESSEE. THE PERMISSION WAS GRANTED BY THE VMC ON THE APPLICATION MADE BY THE APPLICANT, SRI HARSHADBHAI BABUBHAI GARODIA AND OTHERS. AFTER GIVING OPPORTUNITY TO THE ASSESSEE AND TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE, AO WAS OF THE VIEW THAT ASSESSEE-FIRM WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT. A O MAINLY MADE THIS DISALLOWANCE DUE TO FOLLOWING REASONS:- (I) THE LAND IS NOT IN THE NAME OF THE FIRM. OWNE RSHIP OF LAND IS AN ESSENTIAL ELEMENT WHICH CARRIES WITH IT THE RIGHT T O DEVELOP THE LAND I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 3 AND BUILD HOUSING PROJECTS THEREON. AO SAYS THAT T HE DEVELOPER FIRST SHOULD PURCHASE THE LAND AND THEN TAKE NECESSARY PE RMISSION TO CONSTRUCT. (II) APPELLANT IN THE INSTANT CASE HAS ACTED MERELY AS AN AGENT FOR COLLECTION OF THE LAND CONSIDERATION ON BEHALF OF T HE LAND OWNER AND A CONTRACTOR FOR THE CONSTRUCTION OF THE HOUSE ON BEH ALF OF THE UNIT HOLDERS. (III). THE APPROVAL FOR THE PROJECT IS GRANTED BY T HE COMPETENT AUTHORITY IN THE NAME OF THE LAND OWNER ONLY. (IV). THE APPELLANT IS NOT A BUILDER OR DEVELOPER B UT A CONTRACTOR AND THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S. 80 IB. 4. BEFORE LD. CIT(A) THE CONTENTION OF THE ASSESSEE WAS THAT ASSESSEE WAS ENGAGED IN DEVELOPING HOUSING PROJECT ON THE LA ND IN POSSESSION OF THE FIRM IN THE NAME HARSHADBAI BABUBHAI GARODIA AND OT HERS WHO WERE PARTNERS OF THE FIRM AND THAT THE LAND WAS INTRODUC ED AS CAPITAL CONTRIBUTION. IT WAS ALSO SUBMITTED THAT THE APPROVAL OF THE PROJ ECT WAS ALSO OBTAINED IN THE NAMES OF THESE PERSONS AND THAT ALL OTHER CONDI TIONS REGARDING AREA ETC. AS LAID DOWN U/S. 80IB(10) WERE ALSO SATISFIED. RE LIANCE WAS PLACED ON DECISION OF HONBLE ITAT IN THE CASE OF M/S RADHE D EVELOPERS. IT WAS FURTHER SUBMITTED THAT FIXED PRICE WAS PAID FOR PUR CHASE OF LAND AND THE CONSTRUCTION AND OTHER EXPENSES WERE BORN BY THE AS SESSEE AND ENTIRE RISK WAS OF THE ASSESSEE WHO WAS DEVELOPING THE PROJECT AND THERE WAS NO AGREEMENT FOR FIXED REMUNERATION AS A CONTRACTOR AN D THAT THE SAME WAS ALSO EVIDENT FROM THE BOOKS OF THE ASSESSEE-FIRM. 5. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THES E SUBMISSIONS OF THE ASSESSEE DIRECTED THE AO TO ACCEPT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB(10) OF THE ACT BY OBSERVING AS UNDER:- I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 4 4.3. I HAVE CAREFULLY EXAMINED THE FACTS OF THE CA SE, SUBMISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSE SSING OFFICER. ON THE MAIN ISSUE OF DEDUCTION U/S. 80IB(10), IT IS SE EN THAT ALTHOUGH, THE ISSUE WAS DECIDED IN FAVOR OF THE APPELLANT AND AGA INST REVENUE BY THE ORDER OF THE JURISDICTIONAL ITAT, IN THE CASE OF RA DHE DEVELOPERS VS ITO WARD 3(2) BARODA NO 2482/AHD/2006 A BENCH AHMED ABAD, HOWEVER THE DECISION WAS PARTLY MODIFIED BY THE SUB SEQUENT DECISION IN THE CASE OF ITO VS M/S. SHAKTI CORPORATION ITA N O.1503/AHD/2008 DATED 07/11/2008 WHEREIN THE HON'BLE ITAT HAS INDIC ATED THAT THE BENEFIT UNDER 80IB(10) WOULD BE AVAILABLE IF THE DE VELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND THE BENEFIT WOULD BE DE NIED IF THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERAT ION AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE PROJECT ON B EHALF OF THE LAND OWNER. FURTHER, HON'BLE APEX COURT IN THE CASE OF FAQIR CHAND GULATI VS UPPAL AGENCIES PVT. LTD. & ANR, (CIVIL AP PEAL NO. 3302 OF 2005) DATED 10/07/2008 HAS HELD AS UNDER: I) A DEVELOPMENT AGREEMENT IS ONE WHERE THE L AND HOLDER PROVIDES THE LAND. THE BUILDER PUTS UP A BUILDING. THEREA FTER THE LAND OWNER AND BUILDER SHARE THE CONSTRUCTED AREA. THE BUILDER DELIVERS THE OWNERS SHARE TO THE CONSTRUCTED AREA. THE BUILDE R DELIVERS THE OWNER'S SHARE TO THE LAND HOLDER AND RETAINS THE BU ILDER'S SHARE. THE LAND HOLDER SELLS/TRANSFERS UNDIVIDED SHARE/S IN T HE LAND CORRESPONDING TO THE BUILDER'S SHARE OF THE BUILDIN G TO THE BUILDER OR HIS NOMINEES. THE LAND HOLDER WILL HAVE NO SAY OR C ONTROL IN THE CONSTRUCTION OF HAVE ANY SAY AS TO WHOM AND AT WHAT COST THE BUILDER'S SHARE OF APARTMENTS ARE TO BE DEALT WITH OR DISPOSED OF. SUCH AN AGREEMENT IS NOT A ''JOINT VENTURE' IN THE LEGAL SENSE. IT IS A CONTRACT FOR SERVICES. (II). ON THE OTHER HAND, AN AGREEMENT BETWEEN THE O WNER OF 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 INTENT 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. I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 5 (III). THE TITLE OF THE DOCUMENTS IS NOT DETERMINAT IVE OF THE NATURE AND CHARACTER OF THE DOCUMENT, THOUGH THE NAME MAY USUA LLY GIVE SOME INDICATION OF THE NATURE OF THE DOCUMENT. THE USE O F THE WORDS ''JOINT VENTURE' OR 'COLLABORATION' IN THE AGREEMENT WILL N OT MAKE THE TRANSACTION A JOINT VENTURE, IF THERE ARE NO PROVIS IONS FOR SHARED CONTROL AND LOSSES. 4.3.1. IN THE INSTANT CASE, THE APPELLANT HAS PUR CHASED THE LAND FOR FIXED CONSIDERATION AND HAS DEVELOPED THE HOUSING P ROJECT ON ITS OWN COST AND RISK AND THERE IS NO JOINT VENTURE WITH TH E LAND OWNER AND THUS IN TERMS OF DECISION IN THE CASE OF M/S. SHAKT I CORPORATION AND FAQIR GULATI VS. UPPAL AGENCIES PVT. LTD & ANR., TH E APPELLANT IS ENTITLED TO DEDUCTION U/S. 80IB(10). THE GROUND IS ALLOWED. 6. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW REVENU E IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING LD. DR VEHEMENTLY SUPPORT ED THE ORDER PASSED BY AO WHILE DENYING THE BENEFIT OF DEDUCTION U/S. 8 0IB(10). HE ALSO HOWEVER POINTED OUT THAT LOWER AUTHORITIES HAVE NO T EXAMINED THE CLAIM OF THE ASSESSEE AS PER THE GUIDELINES GIVEN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RADHE DEVELOPERS INDIA LTD AND THEREFORE THE MATTER MAY KINDLY BE RESTORED BACK TO THE FILE OF AO FOR S UCH EXAMINATION. LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND VEHEMENTL Y SUPPORTED THE ORDER PASSED BY LD. CIT(A) AND THEREFORE HE PRAYED THAT T HE ORDER PASSED BY HIM MAY KINDLY BE UPHELD. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND FORCE IN THE ARGUMENT ADVANCED BY LD. DR THAT LOWER AUTHO RITIES HAVE NOT FOLLOWED THE GUIDELINES AS LAID DOWN IN THE CASE OF M/S RADHE DEVELOPERS INDIA LTD BY THE JURISDICTIONAL HIGH COURT. WE FUR THER FIND THAT ALL THE RELEVANT FACTS ARE NOT AVAILABLE ON RECORD. FOR E XAMPLE EVEN THE COMPLETION I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 6 CERTIFICATE OF THE PROJECT THOUGH ASKED FOR BY THE AO DURING THE ASSESSMENT PROCEEDINGS WAS NOT PRODUCED BY ASSESSEE. WE THER EFORE ARE INCLINED TO SET ASIDE THE ORDER PASSED BY LD. CIT(A) AND THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN THE LIGHT OF D ECISION OF HONBLE ITAT AHMEDABAD BENCH IN THE CASE OF ACIT VS. M/S SHIKHAR DEVELOPERS VIDE ITA NO. 854/AHD/2010 DATED 31/05/2012 WHEREIN UNDER SIMILAR CIRCUMSTANCES THE MATTER WAS RESTORED BACK TO THE F ILE OF AO BY OBSERVING AS UNDER:- 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE OF ADMISSIBILITY OF DEDUCTION PRESCRIBED U/S 80-IB(10) IS NOW TO BE DECIDED AS PER THE OBSE RVATIONS MADE BY GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS INDIA LTD. IN TAX APPEAL NO. L7L OF 1999 VIDE ORDER DATED 01/04/2009 [REPORTED AT (2010) 329 ITR 01 (GUJ) ]. THE HON'BLE COURT HAS G IVEN FINDING IN THAT CASE AFTER EXAMINATION OF CERTAIN FACTS TO SAT ISFY THE CONDITIONS PRESCRIBED U/S.80-IB(L0). ONLY AFTER GIVING A FINDI NG ON FACTS, DIE HON'BLE COURT HAS ALLOWED THE DEDUCTION U/S.80-1B(1 0). THOSE REQUIREMENTS HAVE TO BE FULFILLED BY A DEVELOPER TO STAKE A CLAIM OF DEDUCTION. THE REQUISITE INFORMATION IS NOT AVAILAB LE ON RECORD. WE HAVE NOTICED THAT THE SAID REQUISITE INFORMATION IS NOT EVEN EXAMINED BY THE REVENUE AUTHORITIES IN THE LIGHT OF THE HIGH COURT DECISION. THE GUIDELINES GIVEN BY THE HONBLE HIGH COURT CAN BE S UMMARIZED AS FOLLOWS:- (A) THE RELEVANT TERMS OF DEVELOPMENT AGREEMENT ARE TO BE EXAMINED SO AS TO ASCERTAIN THE TERMS ON WHICH THE ASSESSEE WAS GRANTED RIGHT OF CONSTRUCTION OF A HOUSING PROJ ECT. (B) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE ASCERTAINED WHETHER IT WAS A WORK CONTRACT OR A DEVELOPMENT CONTRACT. (C) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE EXAMINED THAT WHICH OF THE PARTY HAD TAKEN FULL RES PONSIBILITY FOR EXECUTION OF THE SAID DEVELOPMENT PROJECT. I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 7 (D) WHETHER UNDER THE AGREEMENT THE ASSESSEE HAD BE EN GIVEN FULL AUTHORITY TO DEVELOP THE LAND AND TO CON STRUCT RESIDENTIAL UNITS. THE AO HAS TO EXAMINE THE FACT IN RESPECT OF ENGAGEMENT OF PROFESSIONALS, SUCH AS, ARCHITECT FOR DESIGNING AND ARCHITECTURAL WORK. (E) THE AO HAS TO EXAMINE THE RESPONSIBILITY OF ENR OLMENT OF MEMBERS AND COLLECTION OF CHARGES REQUIRED TO BE MA DE FROM THE BUYERS OF THE RESIDENTIAL UNITS. (F) THE AO HAS TO EXAMINE ABOUT THE PROFIT OR LO SS ARISING FROM THE SAID PROJECT. (G) THOUGH THE OWNERSHIP OF LAND HAS BEEN HELD AS N OT THE ONLY CRITERIA FOR ALLOWING THE CLAIM U/S. 80IB(10) BUT THE DOMAIN OVER THE LAND AND THE CONTROL OVER THE PROJE CT HAS TO BE EXAMINED BY THE AO. (H) WHETHER ON TRANSFER OF DOMAIN THE LAND OWNERS H AVE RECEIVED ANY CONSIDERATION AND WHETHER IT WAS A FIX ED AMOUNT OR DEPEND UPON THE PROFITS OF THE PROJECT. LIKEWIS E, THE AO HAS TO ASCERTAIN THAT WHETHER THE ASSESSEE WAS GIVEN A FIXED PERCENTAGE AS REMUNERATION FOR THE SAID PROJECT IN LIEU OF GRANTING PERMISSION TO CONSTRUCT THE RESIDENTIAL UN ITS OR TO EARN PROFIT AS A PROJECT DEVELOPER. (I) THE AO HAS TO ASCERTAIN THE POSITION OF THE POS SESSION OVER THE LAND DURING THE CONSTRUCTION PERIOD. (J) FOR THE PURPOSE OF CONSTRUCTION THE AO HAS TO E XAMINE THE FINANCIAL ARRANGEMENTS. 7. IN ADDITION IN THE ABOVE GUIDELINES, ONCE THE M ATTER IS GOING BACK FOR RECONCILIATION, THEN THE AGREEMENTS CONNEC TED TO THE LAND AND THE DETAILS OF THE APPROVAL GRANTED BY THE LOC AL AUTHORITY PERMITTING TO DEVELOP THE HOUSING PROJECT CAN ALSO BE EXAMINED IF DEEM FIT. SINCE THE HONBLE HIGH COURT HAS GIVEN TH E VERDICT IN FAVOUR OF THE ASSESSEE AFTER DUE ASCERTAINMENT OF THESE BA SIC FACTS, THEREFORE IT IS APPROPRIATE FIRST TO PLACE ON RECORD ALL THES E INFORMATION AND THEN IF FACTS ARE IDENTICAL CONSEQUENTLY THEREUPON, THE CITED DECISION HAS TO I.T.A NO.1528/AHD/2010 A.Y. 2007-08 PAGE NO ITO VS. M/S. OM DEVELOPERS 8 BE FOLLOWED TO DISPOSE OF THE ISSUE. WITH THESE DIRECTIONS, WE HE REBY ALLOW THE GROUND OF THE REVENUE THAT TOO FOR STATIS TICAL PURPOSES ONLY. 9. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 21/03/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,