The ACIT, Circle-5, Baroda V. M/d. Siddharth Enterprises, Baroda

ITA 1529/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60338 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MUDHOUSNALAN
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1529/AHD/ 2010 ASSESSMENT YEAR :2007-08 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA-390 007 V/S . M/S SIDDHARTH ENTERPRISE, S.NO.341, 342, SIDDHARTH PARK NR. SAIDEEP NAGAR, NEW VIP ROAD, B/H. AIR PORT, BARODA. PAN NO. AB C F S 0 789 H (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI K. MUDHOUSNALAN, SR. D.R. /BY RESPONDENT NONE /DATE OF HEARING 14.05.2012 /DATE OF PRONOUNCEMENT 18.05.2012 O R D E R PER : D.K.TYAGI, JUDICIAL MEMBER THIS IS A REVENUES APPEAL DIRECTED AGAINST THE OR DER OF LD. CIT (A)-V, BARODA DATED 09.03.2010 FOR ASSESSMENT YEAR 2007-08 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE BEING SERVED UPON HIM. SO WE PROCEEDED TO DECIDE THE APPEAL AFT ER HEARING LEARNED A.R. 3. THE REVENUE IN THIS APPEAL IS AGGRIEVED BY THE O RDER OF LD. CIT (A) ITA NO. 1529/AHD/2010 A.Y.2007-08 PAGE 2 ALLOWING THE DEDUCTION UNDER SECTION 80IB(10) OF TH E ACT OF RS. 57,18,600/- AS CLAIMED BY THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDING THE ASSESSMENT OFFICER OBSERVED THAT THE ASSESSEE F IRM HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT OF RS. 57,18,600/-. IN THIS REGARD, THE SHOW CAUSE NOTICE WAS ISSUED BY HIM AS TO WHY T HIS DEDUCTION SHOULD NOT BE DISALLOWED, CONSIDERING THAT THE DEVELOPER IS NO T THE OWNER OF THE LAND. AFTER GOING THROUGH THE RETURN OF INCOME OF THE ASS ESSEE AS WELL AS THE SUBMISSION OF THE ASSESSEE IN REPLY TO THE SHOW CAU SE NOTICE ISSUED BY HIM THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE FIRM WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. T HE REASON FOR THIS DISALLOWANCE BY A.O. OF ASSESSEES CLAIM CAN BE SUM MARIZED AS UNDER: (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 AND BUILD HOUSING PROJECTS THEREON. AO SAYS THAT THE D EVELOPER FIRST SHOULD PURCHASE THE LAND AND THEN TAKE NECESSARY PERMISSIO N 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 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 80I B. ITA NO. 1529/AHD/2010 A.Y.2007-08 PAGE 3 5. AGGRIEVED BY THIS DISALLOWANCE THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT (A). THE ASSESSEES CONTENTION BEFORE HIM WAS THAT HE IS ENGAGED IN DEVELOPING HOUSING PROJECT ON THE LAND IN POSSESSIO N OF THE FIRM IN THE NAME OF SHRI BHOLABHAI RAMJIBHAI PATEL, HUF WHO IS THE P ARTNER OF THE FIRM AND THAT THE LAND WAS INTRODUCED AS CAPITAL CONTRIBUTION. I T WAS FURTHER MENTIONED THAT THE APPROVAL OF THE PROJECT WAS ALSO OBTAINED IN TH E NAME OF THE AFORESAID PERSON AND THAT ALL THE OTHER CONDITIONS REGARDING AREA ETC. AS LAID DOWN UNDER SECTION 80IB(10) WERE ALSO SATISFIED. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF RADHEY DEVELOPERS VS ITO WARD 3(2) BARODA NO 2482/AHD/2006 A BENCH AHMEDABAD. IT WAS FURTHER SUBMITTED THAT THE ENTIRE RISK WAS OF THE ASSESSEE WHO WAS DEVELOPING THE PROJECT AND THERE WAS NO AGREEMENT FOR FIXED REMUNERATION AS A CONTRACTOR AND THE LAND OWNER DID NOT HAVE ANY RIGHT OR INTEREST IN THE DEVELOPING OF THE PROJECT. 6. LEARNED CIT (A) ALLOWED THE APPEAL OF THE ASSESS EE BY OBSERVING AS UNDER: 4.3 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CAS E, 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 FAVOUR OF THE APPELLANT AND AG AINST REVENUE BY THE ORDER OF THE JURISDICTIONAL ITAT, IN THE CASE OF RADHE 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 NO. 1503/AHD/2008 DATED 07/11/2008 WHEREIN, THE HONBLE ITAT HAS INDI CATED 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 ITA NO. 1529/AHD/2010 A.Y.2007-08 PAGE 4 RISK AND THE BENEFIT WOULD BE DENIED IF THE ASSESSE E HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERATION AS A CONTRACTOR TO CONSTRUCT OR DEVLOP THE PROJECT ON BEHALF OF THE LAND OWNER. FU RTHER, HONBLE APEX COURT IN THE CASE OF FAQIR CHAND GULATI VS UPPAL AG ENCIES PVT. LTD. & ANR. (CIVIL APPEAL NO. 3302 OF 2005) DATED 10/07/20 08 HAS HELD AS UNDER : I) ADEVELOPMENT AGREEMENT IS ONE WHERE THE LAND HOL DER 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 W HOM AND AT WHAT COST THE BUILDERS SHARE OF APARTMENTS ARE TO BE DEALT WITH OR DISPOSED OF. SUCH AN AGREEMENT IS NOT A JOINT VEN TURE IN THE LEGAL SENSE. IT IS A CONTRACT FOR SERVICES. II) ON THE OTHER HAND, AN AGREEMENT BETWEEN THE OWN ER 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 PARETIES 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 DETERMINATIV E 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 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. ITA NO. 1529/AHD/2010 A.Y.2007-08 PAGE 5 4.3.1 IN THE INSTANT CASE, THE APPELLANT HAS PURCHA SED THE LAND FOR FIXED CONSIDERATION AND HAS DEVELOPED THE HOUSING PROJECT ON ITS OWN COST AND RISK AND THERE IS NO JOINT VENTURE WITH THE LAN D OWNER AND THUS IN TERMS OF DECISION IN THE CASE OF M/S. SHAKTI CORPOR ATION AND FAQIR CHAND GULATI VS. UPPAL AGENCIES PVT. LTD. & ANR. TH E APPELLANT IS ENTITLED TO DEDUCTION U/S. 80IB(10). THE GROUND IS ALLOWED. 7. SINCE THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASS ESSEE BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SHAKTI CORPORATION AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF FAQIR CHAND GULATI VS. UPPAL AGENCIES PVT. LTD. & ANR, THE ORDER PASSED BY HIM I S HEREBY UPHELD. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A. MOHAN ALANKAMONY) ( D.K. TYAGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; ITA NO. 1529/AHD/2010 A.Y.2007-08 PAGE 6