DCIT, Bangalore V. M/s Renaissance Holding & Developers Pvt. Ltd., Bangalore

ITA 1537/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51351 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: PADAMCHAND KHINCHA
• Section: 80IB

Judgement Text

PAGE 1 OF 7 ITA NO.1537/BANG/201 0 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1537/BANG/2010 (ASST. YEAR 2006-07) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(4), BANGALORE. - APPELLANT VS M/S RENAISSANCE HOLDING & DEVELOPERS PVT. LTD., NO.12, 18 TH CROSS, 6 TH MAIN, MALLESWARAM, BANGALORE-55. - RESPONDENT PA NO.AAACR6804J DATE OF HEARING : 29/11/2011 DATE OF PRONOUNCEMENT : 29/11/2011 APPELLANT BY : SMT. SUSAN THOMAS JOSE, JCIT RESPONDENT BY : SHRI PADAM CHAND KHINCHA, C.A. O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-III, BANGALORE DATED 14/9/2 010. THE RELEVANT ASST. YEAR IS 2006-07. 2. THE EFFECTIVE GROUND RAISED BY THE REVENUE READS AS FOLLOWS:- THE LEARNED CIT(A) ERRED IN HOLDING THAT PROFIT DER IVED FROM MODIFICATION AND UPGRADATION WORKS UNDERTAKEN IN SOME FLATS OF 80IB(10) PROJECT IS PROFIT DERIVED FR OM THE PROJECT ELIGIBLE FOR DEDUCTION U/S 80IB(10) WITHOUT PAGE 2 OF 7 ITA NO.1537/BANG/201 0 2 APPRECIATING THAT THESE WORKS WERE UNDERTAKEN AS A SEPARATE CONTRACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. IT FILED ITS RETURN OF INCOME FOR THE CONCERNED ASST. YEAR ON 30.11.2006 DECLARING TOTAL INCOME OF RS.3,83,62,360/-. THE ASSESSEE COMPANY HAD REFLECTE D AN AMOUNT OF RS.83,90,091/- AS EXPENDITURE ON WORKS CONTRACTS. THE AO, IN THE COURSE OF ASSESSMENT PROCEEDINGS, VERIFIED AND ASCERTAINED TH AT THE ASSESSEE COMPANY HAD ENTERED INTO MODIFICATION/UPGRADATION CONTRACT WITH ITS CUSTOMERS AMOUNTING TO RS.96,43,782/- ON WHICH THE ABOVE EXPE NDITURE OF RS.83,90,091/- WAS INCURRED. THIS HAD RESULTED IN A PROFIT OF RS.12,53,692. WHILE COMPLETING THE ASSESSMENT, THE AO HELD THAT T HE ABOVE PROFIT OF RS.12,53,692/- IS NOT ATTRIBUTABLE TO INCOME U/S 80 IB OF THE ACT AS THE ASSESSEE COMPANY HAD EXECUTED THE ABOVE MODIFICATION /UPGRADATION CONTRACT IN THE CAPACITY AS A CONTRACTOR AND NOT AS A BUILDER FOR DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT WITHIN THE MEAN ING OF SECTION 80IB(10) OF THE ACT. THEREFORE, AN AMOUNT OF RS.12,53,692/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. ELABORATE SUBMISSIONS WERE MADE BEFORE THE CIT( A), WHICH ARE REPRODUCED AT IN PARA 6.1 TO 6.5 OF THE IMPUGNED OR DER OF THE CIT(A). THE PAGE 3 OF 7 ITA NO.1537/BANG/201 0 3 CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 6.6 I HAVE PERUSED THE DOCUMENTS AND OTHER SUBMISSIONS MADE BY THE APPELLANT AND I AM INCLINED TO AGREE WITH THE SUBMISSIONS MADE BY THE APPELLANT ON THIS COUNT THAT MODIFICATION CHARGES RECEIVED IN CASE OF 80IB PROJECTS TO THE EXTENT OF RS.12,53,692/- DO QUALITY FOR DEDUCTION U/S 80IB(10) OF THE ACT AS THERE IS NO DEVIATION FROM THE CONDITIONS STIPULATED UNDER SECT ION 80IB(10) OF THE INCOME TAX ACT. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED DR RELIED ON THE FINDING OF THE AO. 8. THE LEARNED AR ON THE OTHER HAND SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDER OF THE BANG ALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S PROMOD & OTHERS IN ITA NOS.800 TO 802, 1023 TO 1024, 962, 977 TO 979/BANG/2009 AND THE ORDER OF THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF M/S NORTH CITY DEVELOPER S IN ITA NO.1307/KOL/2010. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE FOR OUR CONSIDERATION IS WHETHER THE PROFIT DERIVED FROM MODIFICATION AND UP-GRADATION WORKS UN DERTAKEN IN CERTAIN FLATS IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDERS OF THE TRIBUNAL CI TED SUPRA. THE RELEVANT FINDING OF THE ORDER OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S PRAMOD & OTHERS AT PARA 33 AND 34 READS AS FOLL OWS:- PAGE 4 OF 7 ITA NO.1537/BANG/201 0 4 33. COMING TO THE MISCELLANEOUS RECEIPTS, THE ASSESSEES REPRESENTATIVE SUBMITTED THAT THESE ARE ADDITIONAL CHARGES RECEIVED FROM THE BUYERS OF THE F LATS FOR PROVIDING ADDITIONAL/MODIFIED SPECIFICATION LIK E TILES, MARBLES ETC., AND, THEREFORE, IT IS PART AND PARCEL OF THE CONSTRUCTION COST AND IT CANNOT BE TREATED SEPARATE LY. WE HEARD THE LEARNED DR ON THE POINT. 34. WE ARE OF THE VIEW THAT THE VIEW CANVASSED BY TH E LEARNED REPRESENTATIVE FOR THE ASSESSEE WHICH WAS A LSO THE ARGUMENT ADVANCED BEFORE THE COMMISSIONER OF INCOME-TAX (A) IS TO BE ACCEPTED. SIMPLY BECAUSE IT IS TERMED AS MISCELLANEOUS, IT CANNOT BE EXCLUDED FROM THE RECEIPTS ELIGIBLE FOR DEDUCTION U/S 80IB(10). 9.1 THE FINDING OF THE KOLKATA BENCH OF THE TRIBUN AL IN THE CASE OF M/S NORTH CITY DEVELOPERS READS AS FOLLOWS:- 21. ON PERUSAL OF AGREEMENT FOR SALE, WE OBSERVE T HAT THE ASSESSEE IS DEVELOPING THE HOUSING PROJECT. TH E ACTIVITIES OF UNDERTAKING DEVELOPING, CONSTRUCTING AND BUILDING OF HOUSING PROJECT INCLUDE NOT ONLY CONSTRU CTION OF FLATS BUT ALSO INCLUDE WITHIN ITS PURVIEW THE AC TIVITY OF CONSTRUCTING THE RESIDENTIAL FLATS, DEVELOPING SURR OUNDING OPEN SPACE, COMMON AREAS AND FACILITIES, PATHWAYS AN D ALSO TO PROVIDE A COMMUNITY HALL FOR SOCIAL GATHERIN GS. IT ALSO DEPENDS AS TO WHETHER THERE IS ALSO THE FACILI TY OF PROVIDING GYM, GARAGES AND PARKING SPACES, SWIMMING POOL, INTERCOM SYSTEM ETC. NOT ONLY THIS, IN A HOUSI NG PROJECT DRINKING WATER SUPPLY, ELECTRICITY INSTALLATI ONS, COMMON AREA SERVICES AND FACILITIES ARE ALSO REQUIR ED TO BE PROVIDED BY THE DEVELOPER. WE OBSERVE THAT IN TH E CASE BEFORE US, AS PER BROCHURE PLACED AT PAGE 102 OF THE PAPER BOOK, VOLUME I, THE ASSESSEE STATED THE AMENITIES TO BE PROVIDED IN THE HOUSING PROJECT TO BE SET UP, VIZ., AIR-CONDITIONER HALL FOR SOCIAL GATHERING S, MINI GYM AND HEALTH CORNER, WALKING TRACK, CHILDRENS PLA Y AREA, PAGE 5 OF 7 ITA NO.1537/BANG/201 0 5 NATURAL WATER BODY, INTERCOM, 24 HOUR DRINKING WATE R FROM TALA TANK, GENERATOR, INTERNAL WALLS WITH PLAS TER OF PARIS FINISH, TELEPHONE &* TV POINTS IN MASTER BED ROOM AND LIVING ROOM ETC. THEREFORE, WE ARE OF THE CONS IDERED VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE AGGREGATING TO RS.55,00,000/-, THE DETAILS OF WHICH ARE GIVEN AT PAGES 294 TO 303 OF THE PAPER BOOK, VOLUME II, ARE THE EXPENSES INCURRED FOR DEVELOPMENT OF COMMON AREAS WHICH THE ASSESSEE WAS OBLIGED TO PROVIDE AND IT WAS NOTHING TO DO WITH THE RECEIPT OF RS.3,66,763/- , HE DETAILS OF WHICH ARE STATED AT PAGES 288 TO 293 OF THE PAPER BOOK, VOLUME II. THE TRIBUNAL FURTHER HELD AT PARA 24, WHICH READ S AS FOLLOWS :- 24. WE AGREE WITH LD. AR THAT IN THE CONSTRUCTION O F A HOUSING PROJECT, THE ASSESSEE WAS UNDER AN OBLIGATI ON, AS PER AGREEMENT/MEMORANDUM ENTERED INTO, TO PROVIDE A LL COMMON FACILITIES, INCLUDING ELECTRICITY SUPPLY AND M ETER, TRANSFORMER AND ELECTRIC SUB STATION, INCLUDING PRO VISION FOR GENERATOR. IT IS A PART AND PARCEL OF THE ENTI RE ACTIVITY OF DEVELOPING AND BUILDING A HOUSING PROJEC T AND WITHOUT WHICH THE PROJECT DEVELOPED COULD NOT BE SA ID TO BE COMPLETE. WE OBSERVE THAT AS PER AGREEMENT, IT IS PROVIDED THAT EACH OF THE PURCHASERS IS REQUIRED TO PAY AN ADDITIONAL AMOUNT @ RS.55/- PER SQ.FT OF SUPER B UILT UP AREA OF THE SAID FLAT BY WAY OF CONSIDERATION FOR INSTALLATION OF GENERATOR FOR THE COMMON PORTIONS A ND FOR PROVIDING POWER TO THE SAID FLATS AND ALSO FOR PROV IDING ELECTRICITY SUPPLY AND METER ETC. FOR COMMON PURPOSES . WE AGREE THAT CHARGING OF EXTRA AMOUNT FOR PROVIDIN G THE ABOVE ESSENTIAL COMMON FACILITIES AS PER THE AGREEMENT IS IN THE CAPACITY OF DEVELOPING AND CONSTRUCTING THE HOUSING PROJECT BY THE ASSESSEE AND NOT TO ACT AS A MIDDLEMAN/AGENT, AS ALLEGED BY AO. THES E ACTIVITIES, WE ARE OF THE CONSIDERED VIEW, ARE PART AND PAGE 6 OF 7 ITA NO.1537/BANG/201 0 6 PARCEL OF THE ENTIRE ACTIVITY OF DEVELOPING AND COMP LETING THE HOUSING PROJECT. HENCE, WE HOLD THAT CHARGING OF THE SAID ADDITIONAL AMOUNT, I.E. @ RS.55/- PER SQ FT OF SUPER BUILT UP AREA FROM FLAT OWNERS/PURCHASERS IS HAVING DIRECT NEXUS WITH THE ACTIVITY OF DEVELOPING AND BUI LDING HOUSING PROJECT. WE ALSO OBSERVE ON PERUSAL OF DET AILS AT PAGE 60 OF THE PAPER BOOK THAT THE TOTAL RECEIPTS A GAINST CESC, ELECTRICITY AND GENERATOR WAS OF RS.45,70,703/ - AND WHEREAS THE EXPENSES INCURRED BY THE ASSESSEE WA S OF RS.63,94,341.94 AND THUS THERE WAS A LOSS OF RS.18,23,638.94. BESIDES ABOVE, IN RESPECT OF RS.3,66,763/- WHICH IS ALSO MENTIONED IN GROUND NO. 3 OF THE APPEAL, RECEIVED BY THE ASSESSEE FROM FLAT OWNER S FOR EXTRA WORK, WE OBSERVE THAT THE SAID WORK WAS CARRIED OUT BEFORE HANDING OVER OF THE POSSESSION O F THE RESPECTIVE FLATS TO THE BUYERS AND NOT AFTER HANDING OVER OF THE POSSESSION. THE DEPARTMENT HAS DISPUTED THE POSITION BUT THERE WAS NO COGENT MATERIAL BROUGHT O N RECORD TO DISLODGE THE FACT THAT THE SAID EXTRA WOR K WAS CARRIED OUT BY THE ASSESSEE IN TERMS OF CLAUSE (C) O F SECTION A OF SIXTH SCHEDULE OF THE SALE AGREEMENT ENTERED INTO WITH THE FLAT BUYERS. THEREFORE, WE HO LD THAT LD. CIT(A) HAS RIGHTLY HELD THAT THE SAID RECEI PT OF RS.3,66,763/- HAS A DIRECT NEXUS WITH THE ACTIVITY O F UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT AND IS ELIGIBLE TO BE INCLUDED WHILE COMPUTING DEDUCTION U /S 80IB(10) OF THE ACT. IN VIEW OF THE ABOVE FACTS, W E HOLD THAT THERE IS NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). GROUND NO.3 OF THE APPEAL TAKEN BY THE DEPARTMENT IS ALSO REJECTED. 9.2 THE FACTS, BEING SIMILAR TO THE FACTS IN THE C ASES RELIED ON BY THE ASSESSEE, FOLLOWING THE COORDINATE BENCH ORDERS OF THE TRIBUNAL IN THE CASE CITED SUPRA, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS REJECTED. PAGE 7 OF 7 ITA NO.1537/BANG/201 0 7 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER, 2011 SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.