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

ITA 156/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73038 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: CHIRAG R SHAH
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 156/AHD/2011 (ASSESSMENT YEAR: 2006-07) THE ITO WARD-2(2), BARODA V/S M/S. OM ENTERPRISE, 201, VIDHYAHAM APARTMENT OPP. BHATHUJI TEMPLE, MANJALPUR BARODA (APPELLANT) (RESPONDENT) PAN: AABFO 0612P APPELLANT BY : SHRI D.K. MISHRA, D.R. RESPONDENT BY : SHRI CHIRAG R. SHAH ( )/ ORDER DATE OF HEARING : 26-02-201 4 DATE OF PRONOUNCEMENT : 07-03-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-II, BARODA DATED 20.10.2010 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN TH E BUSINESS OF CONSTRUCTION OF RESIDENTIAL HOUSES. ASSESSEE FILED ITS RETURN OF IN COME FOR A.Y. 06-07 ON 28.09.2006 DECLARING NIL INCOME AFTER CLAIMING DEDU CTION OF RS. 67,67,672/- UNDER SECTION 80IB OF THE ACT. THE CASE WAS SELECTE D FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED ITA NO 156/AHD/2 011 . A.Y. 2 006-07 2 31.12.2008 AND THE TOTAL INCOME WAS DETERMINED AT R S. 68,83,170/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER THE BEFORE CIT(A). CIT(A) VIDE ORDER DATED 20.10.2010 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE REV ENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S. 80IB( 10) R.W.S. 80IB(1) OF THE INCOME-TAX ACT TO THE ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE ITA T IN THE CASE OF M/S. RADHE DEVELOPERS IN ITA NO. 2482/AHD/2006 DATED 29.06.2007, WITHOUT APPRECI ATING THAT THE APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COMPLETION CERTIFICATE WAS NOT GRANTED TO THE ASSESSEE BUT THE LANDOWNER AND THE RIGHTS AND THE OBLIGATION UNDER THE SAID APPROV AL WERE NOT TRANSFERABLE, AND THAT TRANSFER OF DWELLING UNITS IN FAVOUR OF THE END-USERS WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S. 80IB( 10) R.W.S. 80IB(1) OF THE INCOME-TAX ACT TO THE ON PROFIT NOT AN FROM SALE OF UNUTILIZED FSI, WITHO UT APPRECIATING THAT THIS PROFIT NOT AN ELEMENT OF PROFITS DERIVED FROM THE BUSINESS ACTIVITY OF DEVEL OPMENT AND CONSTRUCTION OF THE HOUSING PROJECT RELATING TO THE SALE OF TENEMENTS. 4. SINCE THE GROUNDS ARE INTERCONNECTED AND RELATES TO DEDUCTION U/S. 80IB, BOTH ARE CONSIDERED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . NOTICED THAT ASSESSEE FIRM HAD CONSTRUCTED HOUSING PROJECT AND HAD SHOWN TOTAL NET PROFIT OF RS. 67,40,560/- DERIVED FROM DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT AND AS SUCH THE ENTIRE PROFIT WAS CLAIMED AS DEDUCT ION U/S. 80IB(10) OF THE ACT. A.O WAS OF THE VIEW THAT ASSESSEE IS NOT ELIG IBLE FOR DEDUCTION UNDER 80IB(10) OF THE ACT AS THE ASSESSEE WAS NOT THE OWN ER OF THE LAND, THE APPROVAL FOR HOUSING PROJECT FROM LOCAL AUTHORITY W AS TAKEN BY OTHER PEOPLE AND NOT BY ASSESSEE, THE LAND OWNERS HAD SOLD THE P IECES OF LAND TO UNIT HOLDERS DIRECTLY AND ASSESSEE HAD ACTED MERELY AS A CONFIRMING PARTY, ASSESSEE HAD ACTED MERELY AS A CONTRACTOR AS IT HAD ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDER AND THE ASSESSEE NEV ER SOLD THE HOUSE TO THE UNIT HOLDER AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF. A.O. NOTICED THAT ASSESSEE HAD CARRIED OUT THE CONSTRUCT ION ACTIVITY ON THE LAND WITHOUT FULLY UTILIZING THE PERMISSIBLE FLOORS SPAC E INDEX (FSI). A.O NOTICED THAT THOUGH THE APPROVED FSI IN REGARD TO THE UNIT CONSTRUCTED HAS BEEN FULLY ITA NO 156/AHD/2 011 . A.Y. 2 006-07 3 UTILIZED AS PER THE APPROVED PLAN OF THE LOCAL AUTH ORITY YET THE BALANCE FSI AVAILABLE ON THE PLOT OF LAND FOR DEVELOPMENT AND C ONSTRUCTION HAS NOT BEEN UTILIZED FOR THE PURPOSE OF DEVELOPMENT AND CONSTRU CTION OF THE PROJECT. HE NOTICED THAT ASSESSEE HAD TOTAL PLOT AREA OF 25,349 .60 SQ. MT. FOR DEVELOPMENT BUT ASSESSEE HAD UTILIZED 10,393.34 SQ. MT. FOR THE CONSTRUCTION. THE A.O. WAS THEREFORE OF THE VIEW THAT THE PROFIT ARISING FROM THE ENTIRE PROJECT FOR THE YEAR INCLUDES ADDITIONAL PROFIT ATT RIBUTABLE TO SALE OF UNUTILIZED FSI. HE WAS OF THE VIEW THAT PROFIT ATTRIBUTABLE TO THE SALE OF UNUTILIZED FSI WAS NOT RELATING TO THE DEVELOPMENT AND CONSTRUCTIO N AND THEREFORE NOT ELIGIBLE FOR CLAIMING OF DEDUCTION. HE ACCORDINGLY DENIED THE CLAIM OF DEDUCTION U/S. 80IB(10). AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ASSESSEE IS ELIGIBLE FOR DED UCTION UNDER 80IB(10) BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. CO UNSEL AND FACTS OF THE CASE AND THE RECENT DECISION OF HONBLE ITAT, AHMEDABAD, IN THE CASE OF M/S. RADHE DEVELOPERS AND OTHER VIDE ORDER IN ITA NO. 2482/AHD/2006 DATED 29.06.2007. THE FACTS AND CIRC UMSTANCES OF THE APPELLANT ARE IDENTICAL TO THE CASES DECIDED BY HONBLE ITAT, AHMEDABAD. ALSO ALL THE PLEAS RAISED BY THE ASSESSING OFFICER HAVE BEEN EFFECTIVELY DEALT WITH AND DISCUSSED IN THE SA ID ORDER AND THEREAFTER HONBLE ITAT HAS ALLOWED THE DEDUCTION UNDER SECTION 80IB(10). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT, THE DEDUCTION UNDER SECTION 80IB(10) IS DIRECTED TO BE ALLOWED. SECOND GROUND OF APPEAL IS ALLOWED. 6. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US, LD. D.R. TOOK US THROUGH THE DETAILED FINDINGS OF A.O. AND SUBMITTED THAT A.O. HAS RIGHTLY HELD THAT ASSES SEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10). ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT IT HAS COMPLIED WITH ALL THE CONDITIONS AS STIPULATED UNDE R SECTION 80IB(10) AND IT WAS ELIGIBLE FOR DEDUCTION UNDER 80IB(10). HE ALSO RELIED ON THE DECISION IN THE CASE OF RADHE DEVELOPERS AND SHAKTI CORPORATION (SUPRA). HE THUS SUBMITTED THAT CIT(A) HAS RIGHTLY HELD THAT ASSESSE E IS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT AND HE THUS SUPPORTED THE ORDER OF CIT(A). . ITA NO 156/AHD/2 011 . A.Y. 2 006-07 4 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS BEE N DENIED THE DEDUCTION UNDER 80IB(10) BY THE A.O. FOR THE REASON THAT THE ASSESSEE IS NOT THE OWNER OF THE LAND AND HAS ACTED ONLY AS A CONTRACTOR. ON THE OTHER HAND LD. A.R. HAS SUBMITTED THAT IT HAS COMPLIED WITH THE CONDITI ONS LAID DOWN U/S. 80IB(10) AND RELIED ON THE ORDERS OF RADHE DEVELOPERS AND SH AKTI CORPORATION. WE ALSO FIND THAT CIT(A) HAS PASSED A CRYPTIC ORDER WH ILE ALLOWING THE CLAIM OF DEDUCTION OF ASSESSEE . WE FURTHER FIND THAT THE CO -ORDINATE BENCH IN THE CASE OF SHIKAR DEVELOPERS ITA NO. 854/AHD/2010 HAS NOTED THE VARIOUS REQUIREMENTS AS STIPULATED IN THE CASE OF RADHE DEV ELOPERS (2010) 329 ITR 01 (GUJ) THAT NEEDS TO BE FULFILLED BY A DEVELOPER SO AS TO BECOME ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IB(10) . THE RELEVANT POR TION OF THE GUIDELINES AS NOTED BY THE TRIBUNAL ARE 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 OBSERVATIONS MADE BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF R ADHE DEVELOPERS INDIA LTD. IN TAX APPEAL NO. 171 OF 1999 VIDE ORDER DATED 01/04/2009 [REPORT ED AT (2010) 329 ITR 01 (GUJ.)]- THE HON'BLE COURT HAS GIVEN FINDING IN THAT CASE AFTER EXAMINAT ION OF CERTAIN FACTS TO SATISFY THE CONDITIONS PRESCRIBED U/S.80-IB(10). ONLY AFTER GIVING A FINDI NG ON FACTS, THE HON'BLE COURT HAS ALLOWED THE DEDUCTION U/S.80-IB(10). 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 WAS NOT EVEN EXAMINED BY THE REVENUE AUTHORITIES IN THE LIGHT OF THE- HIGH COURT DECISION. THE GUIDELINES GIVEN BY THE HON'BLE HIGH COURT CAN BE SUMMARIZED AS FOLLOWS:- (A) THE RELEVANT TERMS OF DEVELOPMENT AGREEMENT AR E TO BE EXAMINED SO AS TO ASCERTAIN THE TERMS ON WHICH THE ASSESSEE WAS GRANTED RIGHT OF CONSTRUC TION OF A HOUSING PROJECT. (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 HAS TO BE EXAMINED THAT WHICH OF THE PARTY HAD TAKEN FULL RESPONSIBILITY FOR EXECUTION OF THE SAID DEVELOPMENT PROJECT. (D) WHETHER UNDER THE AGREEMENT THE ASSESSEE HAD B EEN GIVEN FULL AUTHORITY TO DEVELOP THE LAND AND TO CONSTRUCT RESIDENTIAL UNITS. THE AO HAS TO E XAMINE 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 EN ROLMENT OF MEMBERS AND COLLECTION OF CHARGES REQUIRED TO BE MADE FROM THE BUYERS OF THE RESIDENT IAL UNITS. (F) THE AO HAS TO EXAMINE ABOUT THE 'PROFIT' OR 'L OSS' ARISING FROM THE SAID PROJECT. ITA NO 156/AHD/2 011 . A.Y. 2 006-07 5 (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 CONTR OL OVER THE PROJECT HAS TO BE EXAMINED BY THE A.O. (H) WHETHER ON TRANSFER OF DOMAIN THE LAND OWNERS HAVE RECEIVED ANY CONSIDERATION AND WHETHER IT WAS A FIXED AMOUNT OR DEPEND UPON THE PROFITS OF THE PROJECT. LIKEWISE, THE AO HAS TO ASCERTAIN THAT WHETHER THE ASSESSEE WAS GIVEN A FIXED PERCENT AGE AS REMUNERATION FOR THE SAID PROJECT IN LIEU OF GRANTING PERMISSION TO CONSTRUCT THE RESIDENTIAL UNITS OR TO EARN PROFITS AS A PROJECT DEVELOPER. (I) THE AO HAS TO ASCERTAIN THE POSITION OF THE PO SSESSION OVER THE LAND DURING THE CONSTRUCTION PERIOD. (J) FOR THE PURPOSE OF CONSTRUCTION THE AO HAS TO E XAMINE THE FINANCIAL ARRANGEMENTS. (K) THE A.O. HAS TO EXAMINE THE PROCEDURE FOR RAISI NG OF FUNDS EITHER BY PRIVATE PLACEMENT OR BY FINANCIAL INSTITUTIONS. (L) THE RISK ELEMENT CONNECTED WITH THE SAID HOUSIN G PROJECT HAS ALSO TO BE EXAMINED. (M) THE ASSESSING OFFICER HAS TO EXAMINE THE SIZE O F THE PLOT ON WHICH PROJECT IS CONSTRUCTED. (N) THE A.O. HAS TO EXAMINE BUILT-UP AREA OF SANCT IONED UNIT WHETHER WITHIN THE PRESCRIBED LIMIT. IN ADDITION TO THE ABOVE GUIDELINES, ONCE THE MATTE R IS GOING BACK FOR RECONCILIATION, THEN THE AGREEMENTS CONNECTED TO THE LAND AND THE DETAILS OF THE APPROVAL GRANTED BY THE LOCAL AUTHORITY PERMITTING TO DEVELOP THE HOUSING PROJECT CAN ALSO BE EXAMINED IF DEEM FIT. SINCE THE HON'BLE HIGH COURT HAS GIVEN THE VERDICT IN FAVOUR OF THE ASSESS EE AFTER DUE ASCERTAINMENT OF THESE BASIC FACTS, THEREFORE IT IS APPROPRIATE FIRST TO PLACE ON RECOR D ALL THESE INFORMATION AND THEN IF FACTS ARE IDENTICAL CONSEQUENTLY THEREUPON, THE CITED DECISIO N HAS TO BE FOLLOWED TO DISPOSE OF THE ISSUE. WITH THESE DIRECTIONS, WE HEREBY ALLOW THE GROUND O F THE REVENUE THAT TOO FOR STATISTICAL PURPOSES ONLY. 8. IN THE PRESENT CASE THERE IS NO FINDING BY THE LOWE R AUTHORITIES IN THE CASE OF ASSESSEE ABOUT THE COMPLIANCE OF ALL THE CONDITIONS PRESCRIBED U/S 80IB(10) AS LAID DOWN BY THE TRIBUNAL IN THE CASE OF SHIKHAR DEVELOPERS (SUPRA). TO VERIFY THE COMPLIANCE OF THE CONDITIONS AS STIPULAT ED BY THE CO-ORDINATE BENCH, WE FEEL THAT THE MATTER NEEDS RE-EXAMINATION . WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF LD. CIT(A) TO VERIFY THE COMPLIANCE WITH THE CONDITIONS AS LAID BY THE CO-ORDINATE BENCH IN CASE OF SHIKHAR DEVELOPERS (SUPRA) AND GIVE A SPECIFIC FINDING ON THEM AND THE REAFTER DECIDE THE ISSUE. NEEDLESS TO STATE THAT CIT(A) SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. THE ASSESSEE IS ALSO DIRECTED TO FURNISH BEFORE CIT(A) ALL ITA NO 156/AHD/2 011 . A.Y. 2 006-07 6 THE NECESSARY INFORMATION/DETAILS CALLED FOR BY CIT (A) FOR DECIDING THE ISSUE. THUS THIS GROUND OF REVENUE IS ALLOWED FOR STATISTI CAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 07 - 03 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD