The ITO, Ward-5, Bharuch V. Shri Lal Bihari S.Pandey, Bharuch

ITA 1642/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6776 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G D BALVA
• Assessee Lawyers: JITENDRA P SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.1642/AHD/2009 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, WARD- 5, BANK OF BARODA BUILDING, STATION ROAD, BHARUCH V/S SHRI LAL BIHARI S PANDEY, VAIBHAV PARK, VALIA ROAD, BHADKODRA, GIDC ANKLESHWAR, DIST. BHARUCH PAN: AEHPP 0767 K [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI G D BALVA,. DR ASSESSEE BY:- SHRI JITENDRA P SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 23- 03-2009 OF THE LD. CIT(APPEALS)-VI, BARODA FOR THE ASSESSMENT YEAR) 2006-07, RAISES THE FOLLOWING GROUNDS:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARN ED CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.46,27,244/- UNDER SECTION 80IB(10)OF THE INCOME-TAX ACT DESPITE THE ASSESSEE'S UNDERT AKING NOT BEING APPROVED BY THE LOCAL AUTHORITY. THE LEARNED CIT( A) RELIED ON THE ITAT'S DECISION IN THE CASE OF M/S. RADHE DEVELOPERS. THE SA ID DECISION HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL TO THE HIGH COURT HAS BEEN FILED. 2 THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE APPROVAL FOR DEVELOPING AND BUILDING HOUSING PROJECTS WAS GRANTED TO THE ORIGINAL OWNERS OF THE LAND AND NOT TO THE ASSESSEE, WHO ACTED O NLY AS AN AGENT FOR EXECUTION OF THE PROJECT OF LAND DEVELOPMENT AND CON STRUCTION OF LAND BEARING R S.NO.270 & 272 OF VILLAGE BHADKODRA, TAL. ANKLESHWAR, WHICH RIGHTS WERE OBTAINED BY THE ASSESSEE FIRM FROM THE ORIGI NAL OWNERS. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LAND BEING AN ESSENTIAL AND INTRINSIC PART OF DEVELOPING AND BUILDING OF A HOUSING PROJECT, APPROVAL IS GRANTED BY THE LOCAL AUTHORITY TO THE OWNE R OF THE LAND FOR DEVELOPING AND BUILDING HOUSING PROJECTS THEREON, AND ANY OTHER PERSON, TO WHOM HE ENTRUSTS THE WORKS CONNECTED WITH THE EXECUTION OF THE PROJECT INSTEAD OF TAKING IT UP HIMSELF, CANNOT BE SAID TO BE AN 'UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY' WITHIN THE MEANING OF SECTION 80IB(10) OF THE ACT. ITA NO.1642/AHD/2009 2 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IT I S THE OWNERS OF THE LAND WHO ENTERED INTO AGREEMENTS FOR SALE OF THE DEVEL OPED UNITS TO THE BUYERS AND THE ASSESSEE ACTED ONLY AS A CONFIRMING PARTY WHI CH RENDERS THE SERVICES TO OWNERS OF THE LAND AND NOT THE ASSESSEE AS 'A N UNDERTAKING' IN TERMS OF SECTION 80IB(10). 5. THE LEARNED CIT(A) ERRED IN ADOPTING LIBERAL INT ERPRETATION OF A BENEVOLENT PROVISION DESPITE THE SAME DOING VIOLENCE TO T HE EXPRESS LANGUAGE USED IN THE PROVISION IN CONTRAVENTION OF THE RATIO SETTLED IN THE CASE OF PETRON ENGINEERING CONSTRUCTION P. LTD. VS C.B.D .T.175 ITR 523 (SC), CIT VS BUDHARAJA & CO 204 ITR 412 (SC), PANDIAN CHEMICALS LTD. VS CIT 262 ITR 278 (SC) AND IPCA LABORATORIES LTD VS CIT 262 ITR 278 (SC). RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ISSUES OF DEDUCTION U/S.8 0IB(10) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.2,22,485/- FILED ON 21-12-2006 BY THE ASSESSEE, CARRYING ON THE BUSINESS OF BUILDING CONSTRUCTION, WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ON 3.10.2007 .ON VERIFICATION OF THE COMPUTATION OF TOTAL INCOME, TH E ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CLAI MED DEDUCTION OF RS.46,27,244/- U/S 80IB(10) OF THE ACT. THE ASSESSE E ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S VAISHNAVI ENTERPRISE , ANKLESHWAR, OWNERS OF THE LAND AT SURVEY NO. 270 AND 272 OF VI LLAGE BHADKODRA, TALUKA ANKLESHWAR, ADMEASURING APPROX. 7209 SQ. MET ERS. THE DEVELOPMENT AGREEMENT REVEALED THAT M/S VAISHNAVI E NTERPRISE, ANKLESHWAR ENTERED INTO A TRIPARTITE SALE DEED WITH INDIVIDUAL BUYERS AND DEVELOPER FOR SALE OF THEIR LANDS AND THE CONSI DERATION RELATING TO LAND HAD GONE TO THE LAND OWNER, AND THAT PART O F CONSTRUCTION HAD BEEN RECEIVED BY THE ASSESSEE. SINCE THE ASSESSEE W AS NOT THE OWNER OF THE LAND AND MERELY ACTED AS CONTRACTOR FO R CONSTRUCTION OF HOUSES WHILE THE APPROVAL OF THE LOCAL AUTHORITY I. E. BHADKODRA GRAM PANCHAYAT, FOR DEVELOPING AND BUILDING THE PROJECT WA S IN THE NAME OF THE OWNER OF THE LAND SMT. SHILA PANDEY W/O OF THE ASSESSEE, THE AO CONCLUDED THAT THE ITA NO.1642/AHD/2009 3 ASSESSEE WAS NOT DEVELOPER AND BUILDER OF THE HOUSING PRO JECT AND HENCE NOT ENTITLED TO DEDUCTION U/S. 80IB(10) OF THE ACT. ACCORDIN GLY, THE AO DENIED THE CLAIM FOR DEDUCTION OF RS.46,27,244/- U/S. 80IB(10) O F THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE C LAIM OF THE ASSESSEE , RELYING, INTER ALIA, ON THE DECISION IN THE ITAT, AHMEDABAD BENCH IN CASE OF RADHE DEVELOPERS V/S. ITO,113 TTJ 300. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OU TSET, BOTH THE PARTIES AGREED THAT THE ISSUE IS REQUIRED TO BE RE STORED TO THE FILE OF THE AO FOR RE-ADJUDICATION IN THE LIGHT OF THE DECI SION DATED 07-11- 2008 OF THE ITAT IN THE CASE M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503/AHD/2008 . 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS O F THE ITAT. WE FIND THAT THE LD. CIT(A) WITHOUT ANALYZING THE FACTS AND CIR CUMSTANCES OF THE CASE, MERELY FOLLOWED THE DECISION IN RADHE DEVELOPERS(SUPRA) .AS CONTENDED BY THE LD. DR, WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED IN A DECI SION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHE RS IN ITA NO. 1503 /AHD./2008, WHEREIN AFTER ANALYZING THE DECISIONS OF HO NBLE APEX COURT IN THE CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT. LTD. IN CIVIL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. 2482/AHD/2006 IN THE CASE OF M/S RADHE DEVELOPERS & OT HERS, THE BENCH CONCLUDED AS UNDER: 16 THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPER S (SUPRA) AND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HA S ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSIN G PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECIS ION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CAS E WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ITA NO.1642/AHD/2009 4 ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED I NTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VES T WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRIC TED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA ) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DO WN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVEL OPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRU X OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE , WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DED UCTION U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVE NUE, AS THE AGREEMENT IS NOT FOR SHARING OF THE CONSTRUCTED ARE A. IN OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEME NT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AN D DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE SHOULD NOT BE AL LOWED DEDUCTION U/S 80IB(10). 5.1. SINCE BOTH THE PARTIES AGREED THAT THE MATT ER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 , IN THE INTERES T OF FAIR PLAY & JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTOR E THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE THE R ELEVANT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAK ING OF THE ASSESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACT S OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAK ING BY THE ITA NO.1642/AHD/2009 5 ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN V IEW THE AFORESAID DECISION OF THE ITAT AS ALSO AFTER ALLOW ING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER, DECIDE AS TO WHETHER THE UNDERTAKING OF THE ASSESSEE HAS INDEED PURCHASED TH E LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVE LOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURC HASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINAN T CONTROL OVER THE PROJECT AND DEVELOPED THE LAND AT THEIR OWN COS T AND RISKS, THE AO SHOULD ALLOW THE DEDUCTION U/S 80IB(10)OF THE AC T, IN ACCORDANCE WITH LAW. IN CASE THE AO FINDS THAT THE UNDERTAKIN G OF THE ASSESSEE HAS ACTED ON BEHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMEN T OF THE HOUSING PROJECT, THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS, GROUND NO S. 1 TO 5 IN THE APPEAL ARE DISPOSED OF AS INDICATED HEREINBEFORE. 6. IN THE RESULT, APPEAL IS ALLOWED, BUT FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 4-05-2011 SD/- SD/- ( T K SHARMA ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATE : 04-05-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI LAL BIHARI S PANDEY, VAIBHAV PARK, VALIA RO AD, BHADKODRA, GIDC ANKLESHWAR, DIST. BHARUCH 2. THE INCOME-TAX OFFICER, WARD-5, BANK OF BARODA B UILDING, STATION ROAD, BHARUCH 3. CIT CONCERNED 4. CIT(A)-VI, BARODA 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD