The ACIT, Central Circle-1, Baroda V. M/s. Mangla Properties Pvt.Ltd., Baroda

ITA 17/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89311 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: P M MEHTA WITH G M THAKER
• Keywords: Initiation of penalty proceedings
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO . 17 /AHD/ 201 2 A. Y. 200 8 - 0 9 A CIT, CENTRAL CIRCLE - 1 , BARODA . VS MANGLA PROPERTIES PVT. LTD., 101, K.P. SHOPPI NG COMPLEX, KARELIBAUG, BARODA. PAN: A ABCM 3105E (APPELLANT) (RESPONDENT) REVENUE BY : S HRI D . C. MISHRA , SR. D.R. , ASSESSEE(S) BY : SHRI P.M. MEHTA WITH G.M. THAKER , A.R. / DATE OF HEARING : 7 / 0 5 /201 5 / DATE OF PRONOUNCEMENT: 8 / 0 5 /201 5 / O R D E R PER : S.S. GODARA , JUDICIAL MEMBER TH IS REVENUE S APPEAL FOR A.Y. 200 8 - 0 9 , ARISE S FROM ORDER OF THE CIT(A) - I V , AHMEDABAD DATED 25.10 .2011 PASSED I N CASE NO . CIT(A) - IV/9B/CC - 1/10 - 11 , IN PROCEEDINGS U/S. 143 ( 3 ) OF THE INCOME TAX ACT IN SHORT THE ACT . 2. THE REVENUE S SOLE SUBSTANTIVE GROUND READS AS UNDER: [1] THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AND CI RCUMSTANCES OF THE CASE IN DELETING TO ALLOW THE DEDUCTION OF RS.10,60,578/ - U/S.80IB(10) OF THE IT ACT. ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 2 - 3. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSEE - FIRM DEVELOPS HOUSING PROJECTS. IT FILES ITS RETURN ON 17.9.2008 DECLARING TOTAL INCOME OF RS.59,36,750/ - ALONG WITH A DEDUCTION CLAIM U/S.80IB(10) OF RS.10,60,578/ - . THE SAME PERTAINED TO TWO HOUSING PROJECTS NAMELY HANUMANT NAGAR AND MADHOV PARK IN BARODA. THE ASSESSING OFFICER IN ITS ORDER DATED 22.3.2010 INTER ALIA HELD THAT SINCE IT ITS ELF HAD NOT OBTAINED APPROVAL FROM THE MUNICIPAL CORPORATION ALONG WITH THE FACT THAT IT WAS MERE CONTRACTOR WORKING ON BEHALF OF LAND OWNERS WITHOUT SHARING ANY RISK OR RESPONSIBILITY AND ALSO THAT THE LAND IN QUESTION WAS NOT UNDER ITS OWNERSHIP, THIS CL AIM HAD TO BE DISALLOWED. HE PROCEEDED ACCORDINGLY AND DISALLOWED THE ASSESSEE S IMPUGNED DEDUCTION OF RS.10,60,578/ - . 4. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) HAS ACCEPTED ITS CONTENTIONS AS FOLLOWS: 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSION S MADE BY THE APPELLANT AND THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. 7.1 IT IS A FACT THAT THE APPELLANT HAS FULFILLED ALL THE CONDITIONS REQUIRED FOR AVAILING DEDUCTION U/S 80IB(10). THE ONLY DISPUTE, BASED ON WHICH THE DEDUCTION AS CLAIMED BY THE APPELLANT HAS BEEN DISALLOWED BY THE AO, IS REGARDING OWNERSHIP OF THE LAND. THE OWNERSHIP OF LAND ON WHICH THE HOUSING PROJECT HAS BEEN DEVELOPED IS LEGALLY NOT IN THE NAME OF THE APPELLANT AND ACCORDINGLY APPROVAL HAS BEEN GRANTED BY THE LOCAL AUTHORITY IN THE NAME OF THE LAND OWNERS AND NOT IN THE NAME OF THE APPELLANT BEING DEVELOPER OF THE HOUSING PROJECT. THE ISSUE THAT NEEDS TO BE DECIDED IS AS TO WHETHER THE OWNERSHIP OF LAND IS AN - ESSENTIAL CONDITION FOR THE PURPOSE OF DEDUCTION U/S 801 B (10). THE SECTION 80IB(10) DOES NOT SPECIFICALLY MENTION SUCH CONDITION TO BE FULFILLED. THE AO HAS CONCLUDED THAT FOR CLAIM OF SUCH DEDUCTION, THE ASSESSEE MUST BE THE LEGAL OWNER OF THE LAND. SUCH CONCLUSION IS NOT CORRECT IN ABSENCE OF ANY SPECIFIC CONDITION MENTIONED IN THE SAID SECTION. THE CONDITION REGARDING OWNERSHIP OF LAND HAS NOT BEEN INCORPORATED IN THE STATUTE WITH A ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 3 - CLEAR CUT OBJECTIVE OF PROVIDING LOW COST HOUSING TO MIDDLE CLASS INVESTORS WHICH IS THE PRIME OBJECTIVE SECTION 80IB(10). I F WE MAKE THE LEGAL OWNERSHIP COMPULSORY FOR DEDUCTION U/S 80 I B(10), THIS WILL SIMPLY OBSTRUCT THE DEVELOPMENT OF HOUSING PROJECTS MAINLY BECAUSE THE LEGAL LAND OWNER MAY NOT HAVE THE EXPERTISE TO DEVELOP HOUSING PROJECTS ON THE SAID LAND AND THE DEVELOPER MAY NOT HAVE SUFFICIENT FUNDS TO PURCHASE THE LAND AND THEN DEVELOP THE PROJECTS. THEREFORE, THE CONDITION OF LEGAL OWNERSHIP OF LAND HAS BEEN DELIBERATELY NOT BROUGHT INTO THE STATUTE SO THAT THE PURPOSE OF U/S 80IB(10) TO PROVIDE LOW COST HOUSING TO MID DLE CLASS INVESTORS DOES NOT GET DEFEATED SINCE INCEPTION ITSELF. FURTHER, THIS ISSUE HAS ALREADY BEEN DECIDED BY THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF RADHE DEVELOPERS & OTHERS IN [2008] 23 SOT 420. THE GIST OF THE FINDINGS ARE REPRODUCED AS UNDER FO R THE SAKE OF CONVENIENCE: 'A BARE READING OF THERE PROVISIONS OF S. 80 - 1B(10), AS THEY STOOD IN THE YEARS UNDER CONSIDERATION, THE REQUIREMENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THAT (I) THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT (II) SUCH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY (III) THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT HAS COMMENCED ON OR AFTER 1 DAY OF OCTOBER, 1998 (IV) THE HOUSING PROJECT IS ON A SIZE OF PLOT OF LAND WHICH HAS A MINIM UM AREA OF ONE ACRE; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUILT UP AREA OF 1,000 SQ. FT. IF IT IS SITUATED IN DELHI AND MUMBAI OR WITHIN 25 KMS. OF MUNICIPAL LIMIT OF THESE CITIES AND 1,500 SQ. FT AT ANY OTHER PLACE. THERE IS NO OTHER CON DITION, WHICH IS TO BE COMPLIED BY AN ASSESSES FOR CLAIMING THE DEDUCTION ON PROFITS OF THE HOUSING PROJECT. THE CONTENTION OF THE REVENUE AUTHORITIES, THAT TO CLAIM DEDUCTION U/S.801B(10) THERE IS CONDITION PRECEDENT THAT THE ASSESSES MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO FORCE. THERE - IS NO SUCH CONDITION AS APPEARING IN THE PROVISIONS OF THE SECTION. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN, CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF TRIPARTITE AGREEMENT AND IT IS NOT BY THE LANDOWNERS. THEREFORE, THE MERE FACT THAT THE LANDO WNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. HAVIN G ENTERED INTO AGREEMENTS WITH ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 4 - LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, ASSESSEE WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. THE ASSESSEE IS A 'DEVELOPER' AND NOT A 'CONTRACTOR' AS HELD BY THE TOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS, BUT DEVELOPER IS WORKING FOR HIMSELF IN ORDER TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN INTEREST AND, THEREFORE, OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVELOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS.' 7. 2. IN VIEW OF THE ABOVE, OWNERSHIP OF LAND IS NOT A NECESSARY CONDITION FOR CLAIMING DEDUCTION U/S. 801B(10) OF THE ACT. 7.3 FURTHER THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF M/S SHAKTI CORPORATION AND OTHERS IN ITA NO.1503/AHD/2008 HAS DECIDED THAT DECISION IN THE CASE OF RADHE DEVELOPERS WILL NOT APPLY IN SUCH CASES WHERE THE ASSESSEE HAS ENTERED INTO AGREEMENT FOR FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LAND OWNER. IT IS NECESSARY THAT THE DEVELOPER SHOULD HAVE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISK INVOLVED THEREIN SHOULD VEST WITH THE DEVELOPER ONLY. FOR THE SAKE OF CONVENIENCE, THE FINDINGS OF THE HON'BLE I TAT, AHMEDABAD IN THE CASE OF M/S SHAKTI CORPORATION AND OTHERS IS REPRODUCED AS UNDER: 'THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SI MILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMINANCE OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CASE WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE H OUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELO PER WILL BE RESTRICTED 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 DOWN IN THE CASE OF RADHE DEVELOPERS C ANNOT BE APPLIED UNIVERSALLY WITHOUT ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 5 - LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND THE CRUX OF THE AGREEME NT IS THAT THE ASSESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U / S . 801 B (10). THE DECISION OF THE HON'BLE SUPREME COURT IN FAKIR CHAND GULA TI (CIVIL APPEAL NO 3302 OF 2005) WILL NOT ASSIST THE REVENUE, AS THE AGREEMENT IS NOT SHARING OF CONSTRUCTED AREA.' 7.4 SO FAR AS THE PRESENT CASE IS CONCERNED, ON PERUSAL OF RELEVANT CLAUSES OF THE DEVELOPMENT AGREEMENTS, IT IS QUITE CLEAR THAT THE APPE LLANT HAS ACQUIRED DOMINANT CONTROL OVER THE LAND. THE LAND OWNER HAS BEEN PAID PRICE CONSIDERATION FOR THE LAND OVER A PERIOD OF TIME. THE APPELLANT IS RESPONSIBLE FOR INCURRING ALL EXPENSES AND TAKING ALL RISKS INVOLVED THEREIN. THE APPELLANT FIRM IS NOT MERELY A CONTRACTOR OF THE LAND OWNER FOR FIXED REMUNERATION. THE LAND OWNERS ARE ELIGIBLE TO GET PRICE OF THE LAND FIXED BY THE DEVELOPMENT AGREEMENTS AND DO NOT GET ANY SHARE IN THE DEVELOPMENT PROFITS OF THE LAND. THUS THE APPELLANT FIRM HAS DOMINANT C ONTROL OVER LAND WITH ALL RISKS AND LIABILITIES AND ALL PROFIT AND LOSS IN RELATION TO THE DEVELOPMENT OF THE PROJECT IS VESTED WITH THE APPELLANT FIRM. 7.5 IN VIEW OF THE ABOVE, THE APPELLANT FIRM HAS FULFILLED ALL CONDITIONS AS REQUIRED U/S 80IB(10) OF THE ACT IN VIEW OF THE DECISIONS OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF RADHE DEVELOPERS AS WELL AS SUBSEQUENT DECISION IN THE CASE OF M/S SHAKTI CORPORATION AND OTHERS. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT FIRM HAVING FULFILLED THE CONDITIONS AS LAID DOWN U/S 80IB(10) OF THE ACT, IS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT. THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF RS.10,60,578 / - U/S 80IB(10) OF THE ACT BY THE AO IS, ACCORDINGLY, NOT JUSTIFIED AND IS, THER EFORE, DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ' . 8. THE NEXT GROUND OF APPEAL IS AGAINST THE ACTION OF THE AO IN GRANTING CREDIT FOR TAXES PAID AT RS.27 , 06 ,7 51/ - AS AGAINST APPELLANT'S CLAIM OF RS. 32,10,787/ - . 8.1 IN THIS REGARD, IT IS NOTED THAT THE DETAILS OF SUCH CLAIM REGARDING CREDIT FOR TAXES HAVE NOT BEEN FILED BEFORE THE UNDERSIGNED. NO SUBMISSION HAS ALSO BEEN MADE IN THIS REGARD EITHER AS PART OF REGULAR SUBMISSION OR EVEN IN THE STATEMENT OF FACTS. AS PER LEGAL SUBMISSION MADE IN THIS CASE, IT IS SIMPLY STATED THAT REGARDING SHORT ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 6 - GRANT OF TAXES PAID AT RS.5,04,036/ - , THE APPELLANT RELIES ON THE STATEMENT OF FACTS FILED. HOWEVER, STATEMENT OF FACTS DOES NOT INCLUDE ANY SUCH DETAILS. THEREFORE, IN ABSENCE OF DETAILS OF TAXES PAI D FOR WHICH CREDIT HAS NOT BEEN GRANTED BY THE AO, IT IS NOT POSSIBLE TO GIVE ANY SPECIFIC FINDING ON THE ISSUE. HOWEVER, THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE APPELLANT REGARDING TAXES PAID FOR WHICH NO CREDIT HAS BEEN GIVEN. IN CASE, THERE IS ANY DISCREPANCY IN ALLOWING CREDIT FOR TAXES PAID, THE SAME MAY BE RECTIFIED IN ACCORDANCE WITH THE PROVISIONS OF LAW AND AFTER DUE VERIFICATION. 9. THE THIRD AND FOURTH GROUNDS OF APPEAL ARE AGAINST CHARGING OF INTEREST U/S. 234B & 234D OF THE ACT AND INIT IATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. SINCE CHARGING OF INTEREST U/S.234B & 234D OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE AND MERE INITIATION OF PENALTY PROCEEDINGS IS NOT APPEALABLE, THESE GROUNDS OF APPEAL ARE ACCORDINGLY, DI SMISSED. 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE CASE FILE. IT IS EVIDENT TO US THAT THE LOWER APPELLATE AUTHORITY IN PRECEDING ASSESSMENT YEAR 2007 - 08 HAD REVERSED THE ASSESSING OFFICER S IDENTICAL FINDINGS DISALLOWING THE ASSESSEE S DEDUCTION CLAIM ED U/S 80IB(10) QUA THE PROJECTS. THE REVENUE CAME IN APPEAL ITA 3028/AHD/2010. A CO - ORDINATE BENCH UPHELD THE CIT(A) ORDER AND REJECTED ITS APPEAL. THE REVENUE FILED IN T AX CASE A PPEAL NO.419 TO 493 IN THE HON BLE JURISDICTIONAL HIGH COURT CHALLENGING THE TRIBUNAL S ORDER RELYING ON SIMILAR FINDINGS RENDERED IN PRECEDING ASSESSMENT YEARS QUA THE VERY PROJECTS. THEIR LORDSHIPS HAVE ALSO UPHELD THE TRIBUNAL S ORDER IN JUDGMENT DATED 7.10.2014. BY NOW, IT IS A SETTLED PREPOSITION OF LAW THAT OWNERSHIP OF LAND OR NON OBTAINING APPROVAL IN CASE OF GETTING BUILDING PLAN APPROVED IN ITS NAME IS NO GROUND IN CASE OF A DEVELOPER TO DENY SECTION 80IB(10) DEDUCTION. THIS IS NOT THE REVENUE S CASE BY WAY OF LEADING POSITIVE EVIDENCE THAT THE ASSESSEE HAS NOT BORNE RISK S AND REWARDS FLOWING ITA NO. 17 /AHD/201 2 MANGLA PROPERTIES PVT. LTD. FOR A.Y. 200 8 - 0 9 - 7 - FROM THE PROJECTS IN QUESTION. BE THAT AS IT MAY, ONCE THE ASSESSEE S PROJECTS HAVE HELD ENTITLED FOR THE IMPUGNED DEDUCTION IN PRECEDING ASSESSMENT YEARS RIGHT UPTO THE HON BLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY JUSTIFIABL E TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. THE REVENUE S GROUND FAILS. 6. THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 8 TH MAY , 201 5 AT AHMEDABAD. SD/ - SD/ - ( N.S. SAINI ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 08 / 0 5 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDAB AD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD