M/s. Vaibhav Construction, Anand V. The Income tax Officer,Ward-1, Anand

ITA 1729/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8948 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SENIOR
• Assessee Lawyers: A L THAKKAR
• Keywords: Capital asset; Depreciation; Question of law; Cost of acquisition; Competent authority; Scheme of amalgamation; Set aside
• Section: 80IB; 80IA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.1729/AHD/2009 (ASSESSMENT YEAR:- 2005-06) M/S VAIBHAV CONSTRUCTION B-27, VAIBHAV TOWER, ANAND V V NAGAR ROAD, ANAND-388001 PAN: AABFV 4757 C V/S THE INCOME-TAX OFFICER, WARD-1, ANAND [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI A L THAKKAR RESPONDENT BY:- SMT. NEETA SHAH, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A) DATED 27-03- 2009, BY TAKING THE FOLLOWING EFFECTIVE GROUND OF A PPEAL: THE LEARNED CIT(A)-IV, BARODA ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.19,74,720/- BY NOT ALLOWI NG DEDUCTION U/S 80IB(10) CLAIMED BY THE APPELLANT. 2 BOTH THE LEARNED AR AND THE LEARNED DR AGREED TH AT NOW THE ISSUE IS COVERED BY THE DECISION OF THE TRI BUNAL IN THE CASE OF M/S SHAKTI CORPORATION AND OTHERS IN ITA NO.1503/AHD/2008, VIDE ORDER DATED 07-11-08 WHEREIN IT HAS BEEN HELD AS UNDER: 2 7 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE GONE THROUGH THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI V UPPAL AGENCIES PVT. LTD. & ANR. [CIVIL APPEAL NO.3302 OF 2005]. WE FIND THAT IN THA T CASE THE QUESTIONS FRAMED BEFORE THE HON'BLE SUPREME COURT WERE AS UND ER: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES, A COMPL AINT UNDER THE CONSUMER PROTECTION ACT, 1986 IS MAINTAINABLE, IN REGARD TO THE AGREEMENT DATED 17-5-1991 BETWEEN THE PARTIES (II) WHETHER A COMPLAINT IS MAINTAINABLE UNDER THE A CT FOR A PRAYER SEEKING DELIVERY OF COMPLETION CERTIFICATE A ND C&D FORMS IN REGARD TO A BUILDING AND WHETHER THE PRAYE R FOR COMPLETION CERTIFICATE / C&D FORMS INVOLVES A PRAYE R FOR RECTIFICATION OF THE DEFICIENCIES IN THE BUILDING S O AS TO SECURE THE COMPLETION CERTIFICATE AND C&D FORMS. THE FACTS INVOLVED IN THE CASE OF FAQIR CHAND GULAT I (SUPRA) ARE THAT THE ASSESSEE IS THE OWNER OF THE PREMISES AT L-3, KAILA SH COLONY, NEW DELHI. HE ENTERED INTO A COLLABORATION AGREEMENT DATED 17- 5-1991 WITH UPPAL AGENCIES PVT. LTD. [THE BUILDER HEREINAFTER]. THE TERMS OF THE AGREEMENT, IN BRIEF WERE AS UNDER: [I] THE OWNER SHALL PLACE AT THE DISPOSAL OF THE BU ILDER, VACANT POSSESSION OF THE REMISES AND AUTHORIZE THE BUILDER TO SECURE NECESSARY SANCTIONS, PERMISSIONS AND APPROVALS FOR DEMOLITION OF THE EXI STING BUILDING AND CONSTRUCTION AND COMPLETION OF A NEW BUILDING. [III] THE BUILDER SHALL DEMOLISH THE EXISTING STRUC TURE AND CONSTRUCT A RESIDENTIAL BUILDING CONSISTING OF GROUND, FIRST AN D SECOND FLOORS, AT ITS COST AND EXPENSE. 3 [IV] THE BUILDER WILL HAVE THE RIGHT TO APPOINT ARC HITECTS, CONTRACTORS, SUB- CONTRACTORS ETC. [V] THE NEW BUILDING TO BE CONSTRUCTED BY THE BUILD ER SHALL BE OF GOOD QUALITY AS PER THE DETAILED SPECIFICATIONS CONTAIN ED IN ANNEXURE- A TO THE AGREEMENT. [VI] ON COMPLETION OF CONSTRUCTION, THE LAND-OWNER WILL BE ENTITLED TO THE ENTIRE GROUND FLOOR (CONSISTING OF THREE BEDROOMS W ITH ATTACHED BATHROOMS, ONE DRAWING-CUM-DINING, ONE STORE ROOM, ONE KITCHEN) WITH ONE SERVANT ROOM UNDER THE OVERHEAD WATER TANK ON REAR TERRACE AND ONE PARKING SPACE, AS HIS SHARE IN CONSIDERATIO N OF HIS HAVING MADE AVAILABLE THE LAND. THE BUILDER SHALL ALSO PAY A SUM OF RS.8 LAKHS AS NON-REFUNDABLE CONSIDERATION TO THE OWNER. [VII] THE REMAINING PART OF THE BUILDING (THE ENTIR E FIRST AND SECOND FLOORS AND TWO SERVANT ROOMS AND TWO CAR PARKING SPACES) S HALL BELONG TO THE BUILDER AS ITS SHARE OF THE BUILDING IN CONSIDERATI ON OF HAVING SPENT THE COST OF CONSTRUCTION OF THE ENTIRE BUILDING AND ALL OTHER SERVICES RENDERED BY HIM UNDER THE AGREEMENT. [VIII] THE OWNER AND THE BUILDER SHALL BE ENTITLED TO UNDIVIDED AND INDIVISIBLE SHARE IN THE LAND, PROPORTIONATE TO THE IR RIGHT IN THE BUILDING, THAT IS, AN UNDIVIDED ONE-THIRD SHARE IN THE LAND SHALL BELONG TO THE OWNER AND TWO-THIRD SHARE SHALL BELONG TO TH E DEVELOPER. [IX] THE BUILDER SHALL BE ENTITLED TO EITHER RETAIN OR SELL ITS SHARE OF THE BUILDING. THE OWNER SHALL EXECUTE NECESSARY DOCUMEN TS FOR TRANSFERRING THE SHARE CORRESPONDING TO THE BUILDER S PORTION OF THE BUILDING. THE OWNER SHALL GIVE AN IRREVOCABLE POWER OF ATTORNEY ENABLING THE BUILDER TO EXECUTE THE DEED OF CONVEYA NCE IN REGARD TO THE BUILDERS SHARE IN THE LAND. THE BUILDER WILL HOWEV ER, HAVE THE OPTION 4 TO REQUIRE THE OWNER TO PERSONALLY EXECUTE THE SALE DEED IN REGARD TO THE BUILDERS SHARE IN THE LAND INSTEAD OF USING SU CH POWER OF ATTORNEY. [X] ON COMPLETION OF THE BUILDING, THE BUILDER SHAL L APPLY FOR COMPLETION CERTIFICATE TO THE CONCERNED AUTHORITY AND SHALL BE LIABLE TO PAY ANY PENALTY THAT MAY BE IMPOSED OR LEVIED IN REGARD TO THE DEVIATIONS, IF ANY, MADE IN THE CONSTRUCTION OF THE BUILDING. [XI] THE OWNER SHALL NOT INTERFERE OR OBSTRUCT THE CONSTRUCTION AND COMPLETION OF THE WORK IN ANY MANNER, BUT WILL HAVE ACCESS TO THE CONSTRUCTION TO POINT OUT ANY DEFECT IN CONSTRUCTIO N OR WORKMANSHIP OR USE OF INFERIOR MATERIAL, SO AS TO REQUIRE THE BUIL DER TO RECTIFY SUCH DEFECTS. [XII] TITLE DEEDS HANDED OVER BY THE OWNER TO THE B UILDER FOR COMPLETING THE FORMALITIES RELATING TO THE AGREEMENT SHALL THEREAF TER BE RETURNED TO THE OWNER, WHO SHALL HOWEVER, MAKE AVAILABLE THE SAME F OR REFERENCE BY THE OWNERS OF THE OTHER FLOORS. (XIII) THE AGREEMEN T AND THE POWER OF ATTORNEY EXECUTED BY THE OWNER IN FAVOUR OF THE BUI LDER ARE IRREVOCABLE. IN THE EVENT OF NEGLECT, FAILURE, DEFA ULT ON THE PART OF THE OWNER OR THE BUILDER, THE AFFECTED PARTY SHALL HAVE THE RIGHT TO SPECIFIC PERFORMANCE OF THE SAID AGREEMENT AT THE COST AND R ISK OF THE DEFAULTING PARTY WHO SHALL ALSO BE LIABLE TO PAY DA MAGES. [XIV] THE AGREEMENT IS NOT A PARTNERSHIP AND SHALL NOT BE DEEMED TO BE A PARTNERSHIP BETWEEN THE OWNER AND THE BUILDER. 8 THE LAND OWNER ALLEGES THAT THE BUILDER MADE SEV ERAL UNAUTHORIZED DEVIATIONS DURING THE CONSTRUCTION FRO M THE SANCTIONED PLAN OF MUNICIPAL CORPORATION OF DELHI DUE TO WHICH THE LAND OWNER RECEIVED A NUMBER OF NOTICES FROM MUNICIPAL CORPORATION OF D ELHI AND VIDE ORDER DATED 16-1-1991, MUNICIPAL CORPORATION OF DELHI DIR ECTED TO SEAL THE PREMISES AND THE PREMISES WERE DE-SEALED SUBSEQUENT LY TO ENABLE THE BUILDER TO RECTIFY THE DEVIATIONS. THE BUILDER DELI VERED THE GROUND FLOOR TO THE LANDOWNERS SON DURING THE LANDOWNERS ABSEN CE FROM INDIA. THE LANDOWNER ON RETURN NOTED A NUMBER OF SHORTCOMINGS IN THE CONSTRUCTION 5 AND THE VIOLATION OF SANCTIONED PLAN AND ACCORDINGL Y VIDE LETTER DATED 29- 10-1992 ASKED THE BUILDER TO RECTIFY THE DEVIATIONS AND DEFECTS. THE BUILDER DID NOT COMPLY WITH THE SAME. THE LANDOWNER THEREFORE FILED A COMPLAINT BEFORE THE DISTRICT CONSUMER DISPUTES RED RESSAL FORUM. THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM DISMISSE D THE COMPLAINT AS NOT MAINTAINABLE UNDER THE CONSUMER PROTECTION ACT, 1986 HOLDING THAT THE LANDOWNER WAS NOT A CONSUMER. THE APPEAL FILED BEFORE THE STATE COMMISSION, DELHI WAS DISMISSED AS NOT MAINTAINABLE . REVISION PETITION WAS FILED BEFORE THE NATIONAL COMMISSION. THE LANDO WNER CONTENDED THAT NON-COMPLETION OF THE BUILDING AS PER SANCTIONED PL AN AND MAKING DEVIATIONS ON A LARGE SCALE RESULTING IN NON-ISSUE OF COMPLETION CERTIFICATE AND C&D FORMS AMOUNTED TO DEFICIENCY IN SERVICES AN D ACCORDINGLY THE COMPLAINT WOULD HAVE BEEN ALLOWED. THE NATIONAL COM MISSION DISMISSED THE REVISION PETITION BY OBSERVING THAT T HE AGREEMENT WAS IN THE NATURE OF JOINT-VENTURE AND THE TRANSACTION DID NOT HAVE ANY ELEMENT OF HIRING THE SERVICES OF THE BUILDER WITHIN THE MEANI NG OF SECTION 2(1)(D)(II) OF THE ACT. THE SAID ORDER WAS CHALLENGED BEFORE TH E HON'BLE SUPREME COURT BY SPECIAL LEAVE. THE HON'BLE SUPREME COURT T OOK THE VIEW THAT THE LANDOWNERS COMPLAINT IS MAINTAINABLE AND DIREC TED THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM TO CONSIDER THE M ATTER ON MERIT BY OBSERVING AS UNDER [AS RELIED ON BY THE LEARNED AR UNDER PARAS 16 AND 19 TO 24 OF THE JUDGMENT]: 16 THERE IS NO DISPUTE OR DOUBT THAT A COMPLAINT U NDER THE ACT WILL BE MAINTAINABLE IN THE FOLLOWING CIRCUMSTANCES: (A) WHERE THE OWNER/HOLDER OF A LAND WHO HAS ENTRUSTED THE CONSTRUCTION OF A HOUSE TO A CONTRACTOR, HAS A COMP LAINT OF DEFICIENCY OF SERVICE WITH REFERENCE TO THE CONSTRU CTION. (B) WHERE THE PURCHASER OR INTENDING PURCHASER OF AN APARTMENT/FLAT/HOUSE HAS A COMPLAINT AGAINST THE BUILDER/DEVELOPER WITH REFERENCE TO CONSTRUCTION OR DELIVERY OR AMENITIES. BUT WE ARE CONCERNED WITH A THIRD HYBRID CATEGORY W HICH IS POPULARLY CALLED AS JOINT-VENTURE AGREEMENTS OR DEVELOPMENT AGREEMENTS OR COLLABORATION AGREEMEN TS BETWEEN A LAND-HOLDER AND A BUILDER. IN SUCH TRANSA CTIONS, THE 6 LAND-HOLDER PROVIDES THE LAND. THE BUILDER PUTS UP A BUILDING. THEREAFTER, THE LAND OWNER AND BUILDER SHARE THE CO NSTRUCTED AREA. THE BUILDER DELIVERS THE OWNERS SHARE TO T HE LAND-HOLDER AND RETAINS THE BUILDERS SHARE. THE LAND-HOLDER SELLS/TRANSFERS UNDIVIDED SHARE/S IN THE LAND CORRESPONDING TO THE BUILDERS SHARE OF THE BUILDING TO THE BUILDER OR HIS NOMINEE S. AS A RESULT EACH APARTMENT OWNER BECOMES THE OWNER OF THE APART MENT WITH CORRESPONDING UNDIVIDED SHARE IN THE LAND AND AN UNDIVIDED SHARE IN THE COMMON AREAS OF THE BUILDING . IN SUCH A CONTRACT, THE OWNERS SHARE MAY BE A SINGLE APARTME NT OR SEVERAL APARTMENTS. THE LAND-HOLDER WHO GETS SOME APARTMENT S MAY RETAIN THE SAME OR MAY DISPOSE OF HIS SHARE OF APAR TMENTS WITH CORRESPONDING UNDIVIDED SHARES TO OTHERS. THE USUAL FEATURE OF THESE AGREEMENTS IS THAT THE LAND-HOLDER WILL HAVE NO SAY OR CONTROL IN THE CONSTRUCTION. NOR WILL HE HAVE ANY S AY AS TO WHOM AND AT WHAT COST THE BUILDERS SHARE OF APARTM ENTS ARE TO BE DEALT WITH OR DISPOSED OF. HIS ONLY RIGHT IS TO DEMAND DELIVERY OF HIS SHARE OF CONSTRUCTED AREA IN ACCORD ANCE WITH THE SPECIFICATIONS. THE BUILDERS CONTEND THAT SUCH AGRE EMENTS ARE NEITHER CONTRACTS FOR CONSTRUCTION, NOR CONTRACTS F OR SALE OF APARTMENTS, BUT ARE CONTRACTS ENTERED FOR MUTUAL BE NEFIT AND PROFIT AND IN SUCH A CONTRACT, THEY ARE NOT SERVIC E-PROVIDERS TO THE LAND-OWNERS, BUT A CO-ADVENTURER WITH THE LAND- HOLDER IN A JOINT VENTURE, IN DEVELOPING THE LAND BY PUTTING UP MULTIPLE- HOUSING (APARTMENTS) AND SHARING THE BENEFITS OF TH E PROJECTS. THE QUESTION IS WHETHER SUCH AGREEMENTS ARE TRULY J OINT- VENTURES IN THE LEGAL SENSE. 19. WHAT THEN IS THE NATURE OF THE AGREEMENT BETW EEN THE APPELLANT AND THE FIRST RESPONDENT? APPELLANT I S THE OWNER OF THE LAND. HE WANTS A NEW HOUSE, BUT IS NOT ABLE TO CONSTRUCT A NEW HOUSE FOR HIMSELF EITHER ON ACCOUNT OF PAUCITY OF FUNDS OR LACK OF EXPERTISE OR RESOURCES. HE, THEREFORE, ENTE RS INTO AN AGREEMENT WITH THE BUILDER. HE ASKS THE BUILDER TO CONSTRUCT A HOUSE AND GIVE IT TO HIM. HE SAYS THAT AS HE DOES N OT HAVE THE MONEY TO PAY FOR THE CONSTRUCTION AND WILL THEREFOR E PERMIT THE BUILDER TO CONSTRUCT AND OWN ADDITIONAL FLOOR/S AS CONSIDERATION. HE ALSO AGREES TO TRANSFER AN UNDIVIDED SHARE IN TH E LAND CORRESPONDING TO THE ADDITIONAL FLOOR/S WHICH FALLS TO THE SHARE OF THE BUILDER. AS A RESULT, INSTEAD OF BEING THE F ULL OWNER OF THE 7 LAND WITH AN OLD BUILDING, HE BECOMES A CO-OWNER OF THE LAND WITH A ONE-THIRD SHARE IN THE LAND AND ABSOLUTE OWN ER OF THE GROUND FLOOR OF THE NEWLY CONSTRUCTED BUILDING AND AGREES THAT THE BUILDER WILL BECOME THE OWNER OF THE UPPER FLOO RS WITH CORRESPONDING TWO-THIRD SHARE IN THE LAND. AS THE C OST OF THE UNDIVIDED TWO-THIRD SHARE IN THE LAND, WHICH THE LA ND OWNER AGREES TO TRANSFER TO THE BUILDER, IS MORE THAN THE COST OF CONSTRUCTION OF THE GROUND FLOOR BY THE BUILDER FOR THE LANDOWNER, IT IS ALSO MUTUALLY AGREE THAT THE BUILD ER WILL PAY THE LANDOWNER AN ADDITIONAL CASH CONSIDERATION OF RS.8 LAKHS. THE BASIC UNDERLYING PURPOSE OF THE AGREEMENT IS THE CO NSTRUCTION OF A HOUSE OR AN APARTMENT (GROUND FLOOR) IN ACCORDANC E WITH THE SPECIFICATIONS, BY THE BUILDER FOR THE OWNER, THE C ONSIDERATION FOR SUCH CONSTRUCTION BEING THE TRANSFER OF UNDIVID ED SHARE IN LAND TO THE BUILDER AND GRANT OF PERMISSION TO THE BUILDER TO CONSTRUCT TWO FLOORS. SUCH AGREEMENT WHETHER CALLED AS A COLLABORATION AGREEMENT OR A JOINT-VENTURE AGREE MENT, IS NOT HOWEVER A JOINT-VENTURE. THERE IS A CONTRACT FOR CONSTRUCTION OF AN APARTMENT OR HOUSE FOR THE APPELLANT, IN ACCORDA NCE WITH THE SPECIFICATIONS AND IN TERMS OF THE CONTRACT. THERE IS A CONSIDERATION FOR SUCH CONSTRUCTION, FLOWING FROM T HE LANDOWNER TO THE BUILDER (IN THE FORM OF SALE OF AN UNDIVIDED SHARE IN THE LAND AND PERMISSION TO CONSTRUCT AND OWN THE UPPER FLOORS). TO ADJUST THE VALUE OF THE EXTENT OF LAND TO BE TRANSF ERRED, THERE IS ALSO PAYMENT OF CASH CONSIDERATION BY THE BUILDER. BUT THE IMPORTANT ASPECT IS THE AVAILMENT OF SERVICES OF TH E BUILDER BY THE LAND-OWNER OF A HOUSE CONSTRUCTION (CONSTRUCTIO N OF OWNERS SHARE OF THE BUILDING) FOR A CONSIDERATION. TO THAT EXTENT, THE LAND-OWNER IS A CONSUMER, THE BUILDER IS A SERVICE- PROVIDER AND IF THERE IS DEFICIENCY IN SERVICE IN REGARD TO CONS TRUCTION, THE DISPUTE RAISED BY THE LAND OWNER WILL BE A CONSUMER DISPUTE. WE MAY MENTION THAT IT MAKES NO DIFFERENCE FOR THIS PU RPOSE WHETHER THE COLLABORATION AGREEMENT IS FOR CONSTRUC TION AND DELIVERY OF ONE APARTMENT OR ONE FLOOR TO THE OWNER OR WHETHER IT IS FOR CONSTRUCTION AND DELIVERY OF MULTIPLE APA RTMENTS OR MORE THAN ONE FLOOR TO THE OWNER. THE PRINCIPLE WOU LD BE THE SAME AND THE CONTRACT WILL BE CONSIDERED AS ONE FOR HOUSE CONSTRUCTION FOR CONSIDERATION . THE DECIDING FACTOR IS NOT THE NUMBER OF APARTMENTS DELIVERABLE TO THE LAND OWNER, BUT WHETHER THE AGREEMENT IS IN THE NATURE OF A JOINT- VENTURE OR WHETHER THE AGREEMENT IS BASICALLY FOR CONSTRUCTION OF CERTAIN AREA FOR THE LANDOWNER. 8 20. IT IS HOWEVER TRUE THAT WHERE THE CONTRACT IS A TRUE JOINT VENTURE THE SCOPE OF WHICH HAS BEEN POINTED OUT IN PARA 17 ABOVE, THE POSITION WILL BE DIFFERENT. IN A TRUE JO INT VENTURE AGREEMENT BETWEEN THE LAND-OWNER AND ANOTHER (WHETH ER A RECOGNIZED BUILDER OR FUND PROVIDER), THE LAND-OWNE R IS A TRUE PARTNER OR CO-ADVENTURER IN THE VENTURE WHERE THE L AND OWNER HAS A SAY OR CONTROL IN THE CONSTRUCTION AND PARTIC IPATES IN THE BUSINESS AND MANAGEMENT OF THE JOINT VENTURE, AND HAS A SHARE IN THE PROFIT/LOSS OF THE VENTURE. IN SUCH A CASE, THE LAND OWNER IS NOT A CONSUMER NOR IS THE OTHER CO- ADVENTURER IN T HE JOINT VENTURE, A SERVICE PROVIDER. THE LAND OWNER HIMSELF IS RESPONSIBLE FOR THE CONSTRUCTION AS A CO-ADVENTURER IN THE VENTURE. BUT SUCH TRUE JOINT VENTURES ARE COMPARATI VELY RARE. WHAT IS MORE PREVALENT ARE AGREEMENTS OF THE NATURE FOUND IN THIS CASE, WHICH ARE A HYBRID AGREEMENT FOR CONSTRU CTION FOR CONSIDERATION AND SALE AND ARE PSEUDO JOINT-VENTURE S. NORMALLY A PROFESSIONAL BUILDER WHO DEVELOPS PROPERTIES OF O THERS IS NOT INTERESTED IN SHARING THE CONTROL AND MANAGEMENT OF THE BUSINESS OR THE CONTROL OVER THE CONSTRUCTION WITH THE LAND OWNERS. EXCEPT ASSURING THE LAND OWNER A CERTAIN CO NSTRUCTED AREA AND/OR CERTAIN CASH CONSIDERATION, THE BUILDER ENSURES ABSOLUTE CONTROL IN HIMSELF, ONLY ASSURING THE QUAL ITY OF CONSTRUCTION AND COMPLIANCE WITH THE REQUIREMENTS O F LOCAL AND MUNICIPAL LAWS, AND UNDERTAKING TO DELIVER THE OWNE RS CONSTRUCTED AREA OF THE BUILDING WITH ALL CERTIFICA TES, CLEARANCES AND APPROVALS TO THE LAND OWNER. 21. LEARNED COUNSEL FOR THE RESPONDENT CONTENDED TH AT THE AGREEMENT WAS TITLED AS COLLABORATION AGREEMENT W HICH SHOWS AN INTENTION TO COLLABORATE AND THEREFORE IT IS A J OINT VENTURE. IT IS NOW WELL SETTLED THAT THE TITLE OR CAPTION OR THE N OMENCLATURE OF THE INSTRUMENT/DOCUMENT IS NOT DETERMINATIVE OF THE NATURE AND CHARACTER OF THE INSTRUMENT/DOCUMENT, THOUGH THE NA ME MAY USUALLY GIVE SOME INDICATION OF THE NATURE OF THE D OCUMENT. THE NATURE AND TRUE PURPOSE OF A DOCUMENT HAS TO BE DET ERMINED WITH REFERENCE TO THE TERMS OF THE DOCUMENT, WHICH EXPRESS THE INTENTION OF THE PARTIES. THEREFORE, THE USE OF THE WORDS JOINT VENTURE OR COLLABORATION IN THE TITLE OF AN AGRE EMENT OR EVEN 9 IN THE BODY OF THE AGREEMENT WILL NOT MAKE THE TRAN SACTION A JOINT VENTURE, IF THERE ARE NO PROVISIONS FOR SHARE D CONTROL OF INTEREST OR ENTERPRISE AND SHARED LIABILITY FOR LOS SES. 22. THE STATE COMMISSION AND NATIONAL COMMISSION HA VE PROCEEDED ON AN ASSUMPTION, WHICH APPEARS TO BE CLE ARLY BASELESS, THAT WHEREVER THERE IS AN AGREEMENT FOR D EVELOPMENT OF A PROPERTY BETWEEN THE PROPERTY OWNER AND BUILDE R UNDER WHICH THE CONSTRUCTED AREA IS TO BE DIVIDED, IT WOU LD AUTOMATICALLY AMOUNT TO A JOINT VENTURE AND THERE I S NO QUESTION OF THE LANDHOLDER AVAILING THE SERVICE OF THE BUILD ER FOR CONSIDERATION. RELIANCE WAS PLACED ON TWO DECISIONS , THE FIRST BEING THAT OF THE NATIONAL COMMISSION IN C NARASIMH A RAO V. K R NEELAKANDAN - I (1994) CPJ 160 AND THE SECOND B EING THAT OF THE DELHI STATE COMMISSION IN HAR SARUP GUPTA V. MIS. KAILASH NATH & ASSOCIATES - II (1995) CPJ 275. IN C NARASIMHA RAO, THERE WAS AN AGREEMENT BETWEEN THE LANDOWNERS AND A BUILDER FOR CONSTRUCTION OF A BUILDING AND SHARING OF THE CONSTRUCTED AREA. THE OLD BUILDING WAS DEMOLISHED, BUT THE BUILDER FAILED TO COMPLETE THE CONSTRUCTION OF A NE W BUILDING AND HAND OVER THE OWNERS SHARE OF FLATS. THE LANDO WNERS PREFERRED A COMPLAINT CLAIMING RS.94,000/- AS THE V ALUE OF THE MALBA (RETRIEVABLE VALUABLES FROM THE DEBRIS OF THE OLD BUILDING) THAT HAD BEEN REMOVED BY THE BUILDER. THE NATIONAL COMMISSION HELD THAT AS THE CLAIM WAS FOR RECOVERY OF THE MONEY BEING VALUE OF THE MALBA REMOVED BY THE BUILD ER, IT DOES NOT AMOUNT TO A CLAIM BASED ON DEFICIENCY OF SERVIC E AND THEREFORE SUCH A CLAIM WOULD FALL OUTSIDE THE SCOPE OF THE CONSUMER PROTECTION ACT. THE SAID DECISION IS WHOLL Y INAPPLICABLE, AS IT DEALT WITH A DIFFERENT QUESTION . IN HAR SWAMP GUPTA, THE STATE COMMISSION WAS CONCERNED WITH A CL AIM OF THE LANDOWNERS FOR COMPENSATION ALLEGING THAT THE BUILD ER HAD NOT BUILT THE FLATS IN TERMS OF THE CONTRACT UNDER WHIC H THE LANDOWNERS WERE ENTITLED TO 36% AND THE BUILDER WAS ENTITLED TO 64% OF THE BUILT UP AREA. THE STATE COMMISSION HELD THAT THE COMPLAINT WAS NOT MAINTAINABLE ON THE GROUND THAT O N SIMILAR FACTS THE NATIONAL COMMISSION IN NARASIMHA RAOS CA SE (SUPRA) HAD HELD THAT THE FORA UNDER THE CONSUMER PROTECTIO N ACT DID NOT HAVE JURISDICTION. BUT NARASIMHA RAO (SUPRA), A S NOTICED 10 ABOVE, WAS NOT SIMILAR ON FACTS, NOR DID IT LAY DOW N ANY SUCH PROPOSITION. HAR SWAMP GUPTA IS CLEARLY WRONGLY DEC IDED. 23. WE MAY NOTICE HERE THAT IF THERE IS A BREACH BY THE LANDOWNER OF HIS OBLIGATIONS, THE BUILDER WILL HAVE TO APPROACH A CIVIL COURT AS THE LANDOWNER IS NOT PROVIDING ANY S ERVICE TO THE BUILDER BUT MERELY UNDERTAKES CERTAIN OBLIGATIONS T OWARDS THE BUILDER, BREACH OF WHICH WOULD FURNISH A CAUSE OF A CTION FOR SPECIFIC PERFORMANCE AND/OR DAMAGES. ON THE OTHER H AND, WHERE THE BUILDER COMMITS BREACH OF HIS OBLIGATIONS, THE OWNER HAS TWO OPTIONS. HE HAS THE RIGHT TO ENFORCE SPECIFIC P ERFORMANCE AND/OR CLAIM DAMAGES BY APPROACHING THE CIVIL COURT . OR HE CAN APPROACH THE FORUM UNDER CONSUMER PROTECTION ACT, F OR RELIEF AS CONSUMER, AGAINST THE BUILDER AS A SERVICE- PROV IDER. SECTION 3 OF THE ACT MAKES IT CLEAR THAT THE REMEDY AVAILAB LE UNDER THE ACT IS IN ADDITION TO THE NORMAL REMEDY OR OTHER RE MEDY THAT MAY BE AVAILABLE TO THE COMPLAINANT. 24. THE DISTRICT FORUM, THE STATE COMMISSION AND TH E NATIONAL COMMISSION COMMITTED A SERIOUS ERROR IN WRONGLY ASS UMING THAT AGREEMENTS OF THIS NATURE BEING IN THE NATURE OF JOINT VENTURE ARE OUTSIDE THE SCOPE OF CONSUMER DISPUTES. FROM THE AFORESAID DECISION IT IS APPARENT THAT THE FOLLOWING PROPOSITION OF LAW HAS BEEN LAID DOWN BY THE HON'BLE SUPREME CO URT FOR DECIDING THE NATURE OF THE AGREEMENT (DOCUMENT): (1) TITLE OR NOMENCLATURE GIVEN TO THE AGREEMENT / DOCUMENT / INSTRUMENT DOES NOT DECIDE THE NATURE OF THE AGREEM ENT. (2) THE NAME GIVEN TO THE AGREEMENT USUALLY GIVES S OME INDICATION OF THE NATURE OF THE AGREEMENT / DOCUMENT / INSTRUMENT . 11 (3) THE NATURE OF THE AGREEMENT HAS TO BE DECIDED W ITH REFERENCE TO THE TERMS AND CONDITIONS AGREED TO BETWEEN THE PARTIES WHO HAVE ENTERED INTO THE AGREEMENT OR EXECUTED THE DOCUMENT OR INSTRUMEN T AS THESE TERMS AND CONDITIONS EXPRESS THE INTENTION OF THE PARTIES. (4) EVEN THE NOMENCLATURE GIVEN IN THE BODY OF THE AGREEMENT / DOCUMENT / INSTRUMENT IS ALSO NOT DETERMINATIVE OF THE NATURE AND CHARACTER OF THE AGREEMENT / DOCUMENT / INSTRUMENT. ON THE FACTS OF THIS CASE, THE HON'BLE SUPREME COUR T OBSERVED THAT THE LAND OWNER HAS TO DO NOTHING EXCEPT TO THE EXTENT H E HAS TO RECEIVE THE CONSTRUCTED AREA BY WAY OF CONSIDERATION FROM THE B UILDER / DEVELOPER. THE HON'BLE SUPREME COURT CAME TO THE CONCLUSION TH AT THE BASIC PURPOSE OF THE AGREEMENT TO CONSTRUCT A HOUSE OR APARTMENT BY THE BUILDER FOR THE OWNER AND, THEREFORE, THE AGREEMENT IS NOT JOINT VE NTURE EVEN THOUGH THE NOMENCLATURE OF THE AGREEMENT GIVEN MAY BE A COLLAB ORATION AGREEMENT. THE LAND OWNER WILL NOT HAVE ANY SAY OR CONTROL IN THE CONSTRUCTION. HIS MOTIVE IS NOT TO DEVELOP, CONSTRUCT OR CARRY ON THE BUSINESS. HIS ONLY RIGHT IS TO DEMAND DELIVERY OF HIS SHARE OF CONSTRUCTED A REA IN ACCORDANCE WITH THE SPECIFICATIONS. THEREFORE, THE HON'BLE SUPREME COURT AFTER HAVING LENGTHY AND PAIN TAKING DISCUSSION CAME TO THE CONC LUSION THAT THE CONTRACT ENTERED INTO EVEN THOUGH IS TITLED AS COLL ABORATION AGREEMENT IS IN FACT A CONTRACT FOR HOUSE CONSTRUCTION FOR THE CONS IDERATION AND ACCORDINGLY TOOK THE VIEW THAT THE LAND OWNER IS A CONSUMER AND THE BUILDER IS A SERVICE PROVIDER. THE REMEDY IS AVAILA BLE TO THE LAND OWNER AGAINST THE BUILDER FOR THE DEFICIENCY IN THE SERVI CE. THE HON'BLE SUPREME COURT ALSO MADE IT CLEAR THAT THE AGREEMENT OF THE NATURE UNDER DISPUTE IS NOT JOINT VENTURE WHICH CAN BE REGARDED TO BE OUTSI DE THE SCOPE OF CONSUMER DISPUTES. 12 9 WE AGREE WITH THE CONTENTIONS OF THE LEARNED AR THAT THE DECISION IS A PRECEDENT ON ITS OWN FACTS. A DECISIO N CANNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING TO THE FACTS AND THE IS SUE INVOLVED IN THE DECISION. IF THE QUESTIONS INVOLVED IN BOTH THE DEC ISIONS ARE DIFFERENT, ONE DECISION CANNOT BE FOLLOWED WHILE DECIDING THE OTHE R CASE. IF THE FACTS INVOLVED IN BOTH THE CASES ARE DIFFERENT, THE DECIS ION INVOLVED IN ONE CASE CANNOT BE APPLIED IN THE OTHER CASE. HOW A JUDGMENT HAS TO BE READ, THE HON'BLE SUPREME COURT IN THE CASE OF CIT V SUN ENGI NEERING WORKS P. LTD. (1992) 198 ITR 297 (SC), HAS HELD [AT PAGE 299 ] AS UNDER: IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THE SUPREME COURT DIVORCED FRO M THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW DECLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERE D IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THE COURT. A DECISI ON OF THE SUPREME COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF GOVERNMENT OF KARNATAKA & OTHERS V SMT. GOWRAMMA AND OTHERS [APPEAL (CIVIL) NO.2874 OF 2001, DATED 14-12 -2007] ON WHICH THE LEARNED SENIOR ADVOCATE HAS HEAVILY RELIED. WE FIND THAT IN THIS CASE THE HON'BLE SUPREME COURT ON THE APPLICABILITY OF THE J UDGMENT HAS HELD AS UNDER: A DECISION IS A PRECEDENT ON ITS OWN FACTS. EACH C ASE PRESENTS ITS OWN FEATURES. IT IS NOT EVERYTHING SAID BY A JUDGE WHIL E GIVING A JUDGMENT THAT CONSTITUTES A PRECEDENT. THE ONLY THING IN A J UDGES DECISION BINDING A PARTY IS THE PRINCIPLE UPON WHICH THE CAS E IS DECIDED AND FOR THIS REASON IT IS IMPORTANT TO ANALYZE A DECISION A ND ISOLATE FROM IT THE RATIO DECIDENDI. ACCORDING TO THE WELL-SETTLED THEO RY OF PRECEDENTS, EVERY DECISION CONTAINS THREE BASIC POSTULATES (I ) FINDINGS OF MATERIAL FACTS, DIRECT AND INFERENTIAL. AN INFERENTIAL FINDI NG OF FACT IS THE 13 INFERENCE WHICH THE JUDGE DRAWS FROM THE DIRECT, OR PERCEPTIBLE FACTS; (II) STATEMENTS OF THE PRINCIPLES OF LAW APPLICABLE TO THE LEGAL PROBLEMS DISCLOSED BY THE FACTS; AND (III) JUDGMENT BASED ON THE COMBINED EFFECT OF THE ABOVE. A DECISION IS AN AUTHORITY FOR WHAT I T ACTUALLY DECIDES. WHAT IS OF THE ESSENCE IN A DECISION IS ITS RATIO A ND NOT EVERY OBSERVATION FOUND THEREIN NOR WHAT LOGICALLY FLOWS FROM THE VARIOUS OBSERVATIONS MADE IN THE JUDGMENT. THE ENUNCIATION OF THE REASON OR PRINCIPLE ON WHICH A QUESTION BEFORE A COURT HAS BE EN DECIDED IS ALONE BINDING AS A PRECEDENT. (STATE OF ORISSA V SUDHANSU SEKHAR MISRA AND ORS. (AIR 1968 SC 647) AND UNION OF INDIA AND ORS. V DHANWANTI DEVI AND ORS. (1996 (6) SCC 44)). A CASE IS A PREC EDENT AND BINDING FOR WHAT IT EXPLICITLY DECIDES AND NO MORE. THE WOR DS USED BY THE JUDGES IN THEIR JUDGMENTS ARE NOT TO BE READ AS IF THEY ARE WORDS IN ACT OF PARLIAMENT. IN QUINN V LEATHEM (1901) AC 495 (H. L.), EARL OF HALSBURY LC OBSERVED THAT EVERY JUDGMENT MUST BE RE AD AS APPLICABLE TO THE PARTICULAR FACTS PROVED OR ASSUMED TO BE PRO VED, SINCE THE GENERALITY OF THE EXPRESSIONS WHICH ARE FOUND THERE ARE NOT INTENDED TO BE EXPOSITION OF THE WHOLE LAW BUT GOVERNED AND QUA LIFIED BY THE PARTICULAR FACTS OF THE CASE IN WHICH SUCH EXPRESSI ONS ARE FOUND AND A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECI DES. COURTS SHOULD NOT PLACE RELIANCE ON DECISIONS WITHO UT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SIT UATION OF THE DECISION ON WHICH RELIANCE IS PLACED. OBSERVATIONS OF COURTS ARE NEITHER TO BE READ AS EUCLID S THEOREMS NOR AS PROVISIONS OF THE STATUTE AND TH AT TOO TAKEN OUT OF THEIR CONTEXT. THESE OBSERVATIONS MUST BE READ IN THE CONTEXT IN WHICH THEY APPEAR TO HAVE BEEN STATED. J UDGMENTS OF COURTS ARE NOT TO BE CONSTRUED AS STATUTES. TO INTERPRET W ORDS, PHRASES AND PROVISIONS OF A STATUTE, IT MAY BECOME NECESSARY FO R JUDGES TO EMBARK INTO LENGTHY DISCUSSIONS BUT THE DISCUSSION IS MEAN T TO EXPLAIN AND NOT TO DEFINE. JUDGES INTERPRET STATUTES, THEY DO NOT I NTERPRET JUDGMENTS. THEY INTERPRET WORDS OF STATUTES; THEIR WORDS ARE N OT TO BE INTERPRETED AS STATUES. IN LONDON GRAVING DOCK CO. LTD. V HORTO N (1951 AC 737), LORD MAC DERMOT OBSERVED: THE MATTER CANNOT, OF COURSE, BE SETTLED MERELY BY TREATING THE IPSISSIMA VERTA OF WILLES, J. AS THOUGH THEY WERE P ART OF AN ACT OF PARLIAMENT AND APPLYING THE RULES OF INTERPRETAT ION APPROPRIATE THERETO. THIS IS NOT TO DETRACT FROM TH E GREAT WEIGHT 14 TO BE GIVEN TO THE LANGUAGE ACTUALLY USED BY THAT M OST DISTINGUISHED JUDGE. IN HOME OFFICE V DORSET YACHT CO. (1970 (2) ALL. E. R. 294) LORD REID SAID, LORD ATKINSS SPEECH - - - IS NOT TO BE TREATED AS IF IT WAS A STATUTE DEFINITION. IT WILL REQUIRE QUALIFICATION I N NEW CIRCUMSTANCES. MEGARRY, J. IN (1971) 1 WLR 1062 OBSERVED: ONE MUST NOT, OF COURSE, CONSTRUE EVEN A RESERVED JUDGMENT OF RUSSELL L.J. AS IF IT WERE AN ACT OF PARLIAMENT. AND, IN HERRINGTON V BRITISH RAILWAYS BOARD (1972 (2) WLR 5 37) LORD MORRIS SAID: THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A S PEECH OR JUDGMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE. CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFE RENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CASE S. DISPOSAL OF CASES BY BLINDLY PLACING RELIANCE ON A DECISION IS NOT PROPER. THE FOLLOWING WORDS OF LORD DENNING IN THE MATTER O F APPLYING PRECEDENTS HAVE BECOME LOCUS CLASSICUS: EACH CASE DEPENDS ON ITS OWN FACTS AND A CLOSE SIM ILARITY BETWEEN ONE CASE AND ANOTHER IS NOT ENOUGH BECAUSE EVEN A SINGLE SIGNIFICANT DETAIL MAY ALTER THE ENTIRE ASPE CT, IN DECIDING SUCH CASES, ONE SHOULD AVOID THE TEMPTATION TO DECI DE CASES (AS SAID BY CORDOZO) BY MATCHING THE COLOUR OF ONE CASE AGAINST THE COLOUR OF ANOTHER. TO DECIDE THEREFORE, ON WHICH SI DE OF THE LINE A CASE FALLS, THE BROAD RESEMBLANCE TO ANOTHER CASE IS NOT AT ALL DECISIVE. 15 *** *** *** PRECEDENT SHOULD BE FOLLOWED ONLY SO FAR AS IT MAR KS THE PATH OF JUSTICE, BUT YOU MUST CUT THE DEAD WOOD AND TRIM OF F THE SIDE BRANCHES ELSE YOU WILL FIND YOURSELF LOST IN THICKE TS AND BRANCHES. MY PLEA IS TO KEEP THE PATH TO JUSTICE CLEAR OF OBS TRUCTIONS WHICH COULD IMPEDE IT. 10 NOW THE QUESTION BEFORE US IS WHETHER THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GU LATI (SUPRA) WILL BE APPLICABLE IN THE CASE OF THE ASSESSEE OR NOT OR CA N IT BE REGARDED TO BE THE PRECEDENT FOR DECIDING THE ISSUE INVOLVED IN THE CA SES BEFORE US FOR WHICH THE LD. SENIOR ADVOCATE TOOK ALL THE PAINS FOR TRAV ELING FROM AHEMADABAD TO BARODA AND MADE US READ AND UNDERSTAN D THE WHOLE JUDGEMENT DELIVERED BY THE HONBLE APEX COURT IN TH E CASE OF FAKIR CHAND GULATI AND THAT OF THIS TRIBUNAL IN THE CASE OF RADHE DEVELOPERS VIS A VIS THE FACTS OF BOTH THE CASES. THE CASE OF FAQI R CHAND GULATI(SUPRA) HAS BEEN DECIDED BY THE HON'BLE SUPREME COURT WHEN A SP ECIAL LEAVE PETITION HAS BEEN FILED AGAINST THE ORDER OF NATION AL COMMISSION DISMISSING THE COMPLAINT OF THE ASSESSEE BEING NOT MAINTAINABLE UNDER THE CONSUMER PROTECTION ACT, 1986. THE ISSUE INVOLVED R ELATES TO WHETHER THE COMPLAINT UNDER THE CONSUMER PROTECTION ACT, 1986 I S MAINTAINABLE OR NOT. WHILE DECIDING THIS ISSUE, THE HON'BLE SUPREME COURT HAS GONE THROUGH THE AGREEMENT ENTERED INTO BY THE LANDOWNER WITH THE BUILDER FOR THE DEVELOPMENT OF THE PROPERTY. THE AGREEMENT WAS ENTERED INTO FOR THE DEVELOPMENT OF THE PROPERTY BY CONSTRUCTING A BUILD ING AND SHARING OF THE CONSTRUCTED AREA BETWEEN THE OWNER AND THE BUILDER. THE HON'BLE SUPREME COURT WHILE INTERPRETING THE AGREEMENT HAS LAID DOWN THAT HOW AN AGREEMENT HAS TO BE INTERPRETED. IT TOOK THE VIE W THAT IT IS WRONG TO ASSUME THAT WHEREVER THERE IS AN AGREEMENT FOR DEVE LOPMENT OF A PROPERTY BETWEEN THE LANDOWNER AND THE BUILDER UNDER WHICH T HE CONSTRUCTED AREA IS TO BE DIVIDED, IT WOULD AMOUNT TO A JOINT-VENTUR E AND THERE IS NO QUESTION OF THE LANDOWNER AVAILING THE SERVICES OF THE BUILDER FOR CONSIDERATION. 16 11 NOW COMING TO THE FACTS OF THE CASE OF THE ASSE SSEE, THE ASSESSEE HAS ENTERED INTO THE AGREEMENT WITH THE LA NDOWNER, THE COPY OF WHICH IS AVAILABLE BEFORE US AND ENGLISH TRANSLATIO N OF WHICH IS AVAILABLE AT PAGES 42 TO 49 OF THE PAPER BOOK. THIS AGREEMENT HAS BEEN ENTERED INTO ON 26-2-2004 WITH THE NOMENCLATURE AGREEMENT FOR D EVELOPMENT. THE PREAMBLE OF THE AGREEMENT STATES THAT OUT OF THE SA ID LAND F. PLOT NO. 375 PAIKI, THE POWERS TO DEVELOP THE LAND 6985 SQ. METE RS = 75158 SQ. FT. ARE GIVEN BY THE LANDOWNER PARTY OF THE FIRST PART TO T HE PARTY OF THE SECOND PART DEVELOPER (THE ASSESSEE) AND FOR THAT PURPOSE, COST OF THE LAND IS FIXED UPON CALCULATING AT THE RATE OF RS.121/- PER SQ. FT. BEING RS.90,94,190/-. OUT OF THE SAID AMOUNT, RS.1,00,000 /- HAS BEEN PAID BY THE DEVELOPER TO THE LANDOWNER. THE REMAINING AMOUN T OF RS.89,94,190/- IS TO BE PAID BY THE PARTY OF THE SECOND PART TO TH E PARTY OF THE FIRST PART WITHIN THE PERIOD OF 33 MONTHS IN EQUAL INSTALMENTS OF THREE MONTHS. IT IS ALSO MENTIONED IN THE SAID AGREEMENT THAT FOR CONST RUCTING BUILDINGS FOR RESIDENTIAL AS WELL AS COMMERCIAL PURPOSE OVER THE LAND MENTIONED IN THIS AGREEMENT, THE VADODARA MUNICIPAL CORPORATION HAS G RANTED RAJACHITHTHI NO. L/96/2003 DATD 28-07-2003. THE ASSESSEE HAS TO PERFORM THE FOLLOWING ACTS OVER THE SAID LAND INCLUDING CONSTRU CTION: (1) THAT THE PARTY OF THE SECOND PART (ASSESSEE) SHALL UPON OBTAINING ALL NECESSARY PERMISSIONS OVER THE SAID LAND SUCH A S N A, N O C, DEVELOPMENT PERMISSION, RAJACHITHTHI, PERMISSION FO R PASSING PLANS, TITLE CLEARANCE, ETC. FOR MAKING THE CONSTRU CTION AND ERECT AN APARTMENT IN THE SAME, CAN ORGANIZE SHOPS, OFFICES, FLATS AND TENEMENT SOCIETY AND CAN ENGAGE ARCHITECT IF REQUIR ED, CAN PREPARE PLANS AND OBTAIN THE OCCUPATION CERTIFICATE, COMPLE TION CERTIFICATE, CAN GET THE REVISED MAPS PREPARED AND FOR WHICH, THE COMPLETE POWERS ARE GIVEN TO THE PARTY OF THE SECON D PART. (2) THE ENTIRE RESPONSIBILITY FOR CARRYING ALL LEGA L PROCEEDINGS IN RESPECT OF AFORESAID LAND SHALL BE THAT OF THE PART Y :F THE SECOND PART AND FOR THAT PURPOSE, THE PARTY OF THE FIRST P ART ARE BOUND TO SUBSCRIBE SIGNATURES, CONSENTS, AFFIDAVITS, IF AND WHEN FOUND NECESSARY. HOWEVER, THE ENTIRE EXPENSES THAT MAY B E REQUIRED TO BE INCURRED BY THE SECOND PARTY ON THE SAME CANNOT BE RECOVERED FROM THE PARTY OF THE FIRST PART. WITH THIS CLEAR-C UT CONDITION, THIS LAND IS ENTRUSTED TO YOU FOR MAKING THE DEVELOPMENT . 17 (3) ON THE BASIS OF THIS AGREEMENT, THE PARTY OF T HE SECOND PART HEREIN IS ENTITLED TO MAKE ADVERTISEMENT BY DISPLAYING THE BOARD R IN ANY OTHER MANNER FOR THE SCHEME OVER THE LAND MENTIONED IN THE SCHEDULE. (4) THE PARTY OF THE SECOND PART DEVELOPERS CAN RE GISTER THE MEMBERS FOR THE NEW CONSTRUCTION THAT MAY BE MADE OVER THE SAID LAND/PROPERTY, CAN ISSUE RECEIPT TO THE MEMBERS, CA N ISSUE ALLOTMENT LETTER TO THE MEMBERS, CAN EXECUTE THE AGREEMENT TO SALE, CAN HAND OVER THE POSSESSION, CAN EXECUTE TRIPARTIE AGREEMEN T, BUT THE ENTIRE RESPONSIBILITY FOR THE SAME SHALL BE THAT OF THE PARTY OF THE SECOND PART. (5) THAT THE PARTY OF THE SECOND PART DEVELOPER HA S TO MAKE THE CONSTRUCTION AS PER THE RAJACHITHHL ISSUED BY THE M UNICIPAL CORPORATION, VADODARA, I.E. CONSTRUCTION PERMISSION OVER THE PROPERTY AS DESCRIBED ABOVE AND THE ENTIRE EXPENSES FOR THE SAME IS TO BE INCURRED BY THE PARTY OF THE SECOND PART OF I TS OWN AND THERE WILL NOT BE ANY RESPONSIBILITY OF THE PARTY OF THE FIRST PART IN RESPECT OF THE SAID AMOUNT OF EXPENSES. (6) THAT THE DEVELOPER CAN ENGAGE LABOUR CONTRACTO R, BUILDING CONTRACTOR OR ANY OTHER AGENCY FOR MAKING CONSTRUCT ION 01: THE SCHEME ORGANIZED OVER THE AFORESAID PROPERTY AND TH E PARTY OF THE SECOND PART IS COMPLETELY AUTHORIZED TO MAKE SEPARA TE AGREEMENTS WITH THEM FOR ALL SUCH ACTIVITIES. THAT ON THE BASI S OF PRESENT AGREEMENT, IF THE PARTY OF THE SECOND PART DEVELOPE RS WILL ORGANIZE ANY SCHEME OR PROJECT OVER THE AFORESAID P ROPERTY, IN WHICH MAY ACCEPT THE COMPLETE AMOUNTS AS STATED IN THIS AGREEMENT FOR SHOPS, OFFICES, FLATS, ETC. WILL BE CONSTRUCTED FOR WHICH WE SHALL EXECUTE THE SALE DEED IN FAVOUR OF MEMBERS AS AND W HEN YOU MAY INTIMATE AND CAUSE REGISTRATION AND WITNESSING, ETC . ON THE SALE DEEDS IN THE OFFICE OF THE SUB REGISTRAR BY PRESENT ING THE SAME. HOWEVER, THE STAMP, REGISTRATION CHARGES AND OTHER EXPENSES FOR THE SAME SHALL BE BORNE BY YOU, THE PARTY OF THE SE COND PART OR THE PURCHASERS OF THE SAID OFFICES, SHOPS, FLATS, HOUSE S, ETC. (7) THAT FOR THE HOUSES, SHOPS, FLATS, ETC. THAT AR E TO BE CONSTRUCTED OVER THE SAID LAND FOR WHICH THE PARTY OF THE SECOND PAR T IS TO REGISTER THEM AS MEMBERS AND CAN UPON EXECUTING AGREEMENTS T O SALE, ETC. ACCEPT THE MONEY AND ISSUE RECEIPTS TO THE MEMBERS. SAME WAY, 18 YOU CAN REMOVE ALL OBSTRUCTIONS THAT MAY COME DURIN G THE PERIOD OF MAKING THE DEVELOP IT. (8) IF REQUIRED, THE PARTY OF THE SECOND, WILL RAI SE NECESSARY CAPITAL FOR MAKING DEVELOPMENT AND CONSTRUCTION OVER THE SA ID LAND AND CAN OBTAIN THE LOAN FROM THE BANK OR ANY OTHER INST ITUTIONS TO COMPLETE THE SCHEME AND FOR THAT PURPOSE CAN FILE A CLAIM AGAINST SUCH INSTITUTIONS FOR CARRYING OUT NECESSARY PROCEE DINGS AND ARTY OF THE SECOND PART OF ITS OWN WHATEVER FINANCIAL RESPO NSIBILITY THAT MAY ARISE IN AU SUCH WORKS, SHALL BE ON THE HEAD OF THE PARTY OF THE SECOND PART DEVELOPERS. (9) THAT ALL ACTIVITIES RELATING TO THE CONSTRUCTIO N IS TO BE CARRIED OUT BY THE DEVELOPER AND IF REQUIRED, THE PARTY OF THE FIR ST PART HAS TO EXTEND NECESSARY COOPERATION AND ASSISTANCE AS A LA ND OWNER. THE EXPENSES FOR THE SAID WORKS IS TO BE BORNE BY THE P ARTY OF THE SECOND PART DEVELOPER. (10) FROM THE DATE OF THIS AGREEMENT, YOU, THE PART Y OF THE SECOND PART IS BOUND TO PAY TAX, LAND REVENUE, SPECIAL CESS, ET C. IN THE OFFICES OF THE VADODARA MUNICIPAL CORPORATION, GOVERNMENT, SEM I GOVERNMENT AND WHATEVER TAX, LAND REVENUE, EDUCATIO N CESS, SPECIAL CESS, ETC. ARE OUTSTANDING PRIOR TO THE DAT E OF THIS AGREEMENT, THE SAME ARE AND SHALL BE PAID BY US, TH E PARTY OF THE FIRST PART AS A LAND OWNER. (11) THAT FOR THE BUILDINGS THAT MAY BE CONSTRUCTED OVER THE SAID LAND, THE PARTY OF THE SECOND PART DEVELOPER CAN GIVE A S UITABLE NAME TO THE PROJECT AS DEEMED FIT AND FOR WHICH THE PARTY O F THE FIRST PART SHALL NOT RAISE ANY OBJECTION OR DISPUTE. (12) THAT FOR PERFORMING DEVELOPMENT ACTIVITY OVER THE SAID LAND AS WELL AS FOR THE PUBLICITY OF THE SAID SCHEME/PROJECT, TH E PARTY OF THE SECOND PART CAN PRINT BROCHURES, ETC. AND CAN PUBLI SH ADVERTISEMENT, ETC. OF THE SAME IN THE DAILY NEWSPA PER AND PRIOR TO MAKING CONSTRUCTION OVER THE SAID LAND, CAN CONSTRU CT A SITE OFFICE AND FOR STORING THE BUILDING MATERIAL, CAN CONSTRUC T THE GODOWN, ETC. AT ITS OWN COST. (13) THAT THE REQUIRED FACILITIES OF WATER, DRAINAG E. ETC. CONNECTIONS FOR THE HOUSES CONSTRUCTED OVER THE SAID LAND AS WELL A S FOR ELECTRIC CONNECTION FROM GUJARAT ELECTRICITY BOARD SHALL BE OBTAINED AND 19 PROVIDED BY THE PARTY OF THE SECOND PART AT ITS COS T AND FOR THAT PURPOSE, THE PARTY OF THE FIRST PART HEREIN IS TO E XTEND NECESSARY COOPERATION AND ASSISTANCE TO THE PARTY OF THE SECO ND PART. (14) THAT EXCEPT THE WRITER HEREIN, NO ONE ELSE HAS ANY RIGHT, TITLE, INTEREST, CONCERN, SHARE OR ENCUMBRANCE OVER THE SA ID LAND AND EXCEPT MYSELF, NO ONE HAS ANY OWNERSHIP RIGHT NOR A NY RIGHT OF MAINTENANCE OR SHARE OR AUTHORITY IS BEING MAINTAIN ED OVER THE SAID LAND. SIMILARLY, THERE IS NO EASEMENT RIGHT OF ANY ONE OVER THE SAID PROPERTY NOR IT IS UNDER ACQUISITION AND WE HAVE NO T PREVIOUSLY EXECUTED ANY AGREEMENT TO SALE OR ANY OTHER WRITING TO SELL THE SAID PROPERTY IN FAVOUR OF ANY ONE ELSE AND NOT TRANSFER RED, ASSIGNED THE SAME IN ANY MANNER. IN SPITE OF THE SAME, IF ANY TH IRD PERSON COMES FORWARD RAISING RIGHT, CLAIM OR CHARGE THAN WE THE PARTY OF THE FIRST PART SHALL BE BOUND TO REMOVE THE SAME AT MY COST. THUS, BY GIVING ASSURANCE, BINDING AND TRUST THAT THE PROPERTY AS D ESCRIBED HEREINABOVE IS HAVING COMPLETE CLEAR AND MARKETABLE TITLE, THE DEVELOPMENT AGREEMENT FOR THE AFORESAID PROPERTY IS EXECUTED IN FAVOUR OF THE DEVELOPER HEREIN. (15) THAT THE PHYSICAL POSSESSION OF THE SAID LAND FOR PERFORMING DEVELOPMENT ACTIVITY OVER THE LAND IS HANDED OVER B Y THE PARTY OF THE FIRST PART HEREIN TO THE PARTY OF THE SECOND PA RT HEREIN. 12 IF THE FACTS AND THE TERMS AND CONDITIONS OF TH IS AGREEMENT ARE COMPARED WITH THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SU PRA), WE NOTED THAT IN THIS CASE THERE IS NO AGREEMENT TO SHARE THE CONSTRUCTED AREA. THIS AGREEMENT RELATES ONLY TO PU RCHASE PART OF THE LAND FROM THE LANDOWNER BY THE ASSESSEE FOR A PRE-DETERMINED CONSIDERATION. ALL THE RESPONSIBILIT IES FOR CARRYING OUT THE CONSTRUCTION, PERMISSION, N A, N O C, LEGAL PROCEEDINGS AND THE RESULTS OF THE DEVELOPMEN T LIES WITH THE ASSESSEE. THE FIRST PARTY IS ONLY TO COOPE RATE THE ASSESSEE IN CARRYING OUT THE DEVELOPMENT AND ALSO T O EXECUTE THE DOCUMENTS WHENEVER IT IS REQUIRED BY TH E DEVELOPER. THE ASSESSEE HAS ALSO HANDED OVER THE PH YSICAL POSSESSION TO THE BUILDER FOR CARRYING OUT THE DEVE LOPMENT OF THE PROJECT. THE LANDOWNER DOES NOT HAVE ANY RI GHT, INTEREST, TITLE IN THE DEVELOPMENT SO CARRIED OUT E XCEPT TO THE EXTENT HE HAS TO RECEIVE THE CONSIDERATION FROM THE 20 ASSESSEE. THE ASSESSEE IS ENTITLED TO PUBLICIZE THE PROJECT, PRINT BROCHURES, ETC. AND CAN SELL THE PROJECT AT I TS OWN RIGHT. ALL THE EXPENSES HAVE TO BE INCURRED BY THE ASSESSEE FOR CARRYING OUT THE CONSTRUCTION, ETC. THE LAND O WNER HAS TO DO NOTHING EXCEPT TO THE EXTENT HE HAS TO RECEIV E CONSIDERATION FROM THE ASSESSEE. HIS MOTIVE IS NOT TO DEVELOP, CONSTRUCT OR CARRY ON THE BUSINESS AS A BU ILDER OR DEVELOPER. PRACTICALLY NO RIGHT IN THE LAND REMAINS WITH THE OWNER. FOR WHOLE PRACTICAL PURPOSE THE ASSESSEE ACQ UIRED DOMINANT RIGHT OVER THE LAND AND HE CAN DEAL WITH T HE LAND IN THE MANNER IN WHICH HE MAY LIKE. THUS, THE TERMS AND CONDITIONS ENTERED INTO, IN OUR OPINION, GIVE ALL D OMINANT CONTROL AND RIGHTS OVER THE LAND TO THE ASSESSEE. T HE ASSESSEE, IN OUR OPINION, WILL BE CONSTRUCTING THE BUILDING AT ITS OWN COST AND WILL REMAIN THE OWNER OF THE BUILD ING AT ITS OWN WITHOUT ANY INTERFERENCE FROM THE LANDOWNER. TH E LANDOWNER DOES NOT HAVE ANY RIGHT TO SHARE THE BUIL DINGS. THE AGREEMENT DOES NOT ENVISAGE THAT THE ASSESSEE W ILL BE WORKING AS A CONTRACTOR OR AGENT ON BEHALF OF THE LANDOWNER. THE AGREEMENT CANNOT BE REGARDED TO BE T HE JOINT-VENTURE OR COLLABORATION AGREEMENT. IT IS, IN OUR OPINION, THE AGREEMENT FOR THE SALE OF THE LAND FOR A DETERMINED CONSIDERATION UNDER WHICH THE ASSESSEE I S ENTITLED TO DEVELOP THE PROJECT ON THE SAID LAND AT ITS OWN COST IN THE MANNER IN WHICH HE MAY DECIDE. 13 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) ON WHICH THE LEARN ED SENIOR COUNSEL HAS HEAVILY RELIED. WE FIND THAT TH E TRIBUNAL IN THAT DECISION ALTHOUGH DEALT WITH 45 AP PEALS OF DIFFERENT ASSESSEES BUT HAS DEALT WITH THE FACTS RE LATING TO RADHE DEVELOPERS IN ITA NO.2482/AHD/2006. THE FACTS IN THAT CASE AS ARE APPEARING 3 THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE H AD DEVELOPED AND BUILT A HOUSING PROJECT ON A LAND AT REVENUE SURVEY NO.648 BELONGING TO ONE SHRI GHANSHYAMBHAI A PATEL & OTHERS, THROUGH POWER OF ATTORNEY HOLDER MAHENDRABHAI A PATEL, WHO ARE THE O WNERS OF THE LAND. THE ASSESSEE-FIRM HAD ENTERED INTO A DEVELOPM ENT AND CONSTRUCTION AGREEMENT WITH (1) SHRI VINODBHAI NATH ABHAI PATEL (HUF), (2) SHRI BHAILALBHAI NATHABHAI PATEL HUF, (3 ) HARISHBHAI NATHABHAI PATEL HUF AND (4) SHRI HASMUKHBHAI NATHAB HAI PATEL 21 THROUGH THEIR PARTNER SHRI CHETANKUMAR RAMESHBHAI J OGI. THE DEVELOPMENT AND CONSTRUCTION AGREEMENT AND BANAKHAT AGREEMENT ARE BOTH DATED 18-05-2000. THERE WAS A TRI-PARTY DEVELO PMENT AGREEMENT REVEALING THAT THE LAND OWNERS AGREED TO GET THE LA ND DEVELOPED THROUGH THE ASSESSEE-FIRM AND ALSO AGREED THAT THE ASSESSEE-FIRM WOULD MAKE THE MEMBERS I.E. PROSPECTIVE BUYERS AND COLLEC T THE LAND CONSIDERATION AT THE RATE MENTIONED IN THE AGREEMEN T. THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY, BARODA MUNICIPAL C ORPORATION (HEREINAFTER REFERRED TO AS BMC ON 17-07-2000. TH E APPROVAL WAS IN THE NAME OF THE SAID OWNERS OF THE LAND. AS THE ASS ESSEE-FIRM IS NOT THE OWNER OF THE LAND AND EVEN THE APPROVAL FOR PERMISS ION TO DEVELOP AND CONSTRUCT THE PROJECT WAS ALSO NOT IN THE NAME OF T HE ASSESSEE BUT IN THE NAME OF THE ORIGINAL LAND OWNERS, THE AO HELD T HAT THE ASSESSEE HAS MERELY ACTED AS AN AGENT/CONTRACTOR FOR CONSTRU CTION OF RESIDENTIAL HOUSES, AND THEREFORE, DID NOT SATISFY THE CONDITIO NS FOR GRANTING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT AND ACCO RDINGLY NOT ENTITLED TO THE DEDUCTION. 4 THE CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE D ISCUSSION IN PARAGRAPH NOS.15 & 16 OF HIS ORDER IN THE FOLLOWING MANNER: 15 THEREFORE, THE DEDUCTION U/S 80IB(10) READ WITH SECTION 80IB(1) AND RULE 18-BBB IS ADMISSIBLE ONLY TO SUCH ASSESSEES AS ARE DERIVING PROFITS FROM AN UNDERTAKING OF BUIL DING AND HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY, A ND FOR SUCH APPROVAL, THE ASSESSEE MUST LEGALLY OWN THE LAND WH ICH IS AN INALIENABLE CONSTITUENT OF ANY HOUSING PROJECT. THE PERSON DOING ONLY THE WORK OF DEVELOPING AND CONSTRUCTING THE BU ILDING STRUCTURE ON THE AUTHORITY OF THE APPROVAL GRANTED TO THE LANDOWNER CANNOT BE SAID TO BE IN THE BUSINESS OF A N UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT , NOT ONLY ON ACCOUNT OF NOT BEING THE OWNER OF THE LAND, A NE CESSARY CONSTITUENT OF THE HOUSING PROJECT, BUT ALSO ON ACC OUNT OF NOT HAVING BEEN GRANTED THE APPROVAL TO EXECUTE THE PRO JECT IN HIS OWN RIGHT, BECAUSE THAT INVOLVES OBLIGATION THAT CA N BE DISCHARGED ONLY BY THE PERSON TO WHOM THE APPROVAL IS GRANTED. THE CASE LAWS RELIED UPON ARE ALL DISTINGUISHABLE O N FACTS AND HENCE ARE NOT APPLICABLE TO THE PRESENT CASE. 16 IN VIEW OF THE DISCUSSIONS GIVEN ABOVE, I DO NOT INTEND TO INTERFERE WITH THE ACTION OF THE AO IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(10) HENCE THE SAME IS CONFIRMED. 22 14 THE FINDINGS OF THE TRIBUNAL ARE GIVEN AT PAGE 13 ONWARDS ARE AS UNDER: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO GONE T HROUGH THE ORDERS OF LOWER AUTHORITIES AS WELL AS THE PAPER-BOOK FILE D BY THE LD.COUNSEL FOR THE ASSESSEE. 9 IN THE MOST COMMON MODE OF DEVELOPMENT OF REAL ES TATE BY THE DEVELOPERS, THE OWNERS OF LAND DO NOT DESIRE TO DEV ELOP THE LAND AND THEY SELL THE LAND TO A DEVELOPER. IT IS THE OBLIG ATION OF THE DEVELOPER TO DEVELOP THE LAND, AND IF NECESSARY TO GET AGRICU LTURAL LAND CONVERTED INTO NON-AGRICULTURAL LAND BY THE CHANGE OF USER, A PPOINT THE ARCHITECTS TO PREPARE THE BUILDING PLANS, GET THEM APPROVED WI TH THE LOCAL AUTHORITY, AND TO CONSTRUCT THE HOUSES IN THE FORM OF TENEMENTS AND FLATS. THE DEVELOPER WOULD CARRY OUT THE CONSTRUC TION ON HIS OWN, NAMELY, CARRY OUT ALL NECESSARY STATUTORY FORMALITI ES FOR CONSTRUCTION, BUY MATERIAL FOR CONSTRUCTION, EMPLOY LABOUR OR AN AGENCY WHICH WOULD SUPPLY LABOURERS AND THEREUPON COMPLETE THE C ONSTRUCTION. THE DEVELOPER WOULD THEN SELL THE HOUSES TO THE PROSPEC TIVE BUYERS. THE DEVELOPER WOULD BUY LAND AND GET IT TRANSFERRED IN HIS NAME EVEN BEFORE THE PLANS ARE PLACED. 10 HOWEVER, THE OTHER MODE IN MANY CASES IS THAT LA ND IS NOT PURCHASED AT THAT STAGE BY EXECUTING DEED OF CONVEY ANCE, I.E. SALE- DEED. THIS IS BECAUSE OF VARIETY OF REASONS, NAMEL Y, BECAUSE SUCH CONVEYANCE WOULD ENTAIL PAYMENT OF STAMP DUTY, BECA USE OF LITIGATION, PROHIBITION AGAINST EXECUTION OF CONVEYANCE-DEED IM MEDIATELY, ETC. IN SOME CASES, THE LAND MAY BE CONVEYED DIRECTLY IN FA VOUR OF CO- OPERATIVE HOUSING SOCIETIES OR NON TRADING CORPORAT IONS OR DEVELOPERS. THEREFORE, IF THE LAND IS CONVEYED TO A DEVELOPER, WHAT THE DEVELOPER DOES IS THAT HE ENTERS INTO AN AGREEM ENT TITLED AS DEVELOPMENT AGREEMENT WITH THE LAND-OWNER. THE DEV ELOPMENT AGREEMENT EFFECTIVELY IS AN AGREEMENT OF SALE UNDER WHICH THE LAND- OWNER HANDS OVER THE POSSESSION TO THE DEVELOPER, W HICH ENTITLE DEVELOPER TO DEVELOP THE PROPERTY ENTIRELY AT HIS C HOICE, CONVENIENCE AND DISCRETION. BY SUCH DEVELOPMENT AGREEMENT, THE PRICE ON WHICH THE LAND WOULD BE SOLD, IS FIXED. THE AGREEMENT W OULD ALSO SPECIFY THAT THE LAND-OWNER WOULD BE ENTITLED TO RECEIVE HI S CONSIDERATION EITHER IMMEDIATELY OR OVER A FIXED PERIOD, IRRESPEC TIVE OF WHETHER OR 23 NOT THE LAND IS ACTUALLY DEVELOPED BY THE DEVELOPER . THE LAND-OWNER GIVES ALL HIS RIGHTS OVER THE LAND AND GIVES FULL A UTHORITY TO THE DEVELOPER TO ENJOY THE LAND IN THE MANNER OF HIS CH OICE. THE AGREEMENT WOULD ALSO SPECIFICALLY AUTHORIZE THE DEV ELOPER TO DEVELOP THE LAND, CONSTRUCT TENEMENTS THEREON, BOOK MEMBERS AND HAND OVER POSSESSION TO ONE OR MORE ALLOTTEES. FOR ALL PURPOS ES, THEREFORE, THE LAND-OWNER EXTINGUISHES HIS INTEREST IN THIS LAND I N FAVOUR OF DEVELOPER ON EXECUTION OF THIS DEVELOPMENT AGREEMEN T. 11 IN THE CASES OF THE PRESENT ASSESSEE LAND SITUAT ED AT VADODARA, I.E. AREA COMPRISING OF THE CITY OF BARODA AND AROU ND IT, IS DECLARED AS URBAN DEVELOPMENT AREA WITHIN THE MEANING OF SECTIO N 2(XXIX) OF THE GTP & UDA AND THE CONSTRUCTIONS CARRIED OUT IN AND AROUND VADODARA ARE GOVERNED BY THE PROVISIONS OF THE GTP & UDA. THE PROVISIONS OF SECTION 26 OF THE GTP & UDA RESTRICTS EVERYONE FROM CARRYING ON DEVELOPMENT/CONSTRUCTION OVER ANY LAND WITHOUT THE PERMISSION OF THE APPROPRIATE AUTHORITY, I.E., VADO DARA URBAN DEVELOPMENT AUTHORITY (VUDA), SECTION 27 PRESCRIBES THAT AN APPLICATION FOR DEVELOPMENT IS TO BE MADE, IMPORTAN TLY, SUCH APPLICATION CAN BE MADE BY ANY PERSON INTENDING TO CARRY OUT ANY DEVELOPMENT . IN OR OVER ANY LAND . IT DOE S NOT REFER ONLY TO AN OWNER OF THE LAND. THAT APART, THE DEFINITION OF THE TERM OWNER AS GIVEN IN SECTION 2 (XVIII) OF THE GTP & UDA CLEA RLY SAYS THAT ANYONE, WHO DEVELOPS THE LAND ON HIS OWN ACCOUNT OR FOR THE BENEFIT OF ANY OTHER PERSON OR AS A JOINT TRUSTEE, GUARDIAN , MANAGER, ETC., IS TO BE TREATED AS AN OWNER. SECTION 29 OF GTP & UDA AUTHORIZES VUDA TO GRANT OR REFUSE PERMISSION FOR DEVELOPMENT. IN TERMS OF THE POWERS PRESCRIBED UNDER SECTION 118 OF GTP & UDA, T HE STATE GOVERNMENT HAS NOTIFIED RULES, VIZ., GUJARAT TOWN P LANNING AND URBAN DEVELOPMENT RULES, 1979 (HEREIN AFTER REFERRE D TO AS GTP & UDR). RULE 9 THEREOF PRESCRIBES APPLICATION FOR DEVELOPMENT PERMISSION UNDER SECTION 27 TO BE IN FORM-C AND THA T PERMISSION TO BE GRANTED UNDER SECTION 29 TO BE IN FORM-D. ON LOOK ING AT FORM-C, IT IS CLEAR THAT SUCH AN APPLICATION CAN BE MADE BY AN YONE, NOT NECESSARILY OWNER. SIMILARLY, PERMISSION FOR DE VELOPMENT COULD BE GRANTED TO WHOEVER HAS APPLIED FOR THE PERMISSIO N; NOT NECESSARILY ONLY THE OWNER. 12 WE MAY ALSO REFER TO AT THIS STAGE, THE GENERAL DEVELOPMENT CONTROL REGULATIONS (GDCR) AS NOTIFIED BY VUDA IN P URSUANCE OF PROVISIONS OF SECTION 12(2) (M) AND SECTION 13(2) ( C) OF THE TP ACT 24 WHICH GOVERN THE ACTIVITY OF CONSTRUCTION IN AND AR OUND THE CITY OF VADODARA. CLAUSE 2 OF GDCR GIVES DEFINITIONS. THE TERM OWNER IN CLAUSE 2.32 INCLUDES DEVELOPERS. THEREFORE, IN GDCR WHENEVER THERE IS A REFERENCE TO THE TERM OWNER IT WOULD A LWAYS INCLUDE DEVELOPERS DEVELOPING ANY PROPERTY. CLAUSE-3 OF GDCR PRESCRIBES PROCEDURE FOR ACQUIRING DEVELOPMENT PERM ISSION. APPLICATION HAS TO BE MADE IN FORM NO.1 WHICH CAN BE FILED BY ANYONE INCLUDING DEVELOPER. THUS A DEVELOPER HAS A RIGHT TO APPLY FOR DEVELOPMENT PERMISSION AND TO CARRY ON AL L CONSTRUCTION ACTIVITIES. CLAUSE-11 PRESCRIBES CONDITIONS FOR D EVELOPMENT OF LAND AND CLEARLY CONTEMPLATES GRANT OF DEVELOPMENT PERMI SSION NOT ONLY TO OWNER BUT ALSO TO A PERSON WHO HAS A RIGHT TO DEV ELOP THE LAND. REGULATION-23 SHOWS THAT IT APPLIES TO THE NEW CONS TRUCTION, AS DISTINGUISHED FROM THE APPLICABILITY TO THE PERSON APPLYING FOR CONSTRUCTION. IN OTHER WORDS, THE DEVELOPER CARIE S OUT DEVELOPMENT ACTIVITY AS TO COMPLY WITH THE REGULATIONS WHETHER OR NOT HE IS THE OWNER. THIS BECOMES FURTHER CLEAR WHEN ONE EXAM INES CLAUSE-25, WHICH PERTAINS TO PENALTIES. FINALLY WHEN THE CONST RUCTION IS COMPLETED THE APPLICATION FOR OCCUPANCY PERMISSION HAS TO BE MADE IN FORM NO.7 PURSUANT TO REGULATION NO.6.2 (B) AND THA T BUILDING COMPLETION CERTIFICATE IS GIVEN BY THE AUTHORITY IN FORM NO.10 PURSUANT TO REGULATION NO.7 IN RELATION TO DEVELOPM ENT. THEREFORE, WHAT IS MATERIAL IS THE DEVELOPMENT OF THE REAL EST ATE AND NOT, WHO HAS CARRIED OUT THE SAME. 13 IT IS A FACT THAT THE LAND WAS NOT REGISTERED IN ITS NAME. IT IS ALSO TRUE THAT THE ASSESSEE HAD THE APPROVAL GRANTED BY LOCAL AUTHORITY, I.E. BMC WHICH STANDS IN THE NAME OF THE OWNER OF THE LA ND. BUT ON PERUSAL OF THE DEVELOPMENT AND CONSTRUCTION AGREEME NT IT IS VERY CLEARL THAT THE LAND OWNERS HAVE AGREED TO GET THEI R LAND DEVELOPED THROUGH THE ASSESSEE-FIRM FOR CONSTRUCTION OF HOUSI NG PROJECT. FROM THE TRANSLATED COPY OF APPROVAL OF LOCAL AUTHORITY, I.E. BMC DATED 17/07/2000 WE FIND THAT IT IS IN THE NAME OF SHRI G HANSHYAMBHAP A.PATEL & OTHERS THROUGH POWER OF ATTORNEY HOLDER M AHENDRABHAI A.PATEL AND IN THIS APPROVAL LETTER, LAND OWNERS IS SHOWN AS THE APPLICANT. THE RELEVANT CLAUSE NO.1 & 2 OF THE AGR EEMENT TO SELL, MAY NOW BE LOOKED INTO TO FIND OUT WHAT IS THE EXAC T NATURE OF THE TRANSACTION. THE RELEVANT CLAUSE READS AS UNDER:- 1) THE ABOVE REFERRED LAND IN SCHEDULE IS AGREED T O BE SOLD BY US, PARTY OF THE THIRD PART, TO PARTY OF THE FIRST PART AT THE RATE 25 OF PER SQ.FT. AT RS.100/- & TODAY & YOU PARTY OF TH E FIRST PART HAS JOINTLY PAID TO PARTY OF THE THIRD PART RS.11,0 00/- (RUPEES ELEVEN THOUSANDS ONLY) BY CASH, SUBHANPURA, BARODA. 2)THE ABOVE SAID AMOUNT PAID AS REFERRED IN PARA. I, YOU PARTY OF THE FIRST PART HAS TO PAY TO PARTY OF THE THIRD PART IN FOUR MONTHLY INSTALMENT WITHIN EIGHTEEN MONTHS. DURING THIS PERIOD AT THE TIME OF PAYING MONEY THE NAME OF MEMBERS THA T YOU SUGGEST TO BE INCORPORATED IN AGREEMENT TO SALE/SAL E DEED BY PART WITH INTERNAL UNDERSTANDING FOR WHICH THE SELL ER WILL GIVE CONSENT. AS THE LAND IS COVERED BY THE LAWS OF URBAN LAND CE ILING ACT, RULES AND REGULATION THERE UNDER THE PARTY OF THE S ECOND PART. BEFORE COMPETENT AUTHORITY AND ADDITIONAL COLLECTOR BARODA HAS PUT THE SAID LAND & HAS DECLARED ON DT. /06 /93. THE SAID LAND TO BE KEPT AS FREE HOLD. THE SAID LAND LAY OUT PLAN, DEVELOPMENT PERMISSION TO CONSTRUCT BY THE ORDER DT: 14/1/96 NO. L/152/95-96 THE BARODA DEPUTY CITY DEVELOPMENT AUTHORITY AND PERMISSION TO CONSTR UCT IS GRANTED BY BARODA MUNICIPAL CORPORATION. THE OWNERS OF THE LAND, EXECUTORS OF AGREEMENT TO S ALE, BY DT: 7/9/81 HAS PASSED THE DEED OF AGREEMENT TO SALE FAV OURING CONSENTING PARTY. THEREFORE THEY ARE TAKEN AS CON SENTING PARTY, IN PRESENT AGREEMENT TO SALE. AT THE TIME OF MAKING AGREEMENT TO SALE WE LAND OWNERS, THE EXECUTORS HAV E RECEIVED FULL AMOUNT TOWARDS THE SALE PRICE OF THE LAND AND THEREFORE THE PARTY OF THIRD PART IS MADE CONSENTING PARTY AND TH EREFORE THE AMOUNT OF SALE PRICE IS TO BE GIVEN TO THE CONSENTI NG PARTY BY THE PURCHASER AS PER THIS AGREEMENT TO SALE. 14 THE RELEVANT TERMS AND CONDITIONS CLEARLY STATES TH AT THE SECOND PARTY ARE THE OWNERS OF THE LAND. THE AGREEMENT FOR DEVELOPMENT OF THE HOUSING PROJECT AND CONSTRUCTION DATED 18-05-20 00 DESCRIBED IN THE SCHEDULE AND THE LAND IS IN THEIR NAMES IN THE GOVT. RECORDS. THE RELEVANT CLAUSES 1, 2, 3 & 4, READ AS UNDER:- WHO SHALL BE HEREINAFTER IN THIS PRESENT AGREEMENT OF DEVELOPMENT OF HOUSING PROJECT AND CONSTRUCTION TER MED AS THE PARTY OF THE THIRD PART OR YOU THE SAID FIRM OR DEVELOPER- BUILDER IN THE MEANING AND CONTEXT OF THE SAID TERM INCLUDES ALL 26 THE PRESENT AND FUTURE PARTNERS/PARTNERS FROM TIME TO TIME OF THE SAID FIRM OF THE PARTY OF THE THIRD PART, WHO ARE A LIVE, AND HEIRS, SUCCESSORS, GUARDIANS, ETC. OF EVERYBODY. 1. WHEREAS THE PARTY OF THE SECOND PART THE CONFIRMING PARTY ARE THE ORIGINAL OWNERS OF THE LAND DESCRIBED IN SC HEDULE BELOW AND IS ON THEIR NAMES IN GOVERNMENT RECORD. 2. THE PARTY OF THE SECOND PART THE CONFIRMING PARTY A S LANDLORDS HAD EXECUTED AN AGREEMENT OF SALE FOR THE LAND DESCRIBED IN SCHEDULE BELOW IN FAVOUR OF THE PARTY OF THE FIRST PART ON 7-9-81 AT THE RATE OF RS.18/- PER SQ. FT. AND SUBJECT TO THE OTHER CONDITIONS MENTIONED THEREIN. ACCORDINGLY THE PARTY OF THE FIRST PART AS DECIDED FULL CONSIDERATION PRICE IS PAID TO THE SECOND PART THE CONFIRMING PARTY I.E. TO LANDLORDS AND THEREFORE, LANDLORDS RE GISTERED SALE DEED/THE FIRST PART OR NOMINEE / S OF THE PART Y OF THE FIRST PART ARE IN ACTUAL POSSESSION OF THE LAND DES CRIBED. 3. THE PARTY OF THE THIRD PART ARE CONNECTED WITH THE CONSTRUCTION OF BUSINESS SINCE MANY YEARS AND HAVE EXPERIENCE OF CONSTRUCTING RESIDENTIAL HOUSES. 4. WITH THE CONSENT OF THE PARTY OF THE FIRST AND SECO ND PART, THE PARTY OF THE THIRD PART AS A DEVELOPER AND BUIL DER WANTS TO DO A PROJECT/SCHEME OF CONSTRUCTING RESIDENTIAL HOUSES HAVING AREA LESS THAN 1500 SQ. FT. FOR THE MIDDLE C LASS SOCIETY. 15 ON PERUSAL OF CLAUSE 11 OF THESE AGREEMENTS WE F IND THAT WITH THE CONSENT OF THE PARTY OF THE FIRST AND SECOND PA RT, THE RIGHTS AND AUTHORITIES ARE GIVEN TO THE THIRD PARTY, AS A DEVELOPER-CUM- BUILDER. THE SUB-CLAUSES (8) & (9) TO CLAUSE 11 ELA BORATE THAT THE DEVELOPER-CUM-BUILDER HAS TO TAKE ALL THE PROCE EDINGS AT GOVERNMENT, SEMI-GOVERNMENT, MUNICIPAL CORPORATION OFFICE AND IN LEGAL COURT AND AT OTHER PLACES ON BEHALF OF THE PARTY OF THE FIRST AND SECOND PART. ALL NECESSARY APPLICATIO NS AND WRITTEN STATEMENTS, REPLIES AND IN THE FORMS ALL THAT IS TO BE DONE BY DEVELOPER-CUM-BUILDING CONTRACTOR. THE RELEVANT S UB-CLAUSES (8) & (9) READ AS UNDER: 27 8. THAT THE SAID DEVELOPER CUM BUILDING CONTRAC TOR IN ORDER TO COMPLETE THE SCHEME IN ORDER STEP BY STEP BUT IN PRESCRIBED TIME PERIOD, THE PARTY OF THE FIRST AND SECOND PART AND ALL THE MEMBERS DESIROUS IN JOINING IN THE SCHEME DEVELOPER CUM BUILDING CONTRACTOR WHENEVER AND WHEREVER THEY NEED THE SIGNATURES AND ADMISSIONS, THEY SHALL HAVE TO GIVE THAT TO THE DEVELOPER CUM BUILDING CONTRACTOR AND IN SPECIAL CIRCUMSTANCES DEVELOPER CUM BUILDING CONTRACTOR IN ORDER TO COMPLETE THE SCHEME IN ORDER STEP BY STEP BUT IN PR ESCRIBED TIME PERIOD, SHALL BE ENTITLED TO RECEIVE GENERAL POWER OF ATTORNEY FORM THE PARTY OF THE FIRST AND SECOND PART. 9. IN ORDER TO COMPLETE THE SCHEME AS PER ARRANG EMENT PLAN AND IN PRESCRIBED TIME PERIOD, DEVELOPER CUM BUILDI NG CONTRACTOR HAS TO ALL THE PROCEEDINGS AT GOVERNMENT AND SEMI- GOVERNMENT AND MUNICIPAL CORPORATION OFFICE AND IN LEGAL COURTS AND AT OTHER PLACES ON BEHALF OF THE PARTY O F THE FIRST AND SECOND PART ON NECESSARY APPLICATIONS AND WRITT EN STATEMENTS, REPLIES AND IN THE FORMS ALL THAT IS TO BE DONE BY DEVELOPER CUM BUILDING CONTRACTOR AND FOR THAT HERE BY THE AUTHORITY AND POWERS ARE GIVEN TO HIM IN SPITE OF T HAT IN FUTURE IF ANY SPECIFIC POWER OF ATTORNEY IS TO BE OBTAINED AT THAT TIME THE PARTY OF THE FIRST AND SECOND PART SHALL HAVE TO EX ECUTE THAT IN FAVOUR OF DEVELOPER CUM BUILDING CONTRACTOR. 16 BY CLAUSE 14 OF THIS AGREEMENT THE POSSESSION IS TO BE WITH THE DEVELOPER-CUM-BUILDING CONTRACTOR, I.E. ASSESSEE-FI RM AND IT READS AS UNDER:- 14. THE LAND DESCRIBED IN SCHEDULE BELOW AND THE CONSTRUCTION DONE ON IT, ITS ACTUAL POSSESSION SHAL L BE WITH DEVELOPER CUM BUILDING CONTRACTOR TILL THE COMPLET ION OF THIS SCHEME AND MOREOVER TILL THE TOTAL IMPLEMENTATION O F THIS AGREEMENT ON THE SAID LAND AND THE CONSTRUCTION OVE R IT THERE SHALL BE A CONTRACTUAL LIEN OF THE DEVELOPER CUM BU ILDING CONTRACTOR. 17 VIDE CLAUSE NO.16 OF THIS AGREEMENT THE PARTIES OF THE FIRST AND SECOND PART OF THIS AGREEMENT HAVE HANDED OVER ALL THE RESPONSIBILITIES OF THE SCHEME TO THE DEVELOPER-CUM-BUILDING CONTRAC TOR. IT READS AS UNDER: 28 16 THE PARTY OF THE FIRST AND SECOND PART HAVE HAN DED OVER ALL THE RESPONSIBILITIES OF THE SCHEME TO THE DEVEL OPER CUM BUILDING CONTRACTOR SO AT PRESENT TO THE PARTY OF T HE FIRST PART AS PER RULES AND REGULATIONS HE IS GETTING F S I BUT I N FUTURE IT CHANGES TAKEN PLACE IN RULES AND REGULATIONS OF F S I IN SUCH CIRCUMSTANCES OTHER THAN THE PRESENT SCHEME ON THE LAND IF SPECIAL CONSTRUCTION IS ALLOWED THEN FOR SUCH ADDIT IONAL WORK OTHER THAN TOTAL CONSTRUCTION MADE, AS PER RULES AN D REGULATIONS BY GETTING PASSED THE PLANS FORM V M C VADODARA TO DO THE CONSTRUCTION ALL THE RIGHTS AND AUTHORITIES SHALL B Y WITH DEVELOPER CUM BUILDING CONTRACTOR AND THEREAFTER AL SO WHATEVER F S I RIGHTS SHALL REMAIN THAT ALSO AS PER HIS AGREEMENT SHALL BE WITH THE PARTY OF THE THIRD PART . 15 AFTER DISCUSSING VARIOUS CLAUSES OF THE AGREEMENT, THE TRIBUNAL HELD AS UNDER: 18 FROM THE CLAUSES OF THE DEVELOPMENT AND CONSTRU CTION AGREEMENTS AS WELL AS AGREEMENT FOR SALE, BOTH DATE D 18/05/2000, EXTRACTED ABOVE WE OBSERVE THAT, THESE TWO AGREEMEN TS EFFECTIVELY TRANSFER TO THE ASSESSEE-FIRM ALL THE RIGHTS OF DEV ELOPMENT AND CONSTRUCTION AND TO DEAL WITH THE LAND FOR A CONSID ERATION PAYABLE WITHIN A STIPULATED TIME; THAT THE ASSESSEE HAD BEE N PUT IN POSSESSION OF THE LAND ON THE TERMS AND CONDITIONS AS MENTIONE D IN THESE TWO AGREEMENTS; THAT THE ASSESSEE-FIRM HAS ALSO PAID CO NSIDERATION OF RS.56 LACS DURING THE TWO FINANCIAL YEARS; I.E. 200 0-01 & 2001-02; THAT THE ASSESSEE-FIRM HAS TO OBTAIN NECESSARY APPR OVALS FROM THE LOCAL AUTHORITIES; I.E. BMC ON BEHALF OF THE LAND-OWNERS AND ALL THE EXPENSES FOR SUCH PURPOSES ARE TO BE INCURRED BY TH E ASSESSEE; THAT THE ASSESSEE-FIRM HAS ENGAGED THE FIRM OF ARCHITECT AND ALSO INCURRED EXPENSES TOWARDS THE CHARGES PAYABLE TO CORPORATION , ETC. FOR OBTAINING THE APPROVALS; THAT EVEN FROM THE BOOKS O F ACCOUNT, IT IS NOTICED THAT FOR OBTAINING THE APPROVAL, THE ASSESS EE-FIRM HAS PAID THE DEVELOPMENTAL CHARGES TO VARIOUS REGULATING AGENCIE S, I.E. VUDA, BMC AND GEB (GUJARAT ELECTRICITY BOARD), ETC.; AND THAT THESE EXPENSES ARE INCURRED BY THE ASSESSEE-FIRM AND THE ASSESSING OFFICER HAS BROUGHT OUT THE COMPLETE DETAILS YEAR-WISE IN H IS ASSESSMENT ORDERS AT PAGE NO.5 READING AS UNDER:- SR.NO. PARTICULARS FINANCIAL AMOUNT 29 YEAR (RS.) 1. VMC CHARGES PAID TO VADODARA MUNICIPAL CORPORATION 2000-01 65,532/- 2. VMC CHARGES PAID TO VADODARA MUNICIPAL CORPORATION 2001-02 31,116/- 3. VUDA CHARGES PAID TO VADODARA DEVELOPMENT AUTHORITY 2000-01 46,508/- 4. ELECTRICITY CHARGES PAID TO GEB FOR GETTING ELECTRICITY CONNECTION TO ITS PROJECT 2000-01 1,99,944/- 19 THE ASSESSEE COMMENCED THE WORK TO DEVELOP WHICH INCLUDED THE DEVELOPMENT OF SITES, LAYING ROADS WITHIN THE H OUSING COMPLEX, PROVIDING FOR COMPOUND-WALLS OF THE HOUSING COMPLEX , STREETLIGHTS, DRAINAGE, ETC.; THAT SIMULTANEOUSLY THE CONSTRUCTIO N COMMENCED THE WORK OF THE HOUSING WORK; THAT THE COST OF THE ENTI RE DEVELOPMENT AND THE CONSTRUCTION IS SUBSTANTIALLY MADE OUT BY THE A SSESSEE-FIRM INITIALLY AND PARTIALLY RECOVERED FROM THE CUSTOMER S WHO ARE DESIROUS TO PURCHASE ANY RESIDENTIAL HOUSES, I.E. THE PROSPE CTIVE BUYERS; AND THAT THE SIZE OF PLOT ON WHICH THE PROJECT IS DEVELOPED IS, DEFINITELY, IN EXCESS OF ONE ACRE AND THE SIZE OF EACH RESIDENTIAL HOUSE IS LESS THAN 1500 SQ. FT. 20 ON THESE UNDISPUTED FACTS WE HAVE TO EXAMINE THE PROVISIONS OF THE SECTION 80-IB(10) OF THE ACT. BEFORE DISCUSSIN G THE PROVISIONS APPEARING IN THE IMPUGNED YEARS, IT WOULD BE RELEVA NT TO HAVE A LOOK THE LEGISLATIVE HISTORY OF THE PROVISION. THE DEDUC TION FOR HOUSING PROJECT WAS INTRODUCED FOR THE FIRST TIME IN ASST. YEAR 1999-2000 BY INSERTING SUB-SECTION (4F) IN SECTION 80IA OF THE A CT AND THE DEDUCTION WAS AS PER PROVISIONS OF SEC.80IA(1) IN R ESPECT OF ANY PROFITS AND GAINS OF SUCH UNDERTAKING. THE SAID SEC TION 80IA(4F) READS AS UNDER:- (4F) THIS SECTION APPLIES TO AN UNDERTAKING, ENGAGE D IN DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY SUBJECT TO THE CONDIT ION THAT THE SIZE OF THE PLOT OF LAND HAS A MINIMUM ARE A OF ONE ACRE, AND THE RESIDENTIAL UNIT HAS A BUILT U P AREA NOT EXCEEDING ONE THOUSAND SQUARE FEET : 30 PROVIDED THAT THE UNDERTAKING COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998 AND COMPLETES THE SAME BEFORE THE 31 ST DAY OF MARCH, 2001. 21 ON A CLOSE READING OF THIS PROVISION, IT WOULD BE APPARENT THAT IT APPLIED TO AN UNDERTAKING WHICH WAS ENGAGED IN DEV ELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHO RITY AND THE DEDUCTION WAS SUBJECT TO THE CONDITIONS THAT (I) T HE SIZE OF THE PLOT OF LAND WAS A MINIMUM AREA OF ONE ACRE, AND THE RESIDE NTIAL UNIT HAS A BUILT UP AREA NOT EXCEEDING 1000 SQ. FT; AND (II) T HE UNDERTAKING COMMENCED DEVELOPMENT AND CONSTRUCTION OF THE HOUSI NG PROJECT ON OR AFTER 1 ST OCTOBER, 1998, AND COMPLETED THE SAME BEFORE 31 ST MARCH, 2001. 22 SECTION 80IA WAS LATER SPLIT INTO AND SPREAD IN TWO SECTIONS- 80IA AND 80IB BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1 ST APRIL 2000. THE HOUSING PROJECT FELL IN S. 80IB AND FORMS PART OF SUB-SECTION (10) OF SEC. 80IB. IT GRANTS DEDUCTION IN RESPECT O F PROFIT AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKING OTHER THAN INFR ASTRUCTURE DEVELOPMENT UNDERTAKINGS. THE RELEVANT PROVISION BR OUGHT OUT READS AS UNDER: 80-IB. DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE D EVELOPMENT UNDERTAKINGS. (10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKING DE VELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL A UTHORITY, SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUS ING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998, AND COMPLETES THE SAM E BEFORE THE 31ST DAY OF MARCH, 2001; 31 (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS MINIMUM AREA OF ONE ACRE; AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE.' 23 FOR ENACTING THIS PROVISION, THE NOTES ON CLAUSE S TO THE FINANCE BILL, 1999 HAS EXPLAINED THAT THE PROVISION ALSO SE EKS TO PROVIDE THAT FOR APPROVED HOUSING PROJECTS THE PROFITS WHICH ARE FULLY DEDUCTIBLE, THE BUILT-UP AREA IN REGIONS OTHER THAN OUTSIDE TWE NTY-FIVE KM. OF MUNICIPAL LIMITS OF DELHI AND MUMBAI, DOES NOT EXCE ED ONE THOUSAND FIVE HUNDRED SQUARE FEET. 24 FURTHER, THE MEMO CONTAINED IN FINANCE BILL, 199 9 HAS EXPLAINED THE PROVISIONS BROUGHT BY THE LEGISLATURE W.E.F. 1ST APRIL, 2000 AND THE SAME READS AS UNDER: 'TAX INCENTIVE FOR PROMOTION OF HOUSING LIBERALIZATION OF TAX HOLIDAY TO APPROVED HOUSING P ROJECTS UNDER S. 80-IA OF THE IT ACT, PROFITS OF APPROVED H OUSING PROJECTS WHERE THE DEVELOPMENT AND CONSTRUCTION COM MENCES ON OR AFTER 1ST OCT., 1998 AND IS COMPLETED BY 31ST MARCH, 2001 ARE FULLY DEDUCTIBLE. THE CONDITIONS NECESSARY FOR CLAIMING THE BENEFIT ARE THAT THE APPROVED HOUSING PROJECT SHOUL D BE ON MINIMUM AREA OF ONE ACRE AND SHOULD HAVE DWELLING U NITS WITH A MAXIMUM BUILT-UP AREA OF 1,000 SQ.FT. IT IS PROPOSED TO MODIFY THE EXISTING BENEFITS TO P ROVIDE THAT IN AREAS OTHER THAN FALLING IN AND WITHIN 25 KMS. FROM THE MUNICIPAL LIMITS OF DELHI AND MUMBAI, THE BUILT-UP AREA OF 32 DWELLING UNITS MAY BE UP TO A MAXIMUM LIMIT OF 1,50 0 SQ. FT. INSTEAD OF 1,000 SQ. FT. AT PRESENT TO MAKE THEM EN TITLED FOR BENEFIT. THE BUILT-UP AREA FOR AREAS FALLING IN DEL HI AND MUMBAI AND WITHIN 25 KMS. OF THE MUNICIPAL LIMITS OF BOTH, HOWEVER, SHALL REMAIN THE SAME. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST AP RIL, 2000, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS T. YR. 2000-01 AND SUBSEQUENT YEARS.' 25 THE PROVISIONS OF SEC.80IB(10) THUS ARE SOUGHT T O PROVIDE THAT FOR APPROVED HOUSING PROJECT, THE PROFITS ARE FULLY DEDUCTIBLE IF THE PROJECT HAS THE BUILT UP AREA FOR THE CITIES OF DEL HI AND MUMBAI, AND THE AREA WITHIN 25 KM. FROM THE MUNICIPAL LIMIT THE REOF DOES NOT EXCEED 1000 SQ. FT. AND FOR OTHER PLACES THE BUILT UP AREA OF RESIDENTIAL UNIT DOES NOT EXCEED 1500 SQ. FT. A PROVISION IS AL SO MADE WHEREBY ANY UNDERTAKING OF AN INDIAN COMPANY, WHICH IS ENTI TLED TO DEDUCTION UNDER THIS SECTION IS TRANSFERRED, BEFORE THE EXPIR Y OF THE PERIOD SPECIFIED IN THIS SECTION, TO ANOTHER INDIAN COMPAN Y IN A SCHEME OF AMALGAMATION OR DEMERGER (A) NO DEDUCTION TO BE ADM ISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE DEMERGED CO MPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEME RGER TAKES PLACE; AND (B) THE PROVISIONS OF THIS SECTION TO APPLY TO THE AMALGAMATED OR RESULTING COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR DEMERGED COMPANY AS IF THE AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE. 26 THE SUB-SECTION (10) RELATING TO HOUSING PROJECT WAS AMENDED FROM TIME TO TIME. FIRSTLY, BY FINANCE ACT, 2000 W. E.F. 1 ST APRIL, 2000 EXTENDING THE OUTER LIMIT FOR COMPLETION OF THE HOU SING PROJECT ON OR BEFORE 31 ST MARCH, 2002 AS AGAINST 31 ST MARCH, 2001 ORIGINALLY ENACTED. THIS SUB-SECTION WAS AGAIN AMENDED BY FINA NCE ACT, 2003 REMOVING THE TIME LIMIT FOR COMPLETION OF THE PROJE CT MEANING THEREBY THAT FOR THE ASST. YEARS 2002-2003, 2003-2004 AND 2 004-05, THE ASSESSMENT YEARS WITH WHICH WE ARE CONCERNED, THERE WAS NO OUTER TIME LIMIT FOR COMPLETION OF THE PROJECT. THERE HAV E BEEN CERTAIN FURTHER AMENDMENTS IN THIS SECTION BY FINANCE (NO.2 ) ACT, 2004 W.E.F. 33 1 ST APRIL, 2005, BUT WE ARE NOT CONCERNED WITH THESE A MENDMENTS INSOFAR AS ALL THESE APPEALS ARE CONCERNED. THEREFO RE, WE ARE NOT DEALING WITH THE SAME. 27 A BARE READING OF THIS PROVISIONS OF S. 80IB (10 ), AS THEY STOOD IN THE YEARS UNDER CONSIDERATION, THE REQUIREMENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THAT (I) THERE M UST 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 ST DAY OF OCTOBER, 1998; (IV) THE HOUSING PROJECT IS ON A SIZE OF A PLOT OF LAND WHICH HAS MINIMUM AREA OF ONE ACR E; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUILT UP AREA OF 1000 SQ. FT. IF IT IS SITUATED IN DELHI AND MUMBAI OR WITHIN 25 KM. OF MUNICIPAL LIMIT OF THESE CITIES AND 1500 SQ. FT. AT ANY OTHER PLACE S. THERE IS NO OTHER CONDITION, WHICH IS TO BE COMPLIED WITH BY AN ASSES SEE FOR CLAIMING THE DEDUCTION ON PROFITS OF THE HOUSING PROJECT. 28 THE CONTENTION OF THE REVENUE AUTHORITIES THAT T O CLAIM DEDUCTION U/S.80IB(10), THERE IS A CONDITION PRECED ENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO FORCE. WE DO NOT FIND ANY SUCH CONDITION AS APPE ARING IN THE PROVISIONS OF THE SECTION EXTRACTED ABOVE. A PLAIN READING OF SUB- SECTION (10) OF SEC.80IB REVEALS AND MAKES IT EVIDE NT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING P ROJECT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT M IGHT BE TRUE THAT THE LAND BELONGS TO THE PERSONS WHO HAS ENTERED INT O AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJ ECT BUT ON A PERUSAL OF THE AGREEMENT AS NARRATED ABOVE, IT IS EVIDENT T HAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSES SEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND OW NERS. THEREFORE, THE MERE FACT THAT THE LAND-OWNER AND THE UNDERTAKING D EVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIE S 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. 34 29 IT IS ALSO THE CASE OF THE REVENUE THAT THE ASSE SSEE WAS A MERE CONTRACTOR DEVELOPING AND BUILDING HOUSING PROJECT AND THEREFORE, IT COULD NOT BE A DEVELOPER. WE FAIL TO UNDERSTAND AS TO HOW SUCH A SITUATION COULD EMERGE. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A CONTRACTOR. HAVING ENT ERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUIL DING THE HOUSING PROJECT, WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TE RM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOVE IT IS THE UNDERTAKING THAT DEVELOPS OR BUILDS THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHET HER THAT IT IS THE OWNER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREO F. THE REQUIREMENT FOR CLAIMING DEDUCTION IS THAT SUCH AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT, BE IT ON THEIR OWN LAND OR O N THE LAND OF OTHERS AND FOR WHICH A TRIPARTITE AGREEMENT HAS BEEN ENTER ED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRACTOR FOR DEVELOPING AND BUILDING HOUSING PROJ ECT OR AN OWNER OF THE LAND. 30 WHAT IS THE MEANING OF THE TERM DEVELOP, DEVELOP ER, DEVELOPING, DEVELOPMENT, WE CAN FIND THE ANSWER IN CERTAIN DICTIONARIES, INCLUDING THE LAW DICTIONARY. A. THE WEBSTERS ENCYCLOPEDIA UNABRIDGED DICTIONARY OF THE ENGLISH LANGUAGE GIVES FOLLOWING MEANINGS OF THE TERM DEVELOPER AS: 1.ONE WHO OR THAT WHICH DEVELOPS; 2.A PERSON WHO INVESTS IN AND DEVELOPS THE URBAN OR SUBURBAN POTENTIALITIES OF REAL ESTATE B. OXFORD ADVANCED LEARNERS DICTIONARY OF CURRENT ENGL ISH FOURTH INDIAN EDITION GIVES MEANING OF THE TERM DEVELOPER AS PERSON OR COMPANY THAT DEVELOPS LAND . C. RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE , THE FOLLOWING DEFINITIONS CAN BE FOUND: 35 DEVELOP : A. TO BRING OUT THE CAPABILITIES OR POSSIBILITIES OF; BRING TO A MORE ADVANCED OR EFFECTIVE STATE. B. TO CAUSE TO GROW OR EXPAND. DEVELOPER : A. THE ACT OR PROCESS OF DEVELOPING; PROGRESS B. SYNONYM: EXPANSION, ELABORATION, GROWTH, EVOLUTION, UNFOLDING, MATURING, MATURATION. D. WEBSTER DICTIONARY , THE FOLLOWING DEFINITIONS EMERGE: A. TO REALIZE THE POTENTIAL OF; B. TO AID IN THE GROWTH OF: STRENGTHEN, DEVELOP THE BICEPS C. TO BRING INTO BEING: MAKE ACTIVE (DEVELOP A BUSINESS) D. TO CONVERT ( A TRACT OF LAND ) FOR SPECIFIC PURPOS E, AS BY BUILDING EXTENSIVELY E. LAW LEXICON DICTIONARY , THE FOLLOWING DEFINITIONS COULD BE SEEN: DEVELOPMENT A. TO ACT, PROCESS OR RESULT OF DEVELOPMENT OR GROWING OR CAUSING TO GROW; THE STATE OF BEING DEVELOPED. B. HAPPENING 31 THE SUPREME COURT IN THE CASE OF GUJARAT INDUSTR IAL DEVELOPMENT CORPORATION AND OTHERS 227 ITR 414 (SC) , CONSIDERING THE MEANING OF DEVELOPER HELD THAT THE WORD DEVE LOPMENT APPEARING IN THE PROVISIONS SHOULD BE UNDERSTOOD IN ITS WIDER SENSE AND, THEREFORE, GRANTED EXEMPTION EVEN THOUGH THE G UJARAT INDUSTRIAL DEVELOPMENT CORPORATION WAS ENGAGED IN THE INDUSTRI AL DEVELOPMENT. THE DEVELOPMENT MEANS THE REALIZATION OF POTENTIALI TIES OF LAND OR 36 TERRITORY BY BUILDING OR MINING. ACCORDINGLY, IT CAN BE SAFELY SAID THAT A PERSON WHO UNDERTAKES TO DEVELOP REAL ESTATE BY DEVELOPING AND CONSTRUCTION A HOUSING PROJECT AN ELIGIBLE UNDERTAK ING DEVELOPING AND BUILDING OF HOUSING PROJECTS WITHIN THE MEANING OF SECTION 80-IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND, THE LAN D OWNER HAS NOT MADE ANY CONSCIOUS ATTEMPT TO DEVELOP THE PROPERTY EXCEP T ENSURING THEIR RIGHTS AS LAND-OWNER SO THAT THE SALE VALUE OF THE LAND COULD BE REALIZED TO THEM AS PER THE TERMS OF AGREEMENT TO SALE AND THE DEVELOPMENT AGREEMENT. THE LAND-OWNERS NO DOUBT, HAVE NOT TH ROWN THEMSELVES INTO DEVELOPMENT OF PROPERTY. IT IS ONLY THE ASSES SEE WHO IS DEVELOPING THE PROPERTY. THROWING ITSELF INTO THE BUSINESS OF DEVELOPMENT AND BUILDING OF HOUSING PROJECTS BY TAK ING ALL RISKS ASSOCIATED WITH THE BUSINESS BY ENGAGING ARCHITECTS , STRUCTURAL CONSULTANTS, DESIGNING AND PLANNING OF THE HOUSING SCHEMES, PAYMENT OF DEVELOPMENT CHARGES, OBTAINING NECESSARY PERMIS SIONS, APPROVING PLANS, HIRING MACHINERY AND EQUIPMENTS, HIRING ENGI NEERS, APPOINTING CONTRACTORS, ETC. NO DOUBT, THE PERMISSION HAS BEE N OBTAINED IN THE NAME OF THE REGISTERED LAND-OWNERS, BUT THE SAME HA VE BEEN OBTAINED BY THE ASSESSEE-FIRM THROUGH ITS PARTNERS WHO ARE H OLDING POWER OF ATTORNEY OF THE RESPECTIVE LAND-OWNERS. IT IS A F ACT THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR TH E LAND-OWNERS, BUT DEVELOPER IS WORKING FOR HIMSELF IN ORDER TO EX PLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN INTEREST AND, THEREFORE, OPTION FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVE LOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS. AS PER THE PROVISIONS OF SECTION 2(1)(G) OF REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVICE ACT (27 OF 1996), THE TEM CO NTRACTOR MEANS A PERSON WHO UNDERTAKES TO PRODUCE A GIVEN RESULT FOR ANY ESTABLISHMENT, OTHER THAN A MERE SUPPLY OF GOODS OR ARTICLES OF MANUFACTURE, BY THE EMPLOYMENT OF BUILDING WORKERS OR WHO SUPPLIES BUILDING WORKERS FOR ANY WORK OF THE ESTABLISHMENT; AND INCLUDES A SUB-CONTRACTOR. 32 IN THESE CIRCUMSTANCES, IN OUR OPINION, THE ASSE SSEE IS ENTITLED TO DEDUCTION U/S. 80IB(10) AS IT HAD DEVELOPED AND BUI LT THE HOUSING PROJECT; IT HAD STARTED CONSTRUCTION AFTER 1 ST DAY OF APRIL 1998; THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND THE MAXIMUM BUILT UP AREA OF THE RESID ENTIAL UNITS ARE NOT MORE THAN 1500 SQ. FT., THE PROPERTY BEING SITUATED IN BARODA, A CITY OTHER THAN DELHI AND MUMBAI. 37 33 IT MAY ALSO BE BORN IN MIND THE DEDUCTION IS NOT EXCLUSIVELY TO AN ASSESSEE BUT TO AN UNDERTAKING DEVELOPING AND BU ILDING HOUSING PROJECT, BE IT DEVELOPED AS A CONTRACTOR OR AS AN O WNER. THIS FACT IS EVIDENT ON THE BARE READING OF SUB-SEC.(1) OF SEC.8 0IB, SUB-SEC.(2) OF SEC.80IB, WHICH PROVIDES THAT THIS SECTION APPLIES TO AN INDUSTRIAL UNDERTAKING WHICH FULFILLS ALL THE FOLLOWING CONDIT IONS VIZ., AND SUB-SECTION (12) WHICH ALLOWS THE DEDUCT ION TO THE AMENDED OR RESULTING COMPANY IN CASE OF AMALGAMATIO N OR DEMERGER OF THE ORIGINAL UNDERTAKING WHICH HAD STARTED DEVEL OPING AND BUILDING THE HOUSING PROJECT. FOR THE SAKE OF CONVENIENCE, S UB-SECTION (12) OF SEC.80IB REPRODUCED HEREUNDER:- 80IB(12) WHERE ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO THE DEDUCTION UNDER TH IS SECTION IS TRANSFERRED, BEFORE THE EXPIRY OF THE PE RIOD SPECIFIED IN THIS SECTION, TO ANOTHER INDIAN COMPAN Y IN A SCHEME OF AMALGAMATION OR DEMERGER (A) NO DEDUCTION SHALL BE ADMISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE DEMERGED COMPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKES PLACE; AND (B) THE PROVISIONS OF THIS SECTION SHALL, AS FAR A S MAY BE, APPLY TO THE AMALGAMATED OR THE RESULTING COMPA NY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR T HE DEMERGED COMPANY IF THE AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE. 34 EVEN IF THAT IS SO REQUIRED, THE ASSESSEE IN THE PRESENT CASE CAN ALSO BE SAID TO BE THE OWNER OF THE LAND AS IT HAD MADE PART PAYMENT TO THE LAND-OWNERS DURING THE FINANCIAL YEARS 2000-01 & 2001-02 FOR AN AMOUNT OF RS.56 LACS, AND TAKEN THE POSSESSION OF T HE LAND FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT AND S ATISFY THAT CONDITION AS WELL OF BEING THE OWNER OF THE LAND IN VIEW OF PROVISIONS OF SECTION 2(47) (V) OF THE ACT. WHEN THE ASSESSEE HAS TAKEN ON THE POSSESSION OF IMMOVABLE PROPERTY OR RETAINED IT IN PART PERFORMANCE OF A CONTRACT OF A NATURE REFERRED TO IN SECTION 53A O F THE ACT OF THE 38 TRANSFER OF PROPERTY ACT, 1882 IT AMOUNTS TO TRANSF ER UNDER SECTION 2(47)(V), WHICH READS AS UNDER:- (47) ' TRANSFER ', IN RELATION TO A CAPITAL ASSET, INCLUDES,- (I) (II) (III) (IV) (IVA) (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE N ATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882 (4 OF 1882) ; OR 35 SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 18 82 REFERRED TO IN THE AFORESAID SECTION OF THE I. T. ACT, READS AS UNDER:- 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIG NED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CER TAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREO F, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SO ME ACT IN FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQ UIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THER E IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR TH E TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UND ER HIM SHALL 39 BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE A ND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROP ERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION , OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONT RACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OR A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 36 IN VIEW OF ABOVE PROVISIONS OF THE TRANSFER OF P ROPERTY ACT, VIS- -VIS, THE INCOME-TAX ACT TO GET THE CORRECT IMPORT OF SECTION 80- IB(10) OF THE ACT WE HAVE TO READ ALONG WITH SECTIO N 80-IB(1) OF THE ACT WHICH ALSO DOES NOT PROVIDE FOR ANY CONDITION T HAT THE ASSESSEE SHOULD BE OWNER OF THE LAND. THE RELEVANT PROVISION S OF SUB-SECTION (1) OF SECTION 80-IB, READS AS UNDER:- 80IB. DEDUCTION IN RESPECT OF PROFITS AND GAINS FR OM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE D EVELOPMENT UNDERTAKINGS. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRE D TO IN SUB- SECTIONS (3) TO (11) AND (11A) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH P ERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIE D IN THIS SECTION. 37 THE LD. DR RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF V.S.M.R. JAGADISHCHANDRAN (DECD.) 227 ITR 2 40 (SC), OBSERVING AT PAGE NO.243 THAT IT HAS BEEN HELD THAT WHERE A MORTGAGE WAS CREATED BY THE PREVIOUS OWNER DURING H IS TIME AND THE SAME WAS SUBSISTING ON THE DATE OF HIS DEATH, THE S UCCESSOR OBTAINS ONLY THE MORTGAGOR'S INTEREST IN THE PROPERTY AND B Y DISCHARGING THE MORTGAGE DEBT HE ACQUIRES THE MORTGAGEE'S INTEREST IN THE PROPERTY AND, THEREFORE, THE AMOUNT PAID TO CLEAR OFF THE MO RTGAGE IS THE COST OF ACQUISITION OF THE MORTGAGEE'S INTEREST IN THE PROP ERTY WHICH IS DEDUCTIBLE AS COST OF ACQUISITION UNDER SECTION 48 OF THE ACT. IN THE 40 PRESENT CASE, WE FIND THAT THE MORTGAGE WAS CREATED BY THE ASSESSEE HIMSELF. IT IS NOT A CASE WHERE THE PROPERTY HAD BE EN MORTGAGED BY THE PREVIOUS OWNER AND THE ASSESSEE HAD ACQUIRED ONLY T HE MORTGAGOR'S INTEREST IN THE PROPERTY MORTGAGED AND BY CLEARING THE SAME HE HAD ACQUIRED THE INTEREST OF THE MORTGAGEE IN THE SAID PROPERTY. THE QUESTIONS RAISED BY THE ASSESSEE IN THE APPLICATION SUBMITTED UNDER SECTION 256(2) OF THE ACT DO NOT, THEREFORE, RAISE ANY ARGUABLE QUESTION OF LAW AND THE SAID APPLICATION WAS RIGHTL Y REJECTED BY THE HIGH COURT. IN THE CIRCUMSTANCES, EVEN THOUGH WE AR E UNABLE TO AGREE WITH THE REASONS GIVEN IN THE IMPUGNED ORDER, WE AR E IN AGREEMENT WITH THE ORDER OF THE HIGH COURT DISMISSING THE APP LICATION FILED BY THE ASSESSEE UNDER SECTION 256(2) OF THE ACT. 38 THE ARGUMENT IS TOTALLY MISCONCEIVED AS IN THE P RESENT CASE, THE ASSESSEE HAS PERFORMED HIS PART OF THE CONTRACT IN REGARD TO AGREEMENT TO SALE AND DEVELOPMENT AGREEMENT AND PAID PART OF CONSIDERATION TO PERFORM HIS PART AND CARRIED OUT D EVELOPMENT ACTIVITIES BY CONSTRUCTING A HOUSING PROJECT AS PER AGREEMENT. THIS BEING A TRI-PARTY AGREEMENT, I.E. THE DEVELOPMENT A GREEMENT WHICH HAS PASSED ON A VALID AND RIGHTFUL TITLE TO THE PRO SPECTIVE BUYERS, IN NO WAY IT CAN BE SAID THAT FACTS OF CASE BEFORE THE SU PREME COURT WOULD APPLY TO THE PRESENT CASE. 39 WE MAY REFER TO THE PROVISIONS OF SECTION 10(20A ) OF THE INCOME-TAX ACT PROVIDING THAT : ' ANY INCOME OF AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENACTED EI THER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVE MENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH. ' THE SUPREME COURT WHILE INTERPRETING THE PROVISIONS OF SECTION 10(20A) OF T HE ACT, THE PURPOSE OF WHICH IS ALMOST SIMILAR TO THE PRESENT SECTION 8 0IB, HELD IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION & OTH ERS (227 ITR 414), AT PAGE NO.417 AS UNDER:- ANY INCOME FALLING WITHIN THE AMBIT OF THE SAID CL AUSE WOULD AUTOMATICALLY SLIP OUT OF THE EXIGIBILITY UNDER THE INCOME-TAX ACT. THE CLAUSE PERTAINS TO ANY INCOME OF AN AUTHOR ITY CONSTITUTED BY OR UNDER ANY ENACTED LAW. THIS FIRST LIMB OF THE CLAUSE IS SQUARELY AVAILABLE TO THE CORPORATION AS IT HAS BEEN CONSTITUTED UNDER THE GUJARAT ACT. 41 THE SECOND LIMB OF THE CLAUSE CONSISTS OF TWO ALTER NATIVES, OF WHICH THE FIRST IS THAT THE AUTHORITY CONSTITUTED B Y LAW SHOULD BE FOR DEALING WITH THE NEED TO PROVIDE HOUSING ACCOMM ODATION. THAT ALTERNATIVE IS OBVIOUSLY NOT AVAILABLE TO THE APPELLANT- CORPORATION AS NOBODY HAS A CASE THAT THE APPELLANT - CORPORATION HAS ANYTHING TO DO WITH THE OBLIGATION TO PROVIDE HOUSING ACCOMMODATION. IT IS THE SECOND ALTERNATIVE IN THE CLAUSE UNDER WHICH THE APPELLANT SEEKS SHELTER TO B E ABSOLVED FROM THE LIABILITY TO PAY INCOME-TAX. AS PER THAT A LTERNATIVE, IF THE AUTHORITY IS CONSTITUTED FOR THE PURPOSE OF PLA NNING OR DEVELOPMENT OR IMPROVEMENT OF ANY CITY OR TOWN OR V ILLAGE OR A COMBINATION OF THEM, THE INCOME OF SUCH AUTHORITY I S NOT EXIGIBLE TO INCOME-TAX. 40 IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORA TION LTD. 249 ITR 214 (SC) REFERRED TO BY THE LD. DR, THE SUPREM E COURT HAS CONSIDERED THE ISSUE AS UNDER:- THE ASSESSEE BEFORE IT HAD PURCHASED CERTAIN HOUSE S FROM THE HOUSING BOARD AND HAD MADE PART PAYMENT THEREOF. IT HAD ACQUIRED POSSESSION OF THE HOUSES BUT THE DEED OF C ONVEYANCE WAS NOT EXECUTED UNTIL AFTER THE FINANCIAL YEAR IN QUESTION. EVEN SO, THE ASSESSEE'S CLAIM FOR DEPRECIATION OF THE BU ILDINGS, WHICH IT HAD USED FOR THE PURPOSE OF ITS BUSINESS, WAS UP HELD ON THE BASIS THAT IT HAD ACQUIRED DOMINION OVER THE BUILDI NGS. WE WILL ASSUME THE CORRECTNESS OF THE JUDGMENT BUT' , ON THE FACTS FOUND, IT IS NOT POSSIBLE TO REACH THE CONCLU SION THAT THE ASSESSEE HAD ACQUIRED DOMINION OVER THE MILLS IN QU ESTION. THERE IS NOTHING ON THE RECORD WHICH INDICATES THIS NOR IS THAT THE FINDING OF THE TRIBUNAL. 41 THE SUPREME COURT IN THIS CASE HAS CONSIDERED TH E ISSUE AND FINALLY FOUND THAT THERE IS NOTHING ON RECORD WHICH INDICATED THAT THE ASSESSEE HAD ACQUIRED DOMINION OVER THE MILLS IN QU ESTION ON WHICH DEPRECIATION WAS CLAIMED IN ORDER TO THE FINDINGS O F THE TRIBUNAL AVAILABLE. IN VIEW OF THESE FACTS, THE SUPREME COUR T HAS DISMISSED THE APPEAL OF THE ASSESSEE. 42 42 WE MAY REFER TO DECISIONS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF SUPREME COURT IN THE CASE O F MYSORE MINERALS LTD. 239 ITR 775 (SC), WHEREIN BY RELYING ON THE DE CISION OF CIT V/S. PODAR CEMENT PVT.LTD.[1997] (226 ITR 625)[SC], THE SUPREME COURT HAS ELABORATELY DISCUSSED AND DEFINED THE WORD OWN ER AND FINALLY HELD AS UNDER:- SECTION 32 OF THE INCOME-TAX ACT CONFERS A BENEFIT ON THE ASSESSEE. THE PROVISION SHOULD BE SO INTERPRETED AN D THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOU LD ENABLE THE ASSESSEE SECURING THE BENEFIT INTENDED TO BE GI VEN BY THE LEGISLATURE TO THE ASSESSEE. IT IS ALSO WELL-SETTLE D THAT WHERE THERE ARE TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVISION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE P REFERRED. WHAT IS OWNERSHIP ? THE TERMS 'OWN', 'OWNERSHIP', ' OWNED', ARE GENERIC AND RELATIVE TERMS. THEY HAVE A WIDE AN D ALSO A NARROW CONNOTATION, THE MEANING WOULD DEPEND ON THE CONTEXT IN WHICH THE TERMS ARE USED BLACK'S LAW DICTIONARY (6TH EDITION), DEFINES 'OWNER' AS UNDER : 'OWNER, THE PERSON IN WHOM IS VESTED THE OWNERSHIP, DOMINION, OR TITLE OF PROPERTY ; PROPRIETOR. HE WHO HAS DOMINION OF A THING, REAL OR PERSONAL, CORPOREAL OR INCORPOREAL, WHICH HE HAS A RIGHT TO ENJOY AND DO WITH AS HE PLE ASES, EVEN TO SPOIL OR DESTROY IT, AS FAR AS THE LAW PERMITS, UNL ESS HE BE PREVENTED BY SOME AGREEMENT OR COVENANT WHICH RESTR AINS HIS RIGHT. THE TERM IS, HOWEVER, A NOMEN GENERALISSIMUM, AND I TS MEANING IS TO BE GATHERED FROM THE CONNECTION IN WHICH IT I S USED, AND FROM THE SUBJECT-MATTER TO WHICH IT IS APPLIED. THE PRIMARY MEANING OF THE WORD AS APPLIED TO LAND IS ONE WHO O WNS THE FEE AND WHO HAS THE RIGHT TO DISPOSE OF THE PROPERTY, B UT THE TERM ALSO INCLUDES ONE HAVING A POSSESSORY RIGHT TO LAND OR THE PERSON OCCUPYING OR CULTIVATING IT. THE TERM 'OWNER' IS USED TO INDICATE A PERSON IN WH OM ONE OR MORE INTERESTS ARE VESTED FOR HIS OWN BENEFIT . . . .' 43 IN THE SAME DICTIONARY, THE TERM 'OWNERSHIP' HAS BE EN DEFINED TO MEAN, INTER ALIA, A 'COLLECTION OF RIGHTS TO USE AND ENJOY PROPERTY, INCLUDING RIGHT TO TRANSMIT IT TO OTHERS .... THE RIGHT OF ONE OR MORE PERSONS TO POSSESS AND USE A THING TO T HE EXCLUSION OF OTHERS. THE RIGHT BY WHICH A THING BELONGS TO SO ME ONE IN PARTICULAR, TO THE EXCLUSION OF ALL OTHER PERSONS. THE EXCLUSIVE RIGHT OF POSSESSION, ENJOYMENT AND DISPOSAL ; INVOL VING AS AN ESSENTIAL ATTRIBUTE THE RIGHT TO CONTROL, HANDLE, A ND DISPOSE.' DIAS ON JURISPRUDENCE (4TH EDITION, AT PAGE 400) ST ATES : 'THE POSITION, THEREFORE, SEEMS TO BE THAT THE IDEA OF OWNERSHIP OF LAND IS ESSENTIALLY ONE OF THE 'BETTER RIGHT' TO BE IN POSSESSION AND TO OBTAIN IT, WHEREAS, WITH CHATTELS THE CONCEP T IS A MORE ABSOLUTE ONE. ACTUAL POSSESSION IMPLIES A RIGHT TO RETAIN IT UNTIL THE CONTRARY IS PROVED, AND TO THAT EXTENT A POSSES SOR IS PRESUMED TO BE OWNER.' STROUD'S JUDICIAL DICTIONARY GIVES SEVERAL DEFINITI ONS AND ILLUSTRATIONS OF OWNERSHIP. ONE SUCH DEFINITION IS THAT THE 'OWNER' OR 'PROPRIETOR' OF A PROPERTY IS THE PERSON IN WHOM (WITH HIS OR HER ASSENT) IT IS FOR THE TIME BEING B ENEFICIALLY VESTED, AND WHO HAS THE OCCUPATION, OR CONTROL, OR USEFRUCT, OF IT ; E.G., A LESSEE IS, DURING THE TERM, THE OWNER OF THE PROPERTY DEMISED. YET ANOTHER DEFINITION THAT HAS BEEN GIVEN BY STROUD IS : ' 'OWNER' APPLIES 'TO EVERY PERSON IN POSSESSION OR RECEIPT EITHER OF THE WHOLE, OR OF ANY PART, OF THE RENTS O R PROFITS OF ANY LAND OR TENEMENT ; OR IN THE OCCUPATION OF SUCH LAN D OR TENEMENT, OTHER THAN AS A TENANT FROM YEAR TO YEAR OR FOR ANY LESS TERM OR AS A TENANT AT WILL'.' IN STATE OF U. P. V. RENUSAGAR POWER COMPANY [1991] 70 COMP CAS 127, 149 (SC) IS, WAS HELD THAT 'THE WORD 'OWN' IS A GENERIC TERM, EMBRACING WITHIN ITSELF SEVERAL GRADA TIONS OF TITLE, DEPENDENT ON THE CIRCUMSTANCES, AND IT DOES NOT NEC ESSARILY MEAN OWNERSHIP IN FEE SIMPLE ; IT MEANS, 'TO POSSES S, TO HAVE OR HOLD AS PROPERTY' '. IN CIT V. PODAR CEMENT PVT. LTD. [1997] 226 ITR 625 (SC), THE QUESTION WHICH CAME UP FOR CONSIDERATION BEFORE THI S COURT WAS WHETHER THE RENTAL INCOME FROM THE HOUSE PROPERTY W HICH HAD 44 COME TO VEST IN THE ASSESSEE, BUT AS TO WHICH THE A SSESSEE WAS NOT LEGAL OWNER FOR WANT OF DEED OF TITLE, WAS LIAB LE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR AS INCOME FROM OTHER SOURCES. TO BE ASSESSABLE AS INCOME FROM HOUS E PROPERTY WITHIN THE MEANING OF SECTION 22 OF THE ACT THE PRO PERTY SHOULD BE SUCH ' OF WHICH THE ASSESSEE IS THE OWNER'. THIS COURT UPON A JURISTIC ANALYSIS OF THE UNDERLYING SCHEME OF THE A CT AND RESORTING TO CONTEXTUAL AND PURPOSIVE INTERPRETATIO N, ALSO HAVING REVIEWED SEVERAL CONFLICTING DECISIONS OF DI FFERENT HIGH COURTS, HELD THAT THE LIABILITY TO BE ASSESSED WAS FIXED ON A PERSON WHO RECEIVES OR IS ENTITLED TO RECEIVE THE I NCOME FROM THE PROPERTY IN HIS OWN RIGHT. VIDE PARA. 55, THIS COURT HAS HELD : 'WE ARE CONSCIOUS OF THE SETTLED POSITION THAT UNDE R THE COMMON LAW, 'OWNER' MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMEN TS OF LAW SUCH AS THE TRANSFER OF PROPERTY ACT, REGISTRATION ACT, ETC. BUT, IN THE CONTEXT OF SECTION 22 OF THE INCOME-TAX ACT, HAVING REGARD TO THE GROUND REALITIES AND FURTHER HAVING REGARD T O THE OBJECT OF THE INCOME-TAX ACT, NAMELY, 'TO TAX THE INCOME', WE ARE OF THE VIEW, 'OWNER' IS A PERSON WHO IS ENTITLED TO RECEIV E INCOME FROM THE PROPERTY IN HIS OWN RIGHT.' IN R. B. JODHA MAL KUTHIALA V. CIT [1971] 82 ITR 57 0 (SC), IT WAS HELD FOR THE PURPOSE OF SECTION 9 OF THE INDIAN INCOME-TAX ACT, 1922, THAT THE OWNER MUST BE THE PERSON WHO CA N EXERCISE THE RIGHTS OF THE OWNER, NOT ON BEHALF OF THE OWNER BUT IN HIS OWN RIGHT. WE MAY USEFULLY EXTRACT AND REPRODUCE THE FOLLOWING CLASSIC STATEMENT OF LAW FROM PERRY V. CLISSOLD [1907] AC 7 3 (PC) QUOTED WITH APPROVAL IN NAIR SERVICE SOCIETY LTD. V . K. C. ALEXANDER, AIR 1968 SC 1165 : 'IT CANNOT BE DISPUTED THAT A PERSON IN POSSESSION OF LAND IN THE ASSUMED CHARACTER OF OWNER AND EXERCISING PEACEABLY THE ORDINARY RIGHTS OF OWNERSHIP HAS A PERFECTLY GOOD T ITLE AGAINST ALL THE WORLD BUT THE RIGHTFUL OWNER. AND IF THE RI GHTFUL OWNER DOES NOT COME FORWARD AND ASSERT HIS TITLE BY THE P ROCESS OF LAW WITHIN THE PERIOD PRESCRIBED BY THE PROVISIONS OF T HE STATUTE OF LIMITATION APPLICABLE TO THE CASE, HIS RIGHT IS FOR EVER 45 EXTINGUISHED AND THE POSSESSORY OWNER ACQUIRES AN A BSOLUTE TITLE.' PODAR CEMENT'S CASE [1997] 226 ITR 625 (SC), IS UNDER THE INCOME-TAX ACT AND HAS TO BE TAKEN AS A TREND-SETTE R IN THE CONCEPT OF OWNERSHIP. ASSISTANCE FROM THE LAW LAID DOWN THEREIN CAN BE TAKEN FOR FINDING OUT THE MEANING OF THE TERM 'OWNED' AS OCCURRING IN SECTION 32(1) OF THE ACT. IN OUR OPINION, THE TERM 'OWNED' AS OCCURRING IN SE CTION 32(1) OF THE INCOME-TAX ACT, 1961, MUST BE ASSIGNED A WID ER MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE E XERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTH ERS BEING EXCLUDED THEREFROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RI GHT WOULD BE THE OWNER OF THE BUILDINGS THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED B Y THE TRANSFER OF PROPERTY ACT, THE REGISTRATION ACT, ETC . 'BUILDING OWNED BY THE ASSESSEE' THE EXPRESSION AS OCCURRING IN SECTION 32(1) OF THE INCOME-TAX ACT MEANS THE PERSON WHO HA VING ACQUIRED POSSESSION OVER THE BUILDING IN HIS OWN RI GHT USES THE SAME FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THOUGH A LEGAL TITLE HAS NOT BEEN CONVEYED TO HIM CONSISTENT LY WITH THE REQUIREMENTS OF LAWS SUCH AS THE TRANSFER OF PROPER TY ACT AND THE REGISTRATION ACT, ETC., BUT NEVERTHELESS IS ENT ITLED TO HOLD THE PROPERTY TO THE EXCLUSION OF ALL OTHERS. 43 IN VIEW OF DECISION OF THE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD.(SUPRA), WHEREIN THE TERM OWNED IN S ECTION 32 HAS BEEN GIVEN A WIDER MEANING BY HOLDING THAT IF AN AS SESSEE WAS IN POSSESSION OF A PROPERTY AND HAD ACQUIRED DOMINION OVER IT TO THE EXCLUSION OF OTHERS, HE WOULD BE ENTITLED DEPRECIAT ION U/S.32 IRRESPECTIVE OF THE LEGAL TITLE. IN THE PRESENT CAS E THE DEVELOPMENT AGREEMENT AND AGREEMENT TO SALE THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS AND CLAIMING DEDUCTION OF PROFITS FROM SUCH HOUSING PROJECT, THERE IS, DEFINITELY, A DOMINION O F THE DEVELOPER OVER THE LAND TO THE EXCLUSION OF OTHERS INASMUCH AS POS SESSION OF THE LAND IS GIVEN TO THE DEVELOPER BY THE LAND-OWNERS TO CAR RY OUT THE CONSTRUCTION ACTIVITY OF THE HOUSING PROJECT. THE A SSESSEE-DEVELOPER HAS COMPLIED WITH ALL THE CONDITIONS AS PROVIDED U/ S.80-IB (10) OF THE ACT, SO AS TO CLAIM DEDUCTION. THE ASSESSEE HAS ALS O PASSED ON THE PART 46 CONSIDERATION FOR ACQUIRING THE LAND THROUGH AN AG REEMENT TO SALE AND IN VIEW OF THE PROVISIONS OF SECTION 2(47) READ WITH SECTION 53-A OF THE TRANSFER OF PROPERTY ACT, 1882, THE ASSESSEE HAS COMPLETELY PERFORMED HIS PART OF THE CONTRACT AND DEVELOPED TH E HOUSING PROJECT AND TRANSFERRED THE FLATS/TENEMENTS TO THE BUYERS I N VIEW OF AGREEMENT TO SALE AS WELL AS DEVELOPMENT AGREEME NT. IT SHOWS THAT THE ASSESSEE WAS IN FULL POSSESSION OF THE LAN D FOR THE DEVELOPMENT OF HOUSING PROJECT AND HAS CARRIED OUT ALL THE ACTIVITIES OF A COMPLETE HOUSING PROJECT BY TAKING ALL RISKS A SSOCIATED WITH THIS BUSINESS. THE ASSESSEE IS ENGAGED IN COMPLETE INFR ASTRUCTURE INCLUDING ENGAGING ARCHITECTS, STRUCTURAL CONSULTANTS, DESIGN ING AND PLANNING OF THE HOUSING SCHEMES, PAYMENT OF DEVELOPMENT CHARGES , OBTAINING NECESSARY PERMISSIONS, ON BEHALF OF THE LAND OWNERS , GOT THE PLANS APPROVED, HIRING OF MACHINERY AND EQUIPMENTS, HIRIN G ENGINEERS, APPOINTING CONTRACTORS, ETC. 44 AS DISCUSSED ABOVE AND IN VIEW OF THE CASE-LAW OF THE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD (SUPRA), W HEREIN IT HAS BEEN CATEGORICALLY OBSERVED AS REGARDS TO OWNERSHIP THAT ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THERE FROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND /OR TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDINGS THOUGH A FORMAL DEED OF TITLE MIGHT NOT HAVE BEEN EXECUTED A ND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF PROPERTY ACT, THE R EGISTRATION ACT, ETC. IN THE PRESENT CASE BEFORE US, BY VIRTUE OF AGREEMENT TO SALE AND DEVELOPMENT AGREEMENT, THE ASSESSEE HAS ACQUI RED DOMINION OVER THE LAND TO THE EXCLUSION OF OTHERS AND HE HAS COMPLETED THE PROJECT IN TERMS AND CONDITIONS LAID DOWN U/S.80-IB (10) OF THE ACT, TO CLAIM DEDUCTION ON THE PROFIT DERIVED FROM CONSTRU CTION AND DEVELOPMENT OF RESIDENTIAL HOUSING PROJECT. THERE I S NO EXPLICIT CONDITION ENUMERATED IN SECTION 80-IB(10) OF THE AC T AS REGARDS TO REQUIREMENT OF OWNERSHIP FOR THE CLAIM OF DEDUCTION . IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL A S LEGAL PROPOSITION LAID DOWN BY THE SUPREME COURT IN THE CASE OF MYSOR E MINERALS LTD.(SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED FOR CLAIM OF DEDUCTION ON THE PROFIT DERIVED FROM CONSTRUCTION AND DEVELOP MENT OF RESIDENTIAL HOUSING PROJECT. 47 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 ASSESSE E HAS ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOP ED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND T AKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THA T, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPE RS (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 TH HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOM INANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REM UNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE D ECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HAS NOT DEA LT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY W ITHOUT 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 TH E DEVELOPMENT AGREEMENT AND CRUX OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LAND AND HAS DEVELOP ED THE HOUSING PROJECT AT ITS OWN, THEREFORE, WE ARE OF TH E VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTIO N U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVENUE, AS THE AGREEMENT IS NOT SHARING OF THE CON STRUCTED AREA. IN OTHER CASES THE COPY OF AGREEMENT SINCE HA S NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEMENT WERE NOT SPECIFICALLY A RGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE I NTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO T HE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WIT H THE LANDOWNER AND DECIDE WHETHER THE ASSESSEE HAS IN FA CT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM T HE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DE VELOPER 48 AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, T HE AO SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB (10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON B EHALF OF THE LANDOWNER AND HAS GOT THE FIXED CONSIDERATION F ROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC TS, THE ASSESSEE SHOULD NOT BE ALLOWED DEDUCTION U/S 80IB(1 0) TO THE ASSESSEE. 17 IN THE RESULT, ALL THESE APPEALS ARE ALLOWED FO R STATISTICAL PURPOSES. 3 RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO D ECIDE THE ISSUE IN THE LIGHT OF AFORESAID DECISION OF THE TRIBUNAL IN THE CASE OF M/S SHAKTI CORPORATION (SUPRA). 4 IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 25-09-2 009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 25-09-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S VAIBHAV CONSTRUCTION B-27, VAIBHAV TOWER, AN AND V V NAGAR ROAD, ANAND-388001 49 2. THE ITO, WARD-1, ANAND 3. CIT CONCERNED 4. CIT(A)-IV, BARODA 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA