The ITO, Ward-4(3), Ahmedabad V. Hindustan Homefina Ltd., Ahmedabad

ITA 1997/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9418 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: VIJAY RANJAN
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 1997/AHD/2012 (ASSESSM ENT YEAR: 2009-10) THE ITO, WARD 4(3), AHMEDABAD NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD VS . HINDUSTAN HOMEFINA LTD., 2 ND FLOOR, AVKAR COMPLEX, DRIVE- IN-ROAD, AHMEDABAD - 380054 PAN NO. AAACH4740D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI VIJAY RANJAN & IRA KAPO OR, A.R. DATE OF HEARING : 29 -02-201 6 DATE OF PRONOUNCEMENT : 02 -03-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)- VIII, AHMEDABAD, DATED 26.06.2012 FOR THE ASSESSMENT YEAR 2009-10 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTION OF HOUSES. ASS ESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 30.09.2009 DEC LARING TOTAL INCOME AT RS. ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTA N HOMEFINA LTD.) 2 14,39,930/- AFTER CLAIMING THE DEDUCTION OF RS.4,17 ,56,392/- U/S.80IB(10) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THEREA FTER, ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 20.12.2011 A ND THE TOTAL INCOME WAS DETERMINED AT RS. 4,31,52,822/- BY DISALLOWING THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE O RDER DATED 26.06.2012 (IN APPEAL NO. CIT(A) VIII/ITO.W4(3)/351/11-12) GRANTE D PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND: 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEDUCTION U/S.80IB(10) CLAIMED BY THE ASSESSEE FOR RS.4,17,12 ,892/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAD MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE FAILED TO FULFILL THE CONDITIONS LAID DOWN IN THIS REGARD, SUCH AS THE ASSESSEE IS NOT DEVELOPER BECAUSE IT DID NOT CONCEPTUALIZE AND OWN THE PROJEC T IN AS MUCH AS THE ASSESSEE DID NOT OWN THE LAND AND THE APPROVAL OF THE PROJECT WAS NO T RECEIVED IN THE NAME OF ASSESSEE BY THE LOCAL AUTHORITY. ASSESSEE IS MERELY A CONTR ACTOR FOR THE PURPOSE OF CONSTRUCTION OF THE PROJECT AND AS PER THE AMENDMENT TO SECTION 80IB BY THE FINANCE ACT, 2009 A WORK CONTRACTOR WHO EXECUTES THE WORK AWARDED BY AN Y PERSONS IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT. 3.1 DURING COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAS CONSTRUCTED A HOUSING PROJECT KNOWN AS DHARTI VIKA S CO.OP. HOUSING SOCIETY LTD. AND HAD EARNED NET PROFIT OF RS.4,17,56,392/- , WHICH WAS CLAIMED AS EXEMPT U/S.80IB(10) OF THE ACT. THE ASSESSEE WAS ASKED T O JUSTIFY THE CLAIM OF DEDUCTION. ON PERUSING THE DETAILS FURNISHED BY TH E ASSESSEE, A.O. CONCLUDED THAT ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10 ) OF THE ACT BECAUSE ASSESSEE WAS NOT A DEVELOPER, ASSESSEE DID NOT CONCEPTUALISE AND OWN THE PROJECT AND THAT ASSESSEE WAS NOT THE OWNER OF THE LAND AND THE APPR OVAL WAS NOT ISSUED TO ASSESSEE BY THE LOCAL AUTHORITIES. A.O. ALSO NOTICED THAT A SSESSEE HAS ENTERED INTO A PROJECT BY ENTERING INTO A DEVELOPMENT AGREEMENT WITH THE L AND OWNERS AND THE CONSTRUCTION WAS DONE BY THE ASSESSEE AS PER THE AG REEMENT AND THEREFORE ASSESSEE ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTA N HOMEFINA LTD.) 3 WAS MERELY A CONTRACTOR. HE WAS, THEREFORE, OF THE VIEW THAT ASSESSEE WAS MERELY A CONTRACTOR AND WAS THEREFORE NOT ELIGIBLE FOR CLA IMING DEDUCTION U/S.80IB(10) OF THE ACT AND ACCORDINGLY DENIED THE CLAIM OF DEDUCTI ON. 4. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER : 3.7 IN THE PRESENT CASE, APPELLANT HAS FULFILLED A LL THE BASIC CONDITIONS LAID DOWN UNDER SECTION 80IB(10) WHICH IS SUMMARIZED AT PARA 3.1 HEREIN ABOVE AND EVEN ASSESSING OFFICER HAS NOT DISPUTED THESE FACTS. TH E APPELLANT HAS ENTERED INTO TWO DEVELOPMENT AGREEMENTS WITH SOCIETY FOR DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT IN LAND AREA OF 7485 SQ. MTRS. AND AS PER SUCH AGREEMENTS, APPELLANT HAS ACQUIRED IMPUGNED LAND ALONG WITH POSSESSION AT AGR EED CONSIDERATION OF RS. 1,19,50,197 WHICH INCLUDES STAMP CHARGES BEING 1% O F THE LAND. AS PER THE DEVELOPMENT AGREEMENTS ENTERED WITH SOCIETY, SOCIETY IS ENTITLE D TO VALUE OF LAND AS STATED HEREIN ABOVE AND ALL THE PROFIT/GAINS AND LOSSES, IF ANY, ARISING ON THE COMPLETION OF THE PROJECT HAS TO BE BORNE BY APPELLANT. THIS FACT PROVES BEYO ND DOUBT THAT ASSESSEE HAS BECOME DE-FACTO OWNER OF THE LAND AND TOOK THE FULL RISK O F EXECUTING THE HOUSING PROJECT AND THEREBY MAKING PROFIT/LOSS, AS THE CASE MAY BE. FUR THER, AS PER VARIOUS CLAUSES OF DEVELOPMENT AGREEMENT ENTERED WITH THE SOCIETY, IT HAS BEEN EXPLICITLY STATED THAT SOCIETY HAS GIVEN DIRECT AND VACANT POSSESSION OF L AND TO THE DEVELOPER AND EVEN TILL COMPLETION OF ENTIRE HOUSING PROJECT WHICH ALSO INC LUDES RECEIPT OF MONEY FROM THE BUYERS OF THE HOUSING UNITS, THE POSSESSION OF THE LAND AND ITS SUPERSTRUCTURE WILL BE OF APPELLANT-DEVELOPER WHICH ALSO SUBSTANTIATES THE CL AIM OF THE APPELLANT THAT IT HAS BECOME OWNER OF THE LAND AS PER SECTION 2(47) OF IN COME TAX ACT, 1961, READ WITH SECTION 53A OF TRANSFER OF PROPERTY ACT. THESE FACT S OF APPELLANT ARE SIMILAR TO THE FACT OF THE CASE BEFORE THE HON'BLE GUJARAT HIGH COURT I N CASE OF RADHE DEVELOPERS REFERRED HEREIN ABOVE WHEREIN IT HAS BEEN HELD THAT WHEN DEV ELOPER HAS OBTAINED THE POSSESSION OF THE LAND, IT WOULD BE THE OWNER OF THE LAND FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT EVEN THOUGH TITLE OF LAND HAS NOT PASSED TO APPELLANT. FURTHER, THE HON'BLE COURT IN VARIOUS PARAS OF THE ORDER HAS GIVEN CATEGORICAL FINDING THAT PROVISIONS OF SECTION 80IB(10) DOES NOT ENVISA GE THE OWNERSHIP OF THE LAND FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IB(10 ) OF THE ACT. IN VIEW OF THE SAME, OBSERVATION MADE BY ASSESSING OFFICER REGARDING OWN ERSHIP OF LAND CANNOT BE ACCEPTED. 3.8. ON CAREFUL CONSIDERATION OF VARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENTS, IT IS EMANATING THAT (I) IT WAS THE RESPONSIBILITY OF THE APPELLANT COMPANY TO CARRY OUT DEVELOPMENT OF THE HOUSING PROJECT AT ITS OWN RISK AND REWARDS. ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTA N HOMEFINA LTD.) 4 (II) FURTHER, THE PLANS PREPARED FOR THE PURPOSE OF PROP OSED CONSTRUCTION OF BUILDINGS WERE PREPARED BY APPELLANT-DEVELOPER AFTE R APPOINTING ARCHITECT AND THE ENTIRE REVISED PLAN, IF ANY REQUIRED, AND BUILD ING USE PERMISSION AND ALL OTHER APPROVAL REQUIRED FOR DEVELOPMENT OF THE PROJ ECT WAS TO BE OBTAINED BY APPELLANT-DEVELOPER ONLY. (III) APPELLANT-DEVELOPER WAS ENTITLED TO FIX SALE PRICE OF HOUSING UNIT TO PROPOSED BUYERS IN LIEU OF THEIR ALLOTMENT AND EVEN IT WAS E NTITLED TO FIX THE MODE OF PAYMENT, TIME OF PAYMENT AS PER ITS OWN REQUIREMENT AND CONSIDERING THE MODE OF PAYMENT, TIME OF PAYMENT, AREA OF UNIT, LOCATION AND SITUATION OF UNIT, APPELLANT WAS ENTITLED TO DECIDE DIFFERENT RATES FO R DIFFERENT BUYERS. IN FACT ENTIRE SALES CONSIDERATION HAS BEEN RECEIVED BY THE APPELL ANT COMPANY AND NOT BY SOCIETY. (IV) THE APPELLANT WAS ENTITLED TO SELL HOUSING UN ITS AS PER ITS OWN CONVENIENCE AND ALL THE RIGHTS OF ALLOTMENT OR TRANSFER OF VARIOUS UNITS CONSTRUCTED IN THE PROJECT ALONG WITH OPEN AND MARGIN LAND WAS WITH APPELLANT COMPANY. IT HAS BEEN AGREED BETWEEN BOTH THE PARTIES THAT TILL THE REALI ZATION OF SALE CONSIDERATION FROM PROPOSED BUYERS, POSSESSION AND CONTRACTUAL LI EN ON SUCH UNSOLD AREA WILL BE WITH APPELLANT COMPANY. (V) APPELLANT WAS ENTITLED TO GIVE ADVERTISEMENTS IN ANY FORM FOR THE SALE OF HOUSING UNITS AT ITS OWN COST. (VI) APPELLANT-DEVELOPER WAS ENTITLED TO MORTGAGE T HE LAND AND CONSTRUCTION ON IMPUGNED LAND ON WHICH HOUSING PROJECT HAS BEEN DEV ELOPED FOR OBTAINING FINANCE, IF ANY REQUIRED FOR THE PROJECT. 3.9. IN THE PRESENT CASE, APPELLANT HAS ACQUIRED TH E IMPUGNED LAND FROM THE SOCIETY AT FIXED COST AND SOCIETY WAS NOT ENTITLED TO ANY F URTHER BENEFITS ARISING FROM DEVELOPMENT OF THE PROJECT. FURTHER, ALL THE DEVELO PMENT AND CONSTRUCTION OF THE PROJECT WAS CARRIED OUT BY APPELLANT AT ITS OWN RISK AND HA S BORNE ALL THE EXPENDITURE LIKE MATERIAL COST, LABOUR COST, ARCHITECT'S FEES, AUDA CHARGES, SITE EXPENSES, ADMINISTRATIVE AND OTHER EXPENSES. THE APPELLANT HAS SHOWN CLOSING WORK-IN PROGRESS AND CLOSING UN- SOLD UNITS IN ITS PROFIT & LOSS ACCOUNT, WHICH ALSO PROVES THAT OWNERSHIP OF UNSOLD UNIT IS OF APPELLANT AND NOT OF SOCIETY. FURTHER, APPELL ANT HAS RECEIVED ENTIRE SALE CONSIDERATION FROM THE BUYERS OF THE UNITS AS PER R ATES DECIDED BY IT ONLY. AT THE TIME OF EXECUTION, OF SALE DEED, APPELLANT IS ONE OF THE PA RTIES TO SUCH AGREEMENT WHICH ALSO PROVES APPELLANT IS ONE OF THE PARTIES FOR TRANSFER OF PROPERTY TO BUYER OF THE UNITS. APPELLANT HAS OBTAINED ALL THE NECESSARY PERMISSION S REQUIRED FOR COMPLETION OF THE HOUSING PROJECT AND MADE NECESSARY FINANCIAL ARRANG EMENTS FOR THE PURPOSE OF COMPLETION OF HOUSING PROJECT. EVEN THOUGH THE DEVE LOPMENT PERMISSION IS IN THE NAME OF SOCIETY, THE SAME WILL NOT LEAD TO ANY DISALLOWA NCE OF DEDUCTION IN VIEW OF OBSERVATION MADE BY THE HON'BLE GUJARAT HIGH COURT REFERRED HEREIN ABOVE AT PARA 45 OF ITS ORDER THAT ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) EVEN WHEN TITLE OF LAND HAS NOT PASSED TO ASSESSEE AND DEVELOPMENT PERMISSION MAY BE OBTAINED IN THE ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTA N HOMEFINA LTD.) 5 NAME OF ORIGINAL LAND OWNER. IN SHORT, APPELLANT HA S TAKEN FULL RISK OF EXECUTING THE HOUSING PROJECT AND WAS ENTITLED TO ALL THE PROFIT AND GAINS INCLUDING LOSSES, IF ANY, ARISING FROM SALE OF HOUSING UNITS, WHICH PROVES BE YOND DOUBT THAT APPELLANT IS DEVELOPER-CUM-BUILDER AND NOT A CONTRACTOR, AS OBSE RVED BY THE ASSESSING OFFICER. APPELLANT HAS NOT RECEIVED ANY FIXED REMUNERATION F ROM THE SOCIETY AND IN FACT IT HAS PURCHASED THE LAND FROM THE SOCIETY AND ACQUIRED DO MINANT CONTROL OVER THE LAND. IN VIEW OF THE SAME, THE ENTIRE RISK OF INVESTMENT AND EXPENDITURE WERE THAT OF ASSESSEE AND SOCIETY FOR THE PURPOSE OF DEVELOPMENT OF HOUSING P ROJECT HAS NOT TAKEN ANY RISK BUT ACCEPTED ONLY FULL PRICE OF LAND AND NOTHING FURTHE R. THE PROFIT AND LOSS HAS ACCRUED TO ASSESSEE HENCE EXPLANATION TO SECTION 80IB WITH RET ROSPECTIVE EFFECT FROM 1ST APRIL, 2001 HAS NO BEARING ON APPELLANT. THE FACTS OF APPE LLANT'S CASE ARE IDENTICAL WITH THE FACTS OF CASE BEFORE THE HON'BLE GUJARAT HIGH COURT IN CASE OF RADHE DEVELOPERS AND RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTION AL HIGH COURT AND ON FACTS AND CIRCUMSTANCES OF APPELLANT'S CASE, DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB(10) MADE BY ASSESSING OFFICER IS DELETED. THE RELATED G ROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 5.1 BEFORE US, LD. D.R. TOOK US THE VARIOUS FINDING OF A.O. AND SUPPORTED HIS ORDER. LD. A.R. ON THE OTHER HAND REITERATED THE S UBMISSIONS MADE BEFORE THE LD. A.O. AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO EL IGIBILITY FOR DEDUCTION U/S.80IB(10) OF THE ACT. THE CLAIM OF DEDUCTION WAS DENIED BY THE A.O. MAINLY FOR THE REASON THAT ASSESSEE WAS NOT THE OWNER OF T HE LAND AND ACCORDING TO HIM, THE ASSESSEE WAS MERELY A CONTRACTOR. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE AND AFTER PERUSING THE DEVELOPMENT AGREEMENT HAS GIVEN A FINDING THAT ASSESSEE HAD ACQUIRED LAND FRO M THE SOCIETY AT FIXED COST AND SOCIETY WAS NOT ENTITLED TO ANY FURTHER BENEFITS AR ISING FROM DEVELOPMENT OF THE PROJECT, ALL THE DEVELOPMENT AND CONSTRUCTION OF TH E PROJECT WAS CARRIED OUT BE ASSESSEE AT ITS OWN RISK AND THE ASSESSEE HAD BORNE ALL THE EXPENDITURES, ASSESSEE HAD RECEIVED ENTIRE SALE CONSIDERATION FROM THE BUY ERS OF THE UNITS AS PER RATES DECIDED BY IT AND ASSESSEE HAS TAKEN FULL RISK OF E XECUTING THE HOUSING PROJECT AND THAT THE ASSESSEE WAS ENTITLED TO ALL THE PROFIT AN D GAINS INCLUDING LOSSES, IF ANY, ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTA N HOMEFINA LTD.) 6 ARISING FROM SALE OF HOUSING UNITS. HE HAS FURTHER GIVEN A FINDING THAT THE FACTS OF THE ASSESSEES CASE WERE IDENTICAL TO THE FACTS OF THE CASE IN THE CASE OF RADHE DEVELOPERS 341 ITR 403, WHICH WAS DECIDED BY THE HO NBLE GUJARAT HIGH COURT IN ASSESSEES FAVOUR. BEFORE US, REVENUE HAS NOT B ROUGHT ON RECORD ANY MATERIAL TO CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS, THE GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 02 - 03 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 02/03/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD