The ITO, Ward-5, Bharuch V. M/s. Vedant Enterprise, Bharuch

ITA 2030/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6420 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMARD R
• Section: 80IB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA, JM & SHRI A N PAHUJA,AM ITA NO.2030/AHD/2009 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, WARD- 5, BANK OF BARODA BUILDING, STATION ROAD, BHARUCH V/S M/S VEDANT ENTERPRISES, BHAMWALAS, GHEE KUDIA, OPP. PATEL SQUARE MARKET, BHARUCH PAN: AAEFV7057Q [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI ANIL KUMAR,DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL FILED BY REVENUE AGAINST AN ORDER DATE D 16-04-2009 OF THE LD. CIT(APPEALS)-VI, BARODA FOR T HE ASSESSMENT YEAR 2006-07, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.27,08,827/ - UNDER SECTION 80IB(10) OF THE INCOME-TAX ACT DESPITE THE ASSESSEE 'S UNDERTAKING NOT BEING APPROVED BY THE LOCAL AUTHORITY. THE LEAR NED CIT(A) RELIED ON THE ITAT'S DECISION IN THE CASE OF M/S. RADHE DE VELOPERS. THE SAID DECISION HAVE NOT BEEN ACCEPTED BY THE DEPARTM ENT AND AN APPEAL TO THE HIGH COURT HAS BEEN FILED. [2] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH AT THE APPROVAL FOR DEVELOPING AND BUILDING HOUSING PROJECTS WAS GR ANTED TO THE ORIGINAL OWNERS OF THE LAND AND NOT TO THE ASSESSEE , WHO ACTED ONLY AS AN AGENT FOR EXECUTION OF THE PROJECT WHICH RIGH TS WERE OBTAINED BY THE ASSESSEE FIRM FROM THE ORIGINAL OWNERS. [3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E LAND BEING AN ESSENTIAL AND INTRINSIC PART OF DEVELOPING AND BUIL DING OF A HOUSING PROJECT, APPROVAL IS GRANTED BY THE LOCAL AUTHORITY TO THE OWNER OF THE LAND FOR DEVELOPING AND BUILDING HOUSING PROJECTS T HEREON, AND ANY OTHER PERSON, TO WHOM HE ENTRUSTS THE WORKS CONNECT ED WITH THE EXECUTION OF THE PROJECT INSTEAD OF TAKING IT UP HI MSELF, CANNOT BE SAID TO BE AN 'UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY' WITHIN THE MEANING OF SECTION 80IB(10)OF THE ACT. [4] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IT IS THE OWNERS OF THE LAND WHO ENTERED INTO AGREEMENTS FOR SALE OF TH E DEVELOPED UNITS 2 ITA NO.2030/AHD/2009 2 TO THE BUYERS AND THE ASSESSEE ACTED ONLY AS A CONF IRMING PARTY WHICH RENDERS THE OWNERS OF THE LAND AND NOT THE AS SESSEE AS 'AN UNDERTAKING' IN TERMS OF SECTION 80IB(10). [5] THE LEARNED CIT(A) ERRED IN ADOPTING LIBERAL IN TERPRETATION OF A BENEVOLENT PROVISION DESPITE THE SAME DOING VIOLENC E TO THE EXPRESS LANGUAGE USED IN THE PROVISION IN CONTRAVENTION OF THE RATIO SETTLED IN THE CASE OF PETRON ENGINEERING CONSTRUCTION P. LTD. VS. CBDT 175 ITR 523 (SC), CIT VS. BUDHARAJA & CO 204 ITR 412 (S C), PANDIAN CHEMICALS LTD. VS. CIT 262 ITR 278 (SC) AND IPCA LA BORATORIES LTD. VS. CIT 262 ITR 278 (SC). [6] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.14,22,676/- BEING PROJECT ATTRIBUTABLE TO THE SA LE OF UNUTILIZED FSI. RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ISSUES OF DEDUCTION U/S.80IB(10) BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 2 NONE APPEARED ON BEHALF OF THE ASSESSEE AND INSTE AD ADJOURNMENT WAS SOUGHT VIDE LETTER DATED 5.5.2011 HOWEVER, CONSIDERING THE NATURE OF ISSUES INVOLVED AND REA SONS FOR SEEKING ADJOURNMENT, WE REJECTED THE REQUEST FOR ADJOURNME NT AND DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LEARNED DEP ARTMENTAL REPRESENTATIVE. 3.. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THA T RETURN DECLARING NIL INCOME FILED ON 7.12.2006 BY THE ASSESSEE, CARR YING ON THE BUSINESS OF LAND DEVELOPMENT AND CONSTRUCTION OF HO USING PROJECT, WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOT ICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO A S THE ACT] ON 30.3.2007. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASS ESSEE CLAIMED DEDUCTION OF RS.27,08,827/- U/S 80IB(10) OF THE ACT . THE ASSESSEE- FIRM HAD UNDERTAKEN THE PROJECT FOR LAND DEVELOPMEN T AND CONSTRUCTION ON LAND BEARING R S NO. 128/1 AT VILLA GE UMRAJ, DISTRICT BHARUCH UNDER A DEVELOPMENT AGREEMENT DATED 18.12. 2003 WITH PARTNERS OF THE FIRM NAMELY NAMELY SHRI YUNUS UMARJ I PATEL, SHRI 3 ITA NO.2030/AHD/2009 3 IBRAHIM UMARJI MUSA PATEL AND SHRI ABDUL HAMID UMAR JI MUSA PATEL, WHO INTRODUCED THE SAID LAND AS CAPITAL CONTRIBUTIO N IN TO THE ASSESSEE-FIRM. THE FIRM AND ITS PARTNERS BEING SEPA RATE ENTITIES AND THE ASSESSEE-FIRM HAVING ACQUIRED DEVELOPMENT RIGHT S IN RESPECT OF LAND ADMEASURING 161884 SQUARE FEET (15045 SQUARE M ETERS), THE AO OBSERVED THAT THE ASSESSEE-FIRM WAS NOT THE LAND OWNER OF THE PROPERTY, ON WHICH THE PROJECT HAD BEEN CONSTRUCTE D WHILE THE APPROVAL FOR CONSTRUCTION, 'RAJA CHITTHI', OBTAINED FROM THE GRAM PANCHAYAT, ON 28-11-2003, WAS IN THE NAME OF SHRI YUNUS UMARJI PATEL AND OTHERS, THE ORIGINAL LAND OWNERS. SINCE T HE SARPANCH, UMRAJ GRAM PANCHAYAT, ACCORDED THE APPROVAL TO ORI GINAL LAND OWNERS FOR THE PURPOSE OF CARRYING OUT PROJECT OF C ONSTRUCTION AND DEVELOPMENT ON THEIR LAND, AND THE ORIGINAL LAND OW NERS HAD CONTRACTED THE SERVICES OF THE ASSESSEE FIRM FOR TH E DEVELOPMENT AND CONSTRUCTION OF THE PROJECT, THE AO CONCLUDED T HAT THE ASSESSEE FIRM WAS NOT ENTITLED TO THE CLAIM FOR DEDUCTION U/ S 80IB (10) OF THE ACT. MOREOVER, SINCE THE ASSESSEE HAD UTILIZED FSI OF 6332.42 SQ. MTR; LEAVING UNUTILIZED FSI. OF 11722 SQ. MTS; WHIC H WAS SOLD ALONG WITH THE TENEMENTS TO THE PROSPECTIVE BUYERS , THE AO CONCLUDED THAT AND THE PROFITS ON SALE OF UNUTILIZED FSI WAS IN ADDITION TO THE PROFIT DERIVED FROM THE BUSINESS OF INSTRUCTION AND DEVELOPMENT AND NOT ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT. ACCORDINGLY, RELYING UPON HIS FINDINGS IN THE IMMEDIATE PRECEDING ASSES SMENTS YEARS, THE AO DENIED CLAIM FOR DEDUCTION OF RS.27,08,827/- U/S 80 IB(10) OF THE ACT. INTER ALIA, THE AO CONCLUDED THAT THE PROFIT ON SALE OF UNUTILI ZED FSI OF RS.14,22,676/-,AS COMPUTED IN PARA 28 OF THE ASSESSMENT ORDER ,WAS N OT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. 4. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE C LAIM OF THE ASSESSEE , RELYING ON THE DECISION IN THE ITAT, AHM EDABAD BENCH IN CASE OF RADHE DEVELOPERS V/S. ITO,113 TTJ 300. 4 ITA NO.2030/AHD/2009 4 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET, THE LD. DR SUBMITTED THAT THE ISSUE IS REQUIRED TO BE RESTORED TO THE FI LE OF THE AO FOR RE- ADJUDICATION IN THE LIGHT OF THE DECISION DATED 07- 11-2008 OF THE ITAT IN THE CASE M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503/AHD/2008 . 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS OF THE ITA T. WE FIND THAT THE LD. CIT(A) WITHOUT ANALYZING THE FACTS AND CIRCUMST ANCES OF THE CASE, MERELY FOLLOWED THE DECISION IN RADHE DEVELOPERS(SUPRA).AS CONTENDED BY THE LD. DR, WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED IN A D ECISION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008, WHEREIN AFTER ANALYZING THE DECISIONS OF HONBLE AP EX COURT IN THE CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT. LTD. IN CIV IL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. 248 2/AHD/2006 IN THE CASE OF M/S RADHE DEVELOPERS & OTHERS, THE BENCH CONCLUDED AS UNDER: 16 THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPER S (SUPRA) AND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HA S ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSIN G PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECIS ION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CAS E WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED I NTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VES T WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRIC TED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA ) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DO WN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVEL OPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRU X OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE , WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DED UCTION U/S 5 ITA NO.2030/AHD/2009 5 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVE NUE, AS THE AGREEMENT IS NOT FOR SHARING OF THE CONSTRUCTED ARE A. IN OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEME NT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AN D DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE SHOULD NOT BE AL LOWED DEDUCTION U/S 80IB(10). 6.1. SINCE THE LD. DR POINTED OUT THAT THE MAT TER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 WHILE COPY OF D EVELOPMENT AGREEMENT IN THE INSTANT CASE IS NOT BEFORE US , IN THE INTEREST OF FAIR PLAY & JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE THE RELEVA NT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE A SSESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN VIEW THE AFORESAID DECISION OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER, DECIDE AS TO WHETHER THE UNDERTAKIN G OF THE ASSESSEE HAS INDEED PURCHASED THE LAND FOR A FIXED CONSIDERA TION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURCHASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINANT CONTROL OVER THE PROJECT AND D EVELOPED THE LAND AT THEIR OWN COST AND RISKS, THE AO SHOULD ALLOW TH E DEDUCTION U/S 6 ITA NO.2030/AHD/2009 6 80IB(10)OF THE ACT, IN ACCORDANCE WITH LAW. IN CAS E THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON B EHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATI ON FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC T, THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS, GROUND NOS. 1 TO 6 IN THE APPEAL ARE DISPOSED OF . 7. IN THE RESULT, APPEAL IS ALLOWED, BUT FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 25-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 25-05-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S VEDANT ENTERPRISES, BHAMWALAS, GHEE KUDIA, OPP. PATEL SQUARE MARKET, BHARUCH 2. INCOME-TAX OFFICER, WARD-5, BANK OF BARODA BUIL DING, STATION ROAD, BHARUCH 3. CIT CONCERNED 4. CIT(A)-VI, BARODA 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD