Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 2557 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 3 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-03-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
26-11-2013
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.2038 TO 2041/PN/2013 '% % / ASSESSMENT YEARS : 2007-08 TO 2010-11 DARODE JOG LAGAD VENTURES, S.NO.12, LAGAD MALA, WADGAON KHURD, SINHGAD ROAD, PUNE 411 051 PAN NO.AAAAD4381Q . / APPELLANT V/S ACIT, CENTRAL CIRCLE-2(3), PUNE . / RESPONDENT . / ITA NOS.310 TO 312/PN/2014 '% % / ASSESSMENT YEARS : 2007-08 TO 2009-10 LAGAD BROTHERS DEVELOPERS, S.NO.12, LAGAD MALA, WADGAON KHURD, SINHGAD ROAD, PUNE 411 051 PAN NO.AACFL9050F . / APPELLANT V/S DCIT, CENTRAL CIRCLE-2(3), PUNE . / RESPONDENT / ASSESSEE BY : SHRI NIKHIL PATHAK & SHRI SUHAS BORA / REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING :10.12.2015 / DATE OF PRONOUNCEMENT:09.03.2016 2 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 / ORDER PER R.K. PANDA, AM : ITA NOS.2038 TO 2041/PN/2013 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 20-08-2013 OF THE CI T(A) CENTRAL PUNE RELATING TO ASSESSMENT YEARS 2007-08 TO 2010-11 RESPECTIVELY. ITA NOS. 310 TO 312/PN/2014 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 24-12-2013 OF THE CIT(A) CENTRAL, PUNE RELATING TO ASSESSMENT YEARS 2007-08 TO 2009-10 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.2038/PN/2013 ( A.Y. 2007-08) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT A SEARCH U/S.132 OF THE I.T. ACT IN THE CASE OF DARODE JOG GROUP OF COMPANIES AND ITS DIRECTORS WAS CONDUCTED ON 28-04-2009. DURING THE SA ID SEARCH ACTION U/S.132 OF THE I.T. ACT IN THE CASE OF DARODE JOG B UILDERS PVT. LTD. CERTAIN PAPERS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED. IN VIEW OF THE ABOVE, THE AO ISSUED NOTICE U/S.153 C TO THE ASSESSEE AFTER RECORDING THE FOLLOWING REASONS : (I) REGISTERED JOINT VENTURE DEVELOPMENT AGREEMENT B EARING SR.NO.9288/2006 DATED 29-12-2006 BETWEEN M/S. LAGAD BROTHERS DEVELOPERS AND DARODE-JOG & ASSOCIATES (PAGES 1 TO 37 OF BUNDLE NO.30 SEIZED FROM THE BUSINESS PREMISES OF DJBPL. (II) STATEMENT OF PAYMENT MADE TO M/S. LAGAD BROTHER S DEVELOPERS AS A DEPOSIT AND AS A DRAWING MADE FROM DARO DE JOG LAGAD VENTURES. TOTAL PAYMENT MADE FROM 28.12.2006 TO 26.02.2009 IS AT , 12,13,14,597/-. (PAGE NO. 55 OF BUNDLE NO. 2 0 SEIZED FROM THE BUSINESS PREMISES OF DJBPL) (III) STATEMENTS DRAWN ON 31.10.2008 SHOWING THE DETAILS OF SOLD FLATS, UNSOLD FLATS, PAYABLE TO LAGAD BROTHERS DEVELOPE RS, PROMOTERS, BUILDERS & DEVELOPERS. COST AND THE WORKING OF SHORTFALL OF FUNDS FOR PROJECTS COMPLETION IN RESPECT OF THE CROSSOVER COUNTY PHASE-I PROJECT OF DARODE JOG LAGAD VENTURES. 3 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 ON PAGE NO.44 THE TOTAL SUMMARY OF THE PAGE NO. 45 H AS BEEN MENTIONED AND IT IS SEEN THAT THE TOTAL ESTIMATED PRO FIT OF' 37.96 CRORES HAS BEEN WORKED OUT WHICH COMES TO , 1,4011- FO R A SQ. FT. AND 44% OF THE TOTAL RECEIPTS WHICH IS INCLUSIVE OF UNSOLD ESTIMATED RECEIPTS OF' 18.39 CRORES ALONG WITH THE AGREEMENT VA LUE RECEIPTS OF SOLD FLATS AT '63.48 CRORES. (PAGE NO. 44 TO 45 OF BUN DLE NO.030 SEIZED FROM THE BUSINESS PREMISES OF DJBPL ) (IV) THE LEDGER EXTRACT OF LAGAD BROTHERS DEVELOPER S CAPITAL A/C IN THE BOOKS OF DARODE JOG LAGAD VENTURES FOR THE PER IOD 01.04.2006 TO 29.04.2009. (PAGE NO. 57 OF BUNDLE NO.28 SEIZED FROM THE BUSINESS PREMISES OF DJBPL). 03. VIDE LETTER DATED 4/5/2011, THE ASSESSEE HAS CON FIRMED THE OWNERSHIP OF THE PAPERS 04. THESE PAPERS WERE EXAMINED VIS-A-VIS JOINT VENTURE DEVELOPMENT AGREEMENT DT. 29.12.2006 EXECUTED BETWE EN DARODE- JOG & ASSOCIATES AND LAGAD BROTHERS DEVELOPERS IN RESPECT OF LA ND AT SR. NO. 12, LAGAD MALA, WADGAON KHURD, PUNE. 05. IT IS GATHERED THAT THE PROJECT SHRINIWAS CROSSOVE R COUNTY PHASE-I PROJECT IS DEVELOPED BY THE A.O.P. DARODE JOG LAGAD VENTURES, THE PROJECT IS CLAIMED TO BE ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE INCOME TAX ACT. 06. ON COMPARISON WITH THE SALE INSTANCE IN RESPECT OF THE TRANSACTION MADE BY DARODE JOG AND ASSOCIATES WITH THE LANDLORD SHRI BABAN GENU KUMBHARKAR IT IS NOTICED THAT THE LA ND IN QUESTION IN THIS JOINT VENTURE IS HIGHLY UNDERVALUED. 07. BOTH THESE LAND (I.E CLAIMED TO BE OWNED BY THE ASSESSEE AND THE ONE AS MENTIONED IN PARA 6) ARE ADJACENT LAND FO RMING PART OF GREATER PIECE OF LAND OF SURVEY NO. 25 AND THE TRAN SACTION HAVE BEEN EXECUTED ON ALMOST SIMILAR DATES. THE DEVELOPMENT AGR EEMENT BETWEEN M/S. LAGAD BROTHERS DEVELOPERS AND DARODE JOG ASSOCIATES WAS ENTERED ON 29.12.2006 AND THE DEVELOPMENT AGREEM ENT BETWEEN SHRI BABAN GENU KUMBHARKAR AND DARODE JOG A SSOCIATES WAS ENTERED ON 26.03.2007. IT IS SEEN THAT THE RATE OF THE LAND IS RS.7,558/- PER SQ. METER IN THE CASE OF SHRI BABAN GEN U KUMBHARKAR, HOWEVER, THE RATE OF LAND IS RS.1,000/- PER SQ. METER IN THE CASE OF LAGAD BROTHERS DEVELOPERS. 08. THUS THERE APPEARS UNDERVALUATION OF LAND WHICH NEEDS VERIFICATION. TO THAT EXTENT THE DOCUMENTS ARE INCRI MINATING. FURTHER, IT IS ADMITTED FACT THAT THE BOOKS OF ACCOUNTS OR DOC UMENTS SEIZED BELONGS TO THE ASSESSEE. 09. I AM THEREFORE SATISFIED THAT THE CASE IS FIT FOR ISSUE OF NOTICE U/S. 153C OF THE IT. ACT. 3. IN RESPONSE TO NOTICE U/S.153C THE ASSESSEE FILED RET URN OF INCOME ON 10-08-2011 DECLARING LOSS OF RS.32,797/- WHICH WA S 4 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THE SAME FIGURE IN THE RETURN FILED BY IT EARLIER ON 31-07-2 007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASK ED THE ASSESSEE TO JUSTIFY AS TO WHY THE JOINT VENTURE AGREE MENT SHOULD NOT BE CONSIDERED AS A DEVELOPMENT AGREEMENT IN VIEW OF CLAUSE (3) OF THE SAME WHEREIN SHARING OF THE PROFITS OF THE JOINT VE NTURE IS GIVEN. 4. THE ASSESSEE SUBMITTED THAT THE PROPOSAL TO CONSID ER THE JOINT VENTURE AGREEMENT AS DEVELOPMENT AGREEMENT IS UN JUSTIFIED AND INCORRECT. THE RELEVANT SUBMISSION OF THE ASSESSEE A S REPRODUCED BY THE AO IN THE BODY OF THE ASSESSMENT OR DER READS AS UNDER : YOUR PROPOSAL TO TREAT JOINT, VENTURE AGREEMENT AS D EVELOPMENT AGREEMENT IS NOT JUSTIFIED AND NOT VALID ON ACCOUNT O F FOLLOWING REASON: 1. YOU HAVE REFERRED TO THE JOINT VENTURE AGREEMEN T AND IN CLAUSE 3, THE MODE OF SHARING THE PROFITS OF THE JOIN T VENTURE IS GIVEN. AS PER THIS CLAUSE, THE ASSESSEE WAS TO GET PROFIT OF 40% A ND THE BALANCE 60% WILL BE TO THE ACCOUNT OF THE DEVELOPER . IT IS FURTHER MENTIONED THAT THIS 40% OF THE SALE PROCEEDS WILL BE R EDUCED BY THE COST OF THE DEVELOPMENT RIGHTS PAID BY THE JOINT VENT URE TO THE ASSESSEE I.E. RS.2 CRS. THUS, IN THIS AGREEMENT, THE PROFI T SHARING RATIO OF THE TWO MEMBERS OF THE AOP WAS LINKED TO THE SALE P ROCEEDS. HOWEVER, THE ASSESSEE AND THE DEVELOPER ENTERED INTO A SUPPLEMENTARY AGREEMENT DATED 2 ND MAY, 2010 WHICH IS SUBMITTED HEREWITH (REFER PAGES 7 TO 14) AND IN WHICH THE PROF ITS OF THE JOINT VENTURE ARE SHARED IN THE PROPORTION OF 80% TO THE L AND OWNER AND 20% TO THE DEVELOPER. THE PROFITS OF THE JOINT VENTU RE ARE COMPUTED BY DEDUCTING THE LAND COST, PROMOTERS, BUILDERS & DEVELOPERS. AND OTHER EXPENSES FROM THE SALE PROCEEDS. THE REASON WHY TH E PARTIES HAD TO ENTER INTO THE SUPPLEMENTARY AGREEMENT ARE ME NTIONED THEREIN ITSELF. ACCORDINGLY, IT IS SUBMITTED THAT QUEST ION OF TREATING THE JOINT VENTURE AGREEMENT AS DEVELOPMENT AGREEMENT DOES NOT ARISE. 2. AT THE OUTSET, THE SUPPLEMENTARY AGREEMENT CLARIF IES IN NO UNCERTAIN TERMS THAT THE ASSESSEE WOULD RECEIVE A SHARE I N THE PROFITS I LOSSES OF THE JV AND THE AMOUNT OF WITHDRAWAL MADE B Y THE ASSESSEE WOULD BE ADJUSTED AGAINST ITS SHARE IN PROFITS AND THE O THER DUES FROM THE JV. 3. IT IS SUBMITTED THAT YOU HAVE NOT CORRECTLY APPRE CIATED THE TRUE ESSENCE OF THE AGREEMENT WHICH REFERS, TO AN AGRE ED SHARING OF THE NET PROFITS, COMPUTED ON THE BASIS, OF CERTAIN PER CENTAGE OF GROSS REVENUE AFTER MAKING CERTAIN ADJUSTMENTS. THESE TERMS WERE REVISED AS PER THE SUPPLEMENTARY AGREEMENT AND THEREFORE IT IS NOT CORRECT TO 5 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 IGNORE IT AND IT MAY BE NOTED THAT AN AGREEMENT IS A CONTRACT WHICH CAN BE REVISED BY THE PARTIES. HENCE SUPPLEMENTARY AGR EEMENT READ WITH ORIGINAL AGREEMENT SHOULD BE CONSIDERED FOR DECI DING THE ISSUE OF CONSIDERING THE JV AGREEMENT AS DEVELOPMENT AGREEM ENT. 4. THE JOINT VENTURE AGREEMENT ENTERED INTO BY THE PAR TIES IS FOR THE IMPROVEMENT OF PROPERTY SO 'THAT FRUITS OF THE VE NTURE CAN BE ENJOYED BY BOTH THE PARTIES. IN VIEW OF ABOVE, IT IS SUBMITTED THAT YOUR PROPOSAL TO CONSIDER JV AGREEMENT AS DEVELOPMENT AGREEMENT IS UNJU STIFIABLE AND NOT CORRECT. 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE FOR THE FOLLOWING REASONS : 6.1 THE CONTENTS OF THE JOINT VENTURE AGREEMENT IF READ OUT CAREFULLY, I FIRMLY BELIEVE THAT IT IS NOT THE JOINT VENTURE AT ALL EVEN WHEN, CONSIDERED IN ITS WIDEST POSSIBLE SENSE BECAUSE SEC. 2(47) CLEARLY DEFINES THE WORD 'TRANSFER' AND IN THE CASE OF THE ASSESSEE IT IS CLEARLY MENTIONED IN THE JOINT VENTURE AGREEMENT TH AT THE POSSESSION OF THE PROPERTY HAS BEEN GIVEN UNCONDITIONALLY. 6.2 THE JOINT VENTURE AGREEMENT IS CERTAINLY FOR TH E DEVELOPMENT OF LAND AND PURSUANT TO THIS AGREEMENT THE LAND OWNER S HAVE HANDED OVER POSSESSION TO THE DEVELOPER. IT IS IN CONSIDERATION OF THIS HANDING OVER OF THE LAND THAT THE LAND OWNERS HAVE B EEN PROMISED TO BE GIVEN PERCENTAGE OF SALES WHICH WAS LATER ON STATED TO BE GIVEN IN THE FORM OF 80% OF THE NET PROFIT WHICH CLEARLY MEA NS THE LAND OWNERS UNDER THE NOMENCLATURE OF JOINT VENTURE AGREE MENT HAVE IN FACT ENTERED INTO DEVELOPMENT AGREEMENT. 6.3 THE REFERENCE OF SUPPLEMENTARY AGREEMENT AND TH E COPY OF WHICH SUBMITTED BEFORE ME, FROM THE PERUSAL OF THE SAM E IT CLEARLY APPEARS THAT ASSESSEE HAS ENTERED INTO A SUPPLEMENTARY AG REEMENT ON 02.05.2010, WHICH IN MY OPINION IS A AFTERTHOUGH T GIVEN FOR CORRECTING THE ORIGINAL JOINT VENTURE AGREEMENT WHI CH IN REAL SENSE IS A DEVELOPMENT AGREEMENT ONLY. 6.4 AS PER SEC. 53A OF THE TRANSFER OF PROPERTY ACT, TRANSFER OF PROPERTY IS EITHER A TRANSFER OF ABSOLUTE OWNERSHIP OR A TRANSFER OF ONE OR MORE OF THE SUBORDINATE RIGHTS. AS PER MULLA'S C OMMENTARY ON TRANSFER OF PROPERTY ACT, ABSOLUTE OWNERSHIP IS AN AGGR EGATE COMPONENT RIGHTS SUCH AS THE RIGHT OF POSSESSION, THE RIGH T OF ENJOYING THE USUFRUCT OF THE LAND AND SO ON. THUS IF T HESE PRINCIPLES ARE APPLIED TO THE PRESENT CASE, THE POSSESSION OF THE LA ND BEING ONE OF THE INTEREST OF THE PROPERTY HAS BEEN TRANSFERRED T O THE DEVELOPER. THE CLAUSE 5 OF THE JOINT VENTURE AGREEMENT CLEARLY SPELLS OUT THAT THE LAND OWNERS HAS GIVEN IRREVOCABLE PERMISSION TO DE VELOP THE SAID LAND AND AUTHORIZES THE DEVELOPER TO ENTER INTO SAID LAND AND COMMENCE THE DEVELOPMENT OF THE SAID PROPERTY. 6.5 IN CLAUSE NO.8 OF THE SO CALLED JOINT VENTURE AG REEMENT CLEARLY SPELLS OUT THAT THE DEVELOPER SHALL BE RESPONSIBLE TO IM PLEMENT THE SCHEME AND DISPOSE OF THE TENEMENT IN THE PROJECT AS WE LL AS GRANT 6 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 EXCLUSIVE RIGHT TO USE PARKING SPACE, TERRACE ETC. TO THE PROSPECTIVE BUYERS, ALLOTTEE ETC. AND TO RECEIVE SALE PROCEEDS FRO M THE PROSPECTIVE BUYERS, WHICH CLEARLY MEANS THE LAND OWNER S HAVE NO ROLE TO PLAY IN THE IMPLEMENTATION OF THE SCHEME AND THE SELLLNG.OF THE SCHEME, THUS THIS JOINT VENTURE AGREEMENT IS NOTHIN G BUT THE DEVELOPMENT AGREEMENT. 6.6 THE CONTENTION OF THE ESSESSEE THAT ENJOYMENT WOUL D BE IN THE FORM OF ENHANCED VALUE IS QUITE HYPOTHETICAL AND NOT WORTHY ANY SERIOUS CONSIDERATION. 6.7 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINI ON THAT THIS JOINT VENTURE AGREEMENT ENTERED INTO BY THE PARTIES IS NOTHING BUT A DEVELOPMENT AGREEMENT. 07. WITHOUT PREJUDICE TO WHATEVER DISCUSSED ABOVE, SIN CE THE ASSESSEE HAS FILED THE RETURN OF INCOME DISCLOSING TOTAL INCOME AT RS. NIL AND ALSO SUBMITTED AUDIT REPORT IN FORM NO. 10CCB CLAIMING THAT THE HOUSING PROJECT DEVELOPED BY THE ASSESSEE IS ELIGIB LE FOR DEDUCTION U/S. 801B(10). THE QUESTION OF ALLOWABILITY OF DEDUCTION U/S.80IB(10) IS NOT TO BE DECIDED HERE SINCE THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION UNDER SEC. 801B(10). 6. IN VIEW OF THE ABOVE, THE AO HELD THAT THE JOINT VENTU RE AGREEMENT IS NOTHING BUT A DEVELOPMENT AGREEMENT WHICH MEANS THAT PAYMENT EFFECTED BY JOINT VENTURE TO THE LAND OWNER S. HE HELD THAT THE EFFECT TO INCREASE IN WIP WILL NOT BE GRANTE D AND WILL BE CONSIDERED SUBSEQUENTLY AFTER THE ISSUE OF LAND COST GETS FINALIZED IN THE CASE OF LAGAD BROTHERS DEVELOPERS WHERE N OTICE U/S.148 HAS BEEN ISSUED AND THE ASSESSMENT PROCEEDINGS ARE IN PROGRESS. THE AO ACCORDINGLY DETERMINED THE INCOME OF T HE ASSESSEE IN THE ORDER PASSED U/S. 143(3) READ WITH SECTIO N 153C AT (-)RS.32,797/-. 7. SIMILAR VIEW WAS TAKEN BY THE AO FOR A.Y. 2008-09 WHERE IN THE INCOME RETURNED AT NIL WAS ACCEPTED. THE RETURN FILE D FOR A.Y. 2009-10 WAS ACCEPTED AT RS.8,99,340/- AND FOR A.Y. 2010-1 1 THE LOSS DECLARED AT RS. (-)6,46,373/- WAS ACCEPTED AS PER TH E RETURN FILED. 7 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 8. BEFORE CIT(A) IT WAS SUBMITTED THAT THE AO HAS CONSIDE RED THE JOINT VENTURE AGREEMENT AS A DEVELOPMENT AGREEMEN T ON THE GROUND THAT AS PER SECTION 2(47) THERE IS A TRANSFER OF LAND AND POSSESSION HAS BEEN GIVEN UNCONDITIONALLY. FURTHER, LAND O WNERS HAVE BEEN PROMISED TO BE GIVEN PERCENTAGE OF SALES WHICH WAS LATER ON STATED TO BE GIVEN IN THE FORM OF 80% OF NET PRO FIT WHICH MEANS THE LAND OWNERS UNDER THE NOMENCLATURE OF JOINT VE NTURE AGREEMENT HAVE INFACT ENTERED INTO DEVELOPMENT AGREEME NT. IT WAS SUBMITTED THAT THE ASSESSEE HAS A VALID PAN AND RE GISTRATION UNDER THE MVAT 2002 AND CENTRAL SALES ACT, 1957 AND DISCHARGED THE LIABILITY AS ASSOCIATION OF PERSONS UNDER B OTH THE ACT. THE INCOME TAX ACT DOES NOT DEFINE WHAT CONSTITUT ES AN AOP WHICH U/S.2(31) (V) OF THE I.T. ACT IS AN ENTITY OR UNIT OF ASSESSMENT. IN THE ABSENCE OF ANY DEFINITION THE WORDS MUST BE CONSTRUED IN THEIR PLAIN ORDINARY MANNER. RELYING ON VARIO US DECISIONS IT WAS SUBMITTED THAT AOP MEANS 2 OR MORE PER SONS WHO JOIN FOR A COMMON PURPOSE WITH A VIEW TO EARN AN INC OME. IT NEED NOT BE ON THE BASIS OF A CONTRACT. AN AOP DOES N OT MEAN ANY AND EVERY COMBINATION OF PERSON. IT IS ONLY WHEN T HEY ASSOCIATE THEMSELVES IN AN INCOME PRODUCING ACTIVITY THAT THEY HAVE BECOME AN AOP. THEY MUST COMBINE TO ENGAGE IN SU CH AN ACTIVITY. THE ENGAGEMENT MUST BE PURSUANT TO THE COMB INED WILL OF THE PERSON CONSTITUTING THE ASSOCIATION. IT WAS SUBM ITTED THAT EXPLANATION HAS BEEN INSERTED BY THE FINANCE ACT 2002 IN SECTION 2(31) W.E.F. 01-04-2002 WHICH PROVIDES THAT FOR THE PURPOSE OF THIS CLAUSE, AN AOP OR A BODY OF INDIVIDUAL OR AN ARTIFICIAL JUDICIAL PERSON SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH PERSON OR BODY, AUTHORITY OR JUDICIAL PERSON WAS FORMED O R ESTABLISHED OR INCORPORATED, WITH THE OBJECT OF DERIVING OF INCOME, 8 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 PROFITS OR GAINS. IT WAS SUBMITTED THAT AS PER CLAUSE (3) OF JOINT VENTURE AGREEMENT IT HAS CATEGORICALLY STATED THAT BOT H THE PARTIES HAVE DECIDED TO DEVELOP THE PROPERTY JOINTLY AND FOR T HIS SPECIFIC REASONS HAVE DECIDED TO SHARE THE SALE PROCEEDS IN THE RATIO OF 40% TO 60% WHICH WAS LATER ON CHANGED TO SHARING OF NE T PROFIT IN THE RATIO OF 80% TO 20% AS PER SUPPLEMENTARY AGREEMENT DATED 02-50-2010. ALTHOUGH THE DEVELOPMENT AGREEMENT AS WELL AS THE SUPPLEMENTARY AGREEMENT WAS FILED BEFORE THE AO, HOWEVER , THE AO HAS ERRONEOUSLY CONCLUDED THAT THE AGREEMENT IS DE VELOPMENT AGREEMENT. IT WAS SUBMITTED THAT THE REASON WHY THE PARTIES HAD TO ENTER INTO SUPPLEMENTARY AGREEMENT WAS ALSO GIVEN. THE SUPPLEMENTARY AGREEMENT CLARIFIES IN NO UNCERTAIN TERMS TH AT THE PARTIES TO THE JOINT VENTURE WOULD RECEIVE A SHARE IN T HE PROFITS/LOSSES OF THE JOINT VENTURE AND THE AMOUNT WITHDR AWN BY THE PARTIES WILL BE ADJUSTED AGAINST THEIR SHARE IN PROFITS/ LOSSES. THEREFORE, THE QUESTION OF TREATING THE JOINT VENTURE AGR EEMENT AS DEVELOPMENT AGREEMENT DOES NOT ARISE. IT WAS SUBMITTED THAT THERE IS NO RELATIONSHIP BETWEEN LAND OWNER AND THE JOINT VENTURE AS BUYER AND SELLER. REFERRING TO VARIOUS CLAUSES OF THE JOINT VENTURE AGREEMENT IT WAS ARGUED THAT : (A) THERE IS A COMBINATION OF TWO OR MORE PERSONS WHO HAVE JOINED TOGETHER. (B) THESE TWO PERSONS HAVE JOINED TOGETHER FOR THEIR O WN VOLITION. (C) THERE IS A COMMON PURPOSE AND COMMON ACTION WHICH IS TO BE EXECUTED AND IMPLEMENTED BY BOTH OF THEM. (D) THE OBJECT OF THE JOINT VENTURE IS TO PRODUCE IN COME. (E) THEY HAVE FORMED THE JOINT VENTURE FOR THE PURP OSE OF COMPLETING THE DEVELOPMENT OF THE LAND AND COMPLETI NG THE PROJECT ON THE SAID LAND WHICH MEANS THE JOINT VENTURE AGREEM ENT IS IN PURSUANT OF THE COMBINE WILL OF BOTH THE PARTIES AND THERE IS A MEETING OF THE MINDS WHICH HAS A MAIN DOMINANT OBJECT IVE TO PRODUCE INCOME FOR BOTH OF THEM. 9 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 (D) THE JOINT VENTURE AGREEMENT ENTERED INTO BY THE PARTIES IS FOR THE IMPROVEMENT OF PROPERTY SO THAT FRUITS OF THE VEN TURE CAN BE ENJOYED BY BOTH THE PARTIES. 9. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF CIT VS. INDIRA BALAKRISHNA REPORTED IN 39 ITR 54 6 IT WAS SUBMITTED THAT THE IMPUGNED AGREEMENT SATISFIES ALL THE CONDITIONS AND THEREFORE THE CONCLUSION DRAWN BY THE AO THAT THE IMPUGNED AGREEMENT IS A DEVELOPMENT AGREEMENT IS INCORRECT. 10. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND HELD THAT THE AGREEMENT BETWEEN LAGAD BROTHERS DEVELOPERS AND DARODE JOG AND ASSOCIATES WAS CLEARLY A JOINT DEVELOPMENT AGREEMENT TH OUGH IT IS TITLED AS JOINT VENTURE DEVELOPMENT AGREEMENT. THE RE LEVANT OBSERVATION OF THE CIT(A) FROM PARA 6.3 TO 6.5 OF THE ORDER READ AS UNDER : 6.3 I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACTS OF THE CASE AND TO THE ARGUMENTS AND CONTENTIONS OF THE APPELLANT ON THIS GROUND OF APPEAL. AT THE OUTSET IT IS OBSERVED .THAT THE APPELLA NT HAS MADE VERY ELABORATE SUBMISSIONS ON THE ISSUE OF ITS STATUS AT THE RELE VANT TIME AS AN 'AOP'. ON THIS ISSUE, HOWEVER, I DO NOT SEE A DISPUT E AS THE LD. AO HAS ALSO ASSESSED THE APPELLANT IN THE STATUS OF AOP AS IS CLE ARLY SEEN FROM THE VERY FACE OF THE ASSESSMENT ORDER. INDEED, THE VER Y FACT THAT THE AO HAS PASSED AN ASSESSMENT ORDER IN -THE APPELLANT'S CASE WOUL D INDICATE THAT THE STATUS OF AOP HAS BEEN ACCEPTED SINCE THE APPEL LANT COULD NOT POSSIBLY HAVE BEEN ASSESSED IN ANY OTHER STATUS CONTEMPLATE D UNDER SECTION 2(31) OF THE ACT. AS SUCH, NO DECISION IS NECESSARY IN MY VIEW ON THE APPELLANT'S SUBMISSIONS WITH REGARD TO ITS ST ATUS. COMING NOW TO THE NATURE OF THE AGREEMENT, I HAVE CAREFULL Y PERUSED THE CONTENTS OF THE 'JOINT VENTURE DEVELOPMENT AGREEMENT ' DATED 29/12/2006 AND ALSO THE 'SUPPLEMENTARY AGREEMENT' DATED 2/5/2010 WITH M/S.LAGAD BROTHERS DEVELOPERS AND HAVE ALSO CONSID ERED CAREFULLY THE ARGUMENTS AND CONTENTIONS OF THE APPELL ANT WHICH HAVE BEEN EXTRACTED ABOVE. UPON CAREFUL READING OF THE T WO DOCUMENTS MENTIONED ABOVE, THE FOLLOWING FACTS CLEARLY EMERGE: I. THAT THE ENTIRE FINANCE FOR THE PROJECT WAS TO B E ARRANGED BY THE SECOND PARTY, NAMELY DARODE JOG & ASSOCIATES (DJA). II. THAT ACTUAL CONSTRUCTION WAS ALSO TO BE UNDERTAKE N BY THE SAID SECOND PARTY 10 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 III. THAT APPROVAL FOR PLAN, SALE OF COMPLETED UNITS, PARKINGS, TERRACES ETC. WAS ALSO TO BE DONE THE SECOND PARTY. IV. THAT THE ROLE OF THE LAND OWNERS, I.E. THE FIRST PARTY WAS ALMOST ENTIRELY CONFINED TO HANDING OVER VACANT POSSESSION OF THE LAND ON WHICH THE PROJECT WAS TO BE DEVELOPED, NOT TO CAUSE A NY HINDRANCE TO THE DEVELOPMENT ACTIVITY, AND TO COOPERATE IN THE E XECUTION OF THE REQUISITE DOCUMENTS FOR CONVEYING THE UNITS WHEN READY , TO THE ULTIMATE BUYERS. V. THAT THE LAND OWNERS IRREVOCABLY PERMITTED AND A UTHORIZED THE SECOND PARTY TO ENTER UPON THE, LAND AND COMMEN CE THE DEVELOPMENT WORK AND SURRENDERED THEIR RIGHTS UNCONDI TIONALLY TO INTERFERE IN ANY MANNER WITH THE DEVELOPMENT WORK T O BE UNDERTAKEN BY THE SECOND PARTY. VI. THAT ALL THE NECESSARY DEPOSITS AND DUES TO BE PAID TO THE LOCAL AUTHORITIES AS WELL AS ANY LIABILITY ON ACCOUNT OF LOSSE S, INJURY OR GOVT. DUES OF ANY KIND WERE TO BE MET BY THE SECOND PARTY. VII. THAT THE CONSIDERATION FOR THE PROPERTY WAS ALRE ADY RECEIVED BY THE FIRST PARTY BEFORE HAND IN THE GUISE OF 'SECURI TY DEPOSIT'. THIS FACT IS INADVERTENTLY ACKNOWLEDGED IN THE 'SUPPLEMEN TARY AGREEMENT' WHEREIN ON PAGE-5 IT IS STATED THAT THE CONSIDERATION FOR THE RIGHTS IN THE LAND HAD ALREADY BEEN DECIDED IN THE ORIGINAL A GREEMENT, AT RS.2 CRORE. NOTABLY, AS PER THE ORIGINAL AGREEMENT, THIS AMOUNT OF RS.2 CRORE WAS TO BE A REFUNDABLE INTEREST FREE SECURITY DE POSIT. 6.4 CONSIDERING THE ABOVE FACTS, I AM OF THE CONSIDER ED VIEW THAT THE AGREEMENT BETWEEN M/S. LAGAD BROTHERS DEVELOPERS ON THE ONE HAND AND DARODE JOG & ASSOCIATES ON THE OTHER, WAS CLEA RLY A JOINT DEVELOPMENT AGREEMENT THOUGH TITLED A JOINT VENTUR E DEVELOPMENT AGREEMENT. 6.5 FOR THE REASONS DISCUSSED N DETAIL ABOVE, THEREFORE, THESE THREE GROUNDS OF APPEAL ARE HEREBY DISMISSED. 11. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER - ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASST . U/S 143(3) R.W.S 153C WAS VALID WHEN THE ASST. WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A GREEMENT BETWEEN DARODE JOG AND ASSOCIATES AND LAGAD BROTHERS DE VELOPERS DID NOT CONSTITUTE ASSOCIATION OF PERSON BUT IT CONSTIT UTED ONLY A DEVELOPMENT AGREEMENT. 11 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT H AVING ACCEPTED THAT THE ABOVE TWO PARTIES CONSTITUTED JOINT VENTURE AND THE STATUS OF THE APPELLANT WAS RIGHTLY CLAIMED AS AOP, IT COULD NO T BE HELD THAT THE AGREEMENT BETWEEN THE TWO PARTIES CONSTITUTED A DEVEL OPMENT AGREEMENT AND NOT A JOINT VENTURE (AOP) AGREEMENT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 12. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROU NDS OF APPEAL NO.1 FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS N O OBJECTION. ACCORDINGLY, GROUNDS OF APPEAL NO.1 IS DISMISSED AS NOT PRESSED. 13. SO FAR AS GROUNDS OF APPEAL NO.2 IS CONCERNED THE LD . COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED THE ORDER O F THE CIT(A). REFERRING TO THE COPY OF THE PAPER BOOK PAGES 1 TO 35 THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE VARIOUS CLAUSES OF THE JOINT VENTURE DEVELOPMENT AGREEME NT DATED 29-12-2006. HE SUBMITTED THAT ON 02-05-2010 LAGAD BR OTHERS DEVELOPERS AND DARODE JOG AND ASSOCIATES MADE A SUPPLEM ENTARY AGREEMENT TO THE ORIGINAL JOINT VENTURE AGREEMENT, A COP Y OF WHICH IS PLACED AT PAGES 36 TO 43 OF THE PAPER BOOK. HE SUBMIT TED THAT IN THE ORIGINAL AGREEMENT THE CLAUSE REGARDING THE DIVISION OF PROFITS OF THE JOINT VENTURE WAS NOT CLEAR. AT ONE PLACE IT WAS STATED 40% PROFIT WHEREAS IN THE OTHER PART IT WAS WRITT EN 35% OF THE SALE PROCEEDS FOR LAGAD. THEREFORE, TO REMOVE THIS AMBIGUITY, THE SUPPLEMENTARY AGREEMENT WAS ENTERED INTO IN WHICH IT WAS CLEARLY MENTIONED AT CLAUSE(2) (PAGE 40 OF THE PAPER BOOK) THAT THE COST OF LAND TO BE RS.2 CRORES IN THE ORIGINAL AGREEMENT. SIMILARLY, IN CLAUSE (3) (PAGE 40 OF THE PAPER BOOK) IT WAS STATED THA T THE PROFITS/LOSSES OF THE JOINT VENTURE WOULD BE DETERMINED BY 12 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 DEDUCTING FROM THE SALE PROCEEDS, COST OF THE LAND AND OF DEVELOPMENT AND CONSTRUCTION EXPENSES. SIMILARLY, IN CLAUSE (4) (PAGE 41 OF THE PAPER BOOK) THE SHARES OF THE 2 PARTIES IN PROFITS/LOSSES OF THE AOP WERE STATED. HE SUBMITTED THAT IN THIS AGREEMENT THE SHARES IN THE PROFIT OF THE INDIVIDUAL PARTIES WERE NOT LINKED TO THE SALE PROCEEDS BUT THEY WERE DEPENDING ON THE ACTUAL PROFITS/LOSSES OF THE AOP. 14. REFERRING TO PAGES 63 AND 64 OF THE PAPER BOOK TH E LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT JOINT VENTURE IS REGISTERED UNDER MVAT ACT, 2002 AND THE TAX PAYER IDENTIFICATION NO.27370925367V WHICH IS DATED 23-08-2012. REFERRING TO PAGE 64 OF THE PAPER BOOK HE SUBMITTED THAT M/S. DARODE JOG LAGAD VENTURE HAS BEEN REGISTERED UNDER THE CENTRAL SALES TA X (REGISTRATION IN TURNOVER) RULES, 1957 W.E.F., 23-08-2012. REFERRING TO PAGE 62 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE PAN NUMBER OF DARODE JOG LAGAD VENTURE W HICH WAS ISSUED BY THE DEPARTMENT AND THE PAN NO. IS AAAAD4 381Q. HE SUBMITTED THAT IF THE AGREEMENT IS A DEVELOPMENT AGRE EMENT THE FLAT WOULD BE SOLD BY THE DEVELOPER AND NOT BY BOTH THE PARTIES TOGETHER. HE REFERRED TO A SAMPLE SALE DEED AND SUBMITT ED THAT THE SELLER IN THE INSTANT CASE IS THE JOINT VENTURE AND N OT DARODE ONLY. THE JOINT VENTURE IS THE SELLER AND NOT DARODE ALO NE. THIS ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE PROVES TH AT THE AGREEMENT IS NOT A DEVELOPMENT AGREEMENT BUT A JOINT V ENTURE AGREEMENT. 15. REFERRING TO PAGE 77 TO 81 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO TH E ASSESSMENT ORDER PASSED BY THE AO FOR A.Y. 2011-12 WHE REIN THE 13 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 ORDER PASSED U/S.143(3) R.W.S.147 HE HAS ACCEPTED M/S. DA RODE JOG LAGAD VENTURE AS AN AOP. REFERRING TO PAPER BOOK P AGES 83 TO 89 OF THE PAPER BOOK HE SUBMITTED THAT THE AO FOR A .Y. 2012-13 HAS ALSO ACCEPTED THE STATUS OF THE ASSESSEE AS AN AS SOCIATION OF PERSONS, I.E. AOP. HE SUBMITTED THAT FOR BOTH THE YEARS THE AO HAS ASSESSED THE PROFIT IN THE HANDS OF THE AOP AND ALLO WED DEDUCTION U/S.80IB(10) TO THE AOP. THE ONLY STAND TAK EN BY THE AO IS THAT THE COST OF THE LAND IS UNDERSTATED. THE AO WHILE CONSIDERING THE PROVISIONS OF SECTION 80IA(10) R.W.S. 80IB(10) HAS CONCLUDED THAT THE MARKET VALUE OF THE LAND IS HIGHER THA N THE VALUE IN THE JOINT VENTURE AGREEMENT AND THEREFORE HE R EDUCED HIGHER VALUE OF THE LAND FROM THE PROFITS AND REDUCED THE PROFIT ELIGIBLE FOR DEDUCTION U/S.80IB(10). HOWEVER, THE AO HAS ASSESSED THE PROFIT IN THE HANDS OF THE AOP AND DEDUCTIO N U/S.80IB(10) HAS ALSO BEEN ALLOWED TO THE AOP. HE SUBMITTE D THAT IF THE AO WAS OF THE OPINION THAT THE AGREEMENT BET WEEN LAGAD AND DARODE DID NOT CONSTITUTE AOP THE ASSESSMEN T OF THE AOP OUGHT TO HAVE BEEN MADE AT NIL AND DEDUCTION U/S.80 IB(10) SHOULD HAVE BEEN ALLOWED TO THE INDIVIDUAL PARTIES. THEREFOR E, THE AO IN THESE ASSESSMENTS HAS ACCEPTED THE STAND OF THE ASSESSEE THAT THE PROFITS HAVE ACCRUED TO THE AOP ONLY AND HE ASSESSED THE INCOME IN THE HANDS OF THE AOP. HE SUBMITTED THAT THE A O AND THE CIT(A) HAVE NOT GIVEN DUE WEIGHTAGE TO THE SUPPLEMEN TARY AGREEMENT. 16. REFERRING TO THE ORDER OF THE AO FOR A.Y.2007-08 THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO PARA 6.3 WHEREIN THE AO HAS STATED THAT THE SAID SUPPLEMENTA RY AGREEMENT IS AN AFTER THOUGH GIVEN FOR CORRECTING THE OR IGINAL JOINT 14 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 VENTURE AGREEMENT WHICH IN REAL SENSE IS A DEVELOPMENT AGREEMENT. THE CIT(A) DOES NOT GIVE ANY OPINION ON THE SUPPLEMENTARY AGREEMENT. HE SUBMITTED THAT THERE WAS AN AMBIGUITY IN THE ORIGINAL AGREEMENT. IN THAT CLAUSE (7) ON P AGE 8 MENTIONED ABOUT THE SHARING OF THE PROFITS OF THE AOP BY THE 2 PARTNERS WHILE SOME CLAUSES STATED THAT THE GROSS SALE PROCEEDS OF THE FLATS WOULD BE SHARED. WHEN THIS AMBIGUITY WAS NOTICED BY THE 2 PARTIES THEY MADE THE SUPPLEMENTARY AGREEMENT FO R BRINGING CLARITY AND IT WAS CLEARLY STATED AS TO HOW THE PROFITS OF THE JOINT VENTURE WOULD BE SHARED BETWEEN THE 2 PARTIES. THERE IS NOTHING WRONG IN REVISING A CONTRACT FOR THE PURPOSE OF REMOVING THE AMBIGUITY. HE SUBMITTED THAT THERE IS NO BAR IN THE CONT RACT ACT THAT AN AGREEMENT ONCE MADE CANNOT BE REVISED. THEREFO RE IT IS NOT UNDERSTOOD AS TO WHY THE AO REJECTED THE SUPPLEM ENTARY AGREEMENT. 17. REFERRING TO THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF WALLFORT SECURITIES REPORTED IN 326 ITR 1 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT EVEN IF THE TRANSACTION IS PREPLANNED BUT THERE IS NOTHING TO IMPEACH THE GENUINENESS OF THE TRANSACTION THE SAME SHO ULD BE ACCEPTED BY THE COURT AND IT DOES NOT AMOUNT TO ABUS E OF LAW. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. AZADI BACHAO ANDOLAN REPORTED IN 263 ITR 706 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS ACCEPTED THAT A CITIZEN IS FREE TO CARRY ON BUSINESS WITHIN FOUR CORNERS OF LAW. SIMILAR VIEW HAS BEEN TAKEN BY T HE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF P ORRITS AND SPENCER LTD. REPORTED IN 329 ITR 222. HE ACCORDINGLY S UBMITTED 15 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THAT THE AO AND THE CIT(A) SHOULD HAVE ACCEPTED THE SUPPLEMENTARY AGREEMENT AS A GENUINE DOCUMENT. HE SU BMITTED THAT THE PROFITS FROM THE HOUSING PROJECT HAVE BEEN DIVID ED BY THE 2 PARTIES ON THE BASIS OF THE PROFIT SHARING RATIO IN THE SUPPLEMENTARY AGREEMENT. 18. REFERRING TO PAGE 196 OF THE PAPER BOOK THE LD. COU NSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE C APITAL ACCOUNT OF THE 2 PARTNERS TO THE JOINT VENTURE IN WHICH THE PROFITS ARE SHARED BY THE 2 PARTIES AS PER THE SUPPLEMENTARY AGREEMENT. THUS, THE SUPPLEMENTARY AGREEMENT HAS BEEN ACTED UPON BY THE PARTIES. HE ACCORDINGLY SUBMITTED THAT THE SUPPLEMENTAR Y AGREEMENT IS NOT MERELY A PIECE OF PAPER BUT IT IS ACTE D UPON BY BOTH THE PARTIES AND THEREFORE DUE CREDENCE SHOULD BE GIVEN TO THE SUPPLEMENTARY AGREEMENT. REFERRING TO PARA 6.3 OF THE OR DER OF THE CIT(A) HE SUBMITTED THAT THE CIT(A) HAS CLEARLY ACCE PTED THAT THIS CONTROVERSY AS TO WHETHER IT IS AN AOP OR NOT DOE S NOT SURVIVE AS THE AO HIMSELF HAS ACCEPTED THE STATUS OF THE ASSESS EE AS AN AOP. BUT THEREAFTER HE HELD THAT THE AGREEMENT IS NOT A JOINT VENTURE AGREEMENT BUT A DEVELOPMENT AGREEMENT. HE SU BMITTED THAT THE WHEN THE AO AND THE CIT(A) HAS ACCEPTED TH AT THE TRANSACTION CONSTITUTED AOP, THE PROFIT SHOULD BE TAXED I N THE HANDS OF THE AOP. REFERRING TO THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF MESSRS. JERKISON TRIBHUVANDAS, BOMBAY VS. CIT REPORTED IN 31 ITR 376 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE AO CAN NOT TAKE CONTRARY STANDS. ON ONE HAND, THE AO AND THE CIT(A) HA VE ASSESSED THE PROFITS IN THE HANDS OF THE AOP AND ON THE OTHER HAND THEY HELD THAT THIS IS NOT THE JOINT VENTURE AGREE MENT BUT 16 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 MERELY A DEVELOPMENT AGREEMENT. THEREFORE, THIS IS A CONTRADICTION IN THEIR DECISION. 18.1 REFERRING TO THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. INDIRA BALAKRISHNA REPORTED IN 39 ITR 546 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN TWO O R MORE PARTIES JOIN TOGETHER IN CARRYING OUT ANY BUSINESS, THEY CONSTITUTE AN AOP. IN THE PRESENT CASE, THE TWO PARTIES NAMELY L AGAD AND DARODE HAVE JOINED TOGETHER FOR DEVELOPING THE HOUSING P ROJECT AND THEY HAVE SHARED THE RESPONSIBILITIES AND DUTIES AS P ER THE AGREEMENT. LAGAD HAS TO ENSURE THAT THE LAND IS FREE FR OM ANY DEFECT AND GOT IT CONVERTED INTO NA AND DARODE HAS TO CONSTRUCT THE PROJECT. THEREFORE, THE TRANSACTION CONSTITUTES AN AOP IN VIEW OF THE ABOVE DECISION OF THE HONBLE SUPREME COURT. FURT HER, SINCE THE AO IN THE ASSESSMENT ORDERS FOR A.YRS. 2007-08 , 2011- 12 AND 2012-13 HAS ASSESSED PROFITS IN THE HANDS OF AOP , THEREFORE, IT IS WRONG TO HOLD THAT THE PROFIT SHOULD BE AS SESSED IN THE HANDS OF THE 2 PARTIES SEPARATELY AND NOT IN THE H ANDS OF THE AOP. 19. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. CIT REPORTED IN 266 ITR 99 SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT IF THE REVENUE HA S NOT CHALLENGED THE CORRECTNESS OF THE LAW LAID DOWN BY THE H IGH COURT AND HAS ACCEPTED IT IN THE CASE OF ONE ASSESSEE, THEN IT IS NOT OPEN TO THE REVENUE TO CHALLENGE ITS CORRECTNESS IN THE CASE OF OTHER ASSESSEES WITHOUT JUST CAUSE. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) HE SUBMITTED THAT THE HONBLE SUPREME COURT IN 17 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THE SAID HAS HELD THAT STRICTLY SPEAKING THE PRINCIPLE OF R ES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS THOU GH EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE Y EAR MAY NOT APPLY IN THE FOLLOWING YEAR. WHERE A FUNDAMENTAL ASPEC T PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS B EEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT W OULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. HE ACCORDINGLY SUBMITTED THAT THE GR OUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED. HE ALSO RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. SHRAVANEE CONSTRUCTIONS REPORTED IN 209 TA XMAN 6 2. SHRI ABDUL KHADER VS. ACIT ITA NO.57/BANG/2011 3. ACIT VS. BOMBAY REAL ESTATE DEVELOPMENT CO. PVT. L TD. ITA NO. 4728/MUM/2007 20. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED T HAT IT IS JOINT DEVELOPMENT AGREEMENT AND NOT A JOINT VENTURE. REFE RRING TO PARA 6.3 OF THE ORDER OF THE CIT(A) HE SUBMITTED THAT THE LD.CIT(A) HAS GIVEN A CATEGORICAL FINDING AT PARA 6.4 OF THE O RDER THAT THE AGREEMENT BETWEEN M/S. LAGAD BROTHERS DEVELO PERS ON THE ONE HAND AND DARODE JOG AND ASSOCIATES ON THE OTH ER WAS CLEARLY A JOINT DEVELOPMENT AGREEMENT AND IS NOT A JOINT VENTURE AGREEMENT. HE SUBMITTED THAT SINCE THE CONSIDERATION FO R THE PROPERTY WAS ALREADY RECEIVED BY THE FIRST PARTY BEFORE HAND IN THE GUISE OF SECURITY DEPOSIT AS PER THE ORIGINAL AGREEMENT WH ICH HAS INADVERTENTLY ACKNOWLEDGED IN THE SUPPLEMENTARY AGREEME NT, THEREFORE, THE AGREEMENT BETWEEN M/S. LAGAD BROTHERS D EVELOPERS AND DARODE JOG AND ASSOCIATES IS ONLY A DEVELOPMENT AGR EEMENT 18 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 AND CANNOT BE CONSIDERED AS A JOINT VENTURE. HE ACCORDIN GLY SUBMITTED THAT THE GROUNDS RAISED BY THE ASSESSEE SHO ULD BE DISMISSED. 21. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT C ASE A REGISTERED JOINT VENTURE DEVELOPMENT AGREEMENT BETWEEN M/S. LAGAD BROTHERS DEVELOPERS AND DARODE JOG AND ASSOCIATE S WAS FOUND DURING THE COURSE OF SEARCH ACTION U/S.132 OF THE ACT IN THE CASE OF DARODE JOG BROTHERS PVT. LTD. ON THE BASIS OF T HIS REGISTERED JOINT VENTURE DEVELOPMENT AGREEMENT AND VARIO US OTHER PAPERS FOUND THE AO ISSUED NOTICE U/S.153C TO THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S.153C THE ASSE SSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.32,797/- WHICH WAS AS PER THE ORIGINAL RETURN FILED ON 31-07-2007 FOR THE A.Y. 200 7-08. ALTHOUGH THE ASSESSEE HAS FILED THE RETURN AS AN AOP TR EATING THE SAID JOINT DEVELOPMENT AGREEMENT AS A JOINT VENTURE AGREE MENT THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SA ME SHOULD NOT BE CONSIDERED AS A JOINT DEVELOPMENT AGREEMENT AND NOT A JOINT VENTURE AGREEMENT IN VIEW OF VARIOUS CLAUSES OF THE S AID AGREEMENT. WE FIND REJECTING THE VARIOUS EXPLANATIONS GIVE N BY THE ASSESSEE THE AO CONSIDERED THE JOINT VENTURE AGRE EMENT AS A DEVELOPMENT AGREEMENT ON THE BASIS OF THE VARIOUS CLAUS ES IN THE AGREEMENT. ACCORDING TO HIM, THE AGREEMENT SPECIFIED SHA RING OF THE SALE PROCEEDS BY THE 2 PARTIES AND THUS THIS IS AN AGREEMENT FOR SALE OF LAND BY LAGAD TO DARODE FOR A CONSIDERATION LINK ED TO THE GROSS SALE PROCEEDS AND THE FLATS IN THE PROJECT. I T IS ALSO THE 19 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 CASE OF THE REVENUE THAT IT IS DARODE WHO IS DEVELOPING T HE HOUSING PROJECT AND LAGAD IS SIMPLY TRANSFERRING ITS LAND AND THUS THE DEDUCTION U/S.80IB(10) IS NOT AVAILABLE TO LAGAD A ND THE ARRANGEMENT BETWEEN THE 2 PARTIES IS NOT A JOINT VENTUR E (AOP) AND IT CANNOT BE ASSESSED AS AOP. IT WAS ACCORDINGLY HELD BY THE AO THAT THE PROFITS CANNOT BE ASSESSED IN THE HANDS O F THE AOP BUT IN THE HANDS OF THE 2 PARTIES SEPARATELY AND THERE FORE DEDUCTION U/S.80IB(10) CANNOT BE ALLOWED TO LAGAD WHO WA S A MERE OWNER OF THE LAND. THE AO ACCORDINGLY PASSED THE ASSESSMENT ORDER HOLDING THAT THIS IS MERELY A DEVELOPM ENT AGREEMENT AND THEREFORE THE CLAIM OF DEDUCTION U/S.80IB(10 ) WAS DENIED IN THE HANDS OF THE AOP. IN APPEAL THE LD.CIT(A) UP HELD THE ACTION OF THE AO. 22. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSE E THAT THE AO IN THE ASSESSMENT ORDER ITSELF HAS ACCEPTED THE RETURN FILED BY THE ASSESSEE CONSIDERING ITS STATUS AS AOP AND A CCEPTED THE RETURNED LOSS OF RS.32,797/-. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO IN SUBSEQUENT ASSESSMENT YEARS, I.E. A.Y. 2011-12 IN ORDER PASSED U/S.1 43(3) R.W.S.147 VIDE ORDER DATED 30-03-2015 HAS CONSIDERED TH E STATUS OF THE ASSESSEE AS AOP AND THE CLAIM OF DEDUCTION U/S.80 IB(10) HAS BEEN ACCEPTED. SIMILARLY, FOR A.Y. 2012-13 THE AO IN TH E ORDER PASSED U/S.143(3) HAS ALLOWED THE STATUS OF THE ASS ESSEE AS AOP AND ALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10). IT IS ALS O THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE LD.CIT(A) AT PARA 6.3 OF HIS ORDER HAS ACCEPTED THAT THE CONTROVERSY AS TO WHETHER IT IS AN AOP OR NOT DOES NO T SURVIVE AS THE AO HIMSELF HAS ACCEPTED THE STATUS OF THE ASSESSEE AS AOP. 20 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 23. WE FIND FORCE IN THE ABOVE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE. FROM THE COPY OF THE ASSESSMENT OR DER THE STATUS HAS BEEN MENTIONED BY THE AO AS AOP AND THE A O HAS PASSED THE ORDERS U/S.143(3) R.W.S. 153C DETERMINING THE T OTAL LOSS OF THE ASSESSEE AOP AT RS.32,797/- WHICH WAS THE R ETURNED LOSS AS PER THE ORIGINAL RETURN FILED ON 31-07-2007. WE FI ND IN APPEAL THE LD.CIT(A) AT PARA 6.3 AT PAGE 24 OF HIS ORDER H AS ALSO MENTIONED THAT THE AO HAS ASSESSED THE ASSESSEE IN TH E STATUS OF AOP WHICH INDICATES THAT THE STATUS OF AOP HAS BEEN AC CEPTED. WE FIND THE AO IN THE ORDER PASSED U/S.143(3) R.W.S.147 VID E LETTER DATED 30-03-2015 FOR A.Y. 2011-12 HAS RECORDED T HE FOLLOWING REASONS FOR ISSUE OF NOTICE U/S.147 : 'THE ASSESSEE IS A JOINT VENTURE BETWEEN DARODE JOG ASSOCI ATES & M/ S LAGAD BROTHERS DEVELOPERS. M/S LAGAD BROTHERS DEVELOP ERS A FIRM. PURCHASED A LAND FROM FANNERS THROUGH A REGISTERED AGR EEMENT FOR RS. 1,15,00,000/- AND IMMEDIATELY GAVE IT FOR DEVELO PMENT TO THE JOINT VENTURE VIZ. DARODE JOG LAGAD DEVELOPERS WERE SUPPOSED TO RECEIVE 40% OF THE SALE PROCEEDS OF THE JOINT VENTURE ON ACCOUNT OF LAND GIVEN IT TO THE JOINT VENTURE FOR DEVELOPMENT. AS PER THE JOINT VENTURE AGREEMENT THE COST OF LAND IN THE BOOKS OF JO INT VENTURE WAS ADOPTED AT 2,00,00,000/- THOUGH THE JOINT VENTURE A CTUALLY PAID 40% OF SALE PROCEEDS ON ACCOUNT OF LAND. VALUE OF LAND AD OPTED BY THE JOINT VENTURE IN ITS BOOKS WAS AT RS. 1000/- PER SQ. METER. TH E JOINT VENTURE PARTNER M/ S DARODE JOG ASSOCIATES PURCHASED TH E LAND BEHIND THE PROJECT OF THE JOINT VENTURE AT THE RATE OF RS. 7,558/ - PER SQ. METER FROM BABAN GENU KUMBHARKAR. THE CONSIDERATI ON PAID TO SHRI. B. G. KUMBHARKAR WHICH WAS IN ACCORDANCE WITH THE STAMP DUTY VALUATION. PURCHASE OF LAND FROM KUMBHARKAR WAS WITHI N 3 MONTHS FROM THE DATE OF PURCHASE OF DEVELOPMENTS RIGHTS BY TH E JOINT VENTURE FROM M/S LAGAD BROTHERS DEVELOPERS. THUS IT WAS OBVIOUS THAT THE MARKET VALUE OF LAND COST WAS AT AROUND RS. 7,558/ - P ER SQ. METER. HOWEVER THIS LAND WAS INTRODUCED IN THE BOOKS OF THE J OINT VENTURE AT A LESSER VALUE OF RS. 1000 PER SQ. METER. 02. THE JOINT VENTURE HAS DEVELOPED A PROJECT ON THE LAND TAKEN FROM LAGAD BROTHERS & DEVELOPERS ON WHICH DEDUCTION U/S 80I B(10) HAS BEEN CLAIMED. BY ADOPTING A MUCH LESSER VALUE FOR LAN D THAN THE MARKET VALUE OF LAND IN THE BOOKS OF THE JOINT VENTU RE, THERE IS AN INFLATION OF EXEMPT INCOME(INCOME ON WHICH DEDUCTIO N U/S 80IB IS CLAIMED). AS THE LAND HAS BEEN PURCHASED FROM THE JOIN T VENTURE PARTNER, PROVISIONS OF SECTION 80IA(10) ARE SQUARELY A PPLICABLE. ON THE FACTS IT IS CLEAR THAT THERE IS AN INFLATION OF E XEMPT INCOME BY SUPPRESSING THE LAND COST. DURING THE YEAR THE ASSESSEE HAS CLAIMED A DEDUCTION U/S 80IB OF RS.15,93,67,320/-. IF LAND COST WAS CLAIMED BASED ON THE MARKET VALUE OR ON THE BASIS OF ACTUAL PA YMENT THE CLAIM 21 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 OF DEDUCTION U/S 80IB WOULD HAVE BEEN MUCH LOWER THA N ONE DONE BY THE ASSESSEE IN ITS RETURNS OF INCOME. AS PER THE PROVISION S OF SECTION 80IA(10) AND ON FACTS AT LEAST A PART OF THIS CLAIM OF DEDUCTION U/ S 80IB(10), WHICH MAY RUN IN TO CRORES CAN BE DISALLOWE D BY THE ASSESSING OFFICER. 03. THEREFORE, ON FACTS I AM SATISFIED THAT THERE IS EX CESS CLAIM OF DEDUCTION U/ S 80IB(10) AND SUCH A CLAIM IS MORE THAN RS. 1 LAKH. THEREFORE I AM OF THE VIEW THAT INCOME ASSESSABLE TO TAX IN EXCESS OF RS. 1,00,000/-HAS ESCAPED ASSESSMENT IN THE CASE OF JOINT V ENTURE M/S DARODE JOG LAGAD VENTURE FOR THE YEAR UNDER CONSI DERATION. IN VIEW OF THIS, THE CASE OF THE ASSESSEE IS A FIT CASE FOR ISSU E OF NOTICE U/ S 148 OF INCOME TAX ACT, 1961.' 24. AFTER RECORDING THE ABOVE REASON, THE AO IN THE ORD ER PASSED U/S.143(3) R.W.S.147 HAS ACCEPTED THE STATUS OF T HE ASSESSEE AS AOP AND THEREAFTER ALLOWED THE CLAIM OF DEDU CTION U/S.80IB(10) TO THE EXTENT OF RS.2,66,30,721/- TO THE AOP. SIMILARLY, THE AO IN THE ORDER PASSED U/S.143(3) VIDE ORDER DATED 31-03-2015 FOR A.Y. 2012-13 HAS ACCEPTED THE STATUS OF THE ASSESSEE AS AOP AND ALLOWED THE DEDUCTION OF RS.26,85,247 /- U/S.80IB(10) OF THE I.T. ACT. IT MAY BE PERTINENT TO MEN TION HERE THAT THE ORDERS FOR A.Y. 2011-12 AND 2012-13 ARE PASSE D AFTER THE ORDER FOR A.Y. 2007-08 WHERE THE STATUS OF THE ASSESSEE IS DISPUTED. 25. WE FIND DARODE JOG LAGAD VENTURE HAS BEEN ALLOTTED T HE PAN BEARING NO. AAAAD4381Q. THE ASSESSEE HAS BEEN REG ISTERED VIDE MAHARASHTRA VALUE ADDED TAX, 2002 AND CERTIFICATE O F REGISTRATION HAS BEEN ALLOTTED TO IT, A COPY OF WHICH IS PLAC ED AT PAGE 63 OF THE PAPER BOOK AND THE TAX PAYER IDENTIFICATIO N NO. 27370925367V. THE CONSTITUTION OF THE ASSESSEE HAS BEE N STATED AS JOINT VENTURE. SIMILARLY, THE ASSESSEE HAS BEEN REGISTE RED UNDER THE CENTRAL SALES TAX (REGISTRATION IN TURNOVER) RULE S, 1957. WE FIND BEFORE THE AO THE ASSESSEE VIDE DATED 04- 05-2011 HAD CATEGORICALLY STATED THAT THE SEIZED DOCUMENTS BELO NGING TO 22 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 DARODE JOG LAGAD VENTURES WHICH IS A JOINT VENTURE BETWE EN DARODE JOG AND ASSOCIATES AND LAGAD BROTHERS DEVELOPER S. FROM THE COPY OF THE SAMPLE SALE DEED BETWEEN DARODE JOG LAG AD VENTURES-M/S. SNEHA CHANDRAKANT KUDAL AND C.P. KUDAL HU F, PURCHASERS WE FIND THE JOINT VENTURE HAS SOLD THE FLAT A S SELLER. WE FURTHER FIND FROM THE COPY OF THE CAPITAL ACCOUNT OF T HE PARTNERS TO THE JOINT VENTURE THAT THE PROFIT HAS BEEN SHARED BY THE 2 MEMBERS AS PER THE SUPPLEMENTARY AGREEMENT DAT ED 02-05- 2010 WHICH IS 20% TO DARODE JOG AND ASSOCIATES AND 80% TO LAGAD BROTHERS DEVELOPERS. ALTHOUGH THE SUPPLEMENTARY DEED WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPEAL PROCEEDINGS EXPLAINING THAT THE SAME WAS NECESSAR Y AS THERE WERE CERTAIN AMBIGUITY IN THE ORIGINAL AGREEMENT R EGARDING SHARING OF PROFIT BY THE 2 PARTIES FOR WHICH THE SUPPLEMENT ARY AGREEMENT WAS MADE FOR BRINGING CLARITY, WE FIND THE LOWER AUTHORITIES HAVE IGNORED THE SAME AS AN AFTERTHOUGHT. W E FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NOTHING WRONG IN REVISING A CONTRACT FOR THE PUR POSE OF REMOVING THE AMBIGUITY. THERE IS NO BAR IN THE CONTRACT ACT THAT AN AGREEMENT ONCE MADE CANNOT BE REVISED. WE THEREFOR E HOLD THAT THE AO AND THE CIT(A) ARE NOT JUSTIFIED IN REJECTING THE SUPPLEMENTARY AGREEMENT. 26. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARE AND STOCK BROKERS PVT. LTD. REPORTED IN 32 6 ITR 1 HAS HELD THAT A CITIZEN IS FREE TO CARRY ON ITS BUSINESS W ITHIN THE 4 CORNERS OF THE LAW. THAT, MERE TAX PLANNING, WITHOUT ANY M OTIVE TO EVADE TAX THROUGH COLOURABLE DEVICES IS NOT FOUND OPE N EVEN BY THE JUDGEMENT OF THIS COURT IN MC.DOWELL CO. LIMITEDS CASE. 23 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 27. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. INDIRA BALAKRISHNA REPORTED IN 39 ITR 546 HAS HELD AS UNDER : 18. THE AFORESAID DISCUSSION WOULD SHOW THAT ONCE THE T RANSACTION IS GENUINE MERELY BECAUSE IT HAS BEEN ENTERED INTO WIT H A MOTIVE TO AVOID TAX, IT WOULD NOT BECOME A COLOURABLE DEVICE AND CONSEQUENTLY EARN ANY DISQUALIFICATION. THE HON'BLE SUPREME COURT IN THE CONCLUDING PARAS OF ITS JUDGMENT IN AZADI BACHAO ANDO LAN (2003) 263 ITR 706 HAS REJECTED THE SUBMISSION THAT AN ACT, WH ICH IS OTHERWISE VALID IN LAW, CANNOT BE TREATED AS NON EST M ERELY ON THE BASIS OF SOME UNDERLYING MOTIVE SUPPOSEDLY RESULTING IN S OME ECONOMIC DETRIMENT OR PREJUDICE TO THE NATIONAL INT EREST AS PER THE PERCEPTION OF THE REVENUE. THE AFORESAID VIEW LOOKS T O BE THE CORRECT VIEW. IT HAS READY SUPPORT FROM THE DIVISION B ENCH JUDGMENT OF THIS COURT RENDERED IN THE CASE OF SATYA NAND MUNJ AL (2002) 256 ITR 516 (P&H) AND THE DIVISION BENCH JUDGMENT OF THE ORISSA HIGH COURT IN THE CASE OF INDUSTRIAL DEVELOPMENT CORPORATI ON OF ORISSA LTD. VS. CIT (2004) 268 ITR 130 (ORISSA) AND VARIOUS OT HER JUDGEMENTS OF DELHI AND MADRAS HIGH COURTS. 28. WE FIND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SHRAVANEE CONSTRUCTIONS REPORTED IN 81 CCH 253 HAS HELD AS UNDER (SHORT NOTES) : DEDUCTION U/S 80IB(10)-ALLOWABILITY-ASSESSEE, ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL FLATS, PURCHASED AGRICULTURAL LAND, HOWEVER, THE SALE DEED W AS NOT REGISTERED-ASSESSEE ENTERED INTO A MEMORANDUM OF UNDERSTA NDING WITH THE LAND OWNER AND TOOK POSSESSION OF THE LAND-A J OINT DEVELOPMENT AGREEMENT WAS ENTERED INTO BY THE ASSESSEE AS 'CONSENTING WITNESS' WITH (I) THE LAND OWNER AS 'OWNER' ; AND (II) M/S.PURVANKARA PROJECTS LTD., MUMBAI AS 'PROMOTER', T O DEVELOP A RESIDENTIAL APARTMENT ON THE ABOVE LAND-AS PER THE AG REEMENT, THE PROMOTERS WERE TO PAY A CONSIDERATION OF RS.45,00,000/ - AND TO DELIVER 22% OF THE SUPER BUILT AREA TO THE CONSENTIN G WITNESS, NAMELY THE ASSESSEE-AS A CONSEQUENCE OF THE AGREEMENT, THE ASSESSEE GOT THE LAND CONVERTED INTO NON-AGRICULTURAL LAND AND GOT T HE WORK COMMENCEMENT FROM THE MUNICIPAL CORPORATION-OUT OF THE TOTAL 211 FLATS THAT WERE TO BE CONSTRUCTED AS PER THE PROJECTS, 40 FLATS IN DIFFERENT BLOCKS WERE ALLOTTED TO THE ASSESSEE-ASSESSEE SOLD SOME OF THE FLATS AND CLAIMED THE INCOME ON SALE OF THE FLATS AS DEDUCTION U/S 80IB(10) OF THE ACT-AO REJECTED THE CLAIM OF DEDUCT ION ON THE GROUND THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIO NS LAID DOWN IN SECTION 80IB(10)-HELD, IT IS NOT MERELY BUILDING HOUSI NG PROJECT, WHICH ATTRACTS THE PROVISION OF SECTION 80IB(10) BUT D EVELOPING AND BUILDING HOUSING PROJECT, WHICH ATTRACTS THE PROVISION -IN THE ORDER PASSED BY THE CIT (APPEALS), THE DEVELOPMENT AND CONSTR UCTION ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE LISTED-AS IS CLEA R FROM THE JOINT DEVELOPMENT AGREEMENT, THE UNDERTAKING OF DEVELOPING AND BUILDING HOUSING PROJECT WAS JOINTLY UNDERTAKEN BY TH E ASSESSEE AND THE BUILDER- THEREFORE, IN RESPECT OF THE RESIDENTIAL UNITS NUMBERING 24 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 211 IN ALL, THE PERSONS WHO UNDERTOOK THIS UNDERTAKING ARE ENTITLED TO THE BENEFIT OF SECTION 80IB(10) OF THE ACT IN PR OPORTION TO THE SHARE TO WHICH THEY ARE ENTITLED TO IN THE BUILT UP AREA. 29. WE FIND THE BANGALORE BENCH OF THE TRIBUNAL IN THE CAS E OF ABDUL KHADER VS. CIT VIDE ITA NO.57/BANG/2011 ORDER DAT ED 30- 04-2012 FOR A.Y. 2006-07 FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT CITED (SUPRA) HAS HELD AS UNDER : 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTI ES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS A L AND DEVELOPER AND THIS FACT HAS ALSO BEEN ADMITTED BY THE AO IN PARA 2 OF THE ASSESSMENT ORDER DATED 31.12.2008. THE ASSESSEE ENTERED INTO AGREEMENT WITH M/S REDDY STRUCTURES PVT. LTD., FOR DE VELOPMENT OF HOUSING PROJECT SITUATED AT SURVEY NO.26/1, VOLAGERAHA LLI, KENGERI HOBLI, BANGALORE SOUTH TALUK, MEASURING 1 ACRE AND 3 1 GUNTAS. THE ASSESSEE GOT 24% SHARE IN THE SAID PROJECT AND SOLD 49 FLA TS AS MENTIONED IN PAGE NO.6 OF THE ASSESSEES COMPILATION, WH ICH IS THE COPY OF THE BILL AND SALE OF FLAT DURING THE FINANCI AL YEAR 2005-06. THE ASSESSEE ALSO INCURRED CERTAIN EXPENSE FOR ELECTRICITY AN D WATER CONNECTION CONNECTED WITH THE PROJECT AND ALSO MADE PAYMENT TO BWSSB AND KEB. THE ASSESSEE ENTERED INTO AN AGREEMENT W ITH M/S REDDY STRUCTURES PVT. LTD. IN THE SAID AGREEMENT DATE D 3.11.2003, COPY OF WHICH IS PLACED AT PAGE NOS. 1 TO 13 OF THE A SSESSEES PAPER BOOK DATED 28.2.2012, IN THE SAID AGREEMENT, IT IS ME NTIONED AT PAGE NO.2 AS UNDER : WHEREAS THE FIRST IS ENGAGED IN PROPERTY DEVELOPMENT OF THE SCHEDULE PROPERTY HENCE HAD APPLIED FOR CONVERSI ON OF THE SAID SCHEDULE PROPERTY FROM AGRICULTURAL TO RESIDE NTIAL PURPOSE BEFORE THE SPECIAL DEPUTY COMMISSIONER BANGALO RE DISTRICT AND THE SAME WAS ALLOWED BY ITS ORDER VIDE NO. BDS. ALN.SR(S) 26/2002-2003 DATED 28- 12-2002. AND WHEREAS THE FIRST PARTY IS DEVELOPING THE SCHEDULE PROPERTY BY PUTTING UP A RESIDENTIAL HOUSING ENCLAVE AND THE FIRST PARTY HAS ENTERED INTO THIS AGREEMENT WITH THE SECOND PARTY TO UNDERTAKES THE WORK OF DEVELOPMENT OF THE SC HEDULE PROPERTY JOINTLY. 10. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE WAS ENG AGED IN THE PROPERTY DEVELOPMENT AND THIS FACT HAS ALSO BEEN ADMIT TED BY THE AO. THE ASSESSEE GOT HIS AGRICULTURAL LAND CONVERTED FOR NON AGRICULTURAL PURPOSES I.E FOR RESIDENTIAL PURPOSES AND JOINTLY UNDERTOOK THE DEVELOPMENT AND CONSTRUCTION OF THE SCH EDULE PROPERTY BY GETTING PERMISSION AND PLAN SANCTIONED. TH E CLAUSE (4) OF THE AGREEMENT ENTERED BY THE ASSESSEE WITH M/S REDDY STRUCTURES PVT. LTD. STATES AS UNDER : 25 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 IT IS HEREBY AGREED THAT THE FIRST PARTY HAS CONTRIBU TED THE SCHEDULE PROPERTY AS HIS CAPITAL CONTRIBUTION FOR JOIN T DEVELOPMENT & CONSTRUCTION AND THE SECOND PARTY SHALL MAKE INVESTMENT ON SCHEDULE PROPERTY FOR JOINT DEVELOPMENT AND CONSTRUCTION. FIRST PARTY SHALL MAKE INVESTMENT FOR ALL STATUTORY APPROVALS INCLUDING BWSSB, KEB, PLAN SANCTIO N ETC., THE FIRST PARTY SHALL RETAIN 24% OF THE BUILT UP AREA IN THE SCHEDULE PROPERTY ALONG WITH 24% CAR PARKING. BOTH T HE PARTIES TO THIS AGREEMENT SHALL BE ENTITLED TO ALL COM MON RIGHTS AND FACILITIES IN THE COMMON AREAS OF THE BUILD ING PROPORTIONALLY AS PER THEIR RESPECTIVE SHARES. 11. FROM THE ABOVE CLAUSE, IT IS CLEAR THAT THE ASSESSEE CONTRIBUTED HIS PROPERTY IN LIEU OF CAPITAL CONTRIBUTION FOR JOI NT DEVELOPMENT AND CONSTRUCTION AND THE SECOND PARTY I.E M/S REDDY STRUCT URES PVT. LTD., WAS REQUIRED TO MAKE INVESTMENT FOR JOINT DEVELOPMENT AND CONSTRUCTION, WHEREAS THE ASSESSEE WAS REQUIRED TO MAKE INVESTMENT ON SCHEDULE PROPERTY BUT THE ASSESSEE WAS REQU IRED TO MAKE INVESTMENT FOR ALL STATUTORY APPROVALS INCLUDING BWSSB, KEB, PLAN SANCTION ETC. AND IN SUCH TYPE OF CASES, THE APPRO VAL AND PLAN SANCTION IS THE FIRST AND INITIAL STAGE WHICH WAS TO BE TAKEN BY THE ASSESSEE AND FOR THAT PURPOSE THE ASSESSEE WAS REQUIRED TO M AKE INVESTMENTS. SO, IT CANNOT BE SAID THAT THE ASSESSEE DID N OT MAKE ANY INVESTMENT FOR THE PROJECT UNDER CONSIDERATION. 12. IN THE PRESENT CASE, THE AO DENIED THE DEDUCTION TO THE ASSESSEE BY STATING THAT THE ASSESSEE ONLY CONTRIBUTED THE LAND AND HAD NOT CARRIED OUT ANY CONSTRUCTION ACTIVITIES. NOW, WE HAVE TO ANALYZE THE PROVISION CONTAINED IN SEC. 80IB(10) OF THE ACT. THE SAID PROVISION READ AS UNDER : THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEF ORE THE 31ST DAY OF MAR, 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVI OUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJEC T 13. THE EXPLANATION HAS BEEN INSERTED TO SUB SEC. (10) OF SEC. 80IB W.E.F 1.4.2010 WITH RETROSPECTIVE EFFECT FROM 1 .4.2001 VIDE FINANCE (NO.2) ACT 2009. THE SAID EXPLANATION R EAD AS UNDER : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THA T NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UNDER TAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STAT E GOVERNMENT). 14. ON A JOINT READING OF SUB. SEC (10) OF SEC. 80IB A ND EXPLANATION THERETO IT IS CLEAR THAT DEDUCTION AS IS ALLOWABLE TO AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT APPROVED, IT IS NOWHERE MENTIONED THAT FOR CLAIMING THIS DEDUCTION, CONSTRUCT ION HAS TO BE CARRIED OUT BY THE UNDERTAKER, MOREOVER THE EXPLANA TION CLARIFIED 26 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THAT ANY UNDERTAKING WHICH EXECUTED HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON IS NOT ELIGIBLE FOR CL AIMING THIS DEDUCTION WHICH CLEARLY SHOWS EVEN IF ANY UNDERTAKING IS CONSTRUCTING THE HOUSING PROJECT UNDER A WORKS CONTRAC T ENTERED BY A PERSON IS NOT ELIGIBLE FOR DEDUCTION. THE ONLY CON DITION FOR CLAIMING THE DEDUCTION U/S 80IB(10) IS THAT THE UNDERTAKING I S DEVELOPING AND BUILDING, HOUSING PROJECTS APPROVED BY A LOCAL AUTHOR ITY. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE DEPARTMENT THAT THE PROJECT WAS NOT APPROVED OR DEVELOPED AND BUILT BY THE ASSESSEE. TH E ONLY REASON FOR DENYING THE DEDUCTION U/S 80IB(10) OF THE ACT TO THE ASSESSEE WAS THAT THE ASSESSEE HAD NOT CARRIED OUT ANY CONSTR UCTION ACTIVITY, IN OUR OPINION THAT REASON IS NOT SUFFICIENT TO DENY DEDUCTION U/S 80IB(10) OF THE ACT. IN THE PRESENT C ASE, THE ASSESSEE MADE THE CONTRIBUTION OF HIS CAPITAL IN THE SHAPE OF LAND AND INCURRED THE INITIAL EXPENSES FOR DEVELOPMENT AND BUI LDING OF HOUSING PROJECT LIKE SANCTION OF PLAN, GETTING THE EL ECTRICITY AND WATER CONNECTION BY MAKING THE PAYMENTS TO BWSSB AN D KEB ETC. THEREFORE, MERELY ON THIS BASIS THAT THE ASSESSEE DID NOT CONSTRUCT HIMSELF WAS NOT A GROUND TO DENY THE DEDUCTION U/S 80I B(10), PARTICULARLY WHEN THE ASSESSEE HAD UNDERTAKEN THE OTHER WORK LIKE MAKING THE LAND USEFUL BY GETTING IT CONVERTED INTO NON AGRICULTURAL PURPOSE AND GETTING PLAN SANCTIONED. ON A SIMILAR ISSUE, THEIR LORDSHIPS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S SHRAVANEE CONSTRUCTION (CITED SUPRA) AT PARA 8 OF THE JUDGMENT DATED 28TH FEB, 2012 IN ITA NO.421 AND 422 OF 2009 OBSERVED AS UNDER: IN TERMS OF THE AGREEMENT, WHICH ARE NOT IN DISPUTE, THE ASSESSEE NOT ONLY UNDERTOOK THE AFORESAID DEVELOPMENT ACTIVITIES ON THE LAND IN QUESTION, BUT IN FACT, HE E NTERED INTO AN AGREEMENT OF SALE WITH THE OWNERS OF THE LAND, PAI D THE ENTIRE CONSIDERATION BUT HE DID NOT TAKE A REGISTERED SALE DEED IN HIS NAME. ON THE CONTRARY, THE PROCEDURE ADO PTED IS HE IN TURN ENTERED INTO A JOINT DEVELOPMENT AGREEME NT WITH THE BUILDER AND THE OWNER OF THE LAND WAS MADE A PAR TY TO THE SAID PROCEEDINGS. THUS, THE ASSESSEE CONTRIBUTED THE LAND, UNDERTOOK THE AFORESAID DEVELOPMENT ACTIVITIES IN THE SAID LAND AND THUS, COMPLIED WITH ALL OTHER CONDITIONS, WH ICH HAVE TO BE FULFILLED BEFORE CLAIMING BENEFIT U/S 80IB(10) OF THE ACT. THE BUILDER HAS INVESTED THE MONEY IN THE CONSTRUCTION . IT IS AFTER COMPLETION OF THE BUILDING IN TERMS OF THE AGR EEMENT, THE ASSESSEE WAS GIVEN 22% SHARE OF THE BUILDING AREA. IT IS AFTER SALE OF THE BUILT AREA, IN TERMS OF SEC. 80IB(10 ), THE ASSESSEE IS CLAIMING DEDUCTION. AS IS CLEAR FROM THE JOIN T DEVELOPMENT AGREEMENT, THE UNDERTAKING OF DEVELOPIN G AND BUILDING HOUSING PROJECT WAS JOINTLY UNDERTAKEN BY TH E ASSESSEE AND THE BUILDER. THEREFORE, IN RESPECT OF THE RESIDENTIAL UNITS NUMBERING 211 IN ALL, THE PERSONS WH O UNDERTOOK THIS UNDERTAKING ARE ENTITLED TO THE BENEF IT OF SEC. 80IB(10) OF THE ACT IN PROPORTION TO THE SHARE TO WH ICH THEY ARE ENTITLED TO IN THE BUILT UP AREA. 15. IN THE PRESENT CASE ALSO, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S REDDY STRUCTURES PVT. LTD., FOR DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT ON THE LAND BELONGING TO HIM. TH E ASSESSEE CONTRIBUTED THE LAND, UNDERTOOK THE DEVELOPMENTAL A CTIVITIES IN THE 27 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 SAID LAND AND THUS COMPLIED WITH ALL OTHER CONDITIONS WHICH HAVE TO BE FULFILLED BEFORE CLAIMING THE BENEFIT U/S 80IB(10 ) OF THE ACT. IN THE PRESENT CASE, IT WAS AGREED THAT AFTER COMPLETION OF T HE BUILDING IN TERMS OF THE AGREEMENT, THE ASSESSEE WAS GIVEN 24% OF THE SHARE OF THE BUILDING AREA WHICH HE WAS ENTITLED TO SELL TO VA RIOUS PERSONS, IT WAS ALSO CLEAR FROM THE JOINT DEVELOPMENT AGREEMENT T HAT THE UNDERTAKING OF DEVELOPING AND BUILDING HOUSING PROJE CT WAS JOINTLY UNDERTAKEN BY THE ASSESSEE AND M/S REDDY STRUCTURES PVT. LTD., THEREFORE, THE ASSESSEE WAS ENTITLED FOR THE BENEFIT OF DEDUCTION U/S 80IB(10) OF THE ACT. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE SAID REFERRED CASE OF M/S SHRAVANEE CONSTRUCTION (CITED SUPRA), SET ASIDE THE IM PUGNED ORDER PASSED BY THE CIT(A) AND DIRECT THE AO TO ALLOW THE D EDUCTION U/S 80IB(10) OF THE ACT TO THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 30. SIMILAR VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF TH E TRIBUNAL IN THE CASE OF ACIT VS. BOMBAY REAL ESTATE DEVELOPMENT COMPANY PVT. LTD. REPORTED IN 64 DTR (TRIBUN AL) 137 WHERE IT HAS BEEN HELD AS UNDER : ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH ANOTHER COMPANY FOR JOINTLY DEVELOPING A HOUSING PROJECT ON ITS LAND, UNDERTAKING THE RESPONSIBILITY OF OBTAINING ALL STATU TORY CLEARANCES, PERMISSIONS, ETC. FOR PUTTING UP THE HOUSIN G PROJECT ON THE LAND AS WELL AS THE RESPONSIBILITY TO REMOVE ALL S TRUCTURES AND UNAUTHORIZED OCCUPANTS OF THE LAND, AND AGREEING TO SHARE THE GROSS SALE PROCEEDS OF THE HOUSING PROJECT WITH THE OTHE R COMPANY IN AN AGREED RATIO, THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE ACTIVITIES RELATING TO DEVELOPMENT OF THE HOUSING PRO JECT AND, THEREFORE, IT IS TO BE TREATED AS A DEVELOPER ENTITLE D TO DEDUCTION U/S.80IB(10). 31. SINCE IN THEIR OWN ACTION THE REVENUE IN A.YRS. 2011-1 2 AND 2012-13 HAS ACCEPTED THE STATUS OF THE ASSESSEE AS AOP AND ALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10), THEREFORE, WE DO N OT FIND ANY REASON AS TO WHY THE CLAIM OF THE ASSESSEE THAT THE AGREEMENT BETWEEN DARODE JOG AND ASSOCIATES AND LAGAD BROTHERS DEVELOPERS CONSTITUTES AN AOP SHOULD NOT BE A LLOWED. IN VIEW OF OUR ABOVE DISCUSSION WE HOLD THAT THE AGREEME NT BETWEEN DARODE JOG AND ASSOCIATES AND LAGAD BROTHERS 28 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 DEVELOPERS DID CONSTITUTE AN AOP AND NOT A MERE DEVELOP MENT AGREEMENT. THEREFORE, THE ASSESSEE HAS RIGHTLY CLAIMED T HE STATUS OF THE ASSESSEE AS AOP. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ACCEPT THE STATUS OF THE ASSESSEE AS AOP. 32. IDENTICAL GROUNDS RAISED BY THE ASSESSEE IN ITA NOS . 2039 TO 2041/PN/2013 FOR A.YRS. 2008-09 TO 2010-11. GROUNDS RAISED BY THE ASSESSEE ARE IDENTICAL TO THAT OF GROUNDS IN ITA NO.2038/PN/2013 FOR A.Y. 2007-08 GROUNDS OF APPEAL NO.2 AN D 3 BY THE ASSESSEE IN THE ABOVE APPEALS ARE ALLOWED. 33. AS MENTIONED EARLIER, THE ASSESSEE HAS NOT PRESSED GROUNDS OF APPEAL NO.1 IN THE ABOVE 3 APPEALS. ACCORDINGLY, THE GR OUNDS OF APPEAL NO.1 CHALLENGING THE VALIDITY OF THE ASSESSMENT U/S.143(3) R.W.S.153C IS DISMISSED. THE ABOVE APPEALS FILED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. ITA NO.310 TO 312/PN/2014 (A.Y. 2007-08 TO 2009-10) : 34. GROUNDS RAISED BY THE ASSESSEEIN THE ABOVE APPEALS ARE AS UNDER: GROUNDS IN ITA NO.310/PN/2014 (A.Y. 2007-08) : 1. THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO OF TAXING RS.82,15,910/- AS TAXABLE IN THE YEAR 2006-07 WITHOUT APPRECIATING THE FOLLOWING IMPORTANT FACTS : A. THAT OBTAINING NA ORDER WAS A RELEVANT FACTOR AND CONSTRUCTION ACTIVITY COULD NOT BE STARTED WITHOUT IT . B. THAT THERE WAS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AS POSSESSION WAS NOT HANDED OVER . 2. THE LD.CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION U/S.80IB(10), AS THE AMOUNT RECEIVED ON TRANSFER OF LA ND SHOULD ALSO BE HELD TO BE ELIGIBLE FOR DEDUCTION U/S.80IB(10) ON THE GROUND THAT 29 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THE APPELLANT HAS NOTHING TO DO WITH THE DEVELOPMENT OF THE HOUSING PROJECT. 3. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE A PPELLANT ULTIMATELY IS TO RECEIVE 80% OF THE PROFIT AS PER THE SUPPLEMENTARY DEED AND THE AMOUNT RECEIVED TOWARDS LAND IS THE PA RT OF 80% OF THE PROFIT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. GROUNDS IN ITA NO.311/PN/2014 (A.Y. 2008-09) : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER- ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE AO CONSIDERING THE WITHDRAWALS OF RS. 27887850/- FROM JOI NT VENTURE AS A TAXABLE INCOME IN THE HANDS OF THE APPELLANT AS BUSIN ESS INCOME. 2. THE LEARNED CIT(A) FAILS TO APPRECIATE THAT THE T RUE ESSENCE OF THE AGREEMENT, WHICH REFERS TO AN AGREED SHARING OF NET P ROFIT COMPUTED ON THE BASIS OF CERTAIN PERCENTAGE OF GROSS REVENUE AFTER MAKI NG CERTAIN ADJUSTMENT IS VERY MUCH PERMISSIBLE UNDER THE PROVISIONS OF LAW. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A CTION OF THE AO FOR NOT ALLOWING DEDUCTION U/S 80IB(10) ON THE GROUND TH AT APPELLANT IS NOT DEVELOPER OF THE PROJECT. 4. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT ULTIMATELY IS TO RECEIVE 80% OF THE PROFIT AS PER SUPP LEMENTARY DEED AND THE AMOUNT RECEIVED TOWARDS LAND IS THE PART OF 80% OF TH E PROFIT. 5. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE C ONCLUSION DRAWN BY THE AO THAT THE APPELLANT HAS GIVEN THE PROPERTY FOR DEVELOPMENT AND EXECUTION OF SUPPLEMENTARY AGREEMENT IS A DEVICE TO A VOID PAYMENT OF LEGITIMATE TAXES. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. GROUNDS IN ITA NO.312/PN/2014 (A.Y. 2009-10) : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER- ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE AO CONSIDERING THE WITHDRAWALS OF RS. 7,32,29,597/- FROM JOINT VENTURE AS A TAXABLE INCOME IN THE HANDS OF THE APPELLANT AS BUSIN ESS INCOME. 2. THE LEARNED CIT(A) FAILS TO APPRECIATE THAT THE T RUE ESSENCE OF THE AGREEMENT, WHICH REFERS TO AN AGREED SHARING OF NET P ROFIT COMPUTED ON THE BASIS OF CERTAIN PERCENTAGE OF GROSS REVENUE AFTER MAKI NG CERTAIN ADJUSTMENT IS VERY MUCH PERMISSIBLE UNDER THE PROVISIONS OF LAW. 30 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A CTION OF THE AO FOR NOT ALLOWING DEDUCTION U/S 80IB(10) ON THE GROUND TH AT APPELLANT IS NOT DEVELOPER OF THE PROJECT. 4. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT ULTIMATELY IS TO RECEIVE 80% OF THE PROFIT AS PER SUPP LEMENTARY DEED AND THE AMOUNT RECEIVED TOWARDS LAND IS THE PART OF 80% OF T HE PROFIT. 5. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE C ONCLUSION DRAWN BY THE AO THAT THE APPELLANT HAS GIVEN THE PROPERTY FOR DEVELOPMENT AND EXECUTION OF SUPPLEMENTARY AGREEMENT IS A DEVICE TO A VOID PAYMENT OF LEGITIMATE TAXES. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 35. FIRST WE TAKE UP ITA NO.310/PN/2014 FOR A.Y. 2007-08 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PA RTNERSHIP FIRM ENGAGED IN THE BUSINESS OF ACTIVITIES RELATED TO REAL ES TATE. A SEARCH ACTION U/S.132 OF THE I.T. ACT WAS CONDUCTED IN T HE CASE OF DARODE JOG AND ASSOCIATES GROUP ON 29-04-2009. DURING THE SAID SEARCH ACTION A JOINT VENTURE AGREEMENT BETWEEN THE A SSESSEE AND DARODE JOG AND ASSOCIATES WAS SIEZED. IN RESPONSE TO NOTICE U/S.148 THE ASSESSEE REQUESTED TO TREAT THE RETURN O F INCOME FILED ORIGINALLY ON 18-08-2008 AS RETURN IN RESPONSE TO NOTICE U/S.148 WHERE THE TOTAL INCOME WAS DECLARED AT NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSE E FIRM M/S. LAGAD BROTHERS DEVELOPERS CAME INTO EXISTENCE VIDE A PA RTNERSHIP DEED DATED 15/12/2006. THE FIRM ACQUIRED DEVELOPMENT RIGH TS OVER THE PROPERTY ADMEASURING TWO HECTORS AND TWO AR ES (202 R) SITUATED AT SR. NO. 12, VADGAON KHURD VIDE AN AGREEMENT DATED 29/12/2006 FROM SHRI LAXMAN NARAYAN LAGAD & OTHER THIR TY ONE (LAND OWNERS) FOR A CONSIDERATION OF RS. 1,15,00,000/-. THE TRANSACTION WAS REGISTERED IN THE OFFICE OF SUB-REGISTRAR H AVELI NO. 16 AT S. NO. 9286 ON 29/12/2006. IN PURSUANCE OF THIS A GREEMENT THE LAND OWNERS HAVE EXECUTED A POWER OF ATTORNEY WHIC H IS ALSO 31 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 REGISTERED AT S.NO. 9287 ON 30/12/2006. IN THE POWER OF ATTORNEY THE LAND OWNERS HAVE APPOINTED TWO PARTNERS OF THE FIRM M/S. LAGAD BROTHERS DEVELOPERS AS THEIR CONSTITUTED ATTORNE Y. AS PER THIS POWER OF ATTORNEY THE FIRM GETS ABSOLUTE AUTHORITY & RIGHT TO DEVELOP THE SAID LAND. 36. ON THE VERY DATE ON WHICH THE FIRM ACQUIRED DEVELOPM ENT RIGHTS OVER THE PROPERTY I.E. 29/12/2006, THE FIRM ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S. DARODE JOG & ASSOCIATES WHICH IS ALSO REGISTERED IN THE OFFICE OF SUB-REGISTER HAVELI N O. 16. AS PER THIS JOINT VENTURE DEVELOPMENT AGREEMENT THE J.V. P ARTNER M/S. DARODE JOG ASSOCIATES IS RESPONSIBLE FOR THE CONSTRUC TION ACTIVITY AND THE ASSESSEE IS SUPPOSED TO RECEIVE 40% OF THE GROSS SALES PROCEEDS. J.V. PARTNER M/S. DARODE JOG ASSOCIATES IS A LSO SUPPOSED TO PAY A SECURITY DEPOSIT OF RS. 2,00,00,000/-. FO R THE PURPOSE OF JOINT VENTURE THE ASSESSEE HAS DETERMINED TH E VALUE OF LAND AT RS. 2,00,00,000/- AND IT WAS PRESUMED TO HAVE BEE N RECEIVED BY THE ASSESSEE OUT OF 40% GROSS SALES PROCE EDS TO BE RECEIVED BY IT. THE ASSESSEE M/S. LAGAD BROTHERS DEVELOPERS IS NOT LIABLE TO SUFFER ANY LOSS. ALL THE FACTS BROUGHT OUT ABOVE HA VE BEEN REDUCED IN WRITING IN THE JOINT VENTURE AGREEMENT SEIZED D URING THE COURSE OF SEARCH IN THE CASE OF DARODE JOG GROUP. 37. AS PER THE JOINT VENTURE AGREEMENT, THE OTHER JOINT V ENTURE PARTNER M/S. DARODE JOG ASSOCIATES WAS SUPPOSED TO DE VELOP THE PROJECT OUT OF ITS SHARE OF 60 % OF THE RECEIPT. THUS IT IS VERY CLEAR THAT DARODE JOG ASSOCIATES WAS THE DEVELOPER OF THE PRO JECT AND THE ASSESSEE HAS NOTHING TO DO WITH THE DEVELOPMENT OF THE HOUSING PROJECT. FOR TRANSFERRING THE DEVELOPMENT RIGHTS THE ASSESSEE WAS SUPPOSED TO GET 40 % OF THE SALE PROCEED S OF THE 32 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 PROJECT. THE ASSESSEE FIRM RECEIVED THE SAME FROM TIME T O TIME. THE TOTAL RECEIPTS RECEIVED BY THE ASSESSEE FROM THE JOIN T VENTURE OVER A PERIOD OF YEARS ON ACCOUNT OF DEVELOPMENT RIGHTS IS AT RS.30,20,41,133/-. 38. ON THE BASIS OF THE ABOVE THE AO NOTED THAT THE ASSESSEE HAS PURCHASED THE DEVELOPMENT RIGHTS ON 29-12-2006 AN D HAS TRANSFERRED THE SAME TO THE JOINT VENTURE FOR A CONSIDER ATION WHICH IS MUCH HIGHER THAN THE COST. HE NOTED THAT THE COST OF PURCHASE OF DEVELOPMENT RIGHTS IS RS.1,15,00,000/- WHICH HA S BEEN TRANSFERRED TO THE JOINT VENTURE ON THE VERY DAY OF ITS PURCHASE 29-12-2006 AND THE JOINT VENTURE HAD ADOPTED THE VALUE OF DEVELOPMENT RIGHTS AT RS.2 CRORES IN ITS BOOKS ON 29-12- 2006. THUS, THERE IS OBVIOUS ADVENTURE IN THE NATURE O F TRADE ON THE PART OF THE ASSESSEE FOR PROFIT. HE NOTED THAT ON A CCOUNT OF THIS TRANSFER IRRESPECTIVE OF THE VALUE OF LAND/DEVELOPMENT RIGHTS ADOPTED BY THE JOINT VENTURE (JV) IN ITS BOOKS, THE ASSES SEE FIRM IS ENTITLED FOR 40% OF SALE PROCEEDS OF THE PROJECT DEVELO PED BY THE JOINT VENTURE WHEREIN THE ASSESSEE IS THE PARTNER. AS PE R THE J.V. AGREEMENT THE OTHER JOINT VENTURE PARTNER I.E. DARODE JOG ASSOCIATES IS SUPPOSED TO RECEIVE 60% OF THE SALE PROCEE DS OF THE PROJECT DEVELOPED BY IT & IS SUPPOSED TO DEVELOP THE PR OJECT OUT OF ITS SHARE OF RECEIPT OF 60%. IN VIEW OF THESE FACTS THE ASS ESSEE WAS ASKED TO CLARIFY AS TO WHY RS. 85,00,000 (RS. 200,00,000/- - RS. 1,15,00,000/-) SHOULD NOT BE TAXED AS ITS INCOME ON ACCOU NT OF TRANSFER OF DEVELOPMENT RIGHTS FOR THE YEAR UNDER CONSIDE RATION. IN RESPONSE TO THE SAME THE ASSESSEE VIDE PARAS 3 & 4 O F THEIR LETTER DATED 17/11/2011 HAVE ADMITTED THAT THE INCOME OF RS. 85,00,000/- HAS BEEN OFFERED TO TAX DURING ASST. YEAR 200 8-09. 33 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 THE INCOME OF RS. 85,00,000/- WAS OFFERED TO TAX DURING ASS T. YEAR 2008-09 ON THE PLEA THAT NA ORDER FOR THE LAND WA S RECEIVED DURING THE ASST. YEAR 2008-09. THUS IT IS VERY CLEAR THA T THERE IS NO DISPUTE ON THE QUANTUM OF INCOME BUT THERE IS A DIFFERE NCE OF OPINION ON THE ISSUE OF YEAR OF TAXABILITY. 39. IN VIEW OF THE ABOVE, THE AO HELD THAT THERE IS ADVE NTURE IN THE NATURE OF TRADE FOR PROFIT IN THE CASE OF THE ASSESSE E FIRM DURING THE YEAR UNDER CONSIDERATION. THEREFORE, ISSUES LIKE GETTING N.A. AT A LATER STAGE IS IRRELEVANT. HE ACCORDINGL Y HELD THAT THE PROFIT ON ACCOUNT OF TRANSFER OF DEVELOPMENT RIGHTS NEEDS TO BE TAXED AS INCOME OF THE YEAR UNDER CONSIDERATION. 40. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT UNDER THE JVA, THE ASSESSEE WAS SADDLED WITH CERTAIN DUTIES AND RESPON SIBILITIES WHICH ARE MENTIONED ON PAGE 10 TO 14 OF THE SAID AGREEM ENT. THE BASIC RESPONSIBILITY WAS TO HAVE THE LAND CONVERTED INTO N ON- AGRICULTURAL (NA) LAND WITH CLEAR TITLE. WITHOUT THESE CLEARANC ES, TRANSFER OF THE LAND TO THE JV WAS MEANINGLESS AND CONSTR UCTION ACTIVITY COULD NOT HAVE STARTED. IT WAS FURTHER CONTENDE D THAT IT WAS CLEAR FROM THE AUDITED STATEMENTS OF ACCOUNT THAT N O CONSTRUCTION ACTIVITY HAS STARTED DURING THE YEAR EXCEP T FOR THE PAYMENT OF DEVELOPMENT CHARGES AND BHOOMI POOJA EXPENSES. MERE INCURRING OF EXPENSES ON BHOOMI POOJA, BOUNDARY WALL ETC., DID NOT AMOUNT TO COMMENCEMENT OF CONSTRUCTION ACTIVITY. FOR THIS PROPOSITION, THE ASSESSEE HAD RELIED UPON THE DECISION IN THE CASE OF NIRMITEE DEVELOPERS 95 TTJ 1117. BASED ON THESE FACTS, THE ASSESSEE CONTENDED THAT THERE WAS NO EXTINGUISHME NT OF RIGHTS OR RECEIPT OF CONSIDERATION AND THE ASSESSEE HAD ALSO NOT PERFORMED ITS OBLIGATIONS AS ENVISAGED UNDER SECTION 53A O F THE 34 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 TRANSFER OF PROPERTY ACT. THE ASSESSEE ALSO RELIED UPON THE DECISION IN CIT V. EASTERN CERAMICS LTD. REPORTED IN 38 TAXMAN.COM 68, WHEREIN IT HAS BEEN HELD THAT WHERE NO POSSESSION OF THE FACTORY LAND WAS GIVEN TO THE ASSESSEE UNDER THE JOINT DEVELOPMENT AGREEMENT AND NO CONSTRUCTION ACTIVITY HAD COMMENCED, THERE IS NO OCCASION FOR THE APPLICATION OF S. 2(4 7). IN THE ASSESSEE'S CASE TOO, IT WAS CONTENDED THAT DEVELOP MENT ACTIVITY COULD NOT COMMENCE IN THE ABSENCE OF N.A. ORDER W HICH WAS RECEIVED ONLY ON 14/05/2007. IT WAS ALSO CONTENDED THAT THE AO HAS MADE THE ADDITION ONLY BECAUSE THE ASSESSEE EN TERED INTO THE JV ON 29/12/2006 BUT MERELY BECAUSE THE ASSESSEE ENTERED INTO THE SAID JV ON THAT DATE WITHOUT PERFORMING THE DUTIE S IT COULD NOT BE TREATED AS 'TRANSFER' WITHIN THE MEANING OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IT WAS ALSO CONTEND ED THAT THE CO-VENTURER M/S DARODE JOG ASSOCIATES WAS NOT A TRANSFEREE. CLAUSE 9 OF THE JV AGREEMENT CLEARLY MENTIONS THAT THE CO- VENTURER HAS NOT TAKEN POSSESSION BUT MERELY GOT A LIC ENSE TO ENTER AND DEVELOP THE PLOT. IN FACT, THERE IS NO QUESTION OF HANDING OVER POSSESSION TO ANYBODY SINCE THE ASSESSEE ITSELF IS A CO- VENTURER AND THE JV IS NOT A NEW LEGAL ENTITY BUT AN EXT ENSION OF THE ASSESSEE ITSELF. IT WAS ALSO ARGUED THAT THE ASSESSE E HAD NOT RECEIVED ANY SALE CONSIDERATION ON THE DATE OF EXECUTION OF JVA, NO CONSTRUCTION ACTIVITY HAD COMMENCED, AND THE N.A. ORD ER WAS OBTAINED ONLY ON 14/05/2007. FOR ALL THESE REASONS SECTION 53A OF THE TRANSFER OF PROPERTY ACT WERE NOT ATTRACTED AND IT COULD NOT BE SAID THAT THERE WAS A TRANSFER OR AN ADVENTURE IN THE NATURE OF TRADE. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE RELIED UPON THE DECISION OF ITAT HYDERABAD IN S. RANJITH REDDY REPORTED IN 95 DTR 283. 35 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 41. HOWEVER, THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO. THE ALTERNATE CLAIM FOR ALLOWING DEDUCTION U/S.80IB(10) ON THE AMOUNT TO BE RECEIVED BY THE ASSESSEE AS PER THE SUPPLEMENTARY DEED WAS ALSO DISMISSED BY THE CIT(A). 42. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 43. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUB MITTED THAT THE ASSESSEE IS A PARTNER OF THE JOINT VENTURE, I.E. D ARODE JOG LAGAD VENTURES. THEREFORE, THE AMOUNT RECEIVED FROM THE JOINT VENTURE IS NOT TAXABLE. SINCE THE ASSESSEE HAS WITHDRAW N SOME AMOUNT FROM ITS CAPITAL ACCOUNT, THEREFORE, THE ASSESSEE I S NOT LIABLE TO ANY TAX. IT IS ONLY THE PROFIT THAT CAN BE TAXE D AND NOT THE WITHDRAWAL. IN HIS ALTERNATE CONTENTION HE SUBMITTED THAT DEDUCTION U/S.80IB(10) SHOULD BE ALLOWED TO THE ASSESSEE. 44. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND WHILE SUPPORTING THE ORDER OF THE AO AND THE CIT(A) SUBMIT TED THAT THE FIRM CAME INTO EXISTENCE ON 15-12-2006, ACQUIRED DEVELOPMENT RIGHTS ON 29-12-2006 AND ENTERED INTO JOINT VENTURE AGREEMENT ON THE SAME DAY THEREOF GIVING DARODE JOG AND ASSOCIATES THE RIGHT TO DEVELOP THE PROPERTY FOR A CONS IDERATION OF RS.2 CRORE. DARODE JOG ASSOCIATE ALONE WAS RESPONSIBLE FO R THE CONSTRUCTION ACTIVITY. THE ASSESSEE HAD RECEIVED SALE CONSIDERATION AND IT HAD NOTHING TO DO FURTHER AND ALSO W AS NOT LIABLE FOR ANY LOSS INCURRED UNDER THE JOINT VENTURE AGREEM ENT ETC. THE ASSESSEE PURCHASED DEVELOPMENT RIGHTS FOR THE PURPOSE 36 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 OF BUSINESS AND THOSE WERE SOLD FOR THE PURPOSE OF BUSINE SS, THEREFORE, IT IS CLEAR THAT INTENTION OF THE ASSESSEE WAS FO R DOING BUSINESS TRANSACTION ONLY. UNDER THESE CIRCUMSTANCES T HE ADVENTURE WAS IN THE NATURE OF TRADE AND GAINS ACCRUED TO THE ASSESSEE IMMEDIATELY. FOR THE ABOVE PROPOSITION, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF G.VENKATASWAMI NAIDU & COM PANY VS. CIT REPORTED IN 35 ITR 594 (SC), CIT VS. PRABHU DAY AL REPORTED IN 82 ITR 804 (SC) AND S.P. BALASUBRAMIAM REPORTE D IN 250 ITR 127 (MAD) AND SMT. PARVATHI DEVI & OTHERS VS. CIT REPORTED IN 164 ITR 675 (AP). 45. AS REGARDS THE ALTERNATE CLAIM OF DEDUCTION U/S.80IB(1 0) BY THE ASSESSEE ON THE GROUND THAT THEY ARE JOINT DEVELOP ER OF THE HOUSING PROJECT AND PROJECT IS ELIGIBLE FOR DEDUCTION U/S.80 IB(10) AND THEREFORE THEY ARE ELIGIBLE FOR DEDUCTION U/S.80IB(10) IS CONCERNED THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT FIRST OF ALL THE ASSESSEE SHOULD CLAIM DEDUCTION IN THE RETUR N OF INCOME FILED ON OR BEFORE THE DUE DATE SPECIFIED U/S.139(1), HOWEVER, THE SAME WAS NOT DONE IN THE PRESENT CASE. M OREOVER, EVEN THE PROCEDURAL REQUIREMENT OF FILING THE AUDIT REPORT IN FORM NO.10CCB WHICH WAS REQUIRED TO BE FILED ALONG WITH RETURN O F INCOME IS CLEARLY NOT FULFILLED. FURTHER, DARODE JOG AND ASSOCIATES UNDERTOOK THE ENTIRE RESPONSIBILITY FOR THE CONSTRUCTION WORK. THE ASSESSEE WAS NOT LIABLE FOR ANY LO SS SUFFERED IN THE BUILDING PROJECT AND THE ASSESSEE HAS NO THING TO DO WITH THE DEVELOPMENT OF THE HOUSING PROJECT. THE ASS ESSEE WAS SUPPOSED TO GET 40% OF SALE PROCEEDS FOR TRANSFERRIN G THE DEVELOPMENT RIGHTS. IN VIEW OF THE ABOVE FACTUAL MATRIX, T HE 37 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 ASSESSEE IS NOT A DEVELOPER AT ALL. RELYING ON VARIOUS D ECISIONS THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80IB(10). 46. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT AN Y AMOUNT IN EXCESS OF RS.2 CRORE IS WITHDRAWAL FROM THE AOP. DARODE JOG LAGAD VENTURE BY A MEMBER THEREOF WHICH CANNOT BE TA XED AS INCOME IN THE HANDS OF THE SAID MEMBER IS CONCERNED, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE JOINT VEN TURE AGREEMENT DATED 29-12-2006 CLEARLY STATES THAT THE A SSESSEE WOULD BE ENTITLED TO 40% OF THE RECEIPTS ON ACCOUNT OF FLAT SALES. FURTHER ACTIONS ALSO SUPPORT THE SAME. THE SAID AMOUNT OF RS.2,78,87,850 THAT WAS PAID TO THE ASSESSEE WAS EXACTLY 40% OF THE RECEIPTS ON ACCOUNT OF FLAT SALES DURING THE YEAR AS PER THE AGREEMENT VIDE WHICH THE PROPERTY IN QUESTION WAS TRANS FERRED TO THE JOINT VENTURE. 47. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE ALSO PRESENTED SUPPLEMENTARY AGREEMENT DATED 2-5-20I0 WHEREIN IT IS STATED THE ASSESSEE M/S LAGAD BROTHERS D EVELOPERS AND M/S DARODE JOG ASSOCIATES WERE TO SHARE PROFITS OF THE VENTURE TO THE EXTENT OF 80% AND 20% RESPECTIVELY AND WITHDRAWAL ALREADY MADE BY THE ASSESSEE WERE TO BE ADJ USTED AGAINST ITS SHARE OF PROFIT AND OTHER RECEIVABLES. HE SUBM ITTED THAT IN THIS REGARD, IT NEEDS TO BE FIRSTLY NOTED THAT T HE SUPPLEMENTARY AGREEMENT ON THE STRENGTH OF WHICH THIS A RGUMENT IS BASED WAS ENTERED INTO ONLY ON 2-5-2010 I.E. WELL AFTER THE PERIOD RELEVANT TO APPEALED ASSESSMENT YEARS. EVEN AFTER THE EXECUTION OF SUPPLEMENTARY DEED IT REMAINED A PAPER AGRE EMENT 38 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 WHICH NEVER INTENDED TO BE ACTED UPON AND WAS MERELY FOR THE PURPOSE OF TAX EVASION. FURTHERMORE MOST IMPORTANTLY IT IS TO BE EXAMINED WHAT IS THE SUPPLEMENTARY AGREEMENT. ASSESSEE FIRM AND DARODE JOG AND ASSOCIATES WILL SHARE PROFITS OF AOP IN T HE RATIO OF 80% AND 20 % RESPECTIVELY. NOW THE QUESTION IS W HY THE ASSESS FIRM WILL GET 80% OF PROFIT FROM AOP. THE ASSESSEE WAS HAVING DEVELOPMENT RIGHTS IN THE LAND AND THOSE RIGHTS WE RE SOLD TO THE SO CALLED AOP. NOW WHAT IS THE STAKE OF THE ASSE SSEE IN THE AOP. ASSESSEE HAS NOT MADE ANY INVESTMENT IN THE AOP T HEN FOR WHAT HE WAS RECEIVING SHARE OF PROFIT 48. HE SUBMITTED THAT THE ASSESSEE FIRM HAS NO STAKE IN THE AOP. HAD THE LAND BEEN CAPITAL CONTRIBUTION OF THE ASSESSE E, THE ASSESSEE WOULD NOT HAVE ACCEPTED ANY CONSIDERATION AGA INST THAT LAND. ONCE THE DEVELOPMENT RIGHTS WERE SOLD FOR ONCE AND ALL, THEN PROFIT SHARING MAKES NO SENSE, BUSINESS IS THE RISK T AKING CAPACITY OF A PERSON. IN THE PRESENT CASE IT IS NOT UNDE RSTANDABLE AS TO WHAT IS THE RISK OF THE ASSESSEE INVOLVED. THERE IS NO LOCUS STANDI OF THE ASSESSEE IN THE AOP. THESE TRANSACTIONS A RE FIT IN THE PRINCIPLE OF CORPORATE VEIL. THE AOP IS JUST FOR THE NA MESAKE. ACTUALLY THE ASSESSEE HAS SOLD HIS DEVELOPMENT RIGHTS AN D RECEIVED CONSIDERATION AND THOSE RECEIPTS ARE GIVEN THE NAME OF WITHDRAWAL FROM THE AOP, THEREFORE IT IS A FIT CASE WHERE TH E CORPORATE VEIL IS REQUIRED TO BE LIFTED AND REAL NATURE OF T HE TRANSACTIONS HAS TO BE EXAMINED. 49. AS REGARDING THE VALUE OF SALE CONSIDERATION IS CONCE RNED, HE SUBMITTED THAT IT BECOMES CLEAR THAT TRANSACTION IN QUESTION IS BUSINESS ACTIVITY AND FOR WHICH CONSIDERATION OF RS. 2 CR WA S 39 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 RECEIVED. THEREFORE, THE QUESTION THAT ARISES IS AS TO WH ETHER ADOPTED CONSIDERATION VALUE IS JUSTIFIABLE OR NOT. DURING THE WHOLE PROJECT ASSESSEE FIRM RECEIVED DIFFERENT AMOUNTS FROM TIME TO TIME FROM THE AOP. THAT AMOUNT IS EXACTLY 40% OF TH E SALE VALUE. THE ASSESSING OFFICER HAS BROUGHT OUT ON RECORD T HAT COMPARABLE SALE INSTANCES ARE AT MUCH HIGHER RATE. HE ACCORDINGLY SUBMITTED THAT THE TRANSACTION IN QUESTION I S A BUSINESS TRANSACTION AND THE ASSESSEE IS NOT ELIGIBLE FOR ANY DEDUCTION U/S.80IB(10) AND THE AO HAS RIGHTLY TAXED AMO UNT OF RS.2 CRORE AND ALSO IN EXCESS OF RS. 2 CRORE IN THE HANDS OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF T HE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOU LD BE DISMISSED. 50. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO & CIT(A) AND THE PAP ER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE CASE OF DARODE JOG LAGAD VENTURES WE HAVE ALREADY ACCEPTED THE GROUN DS RAISED BY THE ASSESSEE BY HOLDING THAT THE AGREEMENT BETWEEN THE DARODE JOG AND ASSOCIATES AND LAGAD BROTHERS DEVELOPER S CONSTITUTE AN AOP AND NOT A DEVELOPMENT AGREEMENT. ON CE IT IS HELD THAT THE AGREEMENT CONSTITUTES AOP ANY AMOUNT DR AWN FROM THE AOP CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE MEMBER. IT IS ONLY THE JOINT VENTURE THAT HAS TO PAY THE TAX AND THE ASSESSEE IS NOT LIABLE TO PAY ANY TAX ON THE AMOUNT WITHDRAWN FROM THE JOINT VENTURE. THE ASSESSEE IS ALSO NOT ENTITLED FOR ANY DE DUCTION U/S. 80IB(10) AND IT IS THE JOINT VENTURE THAT IS ELIGIBLE FOR THE DEDUCTION U/S.80IB(10). WE THEREFORE SET ASIDE THE ORDER OF THE 40 ITA NO.2038 TO 2041/PN/2013 & 310 TO 312/PN/2014 CIT(A) AND DIRECT THE AO TO ACCEPT THE RETURN OF INCOME FILED. 51. SINCE THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT T O BE TAXED IN ITS HANDS, THEREFORE, THE OTHER GROUNDS RAISED BY THE ASSESSEE BECOME ACADEMIC IN NATURE AND THEREFORE ARE N OT DECIDED. 52. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN A.YRS. 2008-09 AND 2009-10. FOLLOWING OUR DECISION IN ITA NO.310/PN/2014 WE HOLD THAT THE AMOUNT OF WITHDRAWAL FROM THE JOINT VENTURE IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE . THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 52. IN THE RESULT, ALL THE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09-03-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 09 TH MARCH, 2016. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) CENTRAL, PUNE 4. 5. 6. THE CIT CENTRAL, PUNE $ ''(, (, / DR, ITAT, A PUNE; . / GUARD FILE. / BY ORDER , // TRUE COPY // // TRUE COPY // C // 01 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE
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