The ITO, Ward-3(2), Surat V. M/s. Archan Enterprises, Surat

ITA 219/AHD/2010

• Counselvise Citation: 21920514 RSA 2010
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-07-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Section: 143(3); 142(1); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 219/AHD/2010 ASSESSMENT YEAR :2003-04 ITO, WARD-3[2], ROOM NO. 208, 2 ND FLOOR, AAYKAR BHAVAN, MAJURA GATE, SURAT V/S . M/S. ARCHAN ENTERPRISES, F-14, JAY COMPLEX, ANAND MAHLA ROAD, SURAT - 395009 PAN NO. AA FFA7596Q (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI J. P. JHANGID, SR. D.R. /BY RESPONDENT NONE (WRITTEN SUBMISSION) /DATE OF HEARING 01.07.2013 /DATE OF PRONOUNCEMENT 14.08.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-II, SURAT, DATED 21.10.200 9 FOR ASSESSMENT YEAR 2003-04. THE SOLE GROUND OF APPEAL IS AGAINST DELE TING THE DISALLOWANCE MADE BY THE A.O. U/S. 80IB OF RS.1,59,29,339/-. 2. THE APPELLANT FILED RETURN ON 30.11.2003 DECLARI NG TOTAL INCOME AFTER CLAIMING DEDUCTION 80IB(10) OF THE IT ACT TO THE TU NE OF RS.1,59,29,339/- AT NIL. THE ASSESSEES RETURN WAS ACCEPTED BY THE A.O. U/S. 143(3) OF THE IT ACT. THE LD. CIT PASSED ORDER U/S. 263 OF THE IT ACT BEC AUSE THE ORDER PASSED U/S. 143(3) BY THE A.O. WAS FOUND ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THUS, THE ORDER PASSED U/S. 143(3) WAS CA NCELLED BY THE CIT-I, ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 2 SURAT, VIDE ORDER DATED 26.03.2008 AND DIRECTED THE A.O. TO FRAME A FRESH ASSESSMENT AFTER EXAMINING RELEVANT FACTS OF THE CA SE AND ALL ASPECTS INVOLVED IN THE CLAIM OF DEDUCTION U/S. 80IB(10) OF THE IT ACT. HE GAVE THREE DIRECTIONS IN THE ORDER DATED 26.03.2008 PASSED U/S . 263 BY HIM. THE A.O. ISSUED NOTICE U/S 142(1) ALONG WITH A QUESTIONNAIRE . VARIOUS QUERIES RAISED BY THE A.O., WHICH WAS REPLIED BY THE ASSESSEE FROM TI ME-TO-TIME. THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION, AS PE R THE INFORMATION FURNISHED BY THE AUDITOR IN FORM 3CD. DURING THE YEAR, THE A SSESSEE HAD CONSTRUCTED AND COMPLETED A PROJECT KNOWN AS MILLENIUM RESIDEN CY, NEAR AYODHYA NAGARI, PALANPUR ROAD, ADAJAN, SURAT AND HAD ALSO M ADE THE SALE OF THE FLATS FOR A TOTAL SUM OF RS.5,92,18,613/-. THE COST OF C ONSTRUCTION WAS SHOWN AT RS.4,32,89,275/-. THE NET PROFIT OF RS.1,59,29,339 /- WAS CLAIMED AS DEDUCTION U/S.80IB(10) OF THE IT ACT. AFTER SCRUTINIZED THE FACTS OF THE CASE, THE LD. A.O. OBSERVED THAT THE ASSESSEE WAS NOT THE REAL AND ACT UAL OWNER OF THE SAID PIECE OF LAND AND THE FLATS BUILT THEREON FOR WHICH THE DEDUCTION U/S. 80IB(10) WAS CLAIMED. THERE WAS NO CONVEYANCE DEED OR ANY L EGAL DOCUMENT MADE IN THE NAME OF ASSESSEE FIRM PROVING THE OWNERSHIP OF LAND IN THE HANDS OF ASSESSEE. ALTHOUGH THE PAYMENTS WERE ROUTED BY ITS BANKING CHANNELS AND ALL THE PROCEEDINGS, LEGAL AND OTHERWISE WERE UNDER TAKEN BY IT. THE ASSESSEE WAS AS MERE CONFIRMING PARTY WITH MILLENIUM CO-OP ERATIVE HOUSING SOCIETY. THUS, HE HELD THAT THE TITLE OF OWNERSHIP OF LAND R ESTED IN THE HANDS OF PURCHASER PARTY M/S. MILLENIUM CO-OPERATIVE HOUSING SOCIETY. THE APPELLANT HAD RIGHT TO BOOK THE MEMBERS, RIGHT TO DETERMINE T HE CONSIDERATION AND RIGHT ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 3 TO RETAIN ENTIRE SURPLUS (PROFITS) WITHOUT ANY REFE RENCE TO THE SOCIETY. LD. A.O. FOUND THAT THIS IS A DEVICE MANAGED BY THE APPELLAN T WITH CONVENIENCE OF SOCIETY. THE APPELLANT HAD NOT REGISTERED THE MEMO RANDUM ENTERED INTO BETWEEN THE SELLER OF THE LAND AND THE SAID FIRM ON A STAMP PAPER. IT WAS ONLY AN AGREEMENT ON RS. 50/- STAMP PAPER. IN ORDER TO COMPLY WITH THE PROVISIONS OF GUJARAT OWNERSHIP FLAT ACT, THE SOCIETY WAS FORM ED. NO CONTROL VESTED IN THE HANDS OF THE SOCIETY BY RELYING UPON THE DECISI ON OF HONBLE SUPREME COURT IN CASE OF FAQIR CHAND GULATI VS. UPPAL AGENCIES PVT. LTD. THE APPELLANT HAD BEEN HELD AS A CONTRACTOR NOT A DEVEL OPER AND BUILDING HOUSING PROJECT. THE APPELLANT CLAIMED TO HAVE A LAND OF 1 .03 ACRE. THE LAND WAS IN THE NAME OF SHRI JASHVANTBHAI GIRDHARBHAI PATEL WHO SE POWER OF ATTORNEY HOLDER WAS ONE SHRI MUKESH JASHVANTBHAI PATEL. THE SURAT MUNICIPAL CORPORATION APPROVED THE PROJECT ON 28.02.2000 IN T HE NAME OF OWNER OF THE LAND. THE ASSESSEE HAD MERELY ACTED AS AN AGENT/CO NTRACTOR FOR THE CONSTRUCTION OF MILLENIUM RESIDENCY. IT WAS FURTHE R HELD THAT THE PERSON DOING ONLY THE WORK OF DEVELOPING AND CONSTRUCTION OF THE BUILDING STRUCTURE, ON THE AUTHORITY OF THE APPROVAL GRANTED TO THE LAND OWNER , CANNOT BE SAID TO BE IN THE BUSINESS OF UNDERTAKING, DEVELOPING AND BUILDING HO USING PROJECTS. LD. A.O. ALSO CONSIDERED THE DIRECTIONS GIVEN BY THE CIT(A), RANGE-3, SURAT, U/S. 144A OF THE IT ACT AND HELD THAT HONBLE ITAT, AHMEDABAD , DECISION IN CASE OF RADHE DEVELOPERS & ORS., HAD NOT GOT FINALITY. HE FURTHER OBSERVED THAT THE ASSESSEE CONSTRUCTED AND DEVELOPED A PROJECT WITH 1 3 SHOPS ON THE GROUND FLOOR. THIS PROJECT HAD BEEN APPROVED BY THE LOCAL AUTHORITY I.E. SURAT ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 4 MUNICIPAL CORPORATION. SINCE THE PROJECT CONSISTS OF SHOPS, THE ASSESSEE DID NOT FULFILL THE ELIGIBILITY CONDITIONS AS LAID DOWN UNDER THE PROVISIONS OF SECTION 80IB(10) SINCE IT WAS NOT COMING WITHIN THE AMBIT O F HOUSING PROJECT. HE FURTHER RELIED UPON HONBLE BOMBAY BENCH DECISION I N CASE OF LAUKIK DEVELOPERS VS. DCIT, VIDE ITA NO. 532/MUM/2006 (200 7) 108 TTJ (MUMBAI) 364 AND CLAIMED THAT CONSTRUCTION OF SHOPS FOR COMMERCI AL PLACE CANNOT BE CONSIDERED A HOUSING PROJECT FOR THE PURPOSE OF APP LICATION OF PROVISIONS OF SECTION 80IB(10). LD. A.O. ALSO ANALYZED THE CBDT CLARIFICATION VIDE LETTER DATED 4 TH MAY, 2001WHICH WAS ADDRESSED TO MAHARASHTRA CHAMBE R OF HOUSING INDUSTRY, WHEREIN IT WAS CLARIFIED THAT THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY SHOULD BE CONSIDERED AS ADEQUATE OF THE P URPOSE OF SECTION 10(23G) AND 80IB(10). THUS, HE DISALLOWED THE DEDU CTION U/S. 80IB(10) AT RS.1,59,29,339/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL AFTER VERIFYING ALL THE TERMS AND CONDITIONS OF AGREEMENT AND FINANCIAL POS ITION OF THE APPELLANT. HE HELD THAT THE ASSESSEE IS A DEVELOPER AND CONSTRUCT ION BUILDING HOUSING PROJECT. THE LAND WAS PURCHASED FROM THE LAND OWNE R IN THE NAME OF SOCIETY, BUT PAYMENTS WERE MADE BY THE APPELLANT. THE DOMIN ANT CONTROL OF LAND AND CONSTRUCTION WITH IT. HE FURTHER HELD THAT HONBLE ITAT IN CASE OF RADHE DEVELOPERS AND OTHERS IN ITA NO. 248/AHD/2006 DTD. 29.06.2007 FOR A.Y. 2002-03 IS SQUARELY APPLICABLE. THE ASSESSEE INCURRED DEVE LOPMENT, EXPENDITURE AND CONSTRUCTION OF BUILDING, WHICH WAS HANDED OVER TO THE ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 5 SOCIETY. HE FURTHER RELIED IN CASE OF M/S. MYSORE MINERALS LTD. 239 ITR 775 (SC) AND SHAKTI CORPORATION IN ITA NO. 1503/AHD/200 8. THE APPELLANT PURCHASED LAND OF RS.3427.32 + 977.78 SQ. METERS OF LAND FOR A TOTAL CONSIDERATION OF RS.24,28,390/- VIDE SATAKHAT OR AG REEMENT FOR SALE DATED 16.04.1999 AND 09.05.1999, FROM FOUR SELLERS, NAMEL Y, JASWANTLAL GIRDHARLAL PATE,, CHANCHALBEN JASWANTLAL PATEL, MUKESHCHANDRA JASWANTLAL PATEL AND DIVYESHKUMAR JASWANTLAL PATEL. THE LD. CIT(A) HAD REPRODUCED AGREEMENT FOR SALE DATED 16.04.1999 ON PAGE 12 TO 16 IN HIS O RDER AND HELD THAT THE ASSESSEE IN ENTITLED FOR DEDUCTION U/S. 80IB(10) OF THE IT ACT. HE FURTHER HELD THAT ONCE THE PROJECT WAS APPROVED BY THE SURAT MUN ICIPAL CORPORATION AS HOUSING PROJECT, DEDUCTION U/S. 80IB(10) IS ADMISSI BLE AND NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF SHOP INCLUDED IN PROJECT. 4. NOW THE REVENUE IS BEFORE US. THE LD. SR. D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE A.O. AND CLAIMED THAT COMMERCIAL B UILT UP AREA MUCH MORE THAN THAT PROVIDED IN THE ACT AND THE ASSESSEE WAS A MERE CONTRACTOR ON BEHALF OF THE SOCIETY. THUS, HE IS NOT ENTITLED TO ALLOW THE DEDUCTION U/S. 80IB(10). 4(I). AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT FILED WRITTEN REPLY, WHICH IS REPRODUCED AS UNDER: YOUR HONOURS MAY APPRECIATE THAT THE RESPONDENT FIR M WAS ENGAGED IN THE BUSINESS OF DEVELOPING AND BUILDING RESIDENT IAL HOUSING PROJECT. THE DETAIL OF THE PROJECT UNDERTAKEN BY TH E RESPONDENT FIRM IS SUBMITTED HEREIN BELOW. ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 6 CONDITIONS P RESCRIBED U/S. 80-IB(10) OF THE ACT DETAIL OF COMPLIANCE MADE BY THE RESPONDENT FIRM AND SUBMISSION OF THE SAME BEFORE THE LEARNED ASSESSING OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT . THE PLOT OF LAND ON WHICH DEVELOPMENT ACTIVITY HAS BEEN UNDERTAKEN IS OF THE SIZE OF MORE THAN 1 ACRE. : COPY OF PURCHASE DEED OF PLOT OF LAND ADMEASURING 4405 SQ. MTS. (1.03 ACRES) ON WHICH DEVELOPMENT ACTIVITY HAS BEEN CARRIED OUT WAS SUBMITTED AS ANNEXURE-!2 VIDE SUBMISSION DATED 30,12.2005. (PAGE NO. 5 & PAGE NOS. 8 TO 88 OF PAPER BOOK DATED 3/10/2012) THE PLAN FOR DEVELOPMENT OF THE PROJECT SHOULD BE APPROVED BY THE LOCAL AUTHORITY BEFORE 31/3/2001 AND THE PROJECT DEVELOPMENT SHOULD BE COMMENCED ON OR AFTER 01/10/1998 : THE COPY OF THE PLAN APPROVED BY THE LOCAL AUTHORITY HAD BEEN DULY SUBMITTED AS PART OF AUDIT REPORT IN FORM JOCCB, FILED ALONG WITH THE RETURN OF INCOME. THE APPROVAL HAS BEEN GRANTED BY THE LOCAL AUTHORITY ON FEBRUARY 21, 2000 AND THE DEVELOPMENT OF THE PROJECT HAS BEEN COMMENCED THEREAFTER. ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 7 THE PROJECT HAS BEEN COMPLETED BY MARCH 31, 2003. THE BUILT UP AREA OF THE RESIDENTIAL UNITS DEVELOPED IN THE PROJECT SHOULD NOT EXCEED 1500 SQ. FTS. : ALL THE RESIDENTIAL UNITS WERE OF THE SIZE LESS THAN 1500 SQ. FTS. A COPY OF CERTIFICATE OF ARCHITECT CERTIFYING THE BUILT- UP-AREA OF EACH FLATS DEVELOPED IN THE PROJECT HAS BEEN SUBMITTED AS PART OF AUDIT REPORT IN FORM 10CCB. WITHOUT PREJUDICE TO THE AFORESAID FACTUA L SUBMISSION, WE HAVE TO FURTHER SUBMIT AS FOLLOWS. A. OWNERSHIP OF LAND ON WHICH THE PROJECT IS CONSTRUC TED: (I) THE RESPONDENT PARTNERSHIP FIRM HAD ENTERED IN TO AN AGREEMENT TO PURCHASE THE PLOT OF LAND WITH THE LAN D OWNERS ON 16/4/1999 FOR PLOT OF LAND ADMEASURING 3427.32 S Q. MTS. AND ON 9/5/1999 FOR PLOT OF LAND ADMEASURING 977.78 SQ. MTS AGGREGATING TO 4405 SQ. MTS. COPIES OF THE SAME WERE SUBMITTED BEFORE THE LEARNE D ASSESSING OFFICER; VIDE 1 ST SUBMISSION. (PAGE NO. 741 TO 754 OF PAPER BOOK DATED 3/10/2012) THE ENGLISH TRANSLATION OF THE SAME IS ENCLOSED AS PAGE NOS. 155 TO 162 OF PAPER BOOK DATED 3/10/2012. (II) PAYMENT OF ENTIRE PURCHASE CONSIDERATION OF T HE LAND HAS BEEN MADE OUT OF THE BANK ACCOUNT OF THE RESPONDENT FIRM. (III) IN ORDER TO COMPLY WITH THE PROVISIONS OF GU JARAT OWNERSHIP FLATS ACT, 1973 THE LAND WAS GOT CONVEYED FROM THE LAND OWNERS IN THE NAME OF 'MILLENIUM CO.OP. HOUSING SOC IETY LTD.'. (IV) COPY OF MEMORANDUM OF UNDERSTANDING ENTERED I NFO BETWEEN 'MILLENIUM CO.OP. HOUSING SOCIETY LTD.' AND THE RES PONDENT ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 8 FIRM WAS SUBMITTED BEFORE THE LEARNED ASSESSING OFF ICER AS ANNEXURE 15 VIDE SUBMISSION DATED 30.12.2005. (PAGE NO. 6 & PAGE NOS. 124 TO 131 OF PAPER BOOK DATED 3/10/201 2). THE COMPLETE ENGLISH TRANSLATION OF THE SAID MEMORA NDUM IS SEPARATELY SUBMITTED BEFORE THE HON'BLE BENCH ON 08/10/2012). THE SOCIETY HAD VIDE SAID MEMORANDUM EXPLICITLY AND CATEGORICALLY DECLARED THAT THE RESPONDENT FIRM IS THE BUILDER AN D DEVELOPER OF THE PROJECT AND THERE IS NO ROLE OF THE SOCIETY IN DEVE LOPMENT OF THE PROJECT OR SALES OF RESIDENTIAL UNITS DEVELOPED IN THE PROJECT. IT IS ALSO CLEAR FROM THE MEMORANDUM THAT THE RESPONDENT FIRM IS NOT THE CONTRACTOR OF THE SOCIETY, BUT IS AN INDEPENDENT DE VELOPER / BUILDER OF THE PROJECT. B. THE PROJECT COMPRISED OF DEVELOPMENT OF SHOPS: YOUR HONOURS MAY APPRECIATE THAT THE TOTAL DEVELOPM ENT SIZE OF THE PROJECT WAS 1,09,424 SQ. FTS. OF BUILT UP AREA. OUT OF THE SAME 3,043 SQ. FTS. WERE IN RESPECT OF 13 SHOPS. THE SAME IS E QUAL TO 2.78 % OF THE TOTAL PROJECT. FURTHER YOUR HONOURS MAY APPRECI ATE THAT THE PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY AS A FULLY RESIDENTIAL HOUSING PROJECT. HENCE, IN VIEW OF DECISION OF HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT V. BRAHMA ASSOCIATES INCOME TAX APPEAL NO. 1194 OF 2010 DEDUCTION IS ADMISSIBLE ON THE ENTIRE PROFIT EARNED FROM THE ACTIVITY OF DEVELOPING AND BUILDING HOUSING PROJECT S. HE REQUESTED TO CONFIRM THE ORDER OF CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ON VERIFICATION OF THE TERMS AND CONDITION S OF AGREEMENT PROVIDED BY THE APPELLANT IN PAPER BOOK BEFORE THE LOWER AUTHOR ITIES. IT IS EVIDENT THAT THE ASSESSEE WAS A DEVELOPER AND BUILDING HOUSING PROJE CT APPROVED BY THE SURAT ITA NO. 219/AHD/2010 A.Y. 03-04 PAGE 9 MUNICIPAL CORPORATION. THE AREA CONSTRUCTED WAS MO RE THAN ONE ACRE. THE PROJECT WAS SANCTIONED AS A HOUSING PROJECT BY THE MUNICIPAL CORPORATION. THE CONSTRUCTION WAS COMPLETED BEFORE 31 ST MARCH, 2003. THE COMMERCIAL AREA WAS LESS THAN 3%. THE ASSESSEE WAS NOT THE OW NER OF THE LAND BUT PAID THE CONSIDERATION FOR PURCHASE OF THE LAND AND HAD DOMINANT CONTROL ON IT. IT INCURRED ALL THE EXPENDITURES FOR CONSTRUCTION. IT ENGAGED ARCHITECT, BOOK AND SOLD FLATS COLLECTED REVENUE ON IT, GOT COMPLETION CERTIFICATE AND ALL THE RISKS AND REWARDS WERE WITH IT. THE HONBLE GUJARAT HIGH COURT DECISION IN CASE OF RADHE DEVELOPERS AND OTHERS (2012) 341 ITR 403 IS SQUARELY APPLICABLE ON THE FACTS OF THE ASSESSEES CASE . THUS, WE HELD THAT THE ASSESSEE WAS BENEFICIAL OWNER OF THE LAND AND WAS A DEVELOPER AN D CONSTRUCTING THE HOUSING PROJECT AS PER SECTION 80IB(10). WE CONFIR M THE ORDER OF CIT(A). 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 14.08.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ':