The ITO, Ward-9(2), Ahmedabad V. M/s. Ashutosh Developers, Ahmedabad

ITA 2196/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1889 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMARD R
• Keywords: Set aside
• Section: 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA, JM& SHRI A N PAHUJA,AM ITA NO.2196/AHD/2008 (ASSESSMENT YEAR:-2005-06) INCOME-TAX OFFICER, WARD- 9(2), A WING, VASUPUJYA CHAMBERS,ASHRAM ROAD, AHMEDABAD V/S M/S ASHUTOSH DEVELOPERS, 15, ABHIJRAM APARTMENTS, NR. RAJ AVENUE, THALTEJ, AHMEDABAD PAN: AAJFA 0847 N [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI ANIL KUMAR,DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 8 TH APRIL, 2008 OF THE LD. CIT(APPEALS)-XV, AHMEDABAD, FOR THE ASSESSMENT YEAR (AY) 2005-06, RAISES THE FOLLOWING GROUNDS:- 1 THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTION U/S 8 0IB(10) OF THE ACT AMOUNTING TO RS.26,17,701/- WHICH WAS DISALLOWED BY THE AO. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD OUGHT TO HAVE UPHELD T HE ORDER OF THE AO. 3 IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD MAY BE SET-ASIDE AND THAT OF THE AO BE RESTORED . 2. FACTS, IN BRIEF AS PER RELEVANT ORDER ARE THAT T HE RETURN DECLARING NIL INCOME FILED ON 29.6.2005 BY THE ASSE SSEE, CARRYING ON THE BUSINESS OF BUILDING CONSTRUCTION, WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-T AX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ON 22.5.2006 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THOUGH THE ASSESSEE CLAIMED THAT THEY HAD UNDERTAKEN THE CONSTRUCTION WORK OF A HOUSING PROJECT KNOWN AS GOKULDHAM APARTMENTS-II AT B/H VEJALPUR POLICE CHOWKY, VEJAL PUR, AHMEDABAD AS PER AGREEMENT WITH NEW HARSHAD BHAVAI CO-OP. HOU SING SOCIETY ITA NO.2196/AHD/2008 2 LTD. AND CONSEQUENTLY CLAIMED DEDUCTION OF RS.26,17 ,701/- U/S 80IB(10) OF THE ACT, THE RECORDS REVEALED THAT THE ASSESSEE DID NOT CARRY OUT ANY DEVELOPMENT AND CONSTRUCTION WORK FOR THE SAID SOCIETY WHILE THE ASSESSEE HAD SHOWN RECEIPTS UNDER THE HEA D 'ORGANIZATION FEES' AND 'LABOUR INCOME' ONLY. IN LI EU OF SUPERVISION AND LABOUR WORK FOR THE SAID SOCIETY, T HE ASSESSEE RECEIVED SUPERVISION FEES AT THE RATE 23% OF TOTAL COLLECTION FROM THE MEMBERS OF THE SOCIETY AND LABOUR CHARGES @ RAT E RS.900/- PER SQ. YRD.. THE P & L ACCOUNT REFLECTED ONLY LABOUR C HARGES AND THE ASSESSEE DID NOT DEBIT ANY EXPENSES TOWARDS PURCHAS E OF CEMENT, STEEL, BRICKS OR ANY OTHER MATERIAL USED IN CONSTRU CTION WORK NOR ANY WORK-IN-PROGRESS WAS SHOWN. ON GOING THROUGH THE A GREEMENT BETWEEN THE ASSESSEE AND THE SOCIETY, THE AO CONCL UDED THAT THE WORK OF THE ASSESSEE WAS TO SUPERVISE AND OVERSEE T HE WORK OF DEVELOPMENT AND CONSTRUCTION OF THE SOCIETY BESIDE S COLLECTING FUND FROM THE MEMBERS AND ALLOTTING UNITS TO THEM ON BEH ALF OF THE SOCIETY. IN THESE CIRCUMSTANCES ,ESPECIALLY WHEN TH E ASSESSEE WAS IN NO WAY CONNECTED WITH ACTUAL DEVELOPMENT AND CON STRUCTION WORK OF GOKULDHAM APARTMENTS-II AND THE ASSESSEE RECEIVE D ONLY FIXED REMUNERATION, THE AO DENIED THE CLAIM FOR DEDUCTION OF RS.27,94,886/- U/S. 80-IB (10) OF THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE C LAIM OF THE ASSESSEE , RELYING, INTER ALIA, ON THE DECISION IN THE ITAT, AHMEDABAD BENCH IN CASE OF RADHE DEVELOPERS V/S. ITO,113 TTJ 300. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). NONE APPEARED BEFOR E US ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE ON 1.2.2001[ AD O RECORD] AT THE OUTSET, THE LD. DR SUBMITTED THAT THE ISSUE I S REQUIRED TO BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION IN THE LIGHT OF THE DECISION DATED 07-11-2008 OF THE ITAT IN THE CASE M /S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503/AHD/2008 . ITA NO.2196/AHD/2008 3 5. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS OF THE ITA T. WE FIND THAT THE LD. CIT(A) WITHOUT ANALYZING THE FACTS AND CIRCUMST ANCES OF THE CASE, MERELY FOLLOWED THE DECISION IN RADHE DEVELOPERS(SUPRA).AS CONTENDED BY THE LD. DR, WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED IN A D ECISION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008, WHEREIN AFTER ANALYZING THE DECISIONS OF HONBLE AP EX COURT IN THE CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT. LTD. IN CIV IL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. 248 2/AHD/2006 IN THE CASE OF M/S RADHE DEVELOPERS & OTHERS, THE BENCH CONCLUDED AS UNDER: 16 THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPER S (SUPRA) AND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HA S ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSIN G PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECIS ION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CAS E WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED I NTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VES T WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRIC TED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA ) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DO WN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVEL OPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRU X OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE , WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DED UCTION U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVE NUE, AS THE AGREEMENT IS NOT FOR SHARING OF THE CONSTRUCTED ARE A. IN OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEME NT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO ITA NO.2196/AHD/2008 4 WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AN D DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE SHOULD NOT BE AL LOWED DEDUCTION U/S 80IB(10). 5.1. SINCE THE LD. DR POINTED OUT THAT THE MAT TER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 WHILE COPY OF D EVELOPMENT AGREEMENT IN THE INSTANT CASE IS NOT BEFORE US , IN THE INTEREST OF FAIR PLAY & JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE THE RELEVA NT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE A SSESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN VIEW THE AFORESAID DECISION OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER, DECIDE AS TO WHETHER THE UNDERTAKIN G OF THE ASSESSEE HAS INDEED PURCHASED THE LAND FOR A FIXED CONSIDERA TION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURCHASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINANT CONTROL OVER THE PROJECT AND D EVELOPED THE LAND AT THEIR OWN COST AND RISKS, THE AO SHOULD ALLOW TH E DEDUCTION U/S 80IB(10)OF THE ACT, IN ACCORDANCE WITH LAW. IN CAS E THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON B EHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATI ON FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC T, THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH ITA NO.2196/AHD/2008 5 THESE DIRECTIONS, GROUND NO. 1 IN THE APPEAL IS DIS POSED OF AS INDICATED HEREINBEFORE. 6. GROUND NOS. 2 & 3 IN THE APPEAL BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFOR E, DISMISSED. 7. IN THE RESULT, APPEAL IS ALLOWED, BUT FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 28-02-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 28-02-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S ASHUTOSH DEVELOPERS, 15, ABHIJRAM APARTMENTS , NR. RAJ AVENUE, THALTEJ, AHMEDABAD 2. ITO, WARD-9(2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD