M/s OM ASSOCIATES, Pune V. ITO, Pune

ITA 2278/PUN/2012

• Counselvise Citation: 227824514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNITA BILLA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Sale consideration of property below Jantri Value; Business income; Fair market value
• Section: 50C; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 2278 / P N/ 20 1 2 ASSESSMENT YEAR : 200 9 - 10 M/S. OM ASSOCIATES, C/O MZSK & ASS OCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO. 84, WELLESLEY ROAD, NEAR RTO, PUNE VS. ITO, WARD 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AABFO6002D APPELLANT BY: SHRI NILESH KHANDELWAL RESPONDENT BY: SMT. SUNITA BILLA D ATE OF HEARING : 1 0 - 06 - 2014 DATE OF PRONOUNCEMENT : 25 - 0 6 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED O RDER OF THE LD. CIT(A) - I, PUNE DATED 27 - 06 - 2012 FOR THE A.Y. 200 9 - 10. T HE ASSESSEE HAS TAKEN T HE FOLLOWING GROUND S IN THE APPEAL: 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, THE INCOME FROM BUSINESS ASSESSED BY THE AO AT RS.40,48,000/ - BY APPLYING PROVISIONS OF SEC. 80IA(8) & (10) R EDUCING THE CORRESPONDING CLAIM U/S. 80IB(10) TO THE EXTENT OF RS.40,48,000 / - IS IMPROPER, CONTRARY TO THE PROVISIONS OF THE ACT AND FACTS PREVAILING IN THE CASE. THE INCOME ASSESSED AT RS.40,48,000/ - UNDER THE INCOME FROM BUSINESS BE DELETED. THE APPELLAN T BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 2. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, VALUE OF THE PLOTS ADOPTED BY THE AO AND APPROVED BY THE 1 ST APPELLATE AUTHORITY 2 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE WITHOUT REFE RRING THE ISSUE TO THE DEPARTMENTAL VALUATION OFFICER IN TERMS OF PROVISIONS OF 50C AND 55A OF THE ACT IS UNJUSTIFIED, IMPROPER AND CONTRARY TO THE SCHEME OF THE ACT. IT BE HELD THAT THE ISSUES SHOULD HAVE BEEN REFERRED TO THE DEPARTMENTAL VALUATION OFFIC ER IN TERMS OF PROVISIONS OF SEC. 50C & 55A FOR DETERMINATION OF MARKET VALUE OF THE PLOTS. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 2. THE ASSESSEE HAS ALSO FILED THE ADDITIONAL GROUND WITH PRAYER TO ADMIT THE SAME AS UNDER: 4. 'ON F ACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, DIRECTION GIVEN BY THE FIRST APPELLATE AUTHORITY TO THE AO THAT EFFECT OF DIFFERENCE BETWEEN STAMP DUTY VALUE OF RS.11352000/ - AND ACTUAL TRANSACTION A MOUNT OF RS.7304000/ - , WILL HAVE IMPLICATION IN FUTURE BY APPLYING PROVISIONS OF SEC. 80IA(8)&(10) REDUCING THE CORRESPONDING CLAIM U/S. 80IB(10) TO THE EXTENT OF RS.40,48,000/ - IS IMPROPER, CONTRARY TO THE PROVISIONS OF THE ACT AND FACTS PREVAILING IN THE CASE. IT BE HELD THAT DIRECTIONS GIVEN BY THE FIRST APPELLATE AUTHORITY IS BEYOND THE POWERS AS PER PROVISIONS & SCHEME OF THE ACT. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT.' 3 . WE HAVE HEARD THE PARTIES. ON ADMISSION OF THE ADDIT IONAL GROUND THE LD. COUNSEL HAS PLACED HIS RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383 (SC). HE PLEADS THAT THE ADDITIONAL GROUND IS A PURELY LEGAL GROUND AND BY THE OVERSIGHT I T WAS NOT TAKEN IN THE MAIN APPEAL MEMO. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL GROUND THE SAME CAN BE DECIDED ON THE BASIS OF FACTS AVAILABLE ON RECORD. WE, ACCORDINGLY, ADMIT T HE ADDITIONAL GROUND. 4. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE FIRM IS A DEVELOPER AND BUILDER AND HAS UNDERTAKEN DEVELOPMENT OF THE HOUSING PROJECT AT SURVEY NO. 9, HISSA NO. 4, 5, 6, 7, 8 AT BALEWADI , TALUKA - HAVELI , DISTRI CT - PUNE , O N THE AREA ADMEASURING 3 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE 8600 SQ. MTRS. FOR WHICH THE ASSESSEE OBTAINED THE DEVELOPMENT RIGHTS VIDE DEVELOPMENT AGREEMENT DATED 30 - 12 - 2006. THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S. 80IB(10) BY RECOGNIZING THE PROFIT FROM PARTIAL COMPLETION OF T HE PROJECT EACH YEAR BY ADOPTING THE COST PLUS 30% OF GROSS PROFITS. THE ASSESSEE HAS ACCORDINGLY DECLARED THE GROSS PROFIT AT RS.1,11,30,448/ - AND HAS SHOWN THE WIP AS ON 31 - 03 - 2009 AT RS. 4,82,32,039/ - . AFTER CLAIMING THE EXPENSES, THE ASSESSEE DECLARED THE NET PROFIT OF RS.1,00,68,674/ - AND THE SAID PROFIT HAS BEEN CLAIMED AS DEDUCTION U/S. 80IB(10). 5. IN THE OPINION OF THE ASSESSING OFFICER , THE ASSESSEE H AS REDUCED THE COST OF HOUSING PROJECT MORE PARTICULARLY DEVELOPMENT RIGHTS WERE ACQUIRED FOR RS.73,04,7000/ - WHEREAS THE FAIR MARKET VALUE FOR THE STAMP DUTY VALUATION OF THE DEVELOPMENT RIGHTS OF THOSE PLOTS WAS ADOPTED AT RS. 1,13,52,000/ - . THE ASSESSING OFFICER HAS OBSERVED THAT THE PROVISIONS OF SEC. 80IA(8) ARE APPLICABLE TO THE ASSESSEES CA SE AS THERE IS AN ARRANGEMENT WITH THE PLOT OWNERS BY THE ASSESSEE OF TAKING THE DEVELOPMENT RIGHTS BELOW THE MARKET PRICE WHICH HAS RESULTED IN MORE THAN ORDINARY AND EXCESSIVE PROFIT WHICH IS SUBJECTED TO CLAIM OF DEDUCTION U/S. 80IB(10). THE ASSESSING OFFICER ALSO HELD THAT THE PROVISIONS OF THE SEC. 80IB(10) OF THE INCOME - TAX ACT ARE ALSO APPLICABLE. THE ASSESSEE TOOK THE FIRM STAND THAT THE CONSIDERATION SHOWN IN THE DEVELOPMENT AGREEMENT IS CORRECT. THE REPLY FILED BY THE ASSESSEE IS PARTLY REPRODU CED IN PARA NO. 5 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER WAS NOT IMPRESSED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND HE HELD THAT TO THE EXTENT OF RS.40,48,000/ - THE ASSESSEE HAS SHOWN THE LETTER COST TO INFLICT THE PROFIT FOR CLAIMING THE DE DUCTION U/S. 80IB(10) AND IN VIEW OF THE PROVISIONS OF SEC. 80IB(8) AND 80IB(10) THE CLAIM OF DEDUCTION U/S. 80IB IS TO BE RESTRICTED TO RS.60,20,674/ - . THE OPERATIVE PART OF THE FINDING OF THE ASSESSING OFFICER IS AS UNDER: 4 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE 6. THE REPLY OF THE ASSESSEE H AS BEEN EXAMINED. PUTTING IT IN SIMPLE WORDS, IT IS THE CLAIM OF THE ASSESSEE THAT SINCE SOME OF THE PLOTS HAVE BEEN RESERVED FOR AMENITY AND OPEN SPACE FOR IN THE PROJECT, THERE WAS NO MARKET VALUE OF SUCH PLOTS AND NO CONSIDERATION WAS REQUIRED TO BE PAI D FOR SUCH PLOTS. THIS CLAIM OF THE ASSESSEE IS INCORRECT FACTUALLY AS WELL AS LOGICALLY. OH ONE HAND ASSESSEE CLAIMS THAT NO CONSIDERATION WAS REQUIRED TO BE PAID FOR RESERVED PLOTS USED FOR AMENITY SPACE AND INTERNAL ROADS IN THE PROJECT BUT ON OTHER HAN D IT HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH OWNERS OF ALL THE 17 PLOTS FOR THE PURCHASE OF DEVELOPMENT RIG}IS FOR THE ENTIRE PLOT OF 8600 SQ. MTS. WHICH INCLUDES PLOT NO 1 TO 17 AS PER THE SANCTIONED LAYOUT PLAN AND DEMARCATIONS A& MENTIONED CLEARLY I N PARA NO 'M' AND THE SALE CONSIDERATION HAS BEEN ACTUALLY GIVEN TO ALL THE 17 PLOTS PLOT HOLDERS IRRESPECTIVE OF WHETHER THEIR PLOT FALLS UNDER THE AMENITY SPACE OR OPEN SPACE OR INTERNAL ROADS IN THE PROJECT DEVELOPED BY THE ASSESSEE. FURTHER, THE AMENIT Y SPACE AND INTERNAL ROADS ARE ALWAYS PART AND PARCEL OF THE PROJECT AND THEY HAVE NOT BEEN EXCLUDED FROM THE PROJECT AND THESE OPEN SPACES/AMENITIES GIVE VALUE ADDITION TO THE PROJECT AS A RESULT OF WHICH THE DEVELOPERS CHARGE IN THE FORM OF SUPER BUILT U P AREA FROM THE CUSTOMERS WHILE SELLING THE FLATS. WHEN THE DEVELOPER CHARGES THE CUSTOMERS ON SUPER BUILT AREA WHICH INCLUDES THE AMENITY FOR OPEN SPACE, GARDENS, INTERNAL ROADS ETC., IT IS CLEAR THAT THESE VALUE OF THESE OPEN SPACES/AMENITIES ARE ALSO TH E PART OF SALE CONSIDERATION FOR THE FLATS SOLD BY THE DEVELOPER. FURTHER THE DEVELOPER GETS EXTRA FSI IN RESPECT OF THE LAND RESERVED FOR OPEN SPACES/AMENITY AND INTERNAL ROADS IN THE PROJECT AND SUCH EXTRA FSI ARE SOLD TO CUSTOMERS AFTER CONSTRUCTION OF THE FLATS. HENCE IT CANNOT BE SAID THAT THE PLOTS USED FOR OPEN SPACES/AMENITY/INTERNAL ROADS ETC. ARE USELESS HAVING NO SALE VALUE AND NO CONSIDERATION WAS REQUIRED TO BE PAID BY THE DEVELOPER (ASSESSEE) TO THE PLOT OWNERS. THEREFORE BY PAYING RS.73,04,00 0/ - FOR THE ENTIRE PLOT OF 8600 SQ. MTS HAVING MARKET VALUE OF RS. 1,13,52,000, THE PROFITS OF THE ASSESSEE ARE MORE THAN NORMAL TO THE EXTENT OF RS.40,48,000/ - (11352000 - 7304000) WHICH COULD HAVE ARISEN TO THE ASSESSEE IN NORMAL COURSE. SUCH EXCESSIVE PRO FIT HAS TO BE REDUCED FROM THE ELIGIBLE PROFITS FOR DEDUCTION U/S 80IB (10 IN VIEW OF SECTION 80IA(8) AND 80IA(10). HENCE THE DEDUCTION CLAIMED U/S 80IB (10) OF RS. IS RESTRICTED TO RS.60,20,674/ - ONLY AND THE BALANCE PROFIT OF RS.40,48,000 IS TO BE TAXED AS BUSINESS INCOME. 6. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A) MORE PARTICULARLY THE ISSUE OF RESTRICTING DEDUCTION U/S. 80IB(10) BY INVOKING THE PROVISIONS OF SEC. 80IB(8) AND 80IB(10). THE ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE CONSIDERATION SHOWN IN THE DEVELOPMENT AGREEMENT FOR ACQUIRING THE DEVELOPMENT RIGHTS FROM THE 17 PLOTS OWNERS IS CORRECT. THE ASSESSEE ALSO CONTENDED THAT THE 5 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE PROVISIONS OF SEC. 80IB(8) AND 80IB(10) ARE NOT APPLICABLE AS THERE IS NO ARRA NGEMENT BETWEEN THE ASSESSEE AND THE PLOT OWNERS AND THERE IS NO TRANSFER OF ANY GOODS OR SERVICES FOR ATTRACTING THE PROVISIONS OF SEC. 80IB(8) OF THE ACT. IN RESPECT OF THE APPLICABILITY OF SEC. 80IB(10) THE ASSESSEE CONTENDED THAT THE TRANSFEROR S HAVE DECLARED THE CAPITAL GAIN AND THE ASSESSEE HAS ACQUIRED THE DEVELOPMENT RIGHTS FOR DOING THE BUSINESS AND HENCE, THE SEC. 80IB(10) IS NOT APPLICABLE. THE ASSESSEE ALSO JUSTIFIED THE CONSIDERATION SHOWN IN THE DEVELOPMENT AGREEMENT WHICH IS LESSER THAN THE FAIR MARKET VALUE ADOPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. THE REPLY FILED BY THE ASSESSEE IS REPRODUCED IN THE IMPUGNED ORDER. ALTERNATIVELY, THE ASSESSEE ALSO CONTENDED THAT FOR THE YEAR ENDING 31 - 03 - 2009 THE ASSESSEE INCURRED COST ON THE WOR K IN PROGRESS (WIP) OF RS.3,71,01,492/ - ON PURCHASE OF MATERIAL AND LABOUR CHARGES AND GROSS PROFIT IS WORKED OUT ON THE WIP BUT NO COST OF DEVELOPMENT RIGHT IS PART OF THE WIP AND HENCE, THE PROFIT DECLARED BY THE ASSESSEE ON WHICH THE DEDUCTION U/S. 80IB (10) HAS BEEN CLAIMED IS INDEPENDENT OF THE COST OF THE DEVELOPMENT RIGHTS. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER THE COST OF THE DEVELOPMENT RIGHTS HA VE NOT BEEN INCLUDED INTO THE WIP . O N WHICH THE PROFIT AND THE DEDUCTION HAS BEEN COMPUTED IN ACCOUNTING METHOD BEING REGULARLY FOLLOWED AND IF IT IS TRUE THEN THERE IS NO REQUIREMENT TO RESTRICT THE PROFITS ON WHICH DEDUCTION U/S. 80IB(10) IS CLAIMED. HE ALSO OBSERVED THAT IF THE COST OF THE DEVELOPMENT RIGHTS IS NOT INCLUDED IN THE WIP THEN IT WILL NOT HAVE IMPLICATION IN THIS YEAR BUT IT MAY IMPLICATION IN THE FUTURE. THE LD. CIT(A) ALSO ADJUDICATED THE ISSUE ON MERIT. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS O F THE CASE AND THE LAW AS ARE APPARENT FROM THE RECORDS. THE ASSESSING OFFICER AFTER CONSIDERING THE DETAILS IN RESPECT OF PURCHASE OF 17 PLOTS FROM APPARENTLY DIFFERENT MEMBERS OF AN AGARWAL FAMILY, HAVING THE TOTAL AREA OF APPROXIMATELY 8599.90 SQ. MTRS. FOR A RECORDED CONSIDERATION OF RS.73,04,000, FOUND THAT THE VALUE OF THE SAID LAND 6 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE AS PER THE LAND REGISTRATION AUTHORITY WAS AT RS.1,13,52,000. SHE PRIMA FACIE FELT THAT THE APPELLANT HAS RECORDED THE TRANSACTION IN A MANNER TO REDUCE THE COST OF LAND I N THE BOOKS SO THAT HIGHER PROFIT AND DEDUCTION U/S 80IB(10) CAN BE CLAIMED IN RESPECT OF HOUSING PROJECT ELIGIBLE FOR THIS DEDUCTION, DEVELOPED BY THE APPELLANT. THE ASSESSING OFFICER FURTHER FOUND THAT THE APPELLANT HAS DECLARED THE SALE CONSIDERATION IN RESPECT OF PLOT NO. 15 AND 17 HAVING THE AREA OF 2207.60 SQ. MTRS. AND 861.58 SQ. MTRS. AT NIL ON THE GROUND THAT THESE PLOTS ARE RESERVED FOR SOME SPECIFIC PURPOSE VIZ. OPEN SPACE, ROAD ETC. HOWEVER, THE ASSESSING OFFICER FELT THAT THE ARGUMENT OF THE AP PELLANT IS NOT CORRECT AS SHE FOUND THAT THE AFORESAID PLOTS WERE UTILIZED BY THE APPELLANT AS PART OF THE PROJECT ON WHICH THE DEDUCTION HAS BEEN CLAIMED AND ALL THE BENEFITS HAVE BEEN DERIVED IN TERMS OF FSI, AMENITIES OF THE PROJECT ETC. THE ASSESSING O FFICER THEREFORE, INVOKED SEC. 80IA(8) AND 80IA(10), TREATING THE SAME TO BE APPLICABLE TO DEDUCTIONS ALLOWABLE U/S 80IB(10). BY DOING SO, THE APPELLANT TREATED THE VALUE OF THE LAND AS RS.1,13,52,000 TO REDUCE THE DEDUCTION BY THE DIFFERENCE OF THE TWO FI GURES I.E. RS.40,48,000. THE DETAILS OF THE ASSESSMENT ORDER HAVE ALREADY BEEN QUOTED ABOVE AND CAN BE REFERRED TO FOR DETAILS. THE APPELLANT HAS FILED THE APPEAL AND HAS MADE THE OBJECTIONS IN THE GROUND RAISED AS WELL AS IN THE SUBMISSIONS MADE IN SUPPOR T OF THE AFORESAID GROUND NO. 1. THE SUBMISSIONS OF THE APPELLANT HAVE ALSO BEEN QUOTED ABOVE AND CAN BE REFERRED TO FOR DETAILS. THE UNDISPUTED FACTS RELATING TO THE ISSUE IN HAND ARE THAT THE APPELLANT IS A DEVELOPER OF REAL ESTATE HOUSING PROJECT AND H AS BEEN DECLARING PROFIT ON PERCENTAGE COMPLETION METHOD @ 30% GP ON WIP. FROM THE ARGUMENTS OF THE APPELLANT MADE IN RESPECT OF THE DISALLOWANCE OF DEDUCTION OF RS.40,48,000, IT IS NOTED THAT THE OBJECTIONS HAVE BEEN RAISED STATING THAT (A) SEC. 80IA(8) A PPLIES TO TRANSFER OF GOODS AND SERVICES AND WILL NOT APPLY IN THIS CASE, (B) SEC. 80IA(10) WILL NOT APPLY AS IT APPLIES TO TRANSACTIONS CARRIED OUT IN 'THE COURSE OF BUSINESS' AND IN THIS CASE THE LAND PLOTS SOLD WERE PART OF INVESTMENT OF THE SELLERS, (C ) INDEX - LL VALUE (STAMP DUTY VALUATION) IS NOT THE MARKET VALUE AS PER EXPLANATION TO SEC. 80IA(8) AND (D) THE ASSESSING OFFICER SHOULD HAVE REFERRED THE MATTER TO THE DVO FOR DETERMINATION OF MARKET VALUE AS PROVIDED IN SEC. 50C AND 55A. IN ADDITION TO THE ABOVE, THE APPELLANT HAS ALSO TRIED TO EXPLAIN WHY THE VALUE OF AFORESAID PLOTS NO. 15 AND 17 WAS TAKEN AS ZERO. THE APPELLANT ALSO MADE CLAIMS WITHOUT PREJUDICE TO THE MAIN GROUND THAT THE VALUATION WAS 7 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE CORRECT AND NO ADJUSTMENT WAS REQUIRED, BY SAYI NG THAT ALTERNATIVELY IT SHOULD EITHER BE ACCEPTED THAT THE PROVISIONS OF SEC. 80IA(10) WILL NOT APPLY IN RESPECT OF AGREEMENT DATED 31.12.2006 OR NO IMPLICATION EXIST IN THE PROFITS COMPUTED IN THIS ASSESSMENT YEAR IN THE BOOKS AND THE RETURN, WHEREIN THE COST OF THE LAND HAS NOT BEEN JAKE INTO ACCOUNT FOR DETERMINING THE WIP ON WHICH PROFIT AND DEDUCTION OF THIS YEAR HAS BEEN COMPUTED. ON CAREFUL CONSIDERATION OF THE FACTS IT IS NOTED THAT THE CLAIMS MADE BY THE APPELLANT THAT SEC. 80IA(8) AND SEC. 80IA( 10) WILL NOT APPLY AS IN THESE SECTIONS ONLY 'GOODS AND SERVICES' AND TRANSACTION OF BUSINESSES WHERE BOTH THE PARTIES TO THE TRANSACTION HAVE SHOWN THE TRANSACTION UNDER THE HEAD BUSINESS AND PROFESSION, RESPECTIVELY, ARE NOT CORRECT. IT CANNOT BE SAID T HAT THE LAND PURCHASED BY THE APPELLANT FOR THE PURPOSE OF THE BUSINESS WAS NOT COVERED UNDER THE TERMS USED AS GOODS OR SERVICES. SIMILARLY, THE CLAIM MADE BY THE APPELLANT THAT IN THE COURSE OF BUSINESS' APPEARING IN SEC. 80IB(10) IMPLIES THAT THE IT EM TRANSACTED SHOULD BE OF THE CHARACTER OF BUSINESS FOR BOTH THE BUYER AND THE SELLER, APPEARS INCORRECT. THE CONCEPT OF MARKET VALUE AND THE REFERENCE TO THE VALUATION OFFICER, BEING CLAIMED BY THE APPELLANT TO BE APPLICABLE IN THIS CASE ALSO APPEARS TO BE INCORRECT. THE ISSUE BEFORE ASSESSING OFFICER IS LIMITED TO SEE WHETHER THE TRANSACTIONS HAVE BEEN ARRANGED IN A MANNER TO INFLATE THE DEDUCTION OR NOT. SIMILARLY, THE REASONS GIVEN FOR TAKING THE VALUE OF PLOT NO. 15 AND 17 AT NIL APPEARS ILLOGICAL IN THE FACT OF THE MATTER AS NO SELLER WOULD GIVE 3069.19 MTRS OF LAND WITHOUT ANY MONEY, EVEN IF THE SAME WHERE HAVING RESTRICTED LAND USE. THE APPELLANT HAS EXPLOITED THE FULL BENEFIT OF THESE PLOTS AND THE SELLER CANNOT BE ASSUMED TO BE NOT AWARE OF THE SA ME. EVEN IF IT IS ASSUMED THAT HE WAS NOT AWARE, WHY SHOULD HE HAND IT OVER TO ANY PERSON WITHOUT ANY CONSIDERATION. THE FACT THAT THE APPELLANT HAD TO PAY SOME ADDITIONAL MONEY TO THE PMC FOR GETTING THE LAND USE CHANGED, IS ALSO IMMATERIAL TO THE ABOVE F INDING. HOWEVER, THE LAST CLAIM MADE WITHOUT PREJUDICE TO ALL THE ABOVE, APPEARS TO CORRECT, IF THE FACTS STATED THEREIN ARE TRUE. THE APPELLANT HAS STATED THAT' THE LAND COST HAS NOT BEEN INCLUDED IN THE WIP, ON WHICH THE PROFIT AND THE DEDUCTION HAS BE EN COMPUTED IN THE ACCOUNTING PRINCIPLE BEING FOLLOWED REGULARLY. APPARENTLY, THIS ASPECT WAS NOT EXPLAINED TO THE ASSESSING OFFICER DURING THE ASSESSMENT. NORMALLY, IT SHOULD NOT HAVE HAPPENED, BECAUSE IT IS UNDISPUTED THAT THE LAND WAS PART OF THE STOCK IN TRADE BEING THE BUSINESS ASSET AND THEREFORE, IT OUGHT TO 8 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE HAVE BEEN PART OF THE WIP. THE APPELLANT CLAIMS THAT THE SAME HAS NOT FORMED PART OF THE WIP AND THEREFORE, NO PROFIT RELATING TO LAND COST HAS BEEN COMPUTED IN THIS YEAR. THE ASSESSING OFFICER I S THEREFORE, DIRECTED TO VERIFY THE AFORESAID FACTS FROM THE RECORDS AND IF THE SAME IS TRUE THEN, WHETHER THE VALUE IS X OR Y WILL HAVE NO IMPLICATION IN THIS ASSESSMENT YEAR. IT MAY HAVE IMPLICATION IN FUTURE. IN VIEW OF THE DISCUSSIONS MADE ABOVE, IT IS HELD THAT THE FINDING OF ASSESSING OFFICER IN RESPECT OF ADJUSTMENT IS HELD TO BE CORRECT BUT IF IT HAS NO IMPLICATION IN THIS YEAR, THEN NO ADJUSTMENT IS DIRECTED TO BE MADE IN THIS YEAR. GROUND NO. 1 THEREFORE, IS TREATED AS PARTLY ALLOWED SUBJECT TO THE ABOVE REMARKS. 5. GROUND NO. 2 IS RESIDUAL AND CONSEQUENTIAL IN NATURE WHICH IS NEITHER EXERCISED NOR PRESSED BY THE APPELLANT AND THEREFORE, THIS GROUND IS TREATED AS DISMISSED. 6. FOR THE STATISTICAL PURPOSE, THE APPEAL IS TREATED AS PARTLY ALLOWED . 7. IN SUM AND SUBSTANCE THE ASSESSEE WAS GIVEN THE RELIEF ON THE BASIS OF THE PLEA THAT THE COST OF THE DEVELOPMENT RIGHTS IS NOT INCLUDED IN THE WIP IN THIS YEAR I.E. A.Y. 2009 - 10 BUT AT THE SAME TIME THE LD. CIT(A) DECIDED THE ISSUE ON MERIT ALSO WH ETHER SEC. 80IB(8) AND 80IB(10) ARE APPLICABLE OR NOT. THIS IS PRECISELY THE GRIEVANCE OF THE ASSESSEE THAT IF THE COST OF THE DEVELOPMENT RIGHTS IS NOT INCLUDED IN THE WIP THEN ISSUE SHOULD NOT HAVE BEEN DISCUSSED ON MERIT. 8. WE HAVE HEARD THE RIVAL S UBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS VERIFIED THE RECORD AND ALLOWED THE FULL DEDUCTION CLAIMED BY THE ASSESSEE. WHILE PASSING THE ORDER GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) HENCE, IT IS CLEAR THAT THE COST OF THE DEVELOPMENT RIGHTS IS NOT INCLUDED INTO WIP . T HEN THE NEXT QUESTION IS WHETHER LD. CIT(A) JUSTIFIED IN ADJUDICAT ING THE ISSUE IN RESPECT OF THE ASSESSMENT YEAR WHICH IS NOT BEFO RE HIM. IN OUR HUMBLE UNDERSTANDING 9 ITA NO. 2278/PN/2012, OM ASSOCIATES, PUNE THE LD. CIT(A) HAS NO POWER OR JURISDICTION TO ADJUDICATE THE ISSUE IN RESPECT OF ASSESSMENT YEAR WHICH IS NOT BEFORE HIM. WE, THEREFORE, DELETE THE FINDING OF THE LD. CIT(A) ON MERIT OF THE ISSUE AND WE KEPT THE ISSUE OPEN WHETHER PROVISIONS OF SEC. 80IB(8) AND 80IB(10) ARE APPLICABLE IN RESPECT OF THE COST INCURRED ON THE DEVELOPMENT RIGHTS BY THE ASSESSEE. THIS ISSUE CAN BE DECIDED BY THE AUTHORITIES BELOW WHEN THE ASSESSEE WILL INCLUDE THE COST OF THE DEVELOPMENT R IGHTS IN THE WIP AND CLAIMS THE DEDUCTION U/S. 80IB(10). ACCORDINGLY, GROUND NOS. 1 & 2 ARE ALLOWED FOR THE STATISTICAL PURPOSES AND ADDITIONAL GROUND IS ALLOWED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCE D IN THE OPEN COURT ON 25 - 0 6 - 2014 PRONOUNCED IN THE OPEN COURT ON - 05 - 2014 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 25 TH JUNE, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I, PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE