ROYAL CONSTRUCTIONS, MUMBAI V. ACIT 19(2), MUMBAI

ITA 2302/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9999 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K SHARMA
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2302/M/2014 ASSESSMENT YEAR: 2008-09 M/S. ROYAL CONSTRUCTIONS, 19, SUPER BAZAR, STATION ROAD, SANTACRUZ (W), MUMBAI 400 054 PAN: AAAAR5211R VS. ACIT-19(2), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI A.K. SHARMA, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 27.04.2017 DATE OF PRONOUNCEMENT : 30.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 10.01.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE ASSESSEE IS AN ASSOCIATION OF PERSONS AND TH E MAIN BUSINESS WAS THAT OF DEVELOPERS AND BUILDERS. DURING THE YEAR, ASSES SEE HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH ONE M/S. GREAT EASTERN S HIPPING COMPANY LTD. (GESCO) TO DEVELOP THE SRA PROJECT AT MULUND. THE PROJECT WAS APPROVED IN THE NAME OF M/S. GREAT EASTERN SHIPPING COMPANY LTD . THE M M/S. GREAT EASTERN SHIPPING COMPANY LTD. HAS COMPLETED THE BUI LDING NO.1 BEING A PROJECT BY CONSUMING 578.61 SQR. MTR. OF FSI AND FO R THE FURTHER DEVELOPMENT OF THE BALANCE AREA OF 418.39 SQR. MTR. THE VENDOR (M/S. GREAT EASTERN SHIPPING COMPANY LTD.) THEN ISSUED A LETTER OF AUTHORITY IN FAVOUR OF ASSE SSEE AUTHORIZING THEM TO DEVELOP THE BALANCE AREA ON THE PLOT HAVING AN AREA OF ITA NO.2302/M/2014 M/S. ROYAL CONSTRUCTIONS 2 418.39 SQR. MTR. BEARING SURVEY NO.16/2 AND CTS NO. 13 AND 13/1 LYING AND BEING ON GAWAN PADA ROAD, MULUND. IT WAS AGREED BE TWEEN THE PARTIES THAT ASSESSEE SHALL DEVELOP THE LAND, CONSTRUCT THE RESI DENTIAL BUILDING AND SELL THE SAME ON OWNERSHIP BASIS. THE DEVELOPMENT OF THE LA ND WAS CARRIED OUT STRICTLY AS PER SANCTIONED PLAN BY SLUM REHABILITATION AUTHO RITY. THE ENTIRE COST OF DEVELOPMENT WAS BORNE BY THE ASSESSEE. THE VENDOR (M/S. GREAT EASTERN SHIPPING COMPANY LTD.) HAS NOT INCURRED ANY CONSTRU CTED ACTIVITIES AND NOT MADE INVESTMENT. VENDOR PERMITTED ASSESSEE TO DEVE LOP THE SAID PROPERTY AND ASSESSEE PAID AN AMOUNT OF RS.13 LAKH BY WAY OF CON SIDERATION. THE PROJECT WAS DEVELOPED AND MADE PROFIT OF RS.48,71,935/-. T HE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB(10). HOWEVER, THE CLA IM WAS REJECTED ON THE GROUND THAT THE ASSESSEE IS NOT A DEVELOPER OF PROJ ECT, ASSESSEE IS NOT RIGHT OWNER CUM DEVELOPER OF SRA PROJECT. THEREFORE, THE ASSESSEE WAS NOT GRANTED THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 3. THE LD. A.R. SUBMITTED BEFORE US THAT ASSESSEE H AS RIGHT TO DEVELOP THE SRA PROJECT UNDER AGREEMENT DATED 18.04.05 ENTERED INTO BETWEEN ORIGINAL OWNER M/S. GREAT EASTERN SHIPPING COMPANY LTD. AND ASSESSEE TO DEVELOP THE BALANCE PORTION OF PROJECT NAMELY BUILDING NO.2. T HE BUILDING NO.2 WAS CONSTRUCTED BY THE ASSESSEE VIDE THE COMMENCEMENT C ERTIFICATE DATED 16.03.06. BUILDING NOS.1 & 2 ARE DIFFERENT HOUSING PROJECTS C ONSTRUCTED ON THE SAME PLOT DECLARED AS SLUM BY COMPETENT AUTHORITY. AS PER TH E AGREEMENT, ASSESSEE WAS ENTITLED TO CONSTRUCT A BUILDING ON THE SAID PLOT A ND ALSO TO DISPOSE THE COMPONENT IN THE SAID NEWLY CONSTRUCTED BUILDING. AS PER CLAUSE N OF THE SAID AGREEMENT THE BALANCE FSI WAS AVAILABLE FOR CONSTRU CTION AS PER SRA SCHEME. THE ASSESSEE IS DEVELOPER AND ALLOWED TO CONSTRUCT THE TENEMENTS FOR SALE IN OPEN MARKET. NO CONDITION IS IMPOSED UNDER SECTION 80IB(10). THE DEDUCTION IS ALLOWED, IF HOUSING PROJECT IS DEVELOPED IN ACCO RDANCE WITH THE PROVISIONS OF THIS SECTION. HONBLE GUJARAT HIGH COURT IN THE CA SE OF RADHE DEVELOPERS 341 ITR 403 HAS HELD THAT NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS ITA NO.2302/M/2014 M/S. ROYAL CONSTRUCTIONS 3 NOT BEEN PROVIDED BY THE LEGISLATURE. IN THE CASE OF MAHADEV DEVELOPERS 214 TAXMAN 130 (GUJ.) THE HONBLE GUJARAT HIGH COURT HA S HELD THAT IF THE ASSESSEE HAD RIGHT OF POSSESSION TO DEVELOP THE HOUSING SOCI ETY THE ASSESSEE IS LIABLE TO CLAIM THE DEDUCTION. THE ASSESSEE IS NOT AN OWNER OF THE PLOT BUT HE HAS DEVELOPED THE PROJECT AS PER THE AGREEMENT. THE AS SESSEE HAS SUBMITTED THE COPY OF NOTIFICATION, COPY OF NOTIFICATION NOTIFYIN G LAND AS SLUM, DATE OF COMMENCEMENT CERTIFICATE, COPY OF DEVELOPMENT AGREE MENT, COPY OF INDEMNITY BOND, COPY OF ORDER OF SLUM REHABILITATION AUTHORIT Y AND COPY OF THE LETTER DATED 24 TH NOVEMBER 2010 ADDRESSED TO AO. THEREFORE, IT MAY BE ALLOWED. 4. THE LD. D.R. SUBMITTED THAT THE ASSESSEE CANNOT BE CONSIDERED AS A DEVELOPER. THE ORIGINAL DEVELOPMENT AGREEMENT OF B UILDING NO.1 WAS CARRIED OUT BY GESCO AND GESCO HAS SOLD THIS TO BE THE SALE COMPONENT TO THE ASSESSEE. THE ASSESSEE IS A SUB CONTRACTOR WITH GE SCO AND HE IS NOT AN ORIGINAL DEVELOPER. HENCE, THE ASSESSEE HAS DEVELO PED THE SLUM REHABILITATION FSI, BUT HE IS NOT THE OWNER. THEREFORE, ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB(10). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT IT IS FACT ON RECORD WHICH IS NOT DISPUTED BETWEEN THE PARTIES. THERE WAS A DEVELOPMENT AGREEMENT BETWEEN ASSESSEE AND GESCO WI TH MR. TANGAPPA KESHAV NAIR THE ORIGINAL OWNER. FROM THE CLAUSE N OF THE DEVELOPMENT AGREEMENT, IT WAS ASCERTAINED THAT OUT OF 997 SQR. MTR. OF FSI AVAILABLE TO THE ASSESSEE, 578.61 SQR. MTR. HAVE BEEN CONSUMED BY GE SCO AND 12 OCCUPANTS OF TANGAPPA CHAWL. THE BUILDING CONSTRUCTED CONSIS TED GROUND AND SEVEN UPPER FLOORS WHICH GOT ALLOTTED TO 12 TENANTS AS A PART OF REHABILITATION AND REST OF THE FLATS WHICH WAS FREE SALE COMPONENT WAS ALSO SOLD OUT. THE DEVELOPMENT AGREEMENT WAS ENTERED INTO FOR THE BALA NCE FSI AVAILABLE OF 418.39 SQR. MTR. OUT OF SAID PROPERTY AND THE LUMP SUMP AMOUNT WAS PAID BY THE ASSESSEE. THE ORIGINAL CERTIFICATE WAS IN THE NAME OF GESCO. THE SRA AUTHORITY HAS ALSO GIVEN THE PERMISSION IN THE NAME OF THE ASSESSEE. THE ITA NO.2302/M/2014 M/S. ROYAL CONSTRUCTIONS 4 ASSESSEE HAS DEVELOPED THE LAND AND CONSTRUCTED THE RESIDENTIAL BUILDING AND SALE THE SAME AS OWNERSHIP BASIS. ASSESSEE HAS DIS POSED THE CONSTRUCTED PREMISES AND RECEIVED THE CONSIDERATION ON ACCOUNT OF SALE. THEREFORE, WE ARE OF THE VIEW THAT THOUGH THE ASSESSEE IS NOT REAL OW NER, ASSESSEE HAS CARRIED OUT THE CONSTRUCTION AND HE HAS SOLD THE FLATS. THEREF ORE, ASSESSEE IS A DEVELOPER. AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT I N THE CASE OF COMMISSIONER OF INCOME-TAX VS. AMALTAS ASSOCIATES [2016] 389 ITR 175X (GUJ) ASSESSEE IS A DEVELOPER AND IS ENTITLED FOR D EDUCTION UNDER SECTION 80IB(10). 6. WE ALSO FIND THE SIMILAR ISSUE DECIDED BY ITAT, E-BENCH IN ITA NO.2545/M/2013 WHEREIN THE TRIBUNAL HAS HELD THAT T HERE IS NO REQUIREMENT OF OWNERSHIP OF THE LAND FOR CLAIMING DEDUCTION UNDER SECTION 80IB(10) AND THERE IS NO REQUIREMENT THAT APPROVAL FROM THE MUNICIPALI TY SHOULD BE IN THE NAME OF THE ASSESSEE. THEREFORE, LOOKING INTO THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE FIND THAT ASSESSEE HAS DEVELOPED A BUILDING UNDE R A DEVELOPMENT AGREEMENT AND LIABLE FOR A CLAIM OF DEDUCTION UNDER SECTION 8 0IB(10). THEREFORE, ASSESSEE IS ENTITLED FOR THE DEDUCTION UNDER SECTIO N 80IB(10). WE ALSO SUPPORT THE DECISION OF BOMBAY TRIBUNAL IN THE CASE OF SARO J SALES ORGANISATION VS. ITO 118 TTJ (MUMBAI) 485 WHEREIN IT IS HELD THAT IF THE HOUSING PROJECT IS DEVELOPED AS A SUB DEVELOPER, THEN HE IS ENTITLED F OR DEDUCTION UNDER SECTION 80IB(10). IN VIEW OF THIS, WE ALLOW THE CLAIM OF T HE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2017. * KISHORE, SR. P.S. ITA NO.2302/M/2014 M/S. ROYAL CONSTRUCTIONS 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.