The ITO, Ward-3(1), Baroda V. M/s. Amar Corporation, Baroda

ITA 2420/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1482 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MDHUSUDAN
• Section: 80IB

Judgement Text

I.T.A. NO . 2420 /AHD/ 20 1 1 ASSESSMENT YEAR: 20 08 - 09 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM ] I.T.A. NO. 2420 /AHD/ 20 1 1 ASSESSMENT YEAR : 20 08 - 09 INCOME TAX OFFICER, WARD - 3(1), BARODA . . .. ......... . APPEL LANT VS. A MAR CORPORATION, ..... ........ RESPONDENT 3/B, RUKSHM A NI NAGAR, NEW SAMA ROAD, BARODA - 390 007 . [ PAN: A A KFA 8894 N ] APPEARANCES BY: K. MDHUSUDAN , FOR THE APPELLANT NONE (WRITTEN SUBMISSION) , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : APRIL 12 TH , 201 6 DATE OF PRONOUNCING THE ORDER : MAY 31 ST , 201 6 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGE D CORRECTNESS OF THE ORDER DAT E D 14 TH JULY 201 1 , PA SSED BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2008 - 09, ON THE FOLLOWING GROUND : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C A SE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S. 80IB(10) R.W.S. 80IB(1) OF THE INCOME TAX ACT TO THE ASSESSEE IN VIEW OF TH E DECISION OF TH E HON BLE ITAT IN THE CASE OF M/S. SHAKTI CORPORATION & OTHERS IN I T A NO. 1503/AHD/2008 DATED 07.11.2008, WITHOUT APPRECIATING THAT THE APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COM PLETION CERTIFICATE WAS NOT GRANTED TO TH E ASSES SE E BUT TO THE LANDOWNER AND THE RIGHTS AND TH E OBLIGATIONS UNDER TH E SAID APPROVAL WERE NOT TRANSFERABLE, A ND T HAT TRANSFER OF DWELLING UNITS IN FAVOUR OF THE END - USERS WAS MADE BY T HE LANDOWNER AND NOT BY T HE ASSESSEE. I.T.A. NO . 2420 /AHD/ 20 1 1 ASSESSMENT YEAR: 20 08 - 09 PAGE 2 OF 5 2. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF, AS ASSESSING OFFICER PUTS IT, DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT . THE CLAIM OF DEDUCTION UNDER SECTION 80IB(1) OF THE INCOME TAX ACT, 1961 HAS BEEN DECLINED BY THE ASSE SSING OFFICER FOR THE REASON THAT NEITHER THE LAND IS OWNED BY THE ASSESSEE NOR THE HOUSING PROJECT APPROVAL WAS IN HIS NAME. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO REVERSED THE ACTION OF THE ASSESSING OFFICER AND HELD AS FOLLOWS : - 3.3. I HAVE CONSIDERED THE SUBMISSION OF THE AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE DECISION OF THE HON'BLE ITAT IN THE CASE OF M/S. SHAKTI CORPORATION AND OTHERS AND THE GUIDELINES LAID DOWN HAS ALSO BEEN C ONSIDERED. THE ISSUE OF OWNERSHIP OF LAND NOT BEING A MANDATORY CONDITION HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT IN THE CASE OF M/S. RADHE BUILDERS AND OTHERS (SUPRA). IN RESPECT OF AY 2005 - 06, 2006 - 07 AND 2007 - 08 THE ASSESSING OFFICER HAS VERIFIED T HAT THE DOMINANT CONTROL OVER THE LAND, THE RISK AND COSTS OF THE PROJECT ARE THAT OF THE APPELLANT, HENCE THE APPELLANT WAS GRANTED DEDUCTION U/S. 80IB(10) AS PER THE CONDITIONS LAID DOWN IN THE DECISION OF THE HON'BLE ITAT IN THE CASE OF M/S. SHAKTI CORP ORATION AND OTHERS. FOR THE YEAR UNDER CONSIDERATION, FOLLOWING THE ABOVE MENTIONED JUDGMENTS OF HON'BLE AHMEDABAD ITAT, THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80IB(10) IS ALLOWED, SUBJECT TO THE ASSESSING OFFICER FINDING THAT THE SITUATION HAS NOT CHANGED AND THE ASSESSEE PASSES THE TEST LAID DOWN IN THE CASE OF M/S. SHAKTI CORPORATION AND OTHERS, THIS YEAR TOO. THE ASSESSING OFFICER SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE LANDOWNER(S) AND DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER(S) AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE ASSESSING OFFICER FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVEL OPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE ASSESSING OFFICER SHALL ALLOW THE DEDUCTION TO THE ASSESSEE U/S. 80IB(10). IN CASE THE ASSESSING OFFICER FINDS THAT THE DEVELOPER HAS AC TED ON BEHALF OF THE LANDOWNER AND HAS GOT A FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, T HE ASSESSEE SHALL NOT BE ALLOWED DEDUCTION U/S. 80IB(10). 3. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I.T.A. NO . 2420 /AHD/ 20 1 1 ASSESSMENT YEAR: 20 08 - 09 PAGE 3 OF 5 5. W E FIND THAT THE ISSUE IS NOW SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE, BY THE DECISION OF A C O - ORDINATE BENCH IN THE C A SE OF S HRI UMEYA CORPORATION VS. ITO (ITA NO.211/AHD/2010 ; A.Y. 2006 - 07; ORDER DATED 07.07.2015) WHEREIN IT IS, INTER ALIA, HELD AS FOLLOWS : - 6. WE FIND THAT, IN THE CASE OF CIT VS RADHE DEVELOPERS [(2012) 341 ITR 403 (GUJ)] , HON BLE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO CONSIDER THE ISSUE OF OWNERSHIP OF LAND, ON WHICH HOUSING PROJECT IS DEVELOPED, IN THE CONTEXT OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10). HON BLE JURISDICTIONAL HIGH COURT HAS, IN THIS CONTEXT, INTER ALIA OBSERVED AS FOLLOWS: 32. SEC. 80 - IB(10) OF THE ACT THUS PROVIDES FOR DEDUCTIONS TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS UNDER CERTAIN CIRCUMSTANCES NOTED ABOVE. IT DOES NOT PROVIDE THAT THE LAN D MUST BE OWNED BY THE ASSESSEE SEEKING SUCH DEDUCTIONS. 33. IT IS WELL SETTLED THAT WHILE INTERPRETING THE STATUTE, PARTICULARLY, THE TAXING STATUTE, NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS NOT BEEN PROVIDED BY THE LEGISLATURE. THE CONDITION WH ICH IS NOT MADE PART OF S. 80 - IB(10) OF THE ACT, NAMELY THAT OF OWNING THE LAND, WHICH THE ASSESSEE DEVELOPS, CANNOT BE SUPPLIED BY ANY PURPORTED LEGISLATIVE INTENT. 34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPMENT AGREEMENTS IN BOTH THE SETS OF CASES . IT CAN BE SEEN FROM THE TERMS AND CONDITIONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUTION OF THE DEVELOPMENT PROJECTS. UNDER THE AGREEMENTS, THE ASSESSEE HAD FULL AUTHORITY TO DEVELOP THE LAND AS PER HIS DISCRETION. THE ASSESSEE COULD ENGAGE PROFESSIONAL HELP FOR DESIGNING AND ARCHITECTURAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CHARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT CAN THUS BE SEEN THAT THE ASSESSEE HAD DEV ELOPED THE HOUSING PROJECT. THE FACT THAT THE ASSESSEE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUENCE. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 7. IN OUR HUMBLE UNDERSTANDING, THEREFORE, IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITI ON PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREPRENEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVELOPING AND BUILDING HOUSING PROJECTS BY BUYING, ON OUTRIGHT BASIS, AND CONSTRUCTING RESIDENTIAL UNITS THE REON COULD I.T.A. NO . 2420 /AHD/ 20 1 1 ASSESSMENT YEAR: 20 08 - 09 PAGE 4 OF 5 PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE OF ACTIVITY, BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BECAUSE THE ASSESSE E HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSI NG PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND REWARDS OF DEVELOPING THE HOUSING PROJECT, IN SUBSTANCE, REMAIN WITH THE ASSESSEE . IT IS DIFFICULT, IF NOT ALTOGETHER IMPOSSIBLE, TO VISUALIZE ALL THE BUSIN ESS MODELS THAT AN ASSESSEE MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS, IN SUBSTANCE, THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME, BUT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY F OR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOPING AND BUILDING A HOUSING PROJECT . THERE IS NO JUSTIFICATION, CONCEPTUAL OR LEGAL, IN RESTRICTING ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINESS MODEL THAT AN ENTREPRENEUR AD OPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HOUSING PROJECT. 8. AS REGARDS LEARNED CIT(A) S RELIANCE ON THE DECISION OF A LARGER BENCH OF THIS TRIBUNAL, IN THE CASE OF B T PATIL & SONS (BELGAUM) CONSTRUCTIONS PVT LTD VS ACIT [(2010) 1 ITR (TRIBUNAL ) 703 (MUM)], WHAT HAS BEEN REFERRED TO BY HER IS THE VIEW OF THE THREE MEMBER BENCH RESOLVING THE POINT OF DIFFERENCE BETWEEN THE MEMBERS OF THE DIVISION BENCH. HOWEVER, THIS VIEW WAS STILLBORN, AND ITS RELEVANCE IS CONFINED TO ACADEMIC SIGNIFICANCE, FOR THE REASON THAT THAT WHILE GIVING EFFECT TO THE MAJORITY VIEW, VIDE ORDER DATED 28 TH FEBRUARY, 2013 AND ON SOMEWHAT PECULIAR FACT SITUATION IN THIS CASE, THE FINAL ORDER OF THE TRIBUNAL DID NOT ENDORSE THESE VIEWS. QUITE TO THE CONTRARY, FOLLOWING HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD AND ORS [(2010) 322 ITR 323 (BOM)] AND UPON BY TAKING INTO ACCOUNT HON BLE BOMBAY HIGH COURT S SPECIFIC DIRECTIONS IN THE CASE BEFORE THE TRIBUNAL, THE TRIBUNAL S FINAL ORDER HAD, IN TER ALIA, CONCLUDED AS FOLLOWS: .WHILE GIVING EFFECT TO THE OPINION OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CON TRARY TO THE OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT T O THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEARS. 9. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT ASSUME THE ENTREPRENEURSHIP RISKS OF THE HOUSING PROJECT. THE FORMAT OF ARRANGEMENTS FOR TRANSFER OF BUILT UP UNIT, AND BUSINESS MODEL OF THE ASSESSEE FOR THAT PURPOSE, IS NOT DECISIVE FACTOR FOR DETERMINING ELIGIBILITY OF DEDUCTION UNDER SECTION 80 IB (10), BUT THAT IS ALL THAT THE AUTHORITIES BELOW HAVE FOUND FAULT WITH. THE OBJECTIONS OF THE AUTHORITIE S BELOW ARE THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AUTHORITIES BELOW, IN DECLINING DEDUCTION UNDER SECTION 80IB (10) AND ON THE FACTS OF THIS CASE, IS INCORRECT. WE VACATE THE SAME AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. I.T.A. NO . 2420 /AHD/ 20 1 1 ASSESSMENT YEAR: 20 08 - 09 PAGE 5 OF 5 6. RESPECTFULLY FOLLOWING THE ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, APP E AL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 31 ST DAY OF MAY , 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 31 ST DAY OF MAY , 2016. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD