Sanand Properties P. Ltd., Pune V. Jt. CIT, Pune

ITA 2446/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76320 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Reopening of assessment; Business income; Maximum Marginal Rate; Benefit of exemption
• Section: 133A; 80IB; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.1860/PN/2012 (ASSESSMENT YEAR 2009-10) SANAND PROPERTIES PVT. LTD., S.NO.177/2, DESAI HOUSE, DHOLE PATIL ROAD, PUNE - 411001 .. APPELLANT PAN NO.AAHCS3227K VS. DCIT, CIRCLE-6, PUNE .. RESPONDENT ITA.NO.2446/PN/2012 (ASSESSMENT YEAR 2008-09) SANAND PROPERTIES PVT. LTD., S.NO.177/2, DESAI HOUSE, DHOLE PATIL ROAD, PUNE - 411001 .. APPELLANT PAN NO.AAHCS3227K VS. JCIT, RANGE-6, PUNE .. RESPONDENT ASSESSEE BY : SHRI NILESH KHANDELWAL REVENUE BY : SMT. M.S. VERMA, CIT DATE OF HEARING : 18-03-2014 DATE OF PRONOUNCEMENT : 21-03-2014 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS DATED 31-01-2012 AND 25-10-2012 OF THE CIT(A)-III, PUNE RELATING TO ASSESSMENT YEAR 2009-10 AND 2008-09 RES PECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE I N BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO.1860/PN/2012 (A.Y. 2009-10) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF DEVELOPING AND PROMOTING THE REAL ESTATE. RETURN OF INCOME FOR THE IMPUGNED ASSESSMEN T YEAR WAS FILED BY THE ASSESSEE ON 21/10/2009 DECLARING TOTAL INCOME O F RS.1,12,21,203/-, WHICH WAS SUBSEQUENTLY REVISED ON 13/09/2010, WHERE IN TAX WAS COMPUTED U/S.115JB AFTER INCLUDING THE INCOME IT RE CEIVED FROM THE AOP IN WHICH IT WAS A MEMBER. A SURVEY ACTION U/S. 133A OF THE I.T. ACT WAS ALSO CARRIED OUT BY THE DEPARTMENT IN THE CASE OF T HE ASSESSEE ON 23/12/2010 DURING WHICH STATEMENT OF SHRI ASHOK V. SURATWALA, DIRECTOR OF THE ASSESSEE COMPANY WAS RECORDED U/S. 131 OF TH E I.T. ACT. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE WAS IN POSSESSION OF THE DEVELOPMENT R IGHTS IN RESPECT OF LAND/PROPERTY, ADMEASURING 37976.90 SQ.MT. AT FINAL PLOT NO. 72, YERAWADA TOWN PLANNING SCHEME AT S. NO. 210, VILLAG E YERAWADA, TAL. HAVELI, DISTT. PUNE, WHICH WERE PURCHASED BY THE AS SESSEE FROM YERAWADA STUD AND AGRICULTURAL FARM FOR A CONSIDERATION OF R S.8,60,00,000/-. LATER, THE ASSESSEE ENTERED INTO AN AGREEMENT ON 28/04/200 3 WITH M/S.RAVIRAJ KOTHARI & COMPANY (HEREINAFTER REFERRED TO AS RKC) FOR DEVELOPING THE LAND TO THE EXTENT ADMEASURING 31026.90 SQ. MT. BY WAY OF FORMING AN ASSOCIATION OF PERSONS (AOP) NAMELY M/S FORTALEZA D EVELOPERS, HAVING ASSESSEE COMPANY AS ONE MEMBER AND RKC AS ANOTHER M EMBER. AS PER THE SAID AGREEMENT THE ASSESSEE AND RKC AGREED TO D EVELOP AND CONSTRUCT A HOUSING PROJECT ON THE SAID PLOT OF LAND AT FINAL PLOT NO. 72, YERAWADA TOWN PLANNING SCHEME AT S. NO. 210, VILLAGE YERAWAD A, TAL. HAVELI, 3 DIST. PUNE. ON ITS PART, THE ASSESSEE INTRODUCED TH E DEVELOPMENT RIGHTS IN THE AFORESAID LAND AS ITS CAPITAL IN THE AOP WHILE M/S. RKC INTRODUCED ITS CAPITAL IN THE FORM OF FINANCE REQUIRED FOR THE SAI D PROJECT. THERE WAS NO FIXED RATIO OF CAPITAL CONTRIBUTION FROM EACH OF TH E MEMBER OF AOP WHILE THE REVENUE/INCOME ARISING FROM THE SAID PROJECT WA S TO BE SHARED BY THE TWO MEMBERS OF THE AOP IN TERMS OF CLAUSE 7 OF THE AOP AGREEMENT. THE SALIENT FEATURES OF THE AGREEMENT AS SUMMARIZED BY THE ASSESSING OFFICER ARE AS UNDER : A) THE HOUSING UNITS SHALL BE SOLD TO PURCHAS ERS BY THE AOP. B) ASSESSEE (SPPL) SHALL BE ENTITLED TO 35% OF T HE GROSS SALE PROCEEDS. C) ASSESSEE (SPPL) MAY WITHDRAW ITS SHARE OF SAL E PROCEEDS (RECEIPTS). D) BALANCE 65% OF THE SALE PROCEEDS SHALL BE U TILIZED TO MEET EXPENDITURE FOR BUSINESS OF AOP. E) NET BALANCE REMAINING AFTER CLAIMING EXPENSE S SHALL BE THE SHARE OF REVENUE/INCOME OF M/S RKC F. THIS ARRANGEMENT OF SHARE OF REVENUE AND INC OME SHALL BE RESTRICTED TO THIS PROJECT DEVELOPED ON 31026.90 SQ . MT. OF LAND AT PLOT NO. 72. 2.2 FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSE E COMPANY FOR THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.5,89,91,145/- FROM THE AOP, M/S. FORTALEZA DEVELOPERS WHICH WAS EXCLUDED FROM THE COMPUTATION OF TOTAL INCOME ON THE GROUND THAT THE SAME, BEING PROFIT RECEIVED FRO M THE AOP, WAS EXEMPT IN TERMS OF THE PROVISIONS OF SEC.167B(2) OF THE I.T. ACT. HOWEVER, CITING THE RELEVANT CLAUSES IN THE AGREEME NT ENTERED INTO WHILE FORMING THE AOP AS ALSO CORROBORATED BY THE DIRECTO R OF THE ASSESSEE COMPANY, MR. ASHOK SURATWALA, THE ASSESSING OFFICER ASSERTED THAT AS PER THE SAID CLAUSES, WHAT THE ASSESSEE WAS ENTITLED TO WAS A SHARE OF 35% IN 4 THE GROSS RECEIPTS OF THE AOP AND NOT A SHARE IN TH E PROFIT, NOTING THAT WHAT WAS EXEMPTED FROM TAX U/S.167B(2) WAS THE PROF IT RECEIVED FROM THE AOP, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAVING RECEIVED A SHARE IN THE GROSS RECEIPTS OF THE AOP, THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER THE SAID SECTION WAS NOT VALI D AND NEEDED TO BE REVOKED. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLA IN AS TO WHY THE AMOUNT CLAIMED U/S.167B(2) SHOULD NOT BE BROUGHT TO TAX. IT WAS SUBMITTED THAT WHAT WAS RECEIVED BY THE ASSESSEE FR OM THE AOP WAS INDEED THE SHARE OF PROFIT ONLY BUT WITH A SLIGHT DEVIATION IN THE FORMULA DEVISED BY IT FOR SHARING THE PROFITS. THE MAIN CON TENTIONS PUT FORTH BY THE ASSESSEE OBJECTING TO THE VIEW OF THE ASSESSING OFFICER ARE SUMMARIZED BY THE ASSESSING OFFICER AT PARA 3 AND 4 OF THE ASSESSMENT ORDER AT PARA 3 AND 4 OF THE ASSESSMENT ORDER WHICH READS AS UNDER: FORTALEZA DEVELOPERS WAS FORMED AS AN AOP VIDE AN AGREEMENT DATED 29-04-2003 BETWEEN SANAND PROPERTIE S PVT. LTD. AND M/S. RAVIRAJ KOTHARI AND COMPANY TO DEVELO P AND CONSTRUCT A HOUSING PROJECT AT PUNE. IN PURSUANCE OF ABOVE ASSESSEE INTRODUCED THE RIGHT S OF DEVELOPMENT IN A LAND HELD BY IT AS A CAPITAL CONTR IBUTION AND M/S. RKC CONTRIBUTED FINANCIAL CONTRIBUTION. IN THE STATEMENT OF TOTAL INCOME, PROFIT AND LOSS A CCOUNT AND TAX AUDIT REPORT, NAMES OF THE MEMBERS, PROFIT SHAR ING RATIO AND WORKING OF PROFIT DISTRIBUTION CLEARLY INDICATE S THE FACT THAT 35% OF THE SALE PROCEEDS CONSTITUTE PROFIT SHA RING RATIO OF ASSESSEE. IT IS AS PER CORRECT UNDERSTANDING BETWEEN THE MEMB ERS OF AOP AS AGREED BY THEM UNDER THE TERMS OF AGREEMENT DATED 29.04.2003. IN REGARD TO SHARE OF INCOME OF THE AOP IT WAS AGRE ED THAT NET SURPLUS OF THE PROFIT AND LOSS ACCOUNT OF AOP W ILL BE DISTRIBUTED AS: 5 35% OF THE GROSS REVENUE OF THE AOP (REPRESENTING T HE RECEIPT OF THE BASIC PRICE OF FLATS SOLD) WOULD BE ALLOCATED TO ASSESSEE AS THEIR SHARE OF INCOME IN AOP. THE BALANCE OF THE NET SURPLUS OF THE AOP WOULD BE ALLOCATED TO M/S . RKC, AS THEIR SHARE OF INCOME IN THE AOP. THIS WOULD EFFECTIVELY REPRESENT THE BALANCE 65% OF THE GROSS REVENUE OF THE AOP ALONG WITH OTHER INCOME, AS REDUCED BY ALL THE EXPENDITURE OF CONSTRUCTION, MARKETING ETC. AOP UNLIKE A PARTNERSHIP FIRM IS NOT GOVERNED, BY A NY LAW AND HENCE MEMBERS ARE FREE TO DEVISE THEIR OWN FORM ULA FOR PROFIT SHARING AND ASSESSEE HAS DONE THE SAME. AOP FORTALEZA DEVELOPERS FALLS UNDER THE PROVISIONS OF SEC. 167B(2) OF THE ACT AND AS PER THE SAID SEC. AS WELL AS DECISION OF HON'BLE SUPREME COURT IN THE CASE OF 1TO VS C H ATCHAIAH, 218 ITR 239 IF IT IS AN INCOME OF AN AOP, THEN ALONE AOP HAS TO BE TAXED. SUCH INCOME CANNOT BE TA XED IN THE HANDS OF MEMBERS. 2.3 HOWEVER, THE AO WAS NOT SATISFIED WITH THE VARI OUS EXPLANATIONS GIVEN BY THE ASSESSEE. REFERRING TO THE PROVISIONS OF SEC.167B, THE ASSESSING OFFICER EMPHASIZED THAT AS PER THE SAID P ROVISIONS, THE INCOME OF THE AOP, HAS TO BE SUBJECTED TO MAXIMUM MARGINAL RATES AND THE INCOME OF THE MEMBER OF THE AOP SHOULD BE PART OF S UCH INCOME SO AS TO GET THE BENEFIT OF EXEMPTION OF SUCH INCOME IN THEI R INDIVIDUAL HANDS. WHILE SAYING SO, THE ASSESSING OFFICER ASSERTED SUC H INCOME, BEING INCOME DERIVED FROM BUSINESS OR PROFESSION, HAD TO BE COMPUTED AS PER PROVISIONS CONTAINED IN CHAPTER IV D OF THE ACT IN THE PRESENT CASE AND ONLY SUCH PROFIT/INCOME CAN ALONE BE RELEVANT FOR A PPLICATION OF SEC.L67B OF THE ACT. ELUCIDATING ON THE TERM 'PROFIT', THE A SSESSING OFFICER EMPHASIZED THAT PROFIT IS ARRIVED AT AFTER DEDUCTIN G ALL THE EXPENSES FROM ALL THE REVENUE WITHIN A SPECIFIED PERIOD WHICH IS SUBJECT TO INHERENT RISKS 6 OF A BUSINESS WHICH COULD BE EITHER ON REVENUE SIDE OR THE EXPENDITURE SIDE. THE ASSESSING OFFICER OBSERVED THAT IN THE PR ESENT CASE, THE NATURE OF RECEIPTS DERIVED BY THE ASSESSEE FROM THE AOP WAS N OT PROFIT, BUT THE RELEVANT CLAUSES IN THE AGREEMENT AMPLY SUGGESTED T HAT THE ASSESSEE WAS DIRECTLY ENTITLED TO 35% OF THE GROSS SALE RECEIPTS IRRESPECTIVE OF THE PROFIT ASPECT, WHICH THE ASSESSEE COULD WITHDRAW DIRECTLY FROM THE BANK ACCOUNT MAINTAINED FOR DEPOSITING THE SALE PROCEEDS, AS ADM ITTED BY THE DIRECTOR OF THE, ASSESSEE COMPANY IN THE COURSE OF HIS STATEMEN T RECORDED U/S.131. THE ASSESSING OFFICER, THUS, SOUGHT TO HIGHLIGHT THAT T HE ASSESSEE HAD NOTHING TO DO WITH THE EXPENDITURE INCURRED TO BRING THE PR OJECT TO ITS SALEABLE CHARACTER AND THE ASSESSEE DID NOT EXPOSE ITSELF TO THE INHERENT RISKS IN A BUSINESS WHICH MIGHT IMPINGE ON THE PROFITABILITY O F THE PROJECT. 2.4 FURTHER, TO ASSERT HIS CONCLUSION THAT WHAT THE ASSESSEE WAS ENTITLED FOR WAS A DIRECT SHARE IN THE GROSS PROCEEDS, THE A SSESSING OFFICER REFERRED TO THE RELEVANT COLUMN OF THE AUDIT REPORT IN FORM NO.3CD INDICATING THE MEMBERS AND THEIR PROFIT SHARING RATIO PERTAINING T O THE AOP, M/S. FORTALEZA DEVELOPERS, OBTAINED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, WHICH IS AS UNDER: S. NO. MEMBERS PSR 1. SANAND PROPERTIES PVT. LTD. 35% OF THE TOTAL SALE PROCEEDS 2. RAVIRAJ KOTHARI AND COMPANY REMAINING PROFIT AFTER DEDUCTING THE SHARE OF ABOVE MEMBER AND ALL EXPENSES RELATING TO THE PROJECT. 2.5 SIMILARLY, HE REFERRED TO SCHEDULE 1 TO THE PRO FIT AND LOSS ACCOUNT, DETAILING THE WORKING OF PROFIT DISTRIBUTION FOR TH E F.Y. 2008-09, RELEVANT TO THE ASSESSMENT YEAR 2009-10, WHICH IS AS UNDER: 7 1 SANAND PROPERTIES PVT. LTD. (SPPL) TOTAL SALE PROCEEDS OF FORTALEZA 35% OF ABOVE TO SPPL PROFIT OF SPPL FOR THE F.Y. 2008-09 16,85,46,129 5,89,91,145 5,89,91,145 2 RAVIRAJ KOTHARI AND COMPANY TOTAL SALE PROCEEDS 35% OF ABOVE TO SPPL NET PROFIT FOR A.Y. 2009-10 ATTRIBUTABLE TO RAVIRAJ KOTHARI & CO. 16,85,46,129 5,89,91,145 --------------- 10,17,23,315 4,27,32,169 2.6 POINTING OUT THAT SHARE ALLOCATED TO THE ASSESS EE AT RS.5,89,91,145/- WORKED OUT TO 35% OF THE GROSS SALES PROCEEDS AFTER WHICH THE NET PROFIT HAS BEEN DETERMINED, THE ASSESSING OFFICER REITERAT ED HIS CONCLUSION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE AOP WA S OUT OF GROSS SALES PROCEEDS AND NOT OUT OF PROFIT. TO SUPPORT TO HIS C ONCLUSION THAT THE ASSESSEE HAD NOTHING TO DO WITH THE PROFIT ELEMENT OF THE AOP, THE ASSESSING OFFICER ALSO SOUGHT TO HIGHLIGHT THAT THE ASSESSEE WAS NOT ACTIVELY INVOLVED IN THE BUSINESS ACTIVITIES OF THE AOP AND ITS ROLE WAS LIMITED TO INTRODUCTION OF THE LAND INTO THE PROJEC T AND THE REST OF THE PROJECT INCLUDING CONSTRUCTION ACTIVITIES, EXECUTIO N OF THE PROJECT, MARKETING ETC. WERE BEING HANDLED BY THE OTHER MEMB ER OF THE AOP, M/S. RAVIRAJ KOTHARI & CO. ALONE, AS THE ASSESSEE DID NO T HAVE THE REQUIRED EXPERTISE IN THE RESPECTIVE FIELDS, AS CORROBORATED BY THE DIRECTOR OF THE ASSESSEE IN HIS STATEMENT RECORDED U/S.131. 2.7 THE AO THUS SUMMARIZED THE FACTS OF THE CASE AT PARA 13 OF HIS ORDER WHICH READS AS UNDER : A. ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S. RKC TO FORM AN AOP M/S. FORTALEZA DEVELOPERS. 8 B. ASSESSEE INTRODUCED THE DEVELOPMENT RIGHTS IN A LAND HELD BY IT IN THE AOP AS ITS CAPITAL AND M/S. RKC INTRODUCED THE FIN ANCIAL CAPITAL. C. ASSESSEE HAS ABSOLVED ITSELF FROM THE INHERENT RISKS OF B USINESS. D. AS ITS SHARE OF REVENUE, ASSESSEE WAS ENTITLED TO 35% OF THE GROSS SALES OF HOUSING UNITS IN THE PROJECT DEVELOPED BY AOP . ASSESSEE CAN ACTUALLY WITHDREW SUCH AMOUNTS FROM THE BANK ACCOUNT. E. ACCOUNTS OF M/S. FORTALEZA DEVELOPERS (AOP) SHOW TH AT ASSESSEE IS WITHDRAWING ITS SHARE FROM GROSS SALES PROCEEDS WITHOUT HA VING ANY REGARD TO THE PROFITS OF M/S. FORTALEZA DEVELOPERS (AO P). F. ASSESSEE IS NOT IN POSSESSION OF ENOUGH EXPERTISE OF CONS TRUCTION BUSINESS DO NOT HAVING ANY EMPLOYEE WITH IT. ITS SCOPE IS AOP IS LIMITED TO INTRODUCTION OF LAND AND RECEIPT OF 35% OF GROSS SALE S AGAINST THAT LAND. 2.8 AFTER DISCUSSING THE VARIOUS ASPECTS OF THE ISS UE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS RECEIVING A FIXE D SHARE IN THE SALE PROCEEDS OF THE AOP WITHOUT HAVING ANY REGARD TO TH E PROFIT ELEMENT OF THE BUSINESS OF THE AOP. HE ACCORDINGLY REJECTED T HE CONTENTION OF THE ASSESSEE THAT WHAT IT HAD RECEIVED WAS ITS SHARE OF PROFIT FROM THE AOP WHICH WAS EXEMPTED FROM TAX BY VIRTUE OF THE PROVIS IONS OF SEC. 167B(2). THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF C.H. ATCHAIAH (218 ITR 239) WAS ALSO HELD TO BE MISPLACED ON THE GROUND THAT WHAT WAS IN DISP UTE IN THE PRESENT CASE WAS NOT THE INCOME OF THE AOP BUT THE NATURE OF REC EIPTS BY THE ASSESSEE FROM THE AOP. THE AO ACCORDINGLY CAME TO THE CONCLU SION WHICH HE HAS SUMMARIZED AT PAGE 8 OF THE ORDER WHICH READS AS UN DER : 1) ASSESSEE HAS RECEIVED CONSIDERATION TO THE TUN E OF RS.5,89,91,145/- ON THE TRANSFER OF DEVELOPMENT RIGHTS IN PLOT OF LA ND. 2) SINCE THE AMOUNT RECEIVED BY THE ASSESSEE IS 3 5% OF GROSS RECEIPTS, THE CLAIM OF THE ASSESSEE THAT THE INCOME HAS SUFFE RED TAX IS NOT ACCEPTABLE. 9 3) SINCE THE AMOUNT OF RS.5,89,91,145/- HAS NOT S UFFERED TAX IN THE HANDS OF AOP, PROVISIONS OF SEC 167B ARE NOT APPLIC ABLE. 4) THEREFORE, THE CONTENTION OF THE ASSESSEE THAT RS.5,89,91,145/- IS NOT TAXABLE AS PER SEE 167B IS HEREBY REJECTED. 2.9 HAVING HELD THAT WHAT THE ASSESSEE RECEIVED FRO M THE AOP WAS NOT ITS SHARE OF PROFIT BUT CONSIDERATION IN LIEU OF TH E TRANSFER OF DEVELOPMENT RIGHTS OVER THE LAND HELD BY THE ASSESSEE, THE ASSE SSING OFFICER PROCEEDED TO DETERMINE THE TAXABLE INCOME DERIVED BY THE ASSE SSEE FROM THE TRANSACTION OF EARNING OF INCOME AGAINST THE DEVELO PMENT RIGHTS ON THE LAND INTRODUCED BY THE ASSESSEE IN THE AOP, BY APPO RTIONING THE COST OF THE LAND IN THE RATIO OF SALEABLE AREA AND BY DEDUC TING SUCH PROPORTIONATE COST FROM THE TOTAL CONSIDERATION RECEIVED BY IT. T HE SAME WAS, ACCORDINGLY, WORKED OUT AS UNDER: (A) TOTAL SALEABLE AREA OF THE PROJECT (IN SQ. FT) RS.6,09,715/- (B) TOTAL COST OF THE DEVELOPMENT RIGHTS IN T HE RS.8,60,00,000/- LAND 2.10 THUS, THE ASSESSING OFFICER ARRIVED AT THE PRO PORTIONATE COST OF THE DEVELOPMENT RIGHTS ON THE LAND INTRODUCED IN THE AO P IN TERMS OF THE SALES EFFECTED DURING THE YEAR UNDER CONSIDERATION AT RS. 65,46,531/-. AFTER DEDUCTING THE COST SO ARRIVED AT FROM THE CONSIDERA TION RECEIVED FROM THE AOP, THE NET PROFIT WAS DETERMINED AT RS.5,24,44,61 4/- (I.E.,RS.5,89,91,145 - 65,46,531). 3. BEFORE THE CITA) IT WAS ARGUED THAT THE IMPUGNED RECEIPTS CANNOT BE SUBJECTED TO TAX IN THE HANDS OF THE ASSESSEE AS THE SAME HAVE BEEN DULY OFFERED BY THE AOP AS ITS INCOME UNDER ITS RETURN OF INCOME FOR A. Y. 10 2007-08 AND ON ONWARDS AND EXISTENCE OR VALIDITY OF THE SAID AOP HAS NOT BEEN QUESTIONED. IT WAS SUBMITTED THAT IN VIEW OF T HE PROVISIONS OF SEC. 86 OF THE I.T. ACT, INCOME-TAX IS NOT PAYABLE BY AN AS SESSEE IN RESPECT OF ITS SHARE IN THE INCOME OF AN ASSOCIATION COMPUTED IN T HE MANNER PROVIDED IN SEC. 67 A. IT WAS FURTHER SUBMITTED THAT AS PER SEC . 167B(2)(I), EVEN IN THE CASE OF A SPECIFIED AOP WHERE THE TOTAL INCOME OF A NY MEMBER EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX, TAX IS RE QUIRED TO BE CHARGED ON THE TOTAL INCOME OF THE AOP AT THE MAXIMUM MARGI NAL RATE. IT WAS SUBMITTED THAT MEMBER OF SUCH AN AOP, AS IN THE CAS E OF THE ASSESSEE, IS NOT REQUIRED TO PAY INCOME-TAX IN RESPECT OF THE IN COME DECLARED IN THE CASE OF THE AOP AND RECEIVED AS SHARE OF INCOME FRO M SUCH AOP. WHILE ARGUING SO, THE ATTENTION OF THE LD.CIT(A) WAS DRAW N TO THE FOLLOWING OBSERVATIONS OF THE HON'BLE HIGH COURT OF BOMBAY WH ILE DECIDING ON THE WRIT PETITION FILED BY THE ASSESSEE FOR AY 2007-08, AGAINST THE REOPENING OF ASSESSMENT U/S.147. THE AOP FILED A RETURN OF INCOME TAX FOR THE ASSES SMENT YEAR 2007-08 DISCLOSING A GROSS TOTAL INCOME OF RS.14.58 CRORES. THE SURPLUS TRANSFERRED TO THE MEMBERS OF THE AOP WAS D ISCLOSED IN THE PROFIT AND LOSS ACCOUNT TO BE 14.25 CRORES. THE SHA RE OF THE ASSESSEE WAS DISCLOSED AT RS. 3.49 CRORES WHICH CORRESPONDS TO WHAT IS REFLECTED IN THE RETURN OF INCOME CORRESPONDINGLY F ILED BY THE ASSESSEE. THE WORKING OUT OF THE DISTRIBUTION OF PR OFITS IS REFLECTED IN THE ACCOUNTS OF THE AOP; THE COMPUTATION THERE S HOWS THAT THE SHARE OF THE ASSESSEE REPRESENTING 35% OF THE BASIC FLATS' COST HAS BEEN COMPUTED AT RS.15.11 CRORES AND AFTER DEDUCTIN G ON AMOUNT OF RS. 11.62 CRORES AS CAPITAL INVESTMENT AND PMC CHAR GES, THE ASSESSEE'S SHARE OF PROFIT IS SHOWN AT RS.3.49 CROR ES. THE POINT, TO BE NOTED IS THAT THE AOP HAS BEEN DULY ASSESSED AND HAS BEEN SUBJECTED TO AN ORDER OF ASSESSMENT. THE EXISTENCE OR VALIDITY OF THE A.O.P. IS NOT QUESTIONED. SECTION 86 OF THE INCOME TAX ACT, 1961 PROVIDES THAT WHERE THE ASSESSEE IS A MEMBER OF AN ASSOCIATION OF PERSONS, INCOME TAX SHALL NOT BE PAYABLE BY THE ASS ESSEE IN RESPECT OF HIS SHARE IN THE INCOME OF THE ASSOCIATION COMPU TED IN THE MANNER PROVIDED IN SECTION 67 A. SECTION 167B PROVI DES THAT WHERE THE INDIVIDUAL SHARES OF THE MEMBERS OF AN ASSOCIAT ION OF PERSONS IN 11 THE WHOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIA TION ARE INDETERMINATE OR UNKNOWN, TAX SHALL BE CHARGED ON T HE TOTAL INCOME OF THE ASSOCIATION AT THE MAXIMUM MARGINAL RATE. SU B-SECTION (2) OF SECTION 167B STIPULATES THAT IN A CASE WHICH DOES N OT FALL UNDER SUBSECTION (1), WHERE THE TOTAL INCOME OF ANY MEMBE R OF AN ASSOCIATION OF PERSONS, EXCEEDS THE MAXIMUM AMOUNT, WHICH IS NOT CHARGEABLE TO TAX IN THE CASE OF THAT MEMBER, TAX S HALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT THE MAXIMUM MARGINAL RATE. THE REVENUE HAS EVIDENTLY TREATED TH E AOP AS A VALID ENTITY IN LAW AND HAS BROUGHT IT TO TAX IN THE ORDE R OF ASSESSMENT FOR A. Y. 2007-08. ONCE THERE IS AN AOP, THE INCOME HAS TO BE ASSESSED IN THE HANDS OF AOP. THE AOP HAS BEEN ASSESSED AS S UCH AND IT IS ON THAT BASIS THAT THE DEPARTMENT HAS PURSUED THE A SSESSMENT PROCEEDINGS PERTAINING TO THE AOP. IN THIS VIEW OF THE MATTER, WE ARE INCLINED TO ACCEPT THE CONTENTION OF THE PETITI ONER THAT THE ASSESSING OFFICER PROPERLY INSTRUCTED IN LAIN COULD NOT POSSIBLY HAVE COME TO THE CONCLUSION THAT THERE WAS ANY ESCAPEMEN T OF TAX. 3.1 IT WAS FURTHER SUBMITTED THAT AS HELD BY THE HO NBLE HIGH COURT, WHERE AN AOP IS ASSESSED AS SUCH AND THE SHARE OF I NCOME OF ANY MEMBER IS CONSIDERED FOR TAX PURPOSES IN THE HANDS OF THE AOP, THE SAME CANNOT BE BROUGHT TO TAX AGAIN IN THE CASE OF THE MEMBER. IT WAS POINTED OUT THAT SINCE IN A.Y. 2007-08, NO DISPUTE WAS RAISED IN THE CASE OF THE AOP OF M/S. FORTALEZA DEVELOPERS IN REGARD TO THE TREATMEN T OF THE SHARE OF INCOME RECEIVED BY THE ASSESSEE AS A MEMBER OF THE AOP, THE HIGH COURT HAD NO HESITATION IN CATEGORICALLY HOLDING THAT SUC H SHARE OF INCOME WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. 3.2 IT WAS ARGUED THAT KEEPING IN VIEW THE AFORESAI D RATIO, IF IT IS HELD IN THE APPEAL IN THE CASE OF THE AOP FOR AY 2008-09 & AY 2009-10 THAT SUCH SHARE IS LIABLE TO TAX IN THE HANDS OF THE AOP , AS IN AY 2007-08, ON THE BASIS OF THE REASONING ADOPTED BY THE HON'BLE H IGH COURT, THE PRESENT APPEAL FOR AY 2009-10 WOULD BE REQUIRED TO BE ALLOW ED IN FAVOUR OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE RATIO OF THE H ON'BLE MUMBAI HIGH COURT AS EXTRACTED ABOVE. THE DECISION OF THE HON'B LE SUPREME COURT IN 12 THE CASE OF C.H. ATCHAIAH (218 ITR 239) WAS RELIED UPON STATING THAT IN THE SAID CASE ALSO, THE HON'BLE COURT HAS CLEARLY L AID DOWN THAT IF IT IS THE INCOME OF AN AOP IN LAW, THE AOP ALONE HAS TO BE TA XED AND SUCH INCOME CANNOT BE TAXED IN THE HANDS OF THE MEMBER OF AN AO P. REITERATING THAT M/S. FORTALEZA .DEVELOPERS, THE AOP WHEREIN THE ASSESSEE IS A MEMBER, HAVING BEEN REGULARLY ASSESSED TO TAX IN THE STATUS OF AN AOP UPTO AND INCLUDING THE ASSESSMENT YEAR 2009-10, THE STATUS O F THE AOP HAS NEVER BEEN DISPUTED BY THE DEPARTMENT AND AS SUCH, FOLLOW ING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF C.H, ATCHA IAH (SUPRA), THE ASSESSEE BEING MEMBER OF THE SAID AOP, THE ASSESSIN G OFFICER CANNOT TAX THE ASSESSEE SEPARATELY AS A MEMBER OF THE AOP. 3.3 HOWEVER, THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. REJECTING THE VARIOUS EXPLA NATIONS GIVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS C ITED BEFORE HIM HE HELD THAT WHAT THE ASSESSEE RECEIVED FROM THE SO-CALLED AOP WAS NOT ITS SHARE OF PROFIT BUT CONSIDERATION AT A FIXED PERCENTAGE O F GROSS SALE PROCEEDS IN LIEU OF THE TRANSFER OF DEVELOPMENT RIGHTS OVER THE LAND HELD BY THE ASSESSEE AND THE SAME CONSTITUTES BUSINESS RECEIPT IN THE HANDS OF THE ASSESSEE CONSIDERING THE FACT THAT THE ASSESSEE HAD BEEN IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. AS THE AMOUNT RECEIVED FROM THE AOP IS NOT SHARE OF PROFIT, THE PROVISIONS OF SEC. 67A, SEC. 8 6 AND SEC. 167B OF THE I.T. ACT HAVE NO APPLICATION TO THE CONSIDERATION R ECEIVED AGAINST SURRENDER OF DEVELOPMENT RIGHTS BY THE ASSESSEE AND THE AMOUNT RECEIVED FROM THE AOP IS CHARGEABLE TO TAX IN THE HANDS OF T HE ASSESSEE AS BUSINESS RECEIPT. HE ACCORDINGLY UPHELD THE ACTION OF THE A SSESSING OFFICER IN 13 TREATING THE AMOUNT RECEIVED FROM AOP AS CONSIDERAT ION IN RELATION TO SURRENDER OF DEVELOPMENT RIGHTS AS ITS BUSINESS PRO FIT FROM THE TRANSACTION. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FA CTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING RS.5,89,91,145 /-, REPRESENTING THE AMOUNT OF SHARE OF PROFIT OF RECEIVED BY THE APPELL ANT AS A MEMBER OF THE AOP FORTALEZA DEVELOPERS AS CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS AND HOLDING THAT THE SAME WAS LIABLE TO TAX AS BUSINESS RECEIPTS IN THE HANDS OF THE APPELLANT. 2. THAT THE LEARNED CIT (A) GRIEVOUSLY ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THE MERITS OF THE APPELLANT'S CONTENTI ON THAT THE AMOUNT RECEIVED BY THE APPELLANT FROM FORTALEZA DEVELOPERS IN ACCOR DANCE WITH THE TERMS OF THE AOP AGREEMENT HAD BEEN DULY REFLECTED IN THE TOTAL INCOME OF THE AOP, WHICH WAS ENTITLED TO DEDUCTION U/S. 80IB(10) AND ACCORDI NGLY THE SAME COULD NOT BE TAXED AGAIN IN THE HANDS OF THE APPELLANT IN VIEW OF THE CLEAR PROVISIONS OF SECTION 86 R.W.S. 167B OF THE INCOME-TAX ACT. 3. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW AN D ON FACTS IN NOT ACCEPTING EVEN THE ALTERNATE CONTENTION OF THE APPE LLANT THAT WHEN IT WAS AN UNDISPUTED FACT THAT THE APPELLANT AND RAVIRAJ KOTH ARI & CO. HAD FORMED AN AOP FOR DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PRO JECT, THE INCOME RECEIVED BY THE APPELLANT FROM THE SAID ACTIVITY OF THE AOP OUGHT TO BE HELD AS ENTITLED TO DEDUCTION U/S. 801B(10). 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE CIT-15, MUMBAI H AVING JURISDICTION OVER THE AOP M/S. FORTALEZA DEVELOPERS, IN WHICH TH E ASSESSEE COMPANY IS A MEMBER, HAD ISSUED NOTICE DATED 21-03-2012 U/S .263 OF THE INCOME TAX ACT TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER IN THE CASE OF THE SAID AOP FOR A .Y. 2007-08 SHOULD NOT BE SET-ASIDE, AS THE ORDER PASSED BY THE AO WAS PRI MA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITTE D THAT THE REASONS FOR INITIATION OF SUCH PROCEEDINGS U/S. 263 IN THE CASE OF THE AOP M/S. 14 FORTALEZA DEVELOPERS ARE ABSOLUTELY IDENTICAL TO TH E FINDINGS AS ARRIVED AT BY THE CIT(A) IN HIS APPELLATE ORDER FOR AY 2009-10 IN THE CASE OF THE ASSESSEE, WHICH WAS PASSED BEFORE THE FINALIZATION OF THE IT. APPEAL FOR A.Y. 2008-09. HE SUBMITTED THAT THE ORDER U/S. 263 DATED 27-03-2012 CAME TO BE CHALLENGED BY M/S. FORTALEZA DEVELOPERS BEFORE THE HON'BLE ITAT, MUMBAI 'F' BENCH, WHO, VIDE ITS APPELLATE ORD ER PRONOUNCED ON 12 TH OCTOBER, 2012, QUASHED THE ORDER U/S. 263, BOTH ON THE MERITS OF THE FACTS OF THE CASE, AS WELL AS LACK OF JURISDICTION U/S. 263. 5.1 HE SUBMITTED THAT EVEN THOUGH IT WAS POINTED OU T TO THE LD.CIT(A) THAT THE TRIBUNAL IN PARA 6.4 OF ITS ORDER HAS QUAS HED THE 263 ORDER ON THE BASIS OF WRONG INVOCATION OF THE POWERS U/S.263 (ON THE ISSUE OF MERGER) AS WELL AS ON THE MERITS OF THE CASE, HOWEVER, THE LD.CIT(A) HAS NOT AT ALL CONSIDERED THE SAME PROPERLY. 5.2 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT IDENTICAL GROUND WAS ALSO RAISED IN THE ASSESSMENT OF THE AOP M/S. FORTALEZA DEVELOPERS, WHEREIN THE ASSESSEE IS A MEMBER. REFE RRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE APPELLAT E ORDER FOR AY 2008- 09 & AY 2009-10, PASSED IN THE CASE OF THE AOP M/S. FORTALEZA DEVELOPERS, HE SUBMITTED THAT THE TRIBUNAL HAS ALLO WED THE APPEAL OF THE AOP WHEREIN THE FOLLOWING GROUND WAS RAISED BEFORE THE TRIBUNAL : 'THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTI ON OF BUSINESS INCOME BY RS. 14,64,64,961/-BEING THE SHARE OF PROF IT OF ONE THE MEMBERS OF THE ASSESSEE AOP ERRONEOUSLY HOLDING THA T THE AGREEMENT ENTERED INTO BETWEEN THE MEMBERS OF THE A OP IS FOR SHARING OF THE REVENUE AND NOT FOR SHARING OF THE N ET PROFIT.' 15 5.3 HE SUBMITTED THAT WHILE DOING SO, THE TRIBUNAL HAS FOLLOWED ITS OWN ORDER FOR AY 2007-08, WHEREIN THE ITAT HAD NOT ONLY QUASHED THE ACTION OF THE CIT U/S.263 OF THE IT. ACT, BUT ALSO GIVEN A CLEAR FINDING ON MERITS. HE SUBMITTED THAT IN ITS ORDER FOR AY 2008-09 & AY 2009-10. THE TRIBUNAL HAS NOTED THAT THE FACTS BEING IDENTICAL T HE ISSUE WAS REQUIRED TO BE DECIDED ON MERITS ON THE SAME LINES AS IN AY 200 7-08. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER, THE GRO UNDS RAISED BY THE ASSESSEE BE ALLOWED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE OTHER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN T HE INSTANT CASE, THE ASSESSEE ALONG WITH M/S. RAVIRAJ KOTHARI AND COMPAN Y (RKC) FORMED AN AOP NAMELY M/S. FORTALEZA DEVELOPERS FOR THE PURPOS E OF DEVELOPING AND CONSTRUCTING A HOUSING PROJECT, NAMELY, 'FORTALEZA' ON THE LAND SITUATED IN S.NO.210 AT YERAWADA, PUNE, THE DEVELOPMENT RIGHTS OF WHICH WERE ACQUIRED BY THE ASSESSEE COMPANY FROM THE OWNERS OF THE LAND. CLAUSE 7 OF THE AOP AGREEMENT PROVIDES THE REVENUE SHARING R ATIO BETWEEN THE TWO ENTITIES AS PER WHICH THE SALES PROCEEDS OF THE UNI TS WERE TO BE DEPOSITED IN A JOINT ACCOUNT AND WOULD BE SHARED AT THE RATIO OF 35% AND 65% BY THE ASSESSEE AND RKC RESPECTIVELY. DURING THE YEAR THE ASSESSEE RECEIVED RS.5,89,91,145/- FROM THE SAID AOP AND HAS SHOWN T HE SAME AS ITS SHARE OF PROFIT FROM AOP UNDER THE HEAD 'OTHER INCOME' IN THE PROFIT AND LOSS A/C. IN THE STATEMENT OF TOTAL INCOME FILED WITH THE RET URN, THE ASSESSEE 16 EXCLUDED THIS AMOUNT FROM THE TOTAL INCOME ON THE G ROUND THAT THE SAID INCOME WAS ALREADY TAXED IN THE HANDS OF AOP AND TH E SHARE OF PROFIT RECEIVED FROM AOP IS NOT TAXABLE AS PER SEC. 167B O F THE I T ACT. ON THE OTHER HAND, THE CASE OF THE ASSESSING OFFICER IS TH AT THE ASSESSEE HAS NOT RECEIVED SHARE OF PROFIT FROM THE AOP BUT HAS RECEI VED CONSIDERATION IN THE FORM OF 35% SHARE IN THE GROSS SALE PROCEEDS AG AINST DEVELOPMENT RIGHTS IN LAND SURRENDERED BY THE ASSESSEE TO THE O THER MEMBER OF AOP AND FINALLY TO THE BUYERS OF UNITS IN THE PROJECT UNDER TAKEN BY THE AOP. THEREFORE, THE POINT FOR DETERMINATION IN THE PRESE NT CASE IS AS TO WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE AOP RE PRESENTING 35% OF GROSS SALE PROCEEDS WAS A PROFIT SHARING ARRANGEMEN T AS CLAIMED BY THE ASSESSEE OR IT IS A MERE CONSIDERATION IN LIEU OF S URRENDER OF DEVELOPMENT RIGHTS IN THE LAND TO RKC AS OBSERVED BY THE ASSESS ING OFFICER. 7.1 WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S FORTALEZA DEVELOPERS VS. ITO AND VIDE ITA NO.3686/M UM/2012 FOR A.Y. 2008-09 AND ITA NO.3687/MUM/2012 FOR A.Y. 2009-10 O RDER DATED 13- 09-2013 HAD AN OCCASION TO DECIDE THE ISSUE IN CASE OF THE AOP WHICH READS AS UNDER : 2. THE ASSESSEE HAS RAISED ONE COMMON GROUND IN THESE A PPEALS. THE GROUND RAISED FOR THE ASSESSMENT YEAR 2008-09 AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTION OF BUSINESS INCOME BY RS. 14,64,64,961/- BEING THE SHARE OF PROFI T OF ONE THE MEMBERS OF THE APPELLANT AOP ERRONEOUSLY HOLDING THAT THE AGREEMENT ENTERED INTO BETWEEN THE MEMBERS OF THE AO P IS FOR SHARING OF THE REVENUE AND NOT FOR SHARING OF THE NET PROFIT. REDUCTION OF BUSINESS INCOME BEING BAD IN LAW, THE SAME NEEDS TO BE CANCELLED AND RETURNED BUSINESS INCOME AND CONSEQUEN TIAL CLAIM U/S 80IB(10) ON THAT AMOUNT NEEDS TO BE ACCEPTED. 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AN D CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE T HAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IS ASSE SSEE S OWN CASE 17 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 12.10. 2012 IN ITA NO. 2648/2012 IN PARA 5.5 TO 5.7 AS UNDER: 5.5 WE HAVE CAREFULLY CONSIDERED THE VERSION OF LD. CIT IN THE LIGHT OF AVAILABLE ON OUR RECORD. WE HAVE CAREFULLY GONE THROUGH THE CLAUSE-7 OF THE AGREEMENT AND THE DISTRIBUTION OF REV ENUE BY THE ASSESSEE IN ITS ACCOUNT. THE DISTRIBUTION OF THE REVENUE IN THE ACCOUNT OF THE ASSESSEE IS IN ACCORDANCE WITH INTENT AND PURPOSE OF CLAUSE-7 OF THE AGREEMENT. ACCORDING TO CLAUSE-7 OF T HE AGREEMENT SPPL IS ENTITLED TO 35% SHARE OF THE GROSS SALE PROCEED S OF THE UNITS INCLUSIVE OF THE VALUE OF THE LAND. ACCORDING TO DIST RIBUTION IN THE ACCOUNT OF THE ASSESSEE SPPL HAS RECEIVED RS. 15.11 CROR E WHICH IS 35% OF GROSS SALE PROCEEDS OF THE UNIT AMOUNTING TO RS. 43. 17 CRORES. A SUM OF RS. 11.62 CRORE IS CREDITED TO THE ACC OUNT OF SPPL ON ACCOUNT OF LAND ETC. AND RS.3.49 CRORE IS CONSIDERE D AS PROFIT SHARE OF SPPL. OUT OF BALANCE 65%, AFTER INCLUDING T HE MSEB AND INCIDENTAL CHARGES AND REDUCING THE DEVELOPMENTAL CH ARGES A SUM OF RS. 10.76 CRORE HAS BEEN CONSIDERED AS PROP SHARE O F RRKC. THEREFORE, THE DISTRIBUTION OF PROFIT MADE BY THE ASS ESSEE BETWEEN ITS MEMBERS IS IN ACCORDANCE WITH CLAUSE 7 OF THE AGREE MENT. THE INTERPRETATION OF CLAUSE-7 SOUGHT TO BE ADOPTED BY LD . CIT WILL BE AGAINST THE VERY INTENT AND PURPOSE FOR WHICH THE ASSESSE E AOP HAS BEEN FORMED AND IF SUCH INTERPRETATION IS ADOPTED IT WILL TANTAMOUNT TO DENIAL OF EXISTENCE OF AOP WHICH IS NOT EVEN THE CASE OF LD. CIT. IT HAS ALREADY BEEN POINTED OUT THAT AOP IS A SEPARATE AND DISTINCT ASSESSABLE ENTITY AND IS ALSO ENTITLED TO CLA IM THE DEDUCTIONS PERMITTED UNDER THE INCOME TAX ACT PROVID ED IT FULFIL THE CONDITIONS LAID DOWN IN THE SECTION GOVERNING THA T DEDUCTION. THE ASSESSEE AOP IN THE PRESENT CASE HAS BEEN ASSESSED AS AOP AND FOUND TO HAVE FULFILLED THE CONDITION LAID DOWN IN SECTION 80IB(10) AND HAS BEEN HELD TO BE ELIGIBLE FOR SUCH DEDUCTION. THE QUANTUM OF DEDUCTION UNDER SECTION 80IB (10) WILL DEPEND ON THE INCOME EARNED FROM ELIGIBLE PROJECT. THE QUANTUM OF DEDUCT ION WILL NOT DEPEND UPON THE MODE OF DISTRIBUTION OF SHARES AMONGST THE MEMBERS OF AOP AS INCOME OF AOP IS TAXABLE AT MAXIMUM MARGINAL RATE. THEREFORE, MANNER IN OVER ELIGIBLE QUANTUM OF DEDUCTION UNDER SECTION U/S. 80IB (10) AS THE ELIGIBLE QUANTUM W ILL BE GROSS RECEIPTS FROM THE PROJECT REDUCED BY EXPENSES INCURRED ON THE PROJECT. IT IS NOT EVEN THE CASE OF LD. CIT THAT ASSESSEE AOP IS NOT ENTITLED TO GET THE BENEFIT OF DEDUCTION UNDER SECTI ON 80IB (10). THE ONLY OBJECTION OF LD. CIT IS THAT DISTRIBUTION OF REV ENUE IN THE ACCOUNT OF THE ASSESSEE IS INAPPROPRIATE AND BY THIS MAN NER ASSESSEE HAS BEEN BENEFITED BY LARGER DEDUCTION IN PLAC E OF SMALLER DEDUCTION AVAILABLE TO IT. IN OUR OPINION SUCH OBSERV ATIONS OF LD. CIT ARE INCORRECT, FIRSTLY, ON THE GROUND THAT EVEN DISTR IBUTION OF REVENUE IN THE BOOKS OF ACCOUNT OF THE-ASSESSEE CANNOT B E SAID TO BE CONTRARY TO THE PURPOSE AND INTENT DESCRIBED IN CLAUSE -7 OF THE AGREEMENT. SECONDLY, THE ALLOWABILITY OR OTHERWISE O F DEDUCTION UNDER SECTION 80IB (10) IS NOT DEPENDENT UPON THE MAN NER IN WHICH THE PROFIT HAS BEEN DISTRIBUTED AMONG THE MEMBERS OF A OP BUT IT DEPEND UPON THE FULFILMENT OF THE CONDITIONS LAID DO WN IN THAT SECTION AND ALSO THE DEDUCTION IS AVAILABLE TO AN UNDE RTAKING AND NOT TO THE INDIVIDUAL CONSTITUENT OF AN UNDERTAKING. 5.6 WE HAVE ALSO NOT FOUND ANY FORCE IN THE SUBMISSION LD. DR THAT 35% SHARE ALLOCABLE TO SPPL WAS IN THE NATURE OF OVERRIDING TITLE. CLAUSE-7 OF THE AGREEMENT WHICH HAS BEEN SOUGH T TO BE INTERPRETED BY LD. CIT DR IN THIS MANNER DOES NOT IN DICATE THAT 35% 18 OF THE GROSS REVENUE TO BE SHARED BY SPPL WAS IN THE NA TURE OF OVERRIDING TITLE, THEREFORE, THIS ARGUMENT OF LD. CI T DR HAS TO BE REJECTED AND IT IS TO BE HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENU E BUT IT IS ONLY SHARE OF PROFIT OF SPPL. 5.7 IN VIEW OF ABOVE DISCUSSION IT IS HELD THAT THE IMP UGNED ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF ALLOCATION OF PROF IT BETWEEN MEMBERS AS PER ACCOUNTS OF THE ASSESSEE AS ALLOCATION OF PR OFIT IN THE ACCOUNTS OF THE ASSESSEE IS IN ACCORDANCE WITH CLAU SE-7 OF THE AGREEMENT AND MANNER OF ALLOCATION OF PROFIT IN THE ACCOUNT CANNOT ALTER THE QUANTUM OF DEDUCTION AVAILABLE TO AOP UND ER SECTION 80 18(10). 4. THE FACTS FOR THE ASSESSMENT YEAR 2007-08 AND FOR TH E ASSESSMENT YEARS UNDER CONSIDERATION ARE IDENTICAL AS THIS ISSUE IS R EGARDING THE CLAUSE 7 OF AOP AGREEMENT DATED 29.4.2003. ACCORDINGLY FOL LOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR O F THE ASSESSEE. THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE SET ASIDE. 7.2 SINCE THE MUMBAI BENCH OF THE TRIBUNAL IN THE C ASE OF THE AOP HAS CATEGORICALLY HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENUE BUT IS ONLY SHAR E OF PROFIT OF SPPL, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO NOTICE AGAINST THE ORDER OF THE TRIBUNAL THE GROUNDS RAISED BY THE ASSESSEE HAVE TO BE ALLOWED. WE ACCO RDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. ITA NO.2446/PN/2012 (A.Y. 2008-09) : 8. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING RS.14,18,52,156/-, REPRESENTING THE AMOUNT OF SHARE OF PROFIT OF RECEIVED BY THE APPELLANT AS A MEMBER OF THE AOP FORTALEZA DEVELOPERS AS CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS AND HOLDING THAT THE SAME WAS LIABLE TO TAX AS BUSINESS RECEIPTS IN THE HANDS OF THE APPELLANT. 2. THAT THE LEARNED CIT (A) GRIEVOUSLY ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THE MERITS OF THE APPELLANT'S CONTENTI ON THAT THE AMOUNT RECEIVED BY THE APPELLANT FROM FORTALEZA DEVELOPERS IN ACCOR DANCE WITH THE TERMS OF THE AOP AGREEMENT HAD BEEN DULY REFLECTED IN THE TOTAL INCOME OF THE AOP, WHICH WAS ENTITLED TO DEDUCTION U/S. 801B(10) AND ACCORDI NGLY THE SAME COULD NOT BE 19 TAXED AGAIN IN THE HANDS OF THE APPELLANT IN VIEW O F THE CLEAR PROVISIONS OF SECTION 86 R.W.S. 167B OF THE INCOME-TAX ACT. 3. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW A ND ON FACTS IN NOT APPRECIATING THE APPELLANT'S SUBMISSION THAT THE ID ENTICAL ISSUE AS IN THE CASE OF THE APPELLANT HAVING BEEN DECIDED ON MERITS BY THE HON'BLE ITAT, 'F' BENCH, MUMBAI, VIDE ITS ORDER PRONOUNCED ON 12 TH OCTOBER, 2012, IN THE CASE OF THE AOP FORTALEZA DEVELOPERS FOR A.Y. 2007-08, THE APPE AL OF THE APPELLANT FOR A.Y. 2008-09 WAS REQUIRED TO BE ALLOWED. 4. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW A ND ON FACTS IN NOT ACCEPTING EVEN THE ALTERNATE CONTENTION OF THE APPE LLANT THAT WHEN IT WAS AN UNDISPUTED FACT THAT THE APPELLANT AND RAVIRAJ KOTH ARI & CO. HAD FORMED AN AOP FOR DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PRO JECT, THE INCOME RECEIVED BY THE APPELLANT FROM THE SAID ACTIVITY OF THE AOP OUGHT TO BE HELD AS ENTITLED TO DEDUCTION U/S.80IB(10). 8.1. THE ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIO NAL GROUNDS : 1. THE LD.CIT(A) HAS ERRED IN FACTS AND IN LAW IN NO T HOLDING THAT THE ASSESSING OFFICER HAD NO JURISDICTION TO MAKE ADDITION O F RS.14,18,52,156/- BY TREATING SAID AMOUNT AS CONSIDERATION FOR TRANSFER O F DEVELOPMENT RIGHTS AS AGAINST SHARE OF PROFIT FROM AOP. 2. THE LD.CIT(A) OUGHT TO HAVE HELD THAT IN RE-ASSESSM ENT PROCEEDINGS U/S.147 R.W. 3 RD PROVISO, THE JURISDICTION OF ASSESSING OFFICER IS CONFI NED TO INCOME, OTHER THAN INCOME INVOLVING MATTERS WHICH AR E SUBJECT MATTER OF ANY APPEAL 8.2 AFTER HEARING BOTH SIDES, THE ADDITIONAL GROUND S RAISED BY THE ASSESSEE ARE ALLOWED FOR ADJUDICATION. 8.3 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS AS WELL AS THE FIRST ADDITIONAL GROUND ARE IDENTICAL TO GROUND S OF APPEAL IN ITA NO.1860/PN/2012. WE HAVE ALREADY DECIDED THE GROUN DS IN FAVOUR OF THE ASSESSEE. FOLLOWING THE SAME RATIO, THE GROUNDS RA ISED BY THE ASSESSEE ARE ALLOWED. 8.4. SO FAR AS THE 2 ND ADDITIONAL GROUND IS CONCERNED WE FIND THE ASSESSE E HAS NOT ADVANCED ANY ARGUMENT BEFORE THE LD.CIT(A) TOWARDS DISALLOWANCE OF RS.2,78,217/- BEING PROVISION FOR D IMINUTION IN THE VALUE OF INVESTMENT. ONCE THE SAME IS NOT PRESSED, THE 2 ND ADDITIONAL GROUND 20 CHALLENGING THE JURISDICTION OF THE ASSESSING OFFIC ER IN A REASSESSMENT PROCEEDING BECOMES ACADEMIC IN NATURE WHICH IN OUR OPINION NEEDS NO ADJUDICATION. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21-03-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 21 ST MARCH 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE