The ACIT, 1 (2), V. M/s Fortune Builders,

ITA 248/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8008 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-03-2010
• Assessment Year: misc
• Appeal Filed On: 02-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJPAL SINGH
• Assessee Lawyers: A GOYAL; G AGRAWAL
• Keywords: Retrospective amendment; Commercial expediency
• Section: 80IB; 80IA

Judgement Text

1 THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO. 248/IND/2008 A.YS. 2005-06 ASSTT. COMMR. OF INCOME TAX 1(2) BHOPAL APPELLANT VS M/S FORTUNE BUILDERS BHOPAL PAN AAAFF9122C RESPONDENT C.O. NO. 56/IND/08 ARISING OUT OF ITA NO ITA NO. 248/IND/2008 M/S FORTUNE BUILDERS BHOPAL OBJECTOR VS. ASSTT. COMMR. OF INCOME TAX 1(2) BHOPAL RESPONDENT DEPTT. BY SHRI RAJPAL SINGH, SR. DR ASSESSEE BY S/SHRI A.GOYAL AND G.AGRAWAL O R D E R PER BENCH THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED COMM ISSIONER OF 2 INCOMETAX (APPEALS) DATED 7.3.2008 FOR THE ASSESSME NT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL ON RECORD. 3. FIRSTLY, WE SHALL TAKE UP THE REVENUES APPEAL I N ITA NO. 248/IND/2008. 4. GROUND NOS. 1 TO 5 READ AS UNDER :- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) HAS ERRED IN :- 1. DELETING THE ADDITION OF RS. 53,60,449/- ON ACCO UNT OF REJECTION OF CLAIM U/S 80IB OF IT ACT HOLDING TH AT EVEN IF THE ASSESSEE DOES NOT OWN THE LAND THE BENEFIT OF DEDUCTION CLAIMED IN RESPECT OF THE PROF ITS DERIVED FROM SUCH HOUSING PROJECT CANNOT BE DENIED TO THE ASSESSEE PARTICULARLY WHEN ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION AND IS MERELY ACTING AS A CONTRACTOR. 2. DELETING THE DISALLOWANCE IN VIRTUALLY SUMMARY A ND NON SPEAKING MANNER THOUGH THE PROVISION U/S 80IB(1) HAS BEEN COMPREHENSIVELY APPLIED BY THE ASSESSING OFFICER. 3. ALLOWING THE EXEMPTION U/S 80IB HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION INSPITE OF ITS STATUS AND THERE IS NO REQUIREMENT IN THE SECTION THAT THE APPROVAL FOR COMPLETING HOUSING PROJECT SHOULD BE IN THE NAME OF ASSESSEE WHO IS CARRYING OUT THE DEVELOPMENT AND CONSTRUCTION WORK. 4. ALLOWING THE EXEMPTION U/S 80IB HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION THOUGH SOME OF THE UNITS CONSTRUCTED BY ASSESSEE ARE ADMITTEDLY MORE THAN THE PRESCRIBED MAXIMUM SIZE OF 1500 SQ.FT. AND THERE IS GROSS VIOLATION OF THE CONDITIO NS MENTIONED IN SECTION 80IB. 3 5. ALLOWING THE EXEMPTION U/S 80IB THOUGH THE ASSESSEE HAS NOT SOLD ANY CONSTRUCTED PROPERTY TO ITS CUSTOMERS AND ALL THE SUMS RECEIVED FROM CUSTOMERS ARE CREDITED AS CONSTRUCTION RECEIPTS AND THE REGISTRY FOR THE LAND ONLY IS MADE AND THAT TOO BY THE SOCIETY. 5. THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THIS ISSUE WAS DECIDED BY THE LEARNED COMMISSI ONER OF INCOMETAX (APPEALS) VIDE HIS ORDER DATED 7.3.2008 I N FAVOUR OF THE ASSESSEE BY HOLDING THAT THE OWNERSHIP OF LAND WAS NOT A SPECIFIED CONDITION IN SECTION 80IB(10) OF THE ACT . IT WAS ALSO HELD BY THE LEARNED COMMISSIONER OF INCOMETAX (APPE ALS) THAT DEVELOPMENT CONSTRUCTION OF THE PROJECT WAS TO BE C OMPLETED IN ALL RESPECTS BY THE BUILDER FIRM (ASSESSEE). THE LD . DR FURTHER SUBMITTED THAT SUBSEQUENTLY, THERE WAS AN AMENDMENT IN SECTION 80IB(10) THROUGH THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2001 BY INSERTION OF EXPLANATION WHEREBY IT WAS PROVIDED THAT THE BENEFIT OF DEDUCTI ON UNDER SECTION 80IB(1) OF THE ACT COULD NOT BE GIVEN TO A N UNDERTAKING WHICH EXECUTED THE HOUSING PROJECT AS A WORKS CONTR ACT AWARDED BY ANY PERSON AND, THEREFORE, THIS ASPECT O F THE MATTER WAS TO BE CONSIDERED NOW. THE LEARNED SR. DEPARTME NTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE OBSERVATI ONS OF THE LARGER THIRD MEMBER BENCH OF THE TRIBUNAL IN THE CA SE OF B.T. PATIL & SONS; BELGAUM CONSTRUCTION PRIVATE LIMITED V. ACIT IN 4 ITA NO. 1408 AND 1409/PN/2003 ORDER DATED 26 TH OCTOBER, 2009 AS REPORTED IN 32 DTR (MUM) (TM) (TRIB) 1 ON T HE ASPECT THAT A CONTRACTOR WAS NOT ENTITLED FOR DEDUCTION UN DER SECTION 80IA WERE ALSO RELEVANT IN THE CONTEXT OF PROVISION S OF SECTION 80IB(10) OF THE ACT. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE CONTENDED THAT IN SECTION 80IA(4) THERE WAS A REQUI REMENT OF OWNERSHIP OF THE PROJECT WHEREAS NO SUCH REQUIREMEN T EXISTED IN SECTION 80IB(10 ) OF THE ACT. AS REGARDS THE ST ATUS OF THE ASSESSEE I.E. WHETHER THE ASSESSEE WAS A DEVELOPER OR A CONTRACTOR, THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSED, IN FACT, WORKED AS A DEVELOPER. HOWEV ER, A QUERY WAS RAISED AS TO HOW THIS FACT WAS ESTABLISHED NOW BECAUSE IN THE EARLIER PROCEEDINGS NOT MUCH EXAMINATION WAS DO NE ON THIS ASPECT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE OBSERVATIONS OF THE TRIBUNAL IN THE AFORESAID C ASE IN PARAS 37 TO 40 AT PAGES 27 TO 29 OF THE SAID ORDER WHEREI N THE TRIBUNAL HAD CONSIDERED BOTH THE TERMS I.E. DEVELO PER VS. WORKS CONTRACT AND SUBMITTED THAT SUCH OBSERVATION S SUPPORTED THE CLAIM OF THE ASSESSEE. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE MATTER SHOULD GO BACK TO THE 5 FILE OF THE LEARNED COMMISSIONER OF INCOMETAX (APPE ALS) TO DECIDE THE SAME AFRESH AFTER CONSIDERING THE AFORES AID DECISION OF THE TRIBUNAL AND EXPLANATION INSERTED BY FINANCE ACT, 2009 AND AFTER CONSIDERING THE FACTS IN DETAIL AS REGARD TO NATURE OF AGREEMENT AS WELL AS ACTUAL WORK DONE BY THE ASSESS EE. 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. 9. THE SHORT QUESTION INVOLVED IN THIS APPEAL IS RE GARDING THE STATUS OF THE ASSESSEE I.E. WHETHER IT HAS ACTED AS A DEVELOPER OR HAS CARRIED OUT WORKS CONTRACT. THERE ARE DEVEL OPMENTS SUBSEQUENT TO THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) IN THIS REGARD IN THE FORM OF L EGISLATIVE AMENDMENT AS WELL AS THE AFORESAID DECISION OF THE TRIBUNAL, WHICH MAY REQUIRE CONSIDERATION TO DECIDE THE ISSUE CONCLUSIVELY. FURTHER INVESTIGATION INTO THE FACTS AS TO THE NATURE OF WORK DONE BY THE ASSESSEE AND THE CAPACITY OF TH E ASSESSED IS ALSO REQUIRED. THEREFORE, WE RESTORE ALL THE IS SUES RAISED IN THESE GROUNDS TO THE FILE OF THE LEARNED COMMISSION ER OF INCOMETAX (APPEALS) TO DECIDE THE SAME AFRESH AS PE R LAW, AFTER TAKING INTO CONSIDERATION SUCH LEGISLATIVE CH ANGES, AFORESAID DECISION OF THE TRIBUNAL AND OUR OBSERVAT IONS MADE 6 HEREINABOVE. IT IS NEEDLESS TO MENTION THAT THE LEA RNED COMMISSIONER OF INCOMETAX (APPEALS) SHALL GRANT ADE QUATE OPPORTUNITY OF HEARING TO THE ASSESSEE WHICH SHALL BE AT LIBERTY TO FILE NECESSARY DETAILS/EVIDENCES TO SUBSTANTIATE ITS CLAIM. THUS, ALL THESE GROUNDS STAND ALLOWED FOR STATISTIC AL PURPOSES. 10. GROUND NOS. 6 AND 7 READ AS UNDER :- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(APPEAL) HAS ERRED IN :- 6. DELETING THE ADDITION OF RS. 148556/- ON ACCOUNT OF LAND REGISTRATION CHARGES RELYING ON THE MISLEADING SUBMISSION MADE BY THE ASSESSEE WITHOUT ALLOWING ANY OPPORTUNITIES TO THE AO IN VIOLATION OF RULE 46 A OF THE IT ACT. 7. DELETING THE ADDITION OFRS.148556/- ON ACCOUNT O F LAND REGISTRATION CHARGES PARTICULARLY WHEN THE REGISTRATION CHARGES CLAIMED BY THE ASSESSEE PERTAINS TO THE PLOTS SOLD BY IT AND IS GROSSLY AGA INST THE ESTABLISHED MARKET PRACTICE AS WELL AS LEGAL PROVISION FOR TRANSFER OF PROPERTY WHEREBY THE REGISTRATION CHARGES ARE INVARIABLY GIVEN BY THE BUYER AND NOT THE SELLER. 11. THE FACTS, IN BRIEF, ARE THAT THE ASSESSING OFF ICER DISALLOWED A SUM OF RS.1,48,556/- BEING THE AMOUNT OF LAND REGISTRATION CHARGES BORNE BY THE ASSESSEE INSTEAD OF THE BUYERS, BEING A NORMAL PRACTICE. 12. ON APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE HELD THAT THERE WAS SUFFICIENT MATERIAL ON RECORD WHICH SHOWE D THAT THE ENTIRE EXPENSES WERE ACTUALLY BORNE BY THE ASSESSEE , HENCE, THE CLAIM OF THE ASSESSEE WAS ACCEPTABLE. HOWEVER, HE 7 ESTIMATED THE SAME AT RS.1,25,000/- AND CONFIRMED T HE DISALLOWANCE OF RS.23,556/-. AGGRIEVED BY THIS, BOT H THE REVENUE AS WELL AS THE ASSESSEE ARE BEFORE US. 13. THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE AMOUNT IN THE GROUND RAISED BY THE REVENUE SHOULD BE READ AS RS.1,25,000/- INSTEAD OF RS.1,48,556/-. HE FURTHER PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFIC ER. 14. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CLAIM OF THE ASSESSEE WAS FULLY SUPPORTED BY DOCUMENTARY EVIDENCES, HENCE, THE LEARNED COMMISSIO NER OF INCOMETAX (APPEALS) SHOULD HAVE ALLOWED TOTAL EXPEN SES. HE FURTHER CONTENDED THAT THE ASPECT OF NECESSITY WAS BEYOND HIS JURISDICTION. 15. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. WE FIND THAT THE ASSESSEE HAS SUBSTANTIATED ITS CLAIM BY ADDUCING NECESSARY EVIDENCE AND HAS ALSO JUSTIFI ED THE SAME ON ACCOUNT OF COMMERCIAL EXPEDIENCY. HENCE, W E FIND NO FAULT IN THE ORDER OF THE LEARNED COMMISSIONER O F INCOMETAX (APPEALS). ACCORDINGLY, BOTH THESE GROUNDS OF THE REVENUE ARE DISMISSED. WE ARE FURTHER OF THE VIEW THAT ENVISAG ING THE RESULTANT CONCLUSION TO EMERGE, THERE IS NO NECESSI TY TO SET 8 ASIDE THIS MATTER TO THE FILE OF THE LEARNED COMMIS SIONER OF INCOMETAX (APPEALS) AS THERE WAS VIOLATION OF RULE 46A OF THE IT RULES. THIS IS ALSO SO BECAUSE OF SMALLNESS OF THE AMOUNT INVOLVED. 16. IN THE CROSS OBJECTION, THE ONLY ISSUE IS REGARDING PARTIAL DISALLOWANCE CONFIRMED BY THE LEARNED COMMI SSIONER OF INCOMETAX (APPEALS) OUT OF SUCH EXPENSES AND HAVING CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES IN RES PECT OF GROUND NOS. 6 AND 7 OF GROUNDS OF APPEAL ABOVE, WE ARE OF THE VIEW THAT NO SUCH PARTIAL DISALLOWANCE IS WARRANTED AS THE SAME IS WITHOUT ANY BASIS. ACCORDINGLY, WE ACCEPT GROUN D NO. 1 OF THE CROSS OBJECTION FILED BY THE ASSESSEE. 17. IN THE RESULT, THE REVENUES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH MARCH, 2010 (JOGINDER SINGH) (V.K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER 26 TH MARCH, 2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR, GUA RD FILE D/- 9