The ITO, Ward-4, Gandhinagar V. M/s. Vraj Corporation, Ahmedabad

ITA 2496/AHD/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8411 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Fair market value; Corroborative evidences
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. VRAJ CORPORATION, 314, MANSAROVAR IOC ROAD, CHANDKHEDA, AHMEDABAD, DIST: GANDHINAGAR PAN: AACFV9461E (APPELLANT) VS THE ADDL. CIT, GANDHINAGAR RANGE, GANDHINAGAR (RESPONDENT) THE ITO, WARD - 4, GANDHINAGAR (APPELLANT) VS M/S. VRAJ CORPORATION, 314, MANSAROVAR IOC ROAD, CHANDKHEDA, AHMEDABAD, DIST: GANDHINAGAR PAN: AACFV9461E (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI S.N. SOPARKAR , A.R. DATE OF HEARING : 08 - 08 - 2 017 DATE OF PRONOUNCEMENT : 22 - 09 - 2 017 I T A NO . 2208 / A HD/20 11 A SSESS MENT YEAR 200 8 - 09 ITA NO. 2496 /AHD/20 11 ASSESSMENT YEAR 200 8 - 09 I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY ASSESSEE AND REVENUE FOR A.Y. 2008 - 09 , AR ISE FROM ORDER OF THE CIT(A), GANDHINAGAR DAT ED 22 - 07 - 2011 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SH ORT THE ACT . THESE TWO APPEAL AROSE FROM THE COMBINE ORDER OF LD.CIT(A) HAVING INTERCONNECTED FACTS THEREFORE THE SAME ARE ADJUDICATED BY THIS COMMON ORDER AS UNDER. ITA NO. 2208/AHD/2011 FILED BY ASSESSEE 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN CONSIDERING IT A FIT CASE FOR INVOKING THE PROVISIONS OF SECT ION 80 - IB (13) R.W.S. 80 - IA(10) AND FURTHER ERRED IN REDUCING THE AMOUNT OF DEDUCTION AVAILABLE TO THE ASSESSEE U/S.80 - 16(10) BY A SUM OF RS.1,24,88,000. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 30 TH JULY, 2008. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 2 2 ND MARCH, 2010. THE ASSESSEE - FIRM WAS ENGAGED IN THE BUSINESS OF DEVELOPING HOUSING PROJECT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT TO THE EXTENT OF RS. 5 , 03 ,1 1 ,524 / - FOR TH E YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS ELABORATED THE PROVISION OF SECTION 80IB(10) OF THE ACT AT PAGE 2 & 3 OF THE ASSESSMENT ORDER. I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 3 THERE AFTER , THE ASSESSING OFFICER OBSERVED THAT FOLLOWING ISSUE S HAVE IMPORTANT EFFECT ON ALLOWABLY OF DEDUCTION U/S 80IB(10) OF THE ACT. 4. THE OWNERSHIP OF LAND REST WITH T H REE INDIVIDUAL S UNRELATED TO VRAJ CORPORATION : - TH E ASSESSING OFFICER STATED THAT THE PROJECT MANSAROVAR TOWNSHIP AT CHANDKHEDA, DIST: GANDHINAGAR WAS SITUATED AT SURVEY N O. & TP NO. 300+314, 300/2 + 305 306/ 1 +306/2 AND 307/1A. T HE ASSESSING OFFICER HAS EXAMINED THE LAND PURCHASE AGREEMENT DATED 4 TH SEP, 1971 AND NOTICED THAT SUCH LAND WAS AN ANCESTRAL OF SHRI TJAKORMLAL G . PA TEL AND OWNERSHIP OF THE AFORESAID LAND WAS DISTRIBUT ED AND VESTED WITH THREE PERSONS IN THE FOLLOWING MANNER: - NO. NAME OF THE CO - PARCENERS SURVEY NO. OF PLOT OF LAND DISTRIBUTED (I) SHRI THAKORLAL GOVARDHANDAS PATEL 302 - 2, 305 & 306 - 1 &2 (II) SMT.SWARNABEN THAKORLAL PATEL 307,368,369 (III) SHRI PRASHANT THAKORLAL PATEL 300 & 314 - 1 & 2 FROM THE ABOVE INFORMATION, THE ASSESSING OFFICER OBSERVED THAT OWNERSHIP AND POSSESSION OF THE LAND WAS TRANSFERRED TO THE THREE PERSONS IN THEIR INDEPENDENT CAPACITY. THE ASS ESSING OFFICER HAS FURTHER OBSERVED THAT I N THE CASE OF SHRI PRASHANT THAKOR LAL PATEL, THE LAND WAS TRANSFERRED IN AN INDIVIDUAL CAPACITY WHEREAS AS PER THE AGREEMENT S AME HAS BEEN TRANSFERRED TO SHRI PRASHANT THAKORLAL PATEL AND HUF. T THE ASSESSING OFFICER HAS ALSO OBSERVED I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 4 THAT ASSESSEE HAS NOT SUBSTANTIATED WITH CONCRETE EVIDENCE THAT THE ENTIRE LAND WAS TRANSFERRED TO ASSESSEE - FIRM AS CAPITAL CONTRIBUTION. THE ASSESSING OFFICER HAS EXAMINED THE B ALANCE SHEET OF SHRI PRASHANT THAKORLAL PATEL F OR THE ASSESSMENT YEAR 2001 - 02 AND 2002 - 03 AND FOUND HIS CAPITAL A/C AS UNDER: - (I) AS ON 31 ST MARCH,2001: RS. 3500/ - (II) AS ON 31 ST MARC, 2002 :RS. 88,875/ - FROM THE ABOVE FACTS, THE ASSESSING OFFICER CONCLUDED THAT NO ENTRY IN THE BOOKS OF A/C WAS PASSED. HE STATED THAT ALL THE CONTRIBUTIONS, ADDITION ETC. BROUGHT BY THE PARTNERS HAVE TO BE ENTERED IN THE BOOKS OF THE FIRM. HE FURTHER POINTED OUT THAT AUDA HAD ISSUED PERMISSION FOR THE CONSTRUCTIO N IN THE NAME OF PRASHANT THAKO R LAL AND OTHERS THROUGH LETTER DATED 24 TH JULY , 2000 BEFOR E THE DATE OF AGREEMENT. THEREFORE, THE AGREEMENT DATED 22 ND FEB, 2001 HAS NOT EVIDENTIARY VALUE. HE HAS ALSO POINTED OUT THAT IMMEDIATELY ON SALE OF FLAT, BUNGALOW ETC. THE RECEIPT WAS T R IFUR CATED UNDER THE THREE PARTS LIKE L AND, PAYABLE A/C, COMMON LAND A/C AND CONSTRUCTION HOUSE A/C WHICH MADE IT CLEAR THAT THE ASSESSEE WAS PAYING LAND COST AT REGULAR INTERVAL WHEN IT RECOVERS FROM THE BUYERS. THE ASSESSING OFFICER OBSERVED THAT ABOVE FACTS MA DE IT CLEAR THAT SHRI PRASHANT THAKORLAL PATEL IN HIS INDIVIDUAL CAPACITY ALONG WITH HIS FATHER AND MOTHER HELD THE COMPLETE RIGHT AND POSSESSION OF THE LAND TILL THE UNIT CONSTRUCTED ON IT WAS SOLD TO THE BUYER A FTER PUTTING CONSTRUCTION ON THE LAND THROUGH THE FIRM VRAJ CORPORATION . I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 5 5. APPROVAL O F PROJECT IN THE NAME PRASHANT T. PATEL AND OTHERS IN RESPECT OF V RAZ CORPORATION : - THE ASSESSING OFFICER HAS STATED THAT THE APPROVAL LETTER GRANTED BY AUDA FOR THE PROJECT WA S IN THE NAME OF PRASHANT THAKP R AND OTHERS AND NOT IN TH E NAME OF ASSESSEE - FIRM M/S. V RAZ CORPORATION. 6. BUILDING USE CERTIFICATE ISSUED NOT IN THE NAME OF ASSESSEE - FIRM, V RAX CORPORATION : - THE ASSESSING OFFICER NOTICED THAT BUILDING USE CERTIFICATE ISSUED BY AUDA WAS IN THE NAME OF PRASHANT T. PATEL OR NIKUNJ N P ATEL OF ASSESSEE - FIRM M/S. V RAJ CORPORATION 7. DEFECTS IN THE A/CS. A ND UNRELIABILITY OF BOOKS OF ACCOUNTS OF THE ASSESSEE - FIRM , VRAJ CORPORATION: - THE ASSESSING OFFICER HAS NOTICED THE FOLLOWING DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. (I) THE ASSESSING OFFICER NOTICED THAT IN THE P & L A/C, ASSESSEE HAS SHOWN TOTAL SALE S OF RS. 6 , 09 , 21 , 705/ - .UNDER THE HEAD CLOSING STOCK/WORK NIL AMOUNT WAS SHOWN. (II) FROM THE LIST PROVIDED BY THE ASSESSEE OF THE PERSON S TO WHOM THE UNITS WERE SOLD, THE ASSES SING OFFICER NOTICED FOR THE PERIOD 01 - 04 - 2007 TO 23 - 03 - 2008 UNIT SOLD TO MEMBERS WAS FOR ONLY RS. 3 , 37 , 46 , 184/ - . ON THE OTHER HAND, CONSTRUCTED UNIT S SHOWN TO BE SOLD UNDER THE PARTNERS ACCOUNT WAS AT THE AMOUNT OF RS. 3 , 47 , 65 , 000/ - . IN VIEW OF THIS, ASSESSING OFFICER HAS WORKED OUT TOTAL SALE S AT RS. 6 , 85 , 11 , 184/ - . (III) 48 UNITS WERE TRANSFERRED TO THE PARTNERS TO PARTNERS SH. P.T. PATEL HUF AND SH. NN PATEL. IN THIS CONNECTION IT WAS STATED I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 6 THAT THERE WAS DISPUTE BETWEEN THE PARTNERS THEREFORE AS M UTUALLY DECIDED THE UNSOLD UNITS WERE TRANSFERRED AT THE MARKET VALUE OF THE SAID UNITS. 8. THE ASSESSING OFFICER HAS NOT ACCEPTED THE ASSESSEE S EXPLANATION THAT BECAUSE OF DISPUTE BETWEEN THE TWO PARTNERS UNSOLD UNITS WERE TRANSFERRED TO BOTH THE PARTN ERS AS MUTUALLY DECIDED RELEVANT MARKET VALUE OF SAID UNITS. THE ASSESSING OFFICER HAS NO T FOUND ANY DOCUMENTARY EVIDENCE TO SHOW THAT THERE WAS ANY DISPUTE BETWEEN TWO PARTNERS. THE ASSESSING OFFICER CONCLUDED THAT TRANSFER OF UNSOLD UNIT S TO THE PARTNE RS WITHOUT ANY DOCUMENTARY EVIDENCES SHOW THAT THE PROFIT DETERMINED BY THE ASSESSEE WAS NOT THE REAL PROFIT ON WHICH THE DEDUCTION U/S. 80IB(10) CLAIMED. HE HAS ALSO NOTICED THAT THE VALUE AT WHICH THESE UNITS WERE TRANSFERRED TO THE PARTNERS WAS QUITE E XCESSIVE AS COMPARED TO THE UNITS SOLD TO THE MEMBERS.HE ALSO OBSERVED THAT THE TRANSFERRED OF UNITS TO THE PARTNERS REFLECT AN IMAGINARY SALE AND IMAGINARY PROFIT. HE FURTHER STATED THAT THERE EXIT CLOSING STOCK ON 48 UNSOLD UNITS WHICH WAS NOT REPORTE D BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS HELD THAT THE BOO KS OF ACCOUNTS OF THE ASSESSSEE - FIRM WAS UNREL IABLE AND DEFECTIVE AND REJECTED U/S. 145(3) OF THE ACT. 9. DOMINANT CONTROL OF THE PROJECT S NOT IN THE HAND OF V RAJ CORPORATION : - T HE ASSESSING OFFICER HAS STATED THAT THE BOOKS OF ACCOUNTS SUGGEST THAT THE DOMINANT CONTROL OF THE PROJECT WAS NOT IN THE HAND OF THE I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 7 ASSESSEE. H E POINTED OUT THAT PROJECT WAS IMPLEMENTED ON THE LAND BELONGING T O THREE PERSONS SH. THAKORLAL GOVARDHANDAS PATEL, SMT. SWARNABEN T PATEL AND SH. PRASHANT THAKORLAL PATEL . THEY HAVE NEVER GIVEN THE LAND FOR DEVELOPMENT OF PROJECT TO THE ASSESSEE - FIRM. FU RTHER, HE STATED THAT TRANSFER OF THE PROJECT BY THE AUDA AS WELL AS APPROVAL OF THE PROJECT BY THE AUDA AS WELL AS COMPLETION CERTIFICATE BY THE AUDA WAS IN T HE NAME OF SHRI PRASHANT T. PATEL AND OTHERS AND NO CERTIFICATE WAS ISSUED . HE FURTHER OBSERVED THAT 48 UNSOLD UNITS WERE NOT SHOWN IN THE CLOSING STOCK OF THE ASSESSEE - FIRM . ON THE OTHER HAND THE SAME W ERE SHOWN AS TRANSFERRED TO THE PARTNERS AT THEIR LEVEL . 10. ROLE OF M/S. VRAJ CROPORATION ONLY AS A CONTRACTOR : - THE ASSESSING OFFICER OBSERVED THAT THE ACTIVITY OF THE ASSESSEE - FIRM WAS ON LY AS A WORK CONTRACTOR AND NOT A DEVELOPER. HE FURTHER ST ATED THAT THE ASSESSEE - FIRM CAN ONLY BE TERMED AS PROVIDING SKILL AND LABOUR WHILE DOMINANT AND MOST VALUABLE MATERIAL IN THE FORM OF THE LAND ETC. WERE SUPPLIED BY OTHER PARTIE S CONSTITUTING PRASHANT T. PATEL . HE ALSO OBSERVED THAT PROCURING OTHER MATE RIAL FROM OUTSIDE BY THE FIRM IS JUST AN ACTIVIT Y INCIDENTAL TO CARRYING ON THE CONTRACT WORK. AFTER CONSIDERING ALL THESE FACTS, THE ASSESSING OFFICER HAS CONCLUDED THAT IT HAS BEEN ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTI ON U/S. 80IB(10) OF THE ACT. THEREFORE, HE DISALLOWED THE CLAIM OF RS. 5 , 03 ,11,524/ - FOR THE YEAR UNDER CONSIDERATION. I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 8 11. AGGRIEVED AGAINST THE DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 6. 4 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. SO FAR AS THE OBJECTION OF THE ID. AO WITH REGARDS TO OWNERSHI P OF LAND DEVELOPED BY THE APPELLANT FIRM, THE LEARNED COUNSEL FOR THE APPELLANT HAVE MADE CATEGORICAL SUBMISSIONS BEFORE ME THAT THE LAND ON WHICH THE PROJECT OF 'MANSAROVAR TOWNSHIP' HAS BEEN DEVELOPED BY THE APPELLANT FIRM ONLY BELONGED TO HUF OF PRASHA NT T PATEL WHO IS A PARTNER IN APPELLANT FIRM AND THE LAND BELONGING TO OTHER TWO PERSONS HAD BEEN TRANSFERRED TO THEIR LEGAL HEIRS AFTER THEIR DEATH AND HENCE NO CONSIDERATION AS REGARDS TO SAND COST WAS PAYABLE TO THOSE PERSONS. THE SUBMISSION OF THE APP ELLANT IS FURTHER SUPPORTED BY THE RELEVANT AGREEMENT AS WELL AS COPY OF 'HAK PATRAK' PLACED ON RECORD BY THE APPELLANT BEFORE THE A.O. FURTHER IT IS NOTICED THAT THE LAND IN QUESTION WAS AN ANCESTRAL PROPERTY, HENCE IT WAS APPROPRIATELY SHOWN AS THE PROPE RTY OF HUF OF SHRI PRASHANT T PATEL, CONSIDERING SUCH FACTS AND MATERIAL ON RECORD, I AM OF TINE CONSIDERED OPINION THE APPELLANT HAS NOT COMMITTED ANY ERROR IN PAYING THE CONSIDERATION FOR LAND COST TO THE HUF OF PRASHANT T PATEL AND THE OBJECTION OF ID. AO TO THIS EXTENT IS WITHOUT ANY MERITS. 6.5 NOW COMING TO THE ELIGIBILITY OF APPELLANT FOR CLAIMING DEDUCTION U/S 801B (10) OF THE ACT, A PLAIN READING OF SECTION 80IB(10) REVEALS THAT THIS DEDUCTION IS AVAILABLE TO AN UNDERTAKING WHICH IS DEVELOPING AND BUILDING HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. IT DOES NOT LAY DOWN ANY FURTHER CONDITION THAT SUCH DEVELOPMENT OF HOUSING PROJECT SHOULD ALSO BE ON THE LAND OWNED BY THE ASSESSEE UNDERTAKING OR THE PERMISSION TO DEVELOP THE SAME SHOULD BE IN T HE NAME OF THE ASSESSEE UNDERTAKING. EVEN THIS POSITION IS NOW CLEAR IN THE JUDGMENTS OF HON'BLE JURISDICTIONAL TRIBUNAL IN CASE OF RADHE DEVELOPERS AND SHAKTI CORPORATION (SUPRA). HENCE DEDUCTION U/S 80IB(10 ) CAN CERTAINLY NOT BE DENIED ON THIS GROUNDS. E VEN OTHERWISE, IN THE PRESENT CASE, IT IS AN UNDISPUTED FACT THAT THE APPELLANT FIRM HAS PAID LAND COST TO OWNER I.E. PRASHANT T. PATEL HUF AND THE LAND WAS HANDED OVER TO THE APPELLANT FIRM FOR DEVELOPMENT OF PROJECT. IN ANY CASE, AS DISCUSSED ABOVE LEGAL OWNERSHIP OVER THE LAND HAS NEVER BEEN ANY RELEVANT CRITERIA. WHAT IS NECESSARY IS THAT THE ASSESSEE CLAIMING DEDUCTION SHOULD HAVE COMPLETE CONTROL AND DOMINANCE OVER THE PROJECT. IN TH E PRESENT CASE, THE APPELLANT FI RM HAS PAID ACQUIRED POSSESSION AND D OMINANT CONTROL OVER THE L AND AND HAS ALSO BORNE THE ENTIRE RISK AND RESPONSIBILITY OF THE PROJECT. EVEN THE AO HAS NOT DISPUTED THE FACT THE TOTAL CONSIDERATION FORM SALE OF UNITS TO MEMBERS HAS BEEN RECEIVED BY THE APPELLANT FIRM AND IT HAS BORNE THE ENT IRE EXPENDITURE INCLUDING LAND COST OF THE PROJECT. FURTHER, A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS NOT DISPUTED FULFILLMENT OF OTHER CONDITIONS LAID DOWN IN SUB CLAUSE (A) TO (D) OF SECTION 80IB(10) EXCEPT FOR THE OBSERVATION THAT THE APP ELLANT HAS CARRIED ON THE DEVELOPMENT IN THE CAPACITY OF THE CONTRACTOR. HOWEVER, AS DISCUSSED ABOVE, THE APPELLANT FIRM HAS NOT WORKED IN THE CAPACITY OF A CONTRACTOR BUT HAS ACQUIRED DOMINANT CONTROL OVER THE LAND AND HAS ALSO BORNE THE ENTIRE RISK AND R ESPONSIBILITY OF THE PROJECT, AND HENCE THE APPELLANT HAS FULFILLED ALL THE TESTS SAID DOWN BY HON'BIE ITAT AHMEDABAD IN CASE OF M/S, SHAKTI CORPORATION(SUPRA). WITH REGARDS TO THE TRANSFER OF 48 UNITS TO PARTNERS, THE AO IS OF THE OPINION THAT THE SAID T RANSFER IS IN VIOLATION OF PROVISIONS OF CL AUSE (E) AND (F) TO SECTION 801B (10) OF THE ACT HOWEVER, AS HAS BEEN RIGHTLY POINTED BY THE LEARNED COUNSEL FOR THE APPELLANT THE SAID PROVISIONS HAS BEEN BROUGHT INTO STATUTE BY FINANCE (NO.2) ACT, 2009 W.E.F. 1 - 4 - 2010, SINCE THE PRESENT YEAR UNDER APPEAL IS A,Y 2008 - 09, THE PROVISIONS WE RE CLEARLY NOT APPLICABLE TO TH E PRESENT YEAR AND HENCE APPELLANT CANNOT BE DISALLOWED DEDUCTION U/S I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 9 80IB(10) ON ACCOUNT OF SUCH GROUND. FURTHER, I HAVE OBSERVED THAT THE CONSTRUC TED AREA OF EACH RESIDENTIAL UNIT IS MUCH SMALLER THAN THE THRESHOLD LIMIT OF 1500 SQ. FEET AND THE LIMIT WOULD BE CROSSED ONLY IF UNITS ARE SOLD AFTER COMBINING STRUCTURALLY 4 - 5 UNITS TOGETHER AS ONE UNIT; WHICH IS DEFINITELY NOT THE CASE OF THE A.O. CONS IDERING THE ENTIRETY OF FACTS, THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 80IB(10) CLAIMED BY THE APPELLANT FOR RS. 3,78,23,524 AS REMAINING INCOME OF RS. 1,24,88,000 HAS BEEN CONSIDERED AS INCOME NOT ELIGIBLE FOR DEDUCTION IN PARA 5 HEREIN ABOVE. THE RELEV ANT GROUND OF APPEAL IS PARTLY ALLOWED. 1 2 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN DENYING DEDUCTION U/S. 80IB(10) TO THE EXTENT OF RS. 1,24,88,000/ - ON THE GROUND THAT ASSESS EE HAS CHARGED EXCESS PRICE ON THE DWELLING UNITS TRANSFERRED TO THE PARTNERS. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE ASSESSEE HAD SHOWN TRANSACTIONS WITH RELATED PARTIES AT EXCESSIVE RATES IN COMPARISON TO THE OUTSI DE PARTIES. HE FURTHER CONTENDED THAT IN THE CASE OF THE ASSESSEE PROVISION OF SECTION 80IB(10) R.W.S. 80IA(10) WAS CORRECTLY APPLIED. 13 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT THE 13 FLATS OF THE AR I & 8 FLATS OF AR - 2 WERE TRANSFERRED TO THE PARTNERS OF FIRM AT RS. 7.90 LACS EACH AS AGAINST MARKET VALUE OF RS. 5 LACS EACH. THE ASSESSEE HAS PLEADED THAT THE AFORESAID FLATS WERE SOLD TO THE OUTSIDERS IN THE MONTH OF JANUARY WHEREAS THE SALE WA S MADE TO THE PARTNERS IN THE MONTH OF MARCH, 2008. WE HAVE FURTHER OBSERVED THAT IN RESPECT OF 11 FLATS OF AR - 3, THE ASSESSEE HAS CHARGED RS. 7.90 LACS FROM PARTNERS AS AGAINST RS. 4.52 LACS WERE CHARGED FROM THE OUTSIDE PARTIES. WE HAVE ALSO NOTICED TH AT 10 FLATS OF A R - 3, THE ASSESSEE I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 10 HAS RECEIVED SALE CONSIDERATION OF RS. 4.90 LACS FROM THE PARTNERS AS AGAINST RS. 2.25 LACS OF SALE CONSIDERATION RECEIVED FROM THE OUTSIDERS. FURTHER 4 FLATS OF A R - 3 ON 2 ND FLOOR WERE SOLD TO THE PARTNERS AT 2.70 LACS WHEREAS TO THE OUTSIDERS HE WAS MADE AT RS. 1.82 LACS EACH. WE HAVE CONSIDERED THESE FACTS ALONG WITH FINDINGS OF THE LD. CIT(A) AND THE MATERIAL ON RECORD. WE ARE OF THE VIEW THAT PLEADING OF THE ASSESSEE THAT THERE WAS GAP IN THE PERIOD OF SALE OF UNIT S TO THE PARTNERS AND OUTSIDERS IS NOT JUSTIFIED. WE OBSERVED THAT A GAP OF SHORT DURATION CANNOT INCREASE THE PRICES AT TREMENDOUS LEVEL OF SALE OF UNITS IN SUCH A SHORT OF PERIOD OF 2 - 3 MONTHS. THE ASSESSEE HAS NOT BROUGHT OUT ANY SUPPORTIVE MATERIAL T O DEMONSTRATE ANY ECONOMIC FACTOR WHICH HAS ENHANCED THE PRICES OF THE UNITS OF FLATS WITHIN A SHORT DURATION WHEN THE SALE WAS EFFECTED TO THE PARTNERS OF THE ASSESSEE FIRM. WE HAVE ALSO CONSIDERED THE FINDINGS OF THE LD. CIT(A) THAT IN RESPECT OF GROUND FLOOR UNITS THERE WAS A SMALL AREA ATTACHED SHOWING ONLY COMMON AREA WITHOUT PROVING THE ATTACHMENT OF INDEPENDENT AREA SUCH UNITS WHICH WERE TRANSFERRED TO THE PARTNERS. WE HAVE FURTHER NOTICED THAT THE ASSESSEE IS PARTNERSHIP FIRM. AS PER SECTION 4 OF THE PARTNERSHIP ACT, 1932, PARTNERSHIP IS THE RELATION BETWEEN PERSON WHO HAVE AGREED TO SHARE THE PROFIT OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL. SECTION 25 OF THE PARTNERSHIP ACT SAY THAT EACH PARTNER IS LIABLE JOINTLY WITH ALL OTHER PARTNERS AND ALSO SEVERELY FOR ALL ACTS OF THE FIRM DONE WHILE HE IS A PARTNER. SECTION 18 OF THE PARTNERSHIP ACT SAYS THAT A PARTNER IS THE AGENT OF THE FIRM FOR THE PURPOSE OF THE BUSINESS OF THE FIRM. WE OBSERVED THAT BECAUSE OF THE RELATION BET WEEN THE PARTNERS I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 11 AND THE PARTNERSHIP FIRM , THE ASSESSEE COULD NOT PROVE WITH THE RELEVANT SUPPORTING EVIDENCES THAT THE TRANSACTION OF SALE OF FLATS MADE TO THE PARTNERS AT EXORBITANT PRICE THAN THE SALE MADE TO THE OUTSIDE PARTIES WERE NOT ARRANGED TRANS ACTIONS. T HE PROFITS OF THE ASSESSE FIRM IS EXEMPTED U/S. 80IB OF THE ACT AND THE SHARE OF THE PARTNER OF A FIRM IS ALSO EXEMPTED AS PER THE PROVISIONS OF SECTION 10(2A) OF THE ACT. LOOKING TO THE ABOVE FACTS AND THE PROPINQUITY BETWEEN THE ASSESSEE AND T HE PARTNERS, THE ASSESSEE HAS NOT PROVED WITH COGENT EVIDENCES THAT THE TRANSACTIONS WITH THE PARTNERS WERE CARRIED OUT AT FAIR MARKET VALUE. AFTER CONSIDERING THE ABOVE FACTS AND THE DETAILED FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY ERROR IN THE DE CISION OF THE LD. CIT(A), THEREFORE, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 2496/AHD/2011 FILED BY REVENUE 1 4 . THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL: - 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DIS ALLOWANCE MAD E U/S 80IB(10)OF RS.5,03,11,524/ - AND ALSO DIRECTING TO ALLOW DEDUCTION U/S 80IB(10) ON DISALLOWANCE OUT OF VEHICLE AND TELEPHONE EXPENSES OF RS.1,06,625/ - . 1 5 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRE SENTATIVE HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT THE ASSESSEE FIRM WAS A WORK CONTRACTOR AND NOT A DEVELOPER. ON THE OTHER HAND, LD. COUNSEL HAS PLACED RELIANCE ON THE JUDICIAL PRONOUNCEMENT IN THE CASE OF M/S VRAJ CONSTRUCTIO N AND M/S. VRAJ CONTRACTOR VIDE ITA NO. 2494/AHD/2011 AND 2495/AHD/2011 FOR DEDUCTION U/S. 80IB(10) OF THE ACT. I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 12 1 6 . WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERIAL ON RECORD. WE HAVE NOTICED THAT LD. CIT(A) HAS PLACED RELIANCE ON THE JUDICIAL PRONOUN CEMENT OF THE HON BLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF RADHE DEVELOPER AND SHAKTI CORPORATION. THE LD. CIT(A) HAS ALSO STATED THAT A PLAIN READING OF SECTION 80IB(10) REVEALS THAT THIS DEDUCTION IS AVAILABLE TO AN UNDERTAKING WHICH IS DE VELOPING AND BUILDING HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. IT DOES NOT LAY DOWN ANY FURTHER CONDITION THAT SUCH DEVELOPMENT OF HOUSING SHOULD ALSO BE ON THE LAND OWNED BY THE ASSESSEE. WE HAVE PERUSED THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT AHMEDABAD IN THE CASE OF M/S. VRAJ CONSTRUCTION AND VRAJ CONTRACTOR ON THE IDENTICAL ISSUE DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 7. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF CONSTRUCTION AND DEVELOPING OF INFRASTRUCTURE HOUSING PROJECTS. THE UNDISPUTED FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME SHOWING NIL INCOME AFTER CLAIMING DEDUCTION U/S 80IB(10) FOR RS.1,52 ,44,321/ - . THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE IS ONLY A WORK CONTRACTOR AND NOT A DEVELOPER. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM FOR DEDUCTION U/S. 80IB(10) TO THE ASSESSEE, FOLLOWING THE DECISION OF ITA T AHMEDABAD BENCH IN THE CASE OF M/S. SHAKTI CORPORATION, BARODA, REPORTED IN 32 SOT 438, HOLDING THAT THE ASSESSEE - FIRM HAS NOT WORKED IN THE CAPACITY OF A CONTRACTOR BUT HAS ACQUIRED DOMINANT CONTROL OVER THE LAND AND HAS ALSO BORNE THE ENTIRE RISK AND R ESPONSIBILITY OF THE PROJECT. 8. WE FIND THAT THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPRA) HAS HELD THAT THE PROVISIONS NOWHERE REQUIRED THAT ONLY THOSE DEVELOPERS WHO THEMSELVES OWN THE LAND WOULD RECEIVE THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. NEITHER THE PROVISIONS OF SECTION 80IB NOR ANY OTHER PROVISIONS CONTAINED IN OTHER RELATED STATUTES DEMONSTRATE THAT OWNERSHIP OF THE LAND WOULD BE A CONDITION PRECEDENT FOR DEVELOPING THE HOUSING PROJECT. SUCH REQUIREM ENT CANNOT BE READ INTO THE STATUTE BECAUSE THERE IS NOTHING UNDER SECTION 80IB(10) OF THE ACT REQUIRING THAT OWNERSHIP OF THE LAND MUST VEST IN THE DEVELOPER TO BE ABLE TO QUALIFY FOR SUCH DEDUCTION. WE, THEREFORE, FIND THAT THE ORDER OF THE CIT(A) IS SUP PORTED BY THE ORDER OF THE HON BLE JURISDICTIONAL HIGH COURT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS HEREBY CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED ACCORDINGLY. I.T.A NO. 2208 & 2496 /AHD/20 11 A.Y. 2008 - 09 PAGE NO VRAJ COPORATION VS. ADDL. CIT 13 RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT ON THE IDENTICAL ISSUE AS SUPRA IN THIS ORDER, WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A), THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 1 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE AND THE APPEAL OF THE REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 09 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 22 /09 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,