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

ITA 2498/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6643 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: BIPIN C SHAH
• Section: 80IB

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M INCOME-TAX OFFICER, WARD 3(1), BARODA. VS. M/S AMAR CORPORATION, A- 10, GHANSHYAM PARK SOCIETY, NEW SAMA ROAD, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. P. TALATI, SR.DR RESPONDENT BY:- SHRI BIPIN C. SHAH, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE THE TWO APPEALS FOR ASST. YEAR 2006-07 A ND 2007-08 FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THESE APPEALS. ASST. YEAR 2006-07 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE D EDUCTION TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS PU RCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER A ND HAS DEVELOPED THE HOUSE PROJECT AT ITS OWN COST AND RIS KS INVOLVED, ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEAR 2006-07 & 2007-08 ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 2 IN RESPECT OF ISSUE REGARDING DEDUCTION U/S 80IB(10 ) R.W.S. 80IB(1) CLAIMED BY THE ASSESSEE, WITHOUT APPRECIATI NG THE FACT THAT THE APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COMPLETION CERTIFICATE WAS NOT GRANTED TO THE ASSESSEE BUT TO THE LAND OWNER AND THE RIGHTS AND OBLIGATION UNDER THE SAID APPROV AL WERE NOT TRANSFERABLE, AND THAT TRANSFER OF DWELLING UNITS I N FAVOR OF THE END-USERS WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE. WHEREAS IN THE CO FILED BY THE ASSESSEE THE FOLLOWI NG GROUND HAS BEEN RAISED :- (1) THE ORDER OF THE CIT(A) BE UPHELD FOR ALLOWING THE CLAIM OF DEDUCTION OF 80IB(10). THE CLAIM OF DEDUCTION IS AL LOWED BY FOLLOWING THE JUDGMENT OF HON. TRIBUNAL IN CASE OF RADHE DEVELOPERS AND SHAKTI CORPORATION & OTHERS. ASST. YEAR 2007-08 3. SIMILAR GROUND HAS BEEN RAISED BY THE REVENUE IN THE APPEAL FOR THIS YEAR AND THE ASSESSEE HAS ALSO RAISED SIMILAR GROUND IN ITS CROSS OBJECTION. 4. THE COMMON ISSUE INVOLVED IN BOTH THE APPEALS AS WELL AS THE CROSS OBJECTIONS IS WHETHER THE ASSESSEE IS ENTITLE D TO DEDUCTION U/S 80IB(10). THE ASSESSEE IS A DEVELOPER. IT IS ENGAGE D IN BUILDING CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION ( ASST. YEAR 2006-07) THE ASSESSEE CONSTRUCTED UNITS IN A PROJECT NAMED A S SUNRISE BUNGLOWS AT SAMA-SAVLI ROAD, KARELIBAUG, BARODA, SHOWING NET PROFIT OF RS.7,74,878/-. IT CLAIMED DEDUCTION U/S 80IB(10) HO LDING ITSELF AS A DEVELOPER. THE LD. AO DISALLOWED THE CLAIM. HE HAS WRITTEN A DETAILED ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 3 ORDER WHEREIN HE HAS GIVEN FOLLOWING REASONS FOR HO LDING THAT THIS DEDUCTION IS NOT AVAILABLE TO THE ASSESSEE:- I) THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WH ICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WAS BUILT. II) THE ASSESSEE HAS NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT FROM THE LOCAL AUTHORITY. THE SAME WAS TAKEN BY THE OTHE R PERSON WHO ARE ENTIRE SEPARATE ENTITY IN THE EYES OF LAW. III) THE LAND OWNERS HAVE SOLD THE PIECES OF LAND T O UNIT HOLDERS DIRECTLY AND ASSESSEE HAD ACTED MERELY AS A CONFIRM ING PARTY. IV) ASSESSEE FIRM HAS ACTED MERELY AS A CONTRACTOR AS IT HAS ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDERS. V) THE ASSESSEE FIRM HAS NEVER SOLD THE HOUSE TO TH E UNIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF . THE DETAILED REASONS ELABORATING ABOVE FIVE POINTS ARE DISCUSSED BY THE AO IN PARA 8, 9 & 10 OF HIS ORDER. THE LD. CIT(A) F OLLOWING THE ORDER IN RADHE DEVELOPERS AND SHAKTI CORPORATION & OTHERS AL LOWED THE CLAIM OF THE ASSESSEE HOLDING AS UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RISED REPRESENTATIVE AND THE ORDER OF THE AO. THE DECISION OF THE HONBL E ITAT IN M/S SHAKTI CORPORATION AND OTHERS AND THE GUIDELINES LAID DOWN HAS ALSO BEEN CONSIDERED. THE ISSUE OF THE OWNERSHIP OF LAND NOT BEING MANDATORY CLAUSE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT IN THE CASE OF RADHE BUILDERS (SUPRA). SINCE THE CONTROL OVER THE LAND T HE RISKS AND COSTS OF THE PROJECT ARE OF THE APPELLANT, THE ASSESSEE IS ENTIT LED TO THE DEDUCTION U/S 80IB(10) AS PER THE CONDITIONS LAID DOWN IN THE JUD GMENT OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION. HENCE, THE APPE LLANTS CLAIM OF DEDUCTION U/S 80IB(10) IS ALLOWED. THE AO IS DIRECT ED TO COMPUTE THE INCOME ACCORDINGLY. ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 4 5. WE HAVE HEARD THE PARTIES. THE LD. AR IN ADDITIO N TO THE DECISION IN THE CASE OF SHAKTI CORPORATION AND RADHE DEVELOPERS , REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S NIKHIL ASSOCIATES VS. ITO IN ITA NO.328/AHD/2010 ASST. YEAR 2006-07 PRONOUNCED O N 25/03/2011. IN THIS ORDER BOTH THE DECISIONS OF THE TRIBUNAL IN TH E CASE OF SHAKTI CORPORATION AND RADHE DEVELOPERS HAVE BEEN CONSIDER ED AND IT HAS BEEN HELD THAT IT IS ONLY THE BENEFICIAL OWNERSHIP AND D OMINANT CONTROL OVER THE LAND IS REQUIRED. ALL THE RISKS AND BENEFITS ATTACH ED TO THE PROJECT WOULD BELONG TO THE DEVELOPER AND IT WOULD BE HIS RESPONS IBILITY TO DISPOSE OF THE FLATS GIVING RISE TO THE PROFIT AND LOSS TO THE DEVELOPER. THE TRIBUNAL IN THE CASE OF M/S NIKHIL ASSOCIATES (SUPRA) HELD AS U NDER :- 20. WHILE INTRODUCING SECTION 80IB(10) BY FINANCE BILL 1999 W.E.F. 1.4.2000 THE MEMORANDUM EXPLAINED THE PROVISIONS AS UNDER :- 24. FURTHER, THE MEMO CONTAINED IN FINANCE BILL, 1 999 HAS EXPLAINED THE PROVISIONS BROUGHT BY THE LEGISLATURE WITH EFFE CT FROM 1-4-2000 AND THE SAME READS AS UNDER: TAX INCENTIVE FOR PROMOTION OF HOUSING.LIBERALIZA TION OF TAX HOLIDAY TO APPROVED HOUSING PROJECTS. UNDER SECTION 80-IA OF T HE INCOME-TAX ACT, PROFITS OF APPROVED HOUSING PROJECTS WHERE THE DEVELOPMENT AND CONSTRUCTION COMMENCES ON OR AFTER 1-10-1998 AND IS COMPLETED BY 31-3-2001 ARE FULLY DEDUCTIBLE. THE CONDITIONS NECESSARY FOR CLAIMING THE BENEFIT ARE T HAT THE APPROVED HOUSING PROJECT SHOULD BE ON MINIMUM AREA OF ONE ACRE AND S HOULD HAVE DWELLING UNITS WITH A MAXIMUM BUILT-UP AREA OF 1,000 SQ. FT. IT IS PROPOSED TO MODIFY THE EXISTING BENEFITS TO PROVIDE THAT IN AREAS OTHER THAN THOSE FALLING IN AND WITHIN 25 KMS. FROM THE MUNICIPAL LIMITS OF DELHI AND MUMBAI, THE BUILT-UP AREA OF DWELLING UNITS MAY BE UPTO A MAXIMUM LIMIT OF 1,500 SQ. FT. INSTEA D OF 1,000 SQ. FT. AT PRESENT TO MAKE THEM ENTITLED FOR BENEFIT. THE BUILT-UP AREA F OR AREAS FALLING IN DELHI AND MUMBAI AND WITHIN 25 KMS. OF THE MUNICIPAL LIMITS O F BOTH, HOWEVER, SHALL REMAIN THE SAME. ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 5 THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1-4-20 00, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AN D SUBSEQUENT YEARS. 21. SUB-SECTION (10) WAS AMENDED FROM TIME TO TIME. THE LAST RELEVANT AMENDMENT WAS MADE BY FINANCE ACT, 2004 W.E.F. 1.4. 2005 WHICH MODIFIED THE DEFINITION OF BUILT-UP AREA WITH WHICH WE ARE CONCERNED AND WITH WHISH WE WILL DEAL SUBSEQUENTLY. THE CONDITION S REQUIRED TO BE SATISFIED FOR AVAILING DEDUCTION UNDER SECTION 80IB (10) ARE - (I) THERE MUST BE AN UNDERTAKING DEVELOPING AND BU ILDING HOUSING PROJECT; (II) SUCH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY; (III) THE DEVELOPMENT AND CONSTRUCTION OF HOUSING P ROJECT HAS COMMENCED ON OR AFTER 1-10-1998; (IV) THE HOUSING PROJECT IS ON A SIZE OF A PLOT OF LAND WHICH HAS MINIMUM AREA OF ONE ACRE; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUILT UP AREA OF 1,000 SQ. FT. IF IT IS SITUATED IN DELHI AND MUMBAI OR WITHIN 25 KMS OF MUNICIPAL LIMIT OF THESE CITIES AND 1,500 SQ. FT. AT ANY OTHER PLACE. 22. A PLAIN READING OF SECTION 80IB(10) REVEALS THA T THIS DEDUCTION IS AVAILABLE TO AN UNDERTAKING WHICH IS DEVELOPING AND BUILDING HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. IT DOES N OT LAY DOWN ANY FURTHER CONDITION THAT SUCH DEVELOPMENT OF HOUSING PROJECT SHOULD ALSO BE ON THE LAND OWNED BY THE ASSESSEE UNDERTAKING. IN OTHER WO RDS AN ASSESSEE CAN DEVELOP A HOUSING PROJECT EVEN ON THE LAND BELONGIN G TO ANOTHER PERSON IF HE ENTERS INTO AGREEMENT WITH THE ASSESSEE TO DEVEL OP AND BUILD SUCH HOUSING PROJECT. A PERUSAL OF THE AGREEMENT OF THE SOCIETY AND NCHSL WITH THE ASSESSEE CLEARLY INDICATES THAT THE SOCIET Y HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP THE HOUSING PROJECT ON THE LAND IN THE NAME OF THE SOCIETY TO BE HANDED OVER TO THE AS SESSEE FOR CARRYING OUT THE DEVELOPMENT. THE TRIBUNAL, A BENCH, CHENNAI I N ACIT VS. C. ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 6 RAJINI [2011] 9 TAXMANN.COM 115 (CHENNAIITAT) IN I TA NOS. 1239/MDS/2008 AND 1666/MDS/2007 PRONOUNCED ON DECEM BER, 10, 2010 HELD THAT A DEVELOPER AND BUILDER IS NOT REQUI RED TO BE OWNER OF THE LAND ON RECORD FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 80IB(10). WHAT IS REQUIRED TO BE SEEN IS THAT ASSESSEE SHOULD BE D E FACTO OWNER OF THE LAND. THE TRIBUNAL, CHENNAI BENCH IN THE CASE OF C. RAJINI (SUPRA) OBSERVED IN THIS REGARD AS UNDER :- 7. FROM THE ABOVE DISCUSSION, WHAT IS REQUIRED IS THAT IF THE ASSESSEE IS A BENEFICIAL OWNER OR TO PUT IT IN A LEGAL TERM IF SHE IS A DE F ACTO OWNER OF THE LAND, ANY DEVELOPER BECOMES ELIGIBLE FOR THIS DEDUCTION. IT IS NOT AT A LL NECESSARY THAT THE DEVELOPER SHOULD BE A DE JURE OWNER OF THE LAND. IT IS QUITE POSSIBL E TO DEVELOP THE PROPERTY WITH CONSENT OF THE OWNER. IT TRANSPIRES FROM THE PERUSA L OF THE RECORDS THAT ASSESSEE WAS DE FACTO OWNER OF THE PROPERTY WHEN THE ENTIRE ALLO TMENT PROCEDURE WAS EXECUTED BY HER ONLY. IT WAS THE ASSESSEE WHO INCURRED ALL THE EXPENSES CONNECTED WITH THE DEVELOPMENTS OF THE PROPERTY RIGHT FROM FILING APPL ICATION FOR PLANNING PERMISSION AND PAYING NECESSARY FEES FOR THE SAME. THE MARKETI NG OF THE SITE WAS ALSO DONE BY THE ASSESSEE THROUGH ADVERTISEMENT, ETC. WE HAVE CA REFULLY PERUSED THE AGREEMENTS AND OTHER RELEVANT DOCUMENTS. WE ARE CONVINCED THAT THIS IS NOT, AT ALL, A WORKS- CONTRACT. 23. SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL, CHENNAI BENCH IN ACIT V. M/S SASHWATH CONSTRUCTIONS PVT. LTD. IN I.T.A. NO. 1069 (MDS.)/2008 FOR THE ASSESSMENT YEAR 2005-06 DATED 25 FEBRUARY, 2009 , WHEREIN IT WAS HELD AS FOLLOWS:- 'IN OUR OPINION IT IS NOT SINCE QUA NON FOR A DEVEL OPER TO BECOME THE DE JURE OWNER OF THE LAND. IT IS QUITE POSSIBLE TO DEVELOP THE PROPERTY WITH THE CONSENT OF THE OWNER. IT TRANSPIRES FROM THE PERUSAL OF THE RE CORDS THAT THE ASSESSEE WAS THE DE FACTO OWNER OF THE PROPERTY, AS THE ENTIRE ALLOT MENT PROCEDURE WAS EXECUTED BY THE ASSESSEE COMPANY ONLY. WE HAVE NOTED THAT THE A SSESSEE DID INCUR ALL THE EXPENSES CONNECTED WITH THE DEVELOPMENT OF THE PROP ERTY. APPLICATION FOR PLANNING PERMISSION WAS ALSO MADE BY THE ASSESSEE. NECESSARY FEE FOR THE SAME WAS PAID BY IT. ROAD FORMATION WAS ALSO DONE BY THE ASSESSEE. BESIDES, FOR MARKETING THE FLATS THE ASSESSEE DID ADVERTISE THE PROPERTY ALSO. WE HAVE PERUSED THE REASONINGS ADDUCED BY THE COMMISSIONER (APPEALS ) IN THE IMPUGNED ORDER. IN OUR OPINION HE TOOK A CORRECT VIEW IN THE MATTER AN D HIS ORDER CALLS FOR NO INTERFERENCE ON THIS COUNT. ACCORDINGLY WE UPHOLD T HE SAME.' ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 7 24. NOW WE REFER TO SECTION 80IB(10) SO AS TO FIND OUT WHETHER THE CONDITION OF LEGAL OWNERSHIP OF THE LAND IS AN ESSE NTIAL INGREDIENT UNDER THAT SECTION. SECTION 80IB(10) READS AS UNDER :- [(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 3 1ST DAY OF MARCH, 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEA R FROM SUCH HOUSING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DE VELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SUCH CONSTRUCTION, (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APP ROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004, ON OR BEFORE THE 31ST DAY OF MARCH, 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, O R, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRI L, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WH ICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. [(III) IN A CASE WHERE A HOUSING PROJECT HAS BEEN A PPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2 004 [BUT NOT LATER THAN THE 31ST DAY OF MARCH, 2005], WITHIN FIV E YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY.] EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUIL DING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETI ON CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND W HICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CL AUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DEC LARED TO BE SLUM ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 8 AREAS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AR EA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FR OM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HU NDRED SQUARE FEET AT ANY OTHER PLACE; AND (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMME RCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED [TH REE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR [ FIVE THOUSAND SQUARE FEET, WHICHEVER IS HIGHER];] (E) NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUS ING PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL; AND (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOUS ING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY:- (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHIL DREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDI VIDUAL IS THE KARTA. (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA.] EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY T O ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTR ACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNME NT).] 25. AS OBSERVED ABOVE, ONLY FIVE CONDITIONS ARE NEC ESSARY FOR CLAIMING DEDUCTIONS UNDER SECTION 80IB(10). APART FROM THESE FIVE (A) TO (E), ONE MORE CONDITION HAS BEEN LAID DOWN IN THIS SECTION. IF ASSESSEE FULFILLS THESE CONDITIONS IT BECOMES ENTITLED FOR THE DEDUCT ION. IN THE PRESENT CASE, IT IS UNDISPUTED FACT THAT MONEY FOR PURCHASE OF LA ND WAS GIVEN BY THE ASSESSEE TO THE SOCIETY AND THEREAFTER LAND WAS HAN D OVER TO THE ASSESSEE FOR DEVELOPMENT OF THE PROJECT. THUS ASSESSEE IS A DE FACTO OWNER OF THE LAND AND EVEN AS PER PROVISION OF SECTION 53A OF TH E TRANSFER OF PROPERTY ACT ASSESSEE WOULD BE OWNER OF THE LAND AS FIRSTLY IT HAS PAID THE ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 9 CONSIDERATION AND SECONDLY IT HAS THE POSSESSION OF THE LAND. IN ANY CASE, LEGAL OWNERSHIP OVER THE LAND HAS NEVER BEEN ANY RE LEVANT CRITERIA FOR ALLOWING OR NOT ALLOWING DEDUCTION UNDER SECTION 80 IB(10). WHAT IS NECESSARY IS THAT ASSESSEE SHOULD HAVE COMPLETE CON TROL, DOMINANCE AND RIGHT TO CARRY ON THE PROJECT AS SANCTIONED BY THE LOCAL AUTHORITY, SUCH AS AUDA IN THE PRESENT CASE. THEREFORE, WE REJECT THE ARGUMENTS OF THE REVENUE THAT ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80IB(10) MERELY BECAUSE ASSESSEE IS NOT THE LEGAL OWNER OF THE LAND . 26. THE OTHER ARGUMENTS OF THE DEPARTMENT ARE THAT AUTHORITY LETTERS/MEMBERSHIP LETTERS WERE ISSUED BY THE SOCIE TY AND ASSESSEE HAD ONLY CONTRACTUAL LIABILITY, SALE PROCEEDS WERE ADJU STED AGAINST THE PURCHASE PRICE OF THE LAND; THE ASSESSEE IS ACTING ONLY AS A RECOMMENDING AUTHORITIES ETC. ARE NOT RELEVANT CRITERIA. THEY AR E INDIVIDUAL CLAUSES OF THE AGREEMENT BETWEEN THE SOCIETY AND THE ASSESSEE. ENTIRE AGREEMENT HAS TO BE READ AS A WHOLE AND ITS EFFECT HAS TO BE SEEN BY READING ALL THE CLAUSES OF THE AGREEMENT TOGETHER. IN OUR CONSIDERE D VIEW AS STATED ABOVE, SOCIETY WAS NOTHING BUT A SPECIAL PURPOSE VE HICLE, A SMOKE SCREEN, FOR REDUCING STAMP DUTY BURDEN OVER THE ASSESSEE. T HE ROLE OF THE SOCIETY CAME TO THE HAULT AFTER PURCHASING OF THE LAND AND HANDING OVER THE POSSESSION TO THE ASSESSEE. IT REVIVED AFTER RECEIV ING THE RECOMMENDATION FROM THE ASSESSEE FOR ULTIMATE SALE OF THE FLATS. I N BETWEEN THESE TWO EVENTS, THE SOCIETY WAS NOTHING BUT A SILENT SPECTA TOR AND ASSESSEE WAS IN FULL AND COMPLETE CONTROL OVER THE PROJECT, ITS DEV ELOPMENT AND SALE OF THE FLATS. IT HAD ENJOYED THE PROFITS ARISING FROM THE SALE OF THE FLATS. IF THE SOCIETY WOULD HAVE BEEN A CONTRACTEE IN THE REAL TE RM, MEANING THEREBY THAT ASSESSEE WAS CONTRACTOR, CARRYING OUT ANY WORK CONTRACT, SOCIETY SHOULD HAVE SHOWN THE SALE PROCEEDS AS ITS OWN AND SHOWN THE PROFITS FROM SUCH SALE PROCEEDS BY DEBITING THE PAYMENTS MA DE TO THE CONTRACTOR ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 10 AGAINST THE SALE PROCEEDS OF THE FLATS. NO SUCH EVI DENCE HAS BEEN PRODUCED BY THE REVENUE. IT IS ALSO NOT SHOWN THAT SOCIETY HAD FILED ANY RETURN OF INCOME SHOWING ANY PROFIT OR LOSS FROM TH E PROJECT. AT LEAST, IT IS NOT ASCERTAINED THAT ANY NOTICE UNDER SECTION 148(1 ) HAS BEEN ISSUED TO THE SOCIETY ASKING IT TO FILE THE RETURN OF INCOME TO DECLARE THE PROFIT EARNED BY IT ON THIS PROJECT. IF ENTIRE FINANCIAL A RRANGEMENTS FROM PURCHASE OF LAND TILL DISPOSAL OF THE FLATS REMAINE D UNDER THE CONTROL OF THE ASSESSEE AND NO PART OF THE SALE PROCEEDS OF TH E FLATS ACCRUED TO THE SOCIETY AS PROFIT, OR AT LEAST NO EVIDENCE HAS BEEN PUT UP IN SUPPORT OF SUCH CLAIM WE ARE UNABLE TO HOLD THAT ASSESSEE ONLY ACTED AS WORK CONTRACTOR. IN A CASE OF WORK CONTRACTOR THERE HAS TO BE SOME PROFIT OR LOSS TO THE CONTRACTEE BECAUSE ULTIMATELY THE FLATS HAVE BEEN SOLD ALONG WITH THE RIGHTS OVER THE LAND. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE HOLD IN THE CASE OF THIS ASSESSEE THAT - (1) LEGAL OWNERSHIP OF THE LAND ON WHICH CONSTRUCTION A CTIVITIES ARE CARRIED OUT BY THE DEVELOPER NEED BE OWNED BY HIM. (2) ONCE APPROVAL IS TAKEN THEN IT IS NOT NECESSARY THA T IT SHOULD BE SPECIFICALLY IN THE NAME OF THE ASSESSEE HIMSELF. (3) ENTIRE PROFIT AND LOSS FROM THE PROJECT BELONGED TO THE ASSESSEE AND IT IS NOT A CASE THAT ASSESSEE WOULD BE GETTING REMUNERATION AT FIXED RATE LIKE A CONTRACTOR. THEREFORE, THE ASS ESSEE CANNOT BE CALLED A CONTRACTOR. (4) EVEN IF, THE ASSESSEE HAS NOT SOLD THE UNITS DIRECT LY TO THE PURCHASERS BUT HAS BEEN ONLY A RECOMMENDING AUTHORI TY, BUT SO LONG AS PROFITS AND RISKS ASSOCIATED WITH THE PROJE CT HAS BEEN BORNE BY THE ASSESSEE HE WOULD BE A DEVELOPER. ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 11 6. IN THIS CONTEXT WE MAY REFER TO CERTAIN OBSERVAT IONS IN THE CASE OF NIKHIL ASSOCIATES (SUPRA) IN PARA 19 WHERE THE OBSE RVATIONS IN RADHE DEVELOPERS HAVE BEEN REFERRED TO, WHICH IN TURN HAS REFERRED TO THE DECISION OF HON. SUPREME COURT IN THE CASE OF GUJAR AT INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT (1997) 229 ITR 414 (SC) CLARIFYING THEREIN WHO IS A DEVELOPER AND WHO IS A CONTRACTOR, AS UNDER :- 19. FURTHER WHO SHOULD BE DEVELOPER HAS BEEN DISCU SSED BY HON. SUPREME COURT IN GUJARAT INDUSTRIAL DEVELOPMENT COR PORATION VS. CIT (1997) 229 ITR 414 (SC) WHERE IN PARA 7 THEREOF THE ISSUE HAS BEEN DISCUSSED. THE TRIBUNAL IN RADHE DEVELOPERS CASE H AS REFERRED TO THAT JUDGMENT AND HAS OBSERVED AS UNDER :- 31. THE SUPREME COURT IN THE CASE OF GUJARAT INDUS TRIAL DEVELOPMENT (SUPRA), CONSIDERING THE MEANING OF DEVELOPER HELD THAT TH E WORD DEVELOPMENT APPEARING IN THE PROVISIONS SHOULD BE UNDERSTOOD IN ITS WIDER SENSE AND, THEREFORE, GRANTED EXEMPTION EVEN THOUGH THE GUJARAT INDUSTRIAL DEVELO PMENT CORPORATION WAS ENGAGED IN THE INDUSTRIAL DEVELOPMENT. THE DEVELOPMENT MEAN S THE REALIZATION OF POTENTIALITIES OF LAND OR TERRITORY BY BUILDING OR MINING. ACCORDI NGLY, IT CAN BE SAFELY SAID THAT A PERSON WHO UNDERTAKES TO DEVELOP REAL ESTATE BY DEV ELOPING AND CONSTRUCTING A HOUSING PROJECT IS AN ELIGIBLE UNDERTAKING; DEVELOP ING AND BUILDING OF HOUSING PROJECTS WITHIN THE MEANING OF SECTION 80-IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND, THE LANDOWNER HAS NOT MADE ANY CONSCIOUS ATTE MPT TO DEVELOP THE PROPERTY EXCEPT ENSURING THEIR RIGHTS AS LANDOWNER SO THAT T HE SALE VALUE OF THE LAND COULD BE REALIZED TO THEM AS PER THE TERMS OF AGREEMENT TO SALE AND THE DEVELOPMENT AGREEMENT. THE LANDOWNERS, NO DOUBT, HAVE NOT THRO WN THEMSELVES INTO DEVELOPMENT OF PROPERTY. IT IS ONLY THE ASSESSEE WH O IS DEVELOPING THE PROPERTY. THROWING ITSELF INTO THE BUSINESS OF DEVELOPMENT AN D BUILDING OF HOUSING PROJECTS BY TAKING ALL RISKS ASSOCIATED WITH THE BUSINESS BY EN GAGING ARCHITECTS, STRUCTURAL CONSULTANTS, DESIGNING AND PLANNING OF THE HOUSING SCHEMES, PAYMENT OF DEVELOPMENT CHARGES, OBTAINING NECESSARY PERMISSIONS, APPROVING PLANS, HIRING MACHINERY AND EQUIPMENTS, HIRING ENGINEERS, APPOINTING CONTRACTOR S, ETC. NO DOUBT, THE PERMISSION HAS BEEN OBTAINED IN THE NAME OF THE REGISTERED LAN DOWNERS, BUT THE SAME HAVE BEEN OBTAINED BY THE ASSESSEE-FIRM THROUGH ITS PARTNERS WHO ARE HOLDING POWER OF ATTORNEY OF THE RESPECTIVE LANDOWNERS. IT IS A FACT THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS, BUT DEVELOPER IS W ORKING FOR HIMSELF IN ORDER TO ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 12 EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN IN TEREST AND, THEREFORE, OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVE LOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS. AS PER THE PROVISIONS OF SECTION 2(1)(G) OF REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVI CE ACT (27 OF 1996), THE TERM CONTRACTOR MEANS A PERSON WHO UNDERTAKES TO PRODU CE A GIVEN RESULT FOR ANY ESTABLISHMENT, OTHER THAN A MERE SUPPLY OF GOODS OR ARTICLES OF MANUFACTURE, BY THE EMPLOYMENT OF BUILDING WORKERS OR WHO SUPPLIES BUIL DING WORKERS FOR ANY WORK OF THE ESTABLISHMENT; AND INCLUDES A SUB-CONTRACTOR. 7. THUS AS PER THE PARA METERS LAID DOWN IN THE DEC ISION IN THE CASES OF RADHE DEVELOPERS, SHAKTRI CORPORATION AND NIKHIL ASSOCIATES (SUPRA), THE ASSESSEE CANNOT BE CALLED A CONTRACTOR BUT WOUL D BE A DEVELOPER AS IT HAD DOMINANT CONTROL OVER THE LAND AS WELL AS HAD T AKEN ALL THE RISKS AND BENEFITS ASSOCIATED WITH THE PROJECT APART FROM OTH ER THINGS. AS A RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLO WED. ORDER WAS PRONOUNCED IN OPEN COURT ON 13/5/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 13/5/11. MAHATA/- ITA NOS.2498 & 2499/AHD/2010 ALONG WITH CO NOS.281 & 282/AHD/2010 ASST. YEARS 2006-07 & 2007-08 13 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 9/5/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10/5/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..