The ACIT 3 (1), V. M/s Tulsi Construction,

ITA 253/IND/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47744 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2010
• Assessment Year: misc
• Appeal Filed On: 02-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MITRA
• Keywords: Retrospective amendment; Competent authority
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.253/IND/2008 A.Y. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 3(1), BHOPAL APPELLANT VS M/S TULSI CONSTRUCTION BHOPAL PAN AADFT-6544R RESPONDENT APPELLANT BY : SHRI P.K. MITRA, SR. DR RESPONDENT BY : SHRI H.P. VERMA ALONGWITH SHRI ASHISH GOYAL O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 7.3.2008 WHEREIN THE GROUND RAISED IS THAT LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.24,15,305/- ON ACCOUNT OF REJECTION OF CLAIM U/S 80IB OF THE ACT A ND HOLDING THAT SINCE 2 THE ASSESSEE DOES NOT OWN THE LAND, THE BENEFIT OF DEDUCTION CLAIMED IN RESPECT OF PROFITS DERIVED FROM SUCH HOUSING PROJE CTS CANNOT BE DENIED TO THE ASSESSEE PARTICULARLY WHEN THE ASSESSEE IS N OT ELIGIBLE FOR EXEMPTION AND IS MERELY ACTING AS A CONTRACTOR AND FURTHER DELETING THE DISALLOWANCE IN A SUMMARY AND NON-SPEAKING MANNER E SPECIALLY WHEN THE PRE-REQUISITE CONDITION OF SECTION 80IB(10) OF THE ACT WERE NOT FULFILLED BY THE ASSESSEE AND FURTHER ALLOWING THE DEDUCTION U/S.80IB WHEN THE ASSESSEE HAS NOT SOLD ANY CONSTRUCTED PROPERTY TO I TS CUSTOMERS AND ALL THE SUMS RECEIVED FROM CUSTOMERS ARE TREATED AS CON STRUCTION RECEIPTS AND THE REGISTRY OF THE LAND WAS ONLY MADE IN THE N AME OF THE SOCIETY, THEREFORE, THE DEDUCTION IS AGAINST THE LETTER AND SPIRIT OF LEGAL PROVISIONS. 2. DURING HEARING, WE HAVE HEARD LEARNED REPRESENTA TIVES OF BOTH THE PARTIES. THE CRUX OF ARGUMENTS ON BEHALF OF THE REV ENUE IS THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TR IBUNAL IN THE CASE OF ACIT V. M/S FORTUNE BUILDERS (ITA NO. 248/IND/2008) , THEREFORE, THIS APPEAL MAY BE REMANDED BACK TO THE FILE OF THE ASSE SSING OFFICER FOR FRESH ADJUDICATION. OUR ATTENTION WAS ALSO INVITED TO PAGE 6 OF THE IMPUGNED ORDER WHEREIN IT HAS BEEN HELD THAT DEVELO PER INCLUDES CONTRACTOR. IT WAS ALSO SUBMITTED THAT MUNICIPAL C ORPORATION GIVES APPROVAL IN THE NAME OF M/S JAI SHANKAR GRAH NIRMAN SAHKARI SANSTHA AND NOT TO THE ASSESSEE. CONSEQUENTLY, THE IMPUGNE D ORDER IS UNJUSTIFIED. 3 3. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE IMPUGNED ISSUE IS NOT COVERED BY THE DECISION O F M/S FORTUNE BUILDERS AS CANVASSED BY THE LEARNED SENIOR DEPARTM ENTAL REPRESENTATIVE. OUR ATTENTION WAS ALSO INVITED TO LAST PARA OF PAGE 3 OF THE ASSESSMENT ORDER. ONLY APPROVAL SHOULD BE TAKE N BY THE ASSESSEE AND OWNERSHIP IS NOT THE PRE-REQUISITE. THE IMPUGN ED ORDER WAS DEFENDED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREE MENT WITH M/S JAI SHANKAR GRAH NIRMAN SAHKARI SANSTHA (THE SOCIETY) F OR DEVELOPMENT OF A HOUSING PROJECT ON A PLOT OF 5.24 ACRES OF LAND. THE LEGAL TITLE OF THE LAND WAS IN THE NAME OF THE SOCIETY. THE ASSESSEE CONSTRUCTED THE HOUSES AND SOLD TO THE BUYERS. THE STAND OF THE AS SESSEE IS THAT THE ASSESSEE IS A BUILDER AND DEVELOPMENT OF HOUSING PR OJECT, THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF TH E ACT. HOWEVER, THE LEARNED ASSESSING OFFICER DENIED SUCH CLAIM OF RS.2 4,15,305/-. THE MAIN REASON FOR MAKING DISALLOWANCE U/S 80IB(10) WA S THAT THE ASSESSEE WAS NOT THE OWNER OF THE LAND AND THE REGI STRY WAS ALSO NOT IN THE NAME OF THE ASSESSEE. THE APPROVAL WAS ALSO NOT OBTAINED IN THE NAME OF THE ASSESSEE. THE STAND OF THE ASSESSEE IS THAT THERE IS NO REQUIREMENT UNDER SECTION 80IB(10) THAT THE LAND ON WHICH SUCH HOUSES 4 ARE CONSTRUCTED/BUILT MUST BE IN THE NAME OF THE AS SESSEE OR THE APPROVAL SHOULD BE OBTAINED IN THE NAME OF THE ASSE SSEE. NOW THE QUESTION ARISES AS TO WHETHER THE ASSESSEE SHOULD B E OWNER OF THE LAND FOR CLAIMING SUCH DEDUCTION AND FURTHER WHETHER THE ASSESSEE IS A DEVELOPER OR A CONTRACTOR ? 5 . IN THIS CASE THE ASSESSEE HAS SOUGHT EXEMPTION U/S 80IB OF THE ACT IN RESPECT OF ITS HOUSING PROJECT. AS PER OUR CONSIDERED VIEW, FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFILLED F OR CLAIMING EXEMPTION/DEDUCTION U/S 80IB OF THE ACT [(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT S APPROVED BEFORE THE 31ST DAY OF MARCH, 6A [ 2008 ] BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR F ROM SUCH HOUSING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SU CH CONSTRUCTION, (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APP ROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 20 04, 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 APRIL, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY TH E 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 PR OJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE O N 5 WHICH THE BUILDING 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 COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING P ROJECT 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 CLAUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMEN T OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM ARE AS 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 FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; 6B [ AND ] (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMME RCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHE VER IS LESS.] THE FOLLOWING CLAUSES (E) AND (F) SHALL BE INSERT ED AFTER CLAUSE (D) OF SUB-SECTION (10) OF SECTION 80-IB BY THE FINANCE (NO. 2) ACT, 2009, W.E.F. 1-4-2010 : (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 ALLOTTE D 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, 6 (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. 6C [ EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). ] HOWEVER, THE ASSESSING OFFICER FOUND THAT THE CONDI TIONS STIPULATED U/S 80IB OF THE ACT HAVE NOT BEEN FULFILLED BY THE ASSE SSEE. HE, ACCORDINGLY, DECLINED THE CLAIM OF THE ASSESSEE U/S 80IB OF THE ACT. BY THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ALLOWED THE ASSESSEES CLAIM AFTER HAVING MADE THE FOLLOWING OB SERVATIONS :- I HAVE GONE THROUGH THE ORDER OF THE A.O. AND ALSO PERUSED THE SUBMISSION OF THE LEARNED AR. I HAVE ALSO DEEPLY CONSIDERED THE FACTS AND REASONS RECORDED BY THE A.O. IN HIS ORDER FOR REJECTING THE CLAIM OF THE APPELLANT UNDER SECTION 80-IB(10). O N A CAREFUL CONSIDERATION OF THE FACTS, CIRCUMSTANCES , LEGAL POSITION AND ALSO THE EXPLANATIONS OF THE A.R ., IT IS OBSERVED THAT THERE IS AN IMMENSE FORCE IN TH E CONTENTION OF THE LEARNED A.R. TO DRIVE HOME THE POINT THAT THE APPELLANT CANNOT BE DENIED THE BENEF IT AVAILABLE U/S 80IB(10) OF THE IT ACT, 1961. IT IS TRUE 7 THAT THE DEVELOPER INCLUDES CONTRACTOR AND ALSO THE SECTION DOES NOT BAR DEDUCTION TO ANY SPECIFIC CATEGORY OF PERSONS LIKE BUILDER, DEVELOPER OR IT M AY BE A COLONIZER. THE WORD UNDERTAKING HAS NOT BEEN DEFINED IN THE ACT. HENCE THE APPELLANT IS ELIGIBL E FOR DEDUCTION UNDER THIS SECTION INSPITE OF ITS STA TUS. THE AGREEMENT EXECUTED BETWEEN THE SOCIETY AND THE APPELLANT BUILDER FIRM IS VERY CLEAR THAT THE DEVELOPMENT AND CONSTRUCTION WORK IS TO BE COMPLETED IN ALL RESPECTS BY THE BUILDER FIRM. I A M CONVINCED WITH THE ARGUMENTS AND SUBMISSION OF THE LD. AR THAT THERE IS NO REQUIREMENT IN THIS SECTION THAT THE APPROVAL SHOULD BE IN THE NAME OF APPELLANT IN QUESTION. IN FACT THE SECTION DOES NO T EVEN REQUIRE THAT THE APPELLANT SHOULD BE THE OWNER OF THE LAND ON WHICH THE HOUSING PROJECT IS BEING CARRIED ON. THUS, EVEN IF THE APPELLANT DOES NOT OW N THE LAND, THE BENEFIT OF DEDUCTION TO THE EXTENT OF 100% OF THE PROFITS DERIVED BY THE ACTIVITY OF DEVELOPING AND BUILDING A HOUSING PROJECT, AVAILABL E U/S 80IB(10), CANNOT BE DENIED TO THE APPELLANT. I N VIEW OF THE ABOVE, THE A.O. IS DIRECTED TO ALLOW TH E 8 DEDUCTION CLAIMED BY THE APPELLANT U/S 80IB(10) OF THE IT ACT, 1961 AND IN THE PROCESS THIS GROUND OF APPEAL IS ALLOWED. FROM RECORD, WE FIND THAT THE ASSESSING OFFICER HAS DECLINED THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT BY OBSERVING THAT THE ASSESSEE HAS NOT DEVELOPED THIS PROJECT. THE MAIN CONDITION FOR GRANT OF EXEMPTION U/S 80IB(10) OF THE ACT IS THAT THE ASSESSEE SHOULD WORK AS A DEVELOPER AND SHOULD HAVE DEVELOPED THE PROJECT IN ENTIRETY. THIS FINDING OF THE ASSESSING OFFICER HAS NOT BEEN CONTROVERTED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BEFORE ALLOWIN G EXEMPTION U/S 80IB OF THE ACT. THERE IS ALSO PRE-CONDITION FOR C OMPLETION OF PROJECT BEFORE 31 ST APRIL, 2008 INSOFAR AS APPROVAL BY THE LOCAL AUTHO RITY WAS TAKEN PRIOR TO IST APRIL, 2004. THIS CONDITION HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE. FURTHERMORE, AN AMENDMENT HAS BEE N BROUGHT BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1. 4.2001 BY INSERTION OF EXPLANATION WHEREBY IT WAS PROVIDED THAT THE BENEFI T OF DEDUCTION U/S 80IB OF THE ACT SHOULD NOT BE GIVEN TO AN UNDERTAKI NG WHICH EXECUTED THE HOUSING PROJECT AS WORK CONTRACT AWARDED BY ANY PERSON. IT HAS BEEN CLEARLY PROVIDED IN THE EXPLANATION THAT ONLY TO THE DEVELOPER WHO DEVELOPS THE PROJECT IN ITS ENTIRETY AS PER THE APP ROVED PLAN CAN BE GIVEN 9 BENEFIT OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF PROFITS DERIVED FROM SUCH PROJECT. FROM RECORD WE FIND THAT THE CONDITIO NAL APPROVAL HAS BEEN GRANTED BY THE ASSESSEE BY THE COMPETENT AUTHORITY BUT THE ASSESSEE HAS NOT FILED ANY COMPLETION CERTIFICATE OF THE PRO JECT IN QUESTION WITHIN THE STIPULATED PERIOD OF FOUR YEARS. EVEN THE SANCT ION/APPROVAL IS SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS MENTIONED IN T HE CERTIFICATE. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS NOT GIVEN ANY FINDING WITH REGARD TO STATUS OF THE ASSE SSEE WHETHER THE DEVELOPER OR MERELY A CONTRACTOR. WE, THEREFORE, S ET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT AND T HE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRE SH AFTER ASKING THE ASSESSEE TO PRODUCE COMPLETION CERTIFICATE OF THE P ROJECT WHICH SHOULD BE PRIOR TO 31 ST MARCH, 2008 BY THE LOCAL AUTHORITY. THE ASSESSING OFFICER IS ALSO DIRECTED TO EXAMINE THE AGREEMENT W HICH APPEARS TO BE PRODUCED BEFORE THE LD. FIRST APPELLATE AUTHORITY F OR THE FIRST TIME GIVING DETAILS OF SCOPE OF THE WORK TO BE UNDERTAKEN BY TH E ASSESSEE. THE ASSESSING OFFICER IS ALSO REQUIRED TO VERIFY WHETHE R THE ASSESSEE HAS ACTUALLY UNDERTAKEN ALL THE JOBS WHICH ARE REQUIRED TO BE UNDERTAKEN BY 10 THE DEVELOPER I.E. DEVELOPMENT OF INFRA-STRUCTURE F ACILITIES LIKE LAYING DOWN SEWERAGE LINE, ELECTRICITY, ROADS, ETC. WE DI RECT ACCORDINGLY. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 4 TH APRIL, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4 TH APRIL 2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/-