The ITO, Ward-2(3), Baroda V. M/s. Krishna Developers, Baroda

ITA 2532/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6406 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Section: 80IB

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI M. K. SHRAWAT, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WARD 2(3), BARODA. VS. M/S KRISHNA DEVELOPERS, B- 44, SAHYOG SOCIETY, REFINARY ROAD, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI B. L. YADAV, SR.DR RESPONDENT BY:- SHRI JAIMIN GANDHI, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING GR OUNDS :- (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, IN RESPECT OF ISSUE REGARDING DEDUCTION U/S 80IB(10 ) R.W.S. 89IB(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 THE TRANSFER OF DWELLING UNIT S IN FAVOUR OF THE END-USERS WAS MADE BY THE LAND OWNER AND NOT BY THE ASSESSEE. (2) WITHOUT PREJUDICE THE LD. CIT(A) ERRED IN ALLOW DED UCTION U/S 80IB(10) IN RESPECT OF THE PROCEEDS ATTRIBUTABLE TO THE SALE OF ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 2 UNUTILIZED FSI AND NOT TO THE DWELLING UNITS IN THE HOUSING PROJECTS, WHICH COULD NOT BE TERMED AS PROFITS DER IVED FROM DEVELOPING AND BUILDING HOUSING PROJECTS IN TERMS O F THIS PROVISION. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT LD. CIT(A) HAS INCORRECTLY ALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10). 2. THE FACTS RELATING TO THE CASE ARE THAT ASSESSEE HAS CLAIMED ITSELF AS DEVELOPER-CUM-BUILDER AND ACCORDINGLY CLAIMED DEDUC TION U/S 80IB(10). THE AO DISALLOWED THE CLAIM FOR THE FOLLOWING REASO NS :- (I) THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WA S BUILT UP. (II) THE ASSESSEE HAS NOT TAKEN THE APPROVAL OF THE HOUS ING PROJECT FROM THE LOCAL AUTHORITY. THE SAME WAS TAKEN BY THE OTHER PERSONS WHO ARE ENTIRELY SEPARATE ENTITY IN THE EYE S OF LAW. (III) THE LAND OWNERS HAVE SOLD THE PIECES OF LAND TO UNI T HOLDERS DIRECTLY AND ASSESSEE HAD ACTED MERELY AS A CONFIRM ING PARTY. (IV) ASSESSEE FIRM HAS ACTED MERELY AS A CONTRACTOR AS I T HAS ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDER. (V) THE ASSESSEE FIRM HAS NEVER SOLD THE HOUSE TO THE U NIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF . 3. HOWEVER, THE LD. CIT(A) ALLOWED THE CLAIM FOLLOW ING THE DECISION OF THE TRIBUNAL IN M/S RADHE DEVELOPERS AND OTHERS IN ITA NOD/2006 WHEREIN FOLLOWING OBSERVATIONS WERE MADE:- 28. THE CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION UNDER SECTION 80-IB(10), THERE IS A CONDITION PRECE DENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 3 FORCE. WE DO NOT FIND ANY SUCH CONDITION AS APPEARI NG IN THE PROVISIONS OF THE SECTION EXTRACTED ABOVE. A PLAIN READING OF SUB -SECTION (10) OF SECTION 80-IB REVEALS AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJECT AS APPROV ED BY A LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION T HAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAN D BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT A S NARRATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND-OWNERS. THEREFORE, THE MERE FACT THAT THE LAND OWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT , ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTI ON WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSIN G PROJECT AND NOT TO THE MERE OWNER THEREOF. 29. IT IS ALSO THE CASE OF THE REVENUE THAT THE ASS ESSEE WAS A MERE CONTRACTOR DEVELOPING AND BUILDING HOUSING PROJECT AND, THEREFORE, IT COULD NOT BE A DEVELOPER. WE FAIL TO UNDERSTAND AS TO HOW SUCH A SITUATION COULD EMERGE. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A CONTRACTOR. HAVING ENTERED INT O AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, ASSESSEE WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOV E, IT IS THE UNDERTAKING THAT DEVELOPS OR BUILDS THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHETHER THAT IT IS THE OWN ER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREOF. THE REQUIREMENT FOR CLAIMIN G DEDUCTION IS THAT SUCH AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT, BE IT ON THEIR OWN LAND OR ON THE LAND OF OTHERS AND FOR WHI CH A TRIPARTITE AGREEMENT HAS BEEN ENTERED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRACTOR FOR DEVELO PING AND BUILDING HOUSING PROJECT OR AN OWNER OF THE LAND. 45. THEREFORE, LOOK AT FROM ANY ANGLE, WE ARE OF T HE CONSIDERED OPINION, THAT TO CLAIM DEDUCTION FOR DEVELOPING AND BUILDING HOUSING PROJECT, IT IS NOT NECESSARY THAT ASSESSEE MUST BE AN OWNER OF THE LAND AND IT WOULD BE SUFFICIENT IF HE WAS AN UNDERTAKING DEV ELOPS AND BUILD HOUSING PROJECT. THE ASSESSEE IS ALSO THE OWNER OF THE PROJECT, THOUGH THE TITLE DOES NOT VEST IN IT. ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 4 4. ANOTHER POINT ON WHICH THE LD. AO CONSIDERED TO DISALLOW THE CLAIM OF THE ASSESSEE WAS THAT ASSESSEE UTILIZED FS I OF 8627 SQ.MTS. AND LEFT UNUTILIZED FSI OF 27355 SQ.MT. WHICH WAS DISPO SED OF BY THE ASSESSEE ALONG WITH THE TENEMENTS TO PROSPECTIVE BUYERS. THE AO HAD TAKEN A VIEW THAT PROFIT FROM SALE OF 27355 SQ.MT. OF UNUTILIZED FSI IS OUTSIDE THE AMBIT OF PROVISIONS OF SECTION 80IB(10) AS IT IS NOT THE PROFIT DERIVED FROM THE ACTIVITIES OF DEVELOPMENT AND CONSTRUCTION. THE ISS UE WAS ALSO CONSIDERED IN THE CASE OF RADHE DEVELOPERS WHEREIN FOLLOWING O BSERVATIONS WERE MADE BY THE TRIBUNAL:- 63. A QUESTION HAS ALSO BEEN RAISED BY THE REVENUE THAT THE PROFIT EARNED BY THE ASSESSEE ARE NOT FOR DEVELOPING AND B UILDING HOUSING PROJECT ALONE BUT FOR THE SALE OF EXTRA FSI, WHICH HAS NOT BEEN UTILIZED FOR DEVELOPING AND BUILDING HOUSING PROJECT. ON A PERUS AL OF THE PROVISIONS OF SEC.80IB(10), WE FIND THAT IT IS NOT MANDATORY R EQUIREMENT TO FULLY UTILIZE PERMISSIBLE FSI; THERE IS NO CONDITION AS T O FSI UNDER THE SCHEME OF THE PROVISIONS OF SECTION 80IB(10) OF THE ACT; T HERE IS NO QUESTION OF SELLING UNUSED FSI TO THE INDIVIDUAL BUYER FOR EACH PROJECT AND ALSO THERE IS NO QUESTION OF CALCULATING THE PROFITABILITY ON FSI AS THE SAME HAS NOT BEEN CONTEMPLATED U/S 80IB(10) OF THE ACT. ON VERIF ICATION OF THE SALE DEED EXECUTED IN FAVOUR OF BUYERS OF THE RESIDENTIA L HOUSES, IT IS CLEAR THAT THE ASSESSEE HAD MADE THIS SALE DEED FOR SALE OF PL OT OF LAND. FURTHER, ON VERIFICATION OF DEVELOPMENT AGREEMENT WITH THE LAND OWNER, WE FIND THAT HERE ALSO THE REFERENCE IS WITH RESPECT TO LAND ARE A ONLY. IN BOTH THE DOCUMENTS ASSESSEE HAD NOT ACQUIRED RIGHTS AND HAS NOT RELINQUISHED RIGHTS WITH REFERENCE TO FSI. FURTHER, ON VERIFICAT ION OF APPROVED MAP FOR EACH UNIT IS WITH REFERENCE TO BUILT UP AREA ONLY. UNDER THE CIRCUMSTANCES, THE ASSESSEE HAS NEVER DEALT WITH FS I, BOTH IN TERMS OF ACQUIRING RIGHTS IN THE LAND AND FOR RELINQUISHMENT OF SUCH RIGHTS IN THE LAND. THE CALCULATION GIVEN IN APPROVED PLAN IS OF MAXIMUM PERMISSIBLE FSI AND BY GIVING SUCH CALCULATION IT IS NOT MADE M ANDATORY BY ANY PROVISIONS OF ANY ACT TO MAKE CONSTRUCTION TO THE F ULLEST EXTENT OF MAXIMUM PERMISSIBLE FSI. THE UTILIZATION OF FSI BY THE BUILDER DEVELOPER DEPENDS ON MANY FACTORS LIKE SITUATION OF PLOT, THE TYPE OF LOCALITY, AND THE ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 5 TYPE OF BUYERS AFFORDABILITY. IT IS THE MARKET FOR CE, WHICH DETERMINES THE AVERAGE SIZE OF THE RESIDENTIAL UNIT- A COMMERCIAL DECISION, WHICH PREVAILS FOR THE PURPOSE OF CARRYING OUT THE BUSINE SS AND FOR MAKING RESIDENTIAL UNITS AND NOT PERMISSIBLE MAXIMUM FSI. IT WOULD ALSO BE IMPOSSIBLE TO CONSTRUCT ANY HOUSING UNIT AS PER THE PROVISIONS OF SEC.80IB(10) BY UTILIZING THE MAXIMUM FSI. 64. THE AO STATES FURTHER THAT IN THE APPROVED LAY OUT PLAN, THE LOCAL AUTHORITY HAD PERMITTED TO BUILD RESIDENTIAL UNIT O F LESSER AREA THAN THE MAXIMUM PERMISSIBLE BUILT UP AREA ON THE LAND AND T HEREFORE THE ASSESSEE HAD CARRIED OUT ONLY PARTIAL CONSTRUCTION OF THE AVAILABLE FSI VIS A VIS THE ENTIRE PLOT OF LAND AVAILABLE FOR DEVELOP MENT WITH THE ASSESSEE. WE FIND THAT THE APPROVED FSI IN REGARD TO THE UNIT S CONSTRUCTED HAS BEEN FULLY UTILIZED AS PER THE APPROVED PLAN OF THE LOCA L AUTHORITY, NAMELY THE FSI IS FULLY UTILIZED, THE FSI ACTUALLY PASSED AND PERMITTED BY THE AUTHORITIES FOR EACH PROJECT. 65. THE AO OBSERVES ASSESSEE HAS SOLD UNUTILIZED FS I WITHOUT INVOLVING ANY PROCESS OF DEVELOPMENT AND CONSTRUCTI ON, WHICH IS THE PRIMARY CRITERION REQUIRED TO BE SATISFIED FOR THE PURPOSE OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT HAVE NO FOR CE; THAT THE ASSESSEES HAVE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE AC T FOR THE PROFIT DERIVED DURING THE YEAR UNDER CONSIDERATION FROM TH E BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT W HICH THOUGH INCLUDES PROFIT EARNED FROM SALES OF UNUTILIZED FSI OF THE H OUSING PROJECT ALSO AND THAT THE OTHER PART OF UNUTILIZED FSI RELATING TO T HE APPROVED UNITS HAVE NOT BEEN CONSTRUCTED OR DEVELOPED BUT BEING SOLD DI RECTLY ALTHOUGH AS A UNRESTRICTIVE BUNDLE OF RIGHTS ATTACHED WITH THE SA LE OF LAND PLOT. AS AFORESAID, THERE IS NO REQUIREMENT AS TO THE FSI UN DER THE SCHEME OF PROVISIONS OF SECTION 80IB(1). IN ANY CASE THE ASSE SSEE HAS NOT SOLD FSI OF PLOT, EVEN IF THE UNUTILIZED FSI RIGHTS ARE AVAILAB LE WITH THE ASSESSEE, IT IS THE ONLY WAY LEFT OUT OF UTILIZING SUCH UNUTILIZED FSI IS TO MAKE CONSTRUCTION ON TOP OF THE GROUND FLOOR, WHICH IS A LREADY BEING SOLD TO PROSPECTIVE BUYERS. WITH THIS SO CALLED UNUTILIZED SI RIGHTS IF THE ASSESSEE WISHES TO MAKE FURTHER CONSTRUCTION THAN IT WILL PR ACTICALLY IMPOSSIBLE AS THE ASSESSEE IS LEFT WITH NO EASEMENT RIGHTS FOR MA KING CONSTRUCTION OR ACCESS TO GO ON TOP OF THE GROUND FLOOR AS THE GROU ND LEVEL RIGHTS ARE ALREADY SOLD TO PROSPECTIVE CUSTOMER. IN THIS SITUA TION IT WOULD BE PRACTICALLY IMPOSSIBLE TO MAKE EITHER CONSTRUCTION OR TO GIVE ACCESS FOR CONSTRUCTION MADE. THUS, THE CONCEPT OF ELEMENT OF UNUTILIZED FSI SOLD IS IMAGINARY AND BASED ON SURMISES AND CONJECTURES. ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 6 5. THE LD. CIT(A) ALSO REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO & ORS. VS. SHAKTI CORPORATION, BARODA I N ITA NO.1503/AHD/2008 DATED 07.11.2008 WHEREIN THE TRIBU NAL HAD REFERRED TO THE DECISION OF HON. SUPREME COURT IN THE CASE O F FAQUIR CHAND GULATI VS. UPPAL AGENCIES (P) LTD. & ANR. (CIVIL APPEAL NO .3302 OF 2005) DATED 10.07.2008 TO THE EFFECT THE AO SHOULD EXAMIN E WHETHER ASSESSEE IS ACTING ON FIXED CONSIDERATION FROM LAND OWNERS AND IF SO DEDUCTION U/S 80IB(10) SHOULD NOT BE ALLOWED. THE LD. CIT(A) AFTE R REMANDING THE MATTER TO THE AO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING 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 HAVE ALSO BEEN CONSIDERED. THE MATTER WAS REFERRED TO THE AO WHO VIDE REMAND R EPORT DATED 17 TH FEBRUARY, 2010 HAS STATED THAT THE LAND IN QUESTIO N ORIGINALLY BELONGED TO SMT. SHANTABEN CHANDULAL PATEL & OTHERS, IN WHOS E NAMES PERMISSION FOR DEVELOPMENT WAS GRANTED BY THE LOCAL AUTHORITY. THE LAND IN QUESTION AT VILLAGE KAPURAL, REVENUE SURVEY NO.420/1 ADMEASU RING 24986 SQ.MTR. WAS PURCHASED BY SMT. MALTIBEN B. PARIKH & SMT. URV ASHIBEN V. PATEL FROM SMT. SHANTABEN CHANDULAL PATEL & OTHERS VIDE A GREEMENT (BANAKHAT) TO SALE DATED 2.2.1997. HOWEVER, THE LAN D WAS NOT TRANSFERRED IN THE NAME OF THE ASSESSEE FIRM, M/S KRISHNA DEVEL OPERS. THE ASSESSEE HAS MADE A TOTAL PAYMENT OF RS.1,48,25,006/- FOR TH E LAND ADMEASURING 24986 SQ/MTR. AND MADE A DEVELOPMENT AGREEMENT DATE D 30.08.2001 FOR THE DEVELOPMENT OF HOUSING PROJECT. AS PER THE DEVE LOPMENT AGREEMENT, THE ASSESSEE IS RESPONSIBLE FOR THE RISK AND COST I NVOLVED IN THE DEVELOPMENT OF PROJECT. IT IS FURTHER NOTICED THAT ALL THE EXPENSES FOR CONSTRUCTION WERE BORNE BY THE ASSESSEE AND ARRANGE MENT FOR SALE OF HOUSING PROJECT IS ALSO UNDERTAKEN BY THE ASSESSEE. THEREFORE, IT IS OBSERVED THE TERMS AND CONDITIONS OF THE DEVELOPMEN T ARE SMILAR TO THE ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 7 TERMS AND CONDITIONS ACCEPTED BY THE HON. ITAT IN T HE CASE OF ITO & OTHERS VS. M/S SHAKTI CORPORATION, VADODARA & OTHER S IN ITA NO.1503/AHD/2008 DATED 07.11.2008 THE AO ALSO VERI FIED THAT THE APPELLANT HAD COMPLETED THE PROJECT BEFORE 31.03.20 08. SINCE THE CONTROL OVER THE LAND, AND THE RISKS AND COSTS OF THE PROJECT ARE OF THE APPELLANT, THE ASSESSEE IS ENTITLED TO THE D EDUCTION U/S 80IB(10). THE AO IS DIRECTED TO COMPUTE THE INCOME ACCORDINGL Y. WITH REGARD TO GROUND NO.4 FOLLOWING THE DECISION O F THE HON. ITAT IN THE CASE OF M/S RADHE BUILDERS AND OTHERS (SUPRA) THE AOS DECISION OF RESTRICTING THE CLAIM OF 80IB(10) ON ACCOUNT OF UNU TILIZED FSI IS NOT ACCEPTABLE AND IS DIRECTED TO BE DELETED. 6. WE HAVE HEARD THE PARTIES. THE LD. DR BASICALLY RELIED ON THE ORDER OF AO WHO HAS WRITTEN A VERY ELABORATE AND EDUCATIV E ORDER. HOWEVER, IT IS CONTRARY TO THE DECISION OF THE TRIBUNAL IN THE CASE OF RADHE DEVELOPERS AND M/S SHAKTI CORPORATION AS REFERRED T O ABOVE. RECENTLY IN THE CASE OF M/S NIKHIL ASSOCIATES VS. ITO IN ITA NO .328/AHD/2010 ASST. YEAR 2006-07 PRONOUNCED ON 25/3/11, WHEREIN THE ISS UE WAS FURTHER CONSIDERED AND IT WAS HELD AS UNDER:- 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. ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 8 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. 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. 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 ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 9 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.' 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, ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 10 (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 WHI CH 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 NO.2532/AHD/2010 ASST. YEAR 2005-06 11 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 NO.2532/AHD/2010 ASST. YEAR 2005-06 12 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 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. ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 13 7. THUS NOW IT IS SETTLED THAT IT IS NOT NECESSARY THAT ASSESSEE SHOULD BE LEGAL OWNER OF THE LAND. IT IS SUFFICIENT THAT H E SHOULD BE BENEFICIAL OWNER AND HAS TAKEN ALL THE RISKS AND BENEFITS OF D EVELOPING THE PROJECT. A CONTRACTOR ONLY WORKS AT A FIXED PROFIT AND AS PER AGREEMENT BETWEEN THE OWNER OF THE PROJECT AND HIMSELF. THE RISKS AND BEN EFITS GOES TO THE OWNER OF THE PROJECT BUT IN THE PRESENT CASE THE RISKS AN D BENEFITS OF THE PROJECT GO TO THE ASSESSEE AND, THEREFORE, HE IS A DEVELOPE R. THE APPROVAL GRANTED IN THE NAME OF THE LAND OWNER DOES NOT REALLY MAKE ANY DIFFERENCE BECAUSE IT IS NOT PRESCRIBED THAT SUCH APPROVAL SHO ULD ALWAYS BE GRANTED IN THE NAME OF THE ASSESSEE. IT IS SUFFICIENT THAT PROJECT IS APPROVED. AS A RESULT, FOLLOWING ABOVE THREE DECISIONS, WE ALLOW T HE CLAIM OF THE ASSESSEE HOLDING THAT IT IS A DEVELOPER U/S 80IB(10 ). AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 17.06.2011. MAHATA/- ITA NO.2532/AHD/2010 ASST. YEAR 2005-06 14 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 6/6/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 9/6/2011 /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..