The ITO, Ward-9(1), Ahmedabad V. M/s. Shyam Builders, Ahmedabad

ITA 2598/AHD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1179 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANKIT PARIKH
• Section: 143(3); 80IB; 2

Judgement Text

ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH , AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM ] ITA NO S . 2598 & 2599 / AHD / 2 0 11 ASSESSMENT YEAR S : 200 7 - 08 & 2008 - 09 INCOME TAX OFFICER, ....... .. . ..... APPELLANT WARD 9(1), AHM EDABAD. VS. SHYAM BUILDERS, .... ........ .... .. .. .. .... .. RESPONDENT SHYAM VILLA BUNGLOWS - II, NEAR BASANT BAHAR, NEAR UPVAN VILLA, BOPAL, AHMEDABAD. [PAN: A BCFS 9726 N ] APPEARANCES BY: KAMLESH MAKWANA , FOR THE APPELLANT ANKIT PARIKH , FOR THE RES PONDENT DATE OF CONCLUDING THE HEARING : JULY 21 ST , 201 5 DATE OF PRONOUNCING THE ORDER : AUGUST 21 ST , 2015 O R D E R PER PRAMOD KUMAR AM : BY WAY OF THESE APPEALS, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF LEARNED CIT(A) S TWO SE PARATE ORDER S, BOTH DATED 30 TH AUGUST, 201 1 , IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR S 200 7 - 08 & 2008 - 09 . 2. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, WE DISPOS E OF THESE APPEALS BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 2 OF 7 3. SINCE COMMON GROUNDS HAVE BEEN RAISED BY THE APPELLANT IN BOTH THESE APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE, THE GROUNDS RAISED IN ITA NO. 2598 / AHD/2011 FOR A.Y. 200 7 - 08 ARE R EPRODUCED AS UNDER : - ITA NO.2598/AHD/2011 FOR A.Y. 2007 - 08 1) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XV , AHMEDABAD H AS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE S CLAIM FOR DEDUCTION OF RS.79,69,534 U/S. 80I B(10) OF THE ACT. 2) THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XV, AHMEDABAD HAS ERRED IN HOLDING THAT THE ASSESSEE FULFILS THE CONDITIONS LAID DOWN FOR CLAIMING DEDUCTION U/S 80IB(10) EVEN WHEN THE LAND WAS IN THE NAMES OF TWO CO - OPERATIVE SOCIETIES I. E., 1) SHYAM BOPAL CO - OPERATIVE HOUSING SOCIETY LTD., AND 2) DARSHAN TWINS CO - OP. HOUSING SOCIETY LTD., WHICH ARE SEPARATE LEGAL ENTITIES IN THE EYE OF LAW AND THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE SOCIE T IES. THE ENTIRE RESPONSIBILITY TO EXECUTE THE HOUSING PROJECT AND ABIDE BY THE TERMS AND CONDITIONS OF ITS APPROVAL RIGHT FROM THE INCEPTION OF THE PROJECT T ILL ITS COMPLETION RESTS WITH T H E SOCIETIES. ASSESSEE WAS JUST A CONTRACTOR AND NOT A DEVELOPER. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME T AX (APPEALS) - XV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4) IT IS THEREFORE , PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XV, A HMEDABA D MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. FIRST WE WILL TAKE UP ITA NO.2598/AHD/2011 FOR A.Y. 2007 - 08. BRIEFLY STATED, THE RELEVANT MA TERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT WHILE THE ASSESSEE HAS CONSTRUCTED A HOUSING PROJECT, NEITHER THE ASSESSEE IS OWNER OF THE LAND ON WHICH PROJECT WAS COMPLETED NOR THE NECESSARY PERMISSIONS WERE GRANTED TO THE ASSESSEE. IT WAS ALSO NOTED THAT T HE LAND BELONGED TO DARSHA N TWINS CO - OPERATIVE HOUSING SOCIETY LIMITED AND SHYA M (BOPAL) CO - OPERATIVE HOUSING S OCIETY LIMITED. IT WAS IN THIS BACKDROP AND FOR THIS REASON THAT ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 3 OF 7 DEDUCTION UNDER SECTION 80IB(10) OF THE ACT WAS DECLINED TO THE ASSESSEE. HOWEVER, WHEN THE MATTER WAS C ARRIED IN APPEAL BEFORE THE LD . CIT ( A ) , SHE REVERSED THE ACTION OF THE ASSESSING OFFICER AND ALLOWED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT BY OBSERVING, INTER ALIA, AS FOLLOWS : - 16. AFTER GOING THROUGH RIVAL SUBMISSIONS ON BU PERMISSION POINT I AM OF THE VIEW THAT GRAM PANCHAYAT BOPAL LETTER DATED 29.4.2010 CAN BE TAKEN AS A CERTIFICATE OF COMPLETION OF THE PROJECT WITHIN THE SPECIFIED TIME FRAME ALLOWED U/S. 80IB(10) . AS PER THE PROVISIONS OF SECTION 80IB(10)(1)(A)(II) THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 1.4.2004 SHOULD BE COMPLETED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. AS PER NAGAR NIYOJAK LETTER DATED 7.6.2011/21.7.2011 A GRAM PANCHAYAT CAN I SSUE BU PERMISSION AND THE APPELLANT HAS PRODUCED CERTIFICATE FROM THE GRAM PANCHAYA T THAT PROJECT WAS COMPLETED IN THE YEAR 2007 - 08, I.E. WELL WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR 2005 - 06 WHEN DEVELOPMENT PERMISSION WAS RECEIVED BY THE APPELL ANT. AND EVEN IF TAXES WERE TO BE COLLECTED FROM F . Y . 2009 - 10 THEN TOO THE APPELLANT COMPLETED THE PROJECT WITHIN TIME AND THEREFORE THERE IS NO JUSTIFICATION FOR DENYING 80IB(10) ON THIS GROUND . 17. AS THE APPELLANT HAS BEEN FOUND FULFILLING THE CONDITIO NS LAID DOWN IN SECTION 80IB(10) AND THE TESTS LAID DOWN BY HON BLE ITAT A BENCH AHMEDABAD IN THE CASE OF SHAKTI CORPORATION AS IT H AS PRACTICALLY PURCHASED THE LAND AND EXERCISED DOMINANT CONTROL S PER DIFFERENT CLAUSES OF THE DEVELOPMENT AGREEMENT, THE APPELLANT IS ELIGIBLE FOR DEDUCTION AND THE AO IS DIRECTED TO ALLOW IT. 5. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE ASSESSEE, AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THE ISSUE IN APPEAL IS NOW COVERED, IN FAVOUR OF THE ASSESSEE, BY A RATHER RECENT DECISION OF THE CO - ORDINATE BENCH, IN THE CASE OF S HRI UMEYA CORPORAT ION V S. INCOME TAX OF FICER (ITA NO.211/AHD/2010; ORD ER DATED 07.07.2015) WHEREIN THE TRIBUNAL HAS OBSERVED A S FOLLOWS : - ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 4 OF 7 6. WE FIND THAT, IN THE CASE OF CIT VS RADHE DEVELOPERS [(2012) 341 ITR 403 (GUJ)] , HON BLE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO C ONSIDER THE ISSUE OF OWNERSHIP OF LAND, ON WHICH HOUSING PROJECT IS DEVELOPED, IN THE CONTEXT OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10). HON BLE JURISDICTIONAL HIGH COURT HAS, IN THIS CONTEXT, INTER ALIA OBSERVED AS FOLLOWS: 32. SEC. 80 - IB(10) O F THE ACT THUS PROVIDES FOR DEDUCTIONS TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS UNDER CERTAIN CIRCUMSTANCES NOTED ABOVE. IT DOES NOT PROVIDE THAT THE LAND MUST BE OWNED BY THE ASSESSEE SEEKING SUCH DEDUCTION S. 33. IT IS WELL SETTLED THAT WHILE INTERPRETING THE STATUTE, PARTICULARLY, THE TAXING STATUTE, NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS NOT BEEN PROVIDED BY THE LEGISLATURE. THE CONDITION WHICH IS NOT MADE PART OF S. 80 - IB(10) OF THE ACT, NAME LY THAT OF OWNING THE LAND, WHICH THE ASSESSEE DEVELOPS, CANNOT BE SUPPLIED BY ANY PURPORTED LEGISLATIVE INTENT. 34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPMENT AGREEMENTS IN BOTH THE SETS OF CASES. IT CAN BE SEEN FROM THE TERMS AND CONDITIONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUTION OF THE DEVELOPMENT PROJECTS. UNDER THE AGREEMENTS, THE ASSESSEE HAD FULL AUTHORITY TO DEVELOP THE LAND AS PER HIS DISCRETION. THE ASSESSEE COULD ENGAGE PROFESSIONAL HELP FOR DESIGNING AND ARCHITECT URAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CHARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT CAN THUS BE SEEN THAT THE ASSESSEE HAD DEVELOPED THE HOUSING PROJECT. THE FACT THAT THE ASSESS EE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUENCE. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 7. IN OUR HUMBLE UNDERSTANDING, THEREFORE, IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS B EEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT O F EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SU CH AN ENTREPRENEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVELOPING AND BUILDING HOUSING PROJECTS BY BUYING, ON OUTRIGHT BASIS, AND CONSTRUCTING RESIDENTIAL UNITS THEREON COULD PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE OF ACTIVITY, BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BECAUSE THE ASSESSEE HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSING PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND REWARDS OF DEVELOPING THE HOUSING PROJECT, IN SUBSTANCE, REMAIN WITH ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 5 OF 7 THE ASSESSEE. IT IS DIFFICULT, IF NOT ALTOGETHER IMPOSSIBLE, TO VISUALIZE ALL THE BUSINESS MODELS THAT AN ASSESSEE MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS, IN SUBSTANCE, THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME, BUT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY FOR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOP ING AND BUILDING A HOUSING PROJECT . THERE IS NO JUSTIFICATION, CONCEPTUAL OR LEGAL, IN RESTRICTING ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINESS MODEL THAT AN ENTREPRENEUR ADOPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HO USING PROJECT. 8. AS REGARDS LEARNED CIT(A) S RELIANCE ON THE DECISION OF A LARGER BENCH OF THIS TRIBUNAL, IN THE CASE OF B T PATIL & SONS (BELGAUM) CONSTRUCTIONS PVT LTD VS ACIT [(2010) 1 ITR (TRIBUNAL) 703 (MUM)] , WHAT HAS BEEN REFERRED TO BY HER IS TH E VIEW OF THE THREE MEMBER BENCH RESOLVING THE POINT OF DIFFERENCE BETWEEN THE MEMBERS OF THE DIVISION BENCH. HOWEVER, THIS VIEW WAS STILLBORN, AND ITS RELEVANCE IS CONFINED TO ACADEMIC SIGNIFICANCE, FOR THE REASON THAT THAT WHILE GIVING EFFECT TO THE MAJO RITY VIEW, VIDE ORDER DATED 28TH FEBRUARY, 2013 AND ON SOMEWHAT PECULIAR FACT SITUATION IN THIS CASE, THE FINAL ORDER OF THE TRIBUNAL DID NOT ENDORSE THESE VIEWS. QUITE TO THE CONTRARY, FOLLOWING HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD AND ORS [(2010) 322 ITR 323 (BOM)] AND UPON BY TAKING INTO ACCOUNT HON BLE BOMBAY HIGH COURT S SPECIFIC DIRECTIONS IN THE CASE BEFORE THE TRIBUNAL, THE TRIBUNAL S FINAL ORDER HAD, INTER ALIA, CONCLUDED AS FOLLOWS: .WHILE GIVING EF FECT TO THE OPINION OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTI ON FOR BOTH THE YEARS. 9. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT ASSUME THE ENTREPRENEURSHIP RISKS OF THE HOUSING PROJECT. THE FORMAT OF ARRANGEMENTS FOR TRANSFER OF BUILT UP UNIT, AND BUSINESS MODEL OF THE ASSESSEE FO R THAT PURPOSE, IS NOT DECISIVE FACTOR FOR DETERMINING ELIGIBILITY OF DEDUCTION UNDER SECTION 80 IB (10), BUT THAT IS ALL THAT THE AUTHORITIES BELOW HAVE FOUND FAULT WITH. THE OBJECTIONS OF THE AUTHORITIES BELOW ARE THUS DEVOID OF LEGALLY SUSTAINABLE MERIT S. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN I.T.A. NO.: 211(AHD) OF 2010 ASSESSMENT YEAR: 2006 - 07 PAGE 6 OF 7 MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AUTHORITIES BELOW, IN DECLINING DEDUCTION UNDER SECTION 80I B (10) AND ON THE FACTS OF THIS CASE, IS INCORRECT. WE VACATE THE SAME AND DIRECT THE ASSESSING OFFI CER TO DELETE THE DISALLOWANCE. 8. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COO - ORDINATE BENCH. RESPECTFULLY F OLLOWING THE SAME, AND IN VIEW OF THE FACT THAT ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 6 OF 7 ENTREPRENEURIAL RISK IN THE PRESENT CASE WAS UNDISPUTEDLY BORNE BY THE ASSESSEE, WE CONFIRM THE STAND TAKEN BY THE LD CIT(A) AND GRANT OF DEDUCTION UNDER S ECTION 80IB(10) TO THE ASSESSEE, AND DECLINE TO INTER FERE IN THE MATTER. 9. IN THE RESULT, A PPEAL FILED BY THE ASSESSING OFFICER FOR A.Y. 2007 - 08 IS DISMISSED. ITA NO.259 9 /AHD/2011 FOR A.Y. 200 8 - 09 10. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEVER WE DECIDE IN ITA NO.2598/AHD/2011 I.E. REVENUE S APPEAL FOR THE A.Y. 2007 - 08 IN THE CASE OF THIS VERY ASSESSEE AND WHICH APP E AL WAS HEARD ALONG WITH THIS APPEAL, WILL FOLLOW IN THIS CASE AS WELL. 11. WHILE DEALING WITH ITA NO . 2598/AHD/2011 FOR A.Y. 2007 - 08 WE HAVE UPHELD THE RELIEF GR A NTED BY T HE LD . CIT(A) VI DE PARAGRAPH NOS.6 TO 9 ABOVE. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US, ON ADMITTEDLY MATERIALLY SIMILAR FACTS OF THE CASE, IN ASSESSEE S OWN CASE. RESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE STAND TAKEN B Y THE LD. CIT(A) AND GRANT DEDUCTION UNDER SECTION 80IB(10) TO THE ASSESSEE. THUS, THE APPEAL FILED BY THE ASSESSING OFFICER FOR A.Y. 200 8 - 09 IS ALSO DISMISSED. 1 2 . IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. (ORDER PRONOUNC ED IN THE OPEN COURT ON 21 ST AUGUST, 2015 ) SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 21ST DAY OF AUGUST, 201 5 PBN/* ITA NO S . 2598 & 2599 /AHD/ 20 11 ASSESSMENT YEAR S : 2 0 07 - 08 & 2008 - 09 PAGE 7 OF 7 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD