The ACIT-CC1(3), Ahmedabad V. M/s. Shri Hari Associates, Ahmedabad

ITA 2709/AHD/2009

• Counselvise Citation: 270920514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: P M MEHTA
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2707, 2708 & 2709 / AHD/2009 (ASSESSMENT YEAR 2005-06, 2006-07 & 2007-08) ACIT, CIRCLE 1(3), AHMEDABAD VS. SHRI HARI ASSOCIATES, F/1, TRIMURTI COMPLEX, THAKKARABAPA NAGAR, BAPUNAGAR, AHMEDABAD PAN/GIR NO. : AASFS6951Q C.O.NO.271/AHD/2009 IN I.T.A.NO. 2707/AHD/2009 (ASSESSMENT YEAR 2005-06) SHRI HARI ASSOCIATES, VS. ACIT CIRCLE 13), F/1, TRIMURTI COMPLEX, AHMEDABAD THAKKARABAPA NAGAR, BAPUNAGAR, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S. K. GUPTA, CIT DR RESPONDENT BY: SHRI P M MEHTA, AR DATE OF HEARING: 07.03.2012 DATE OF PRONOUNCEMENT: 13. 04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE THREE APPEALS OF THE REVENUE WHICH ARE D IRECTED AGAINST A COMBINED ORDER OF LD. CIT(A)-I, AHMEDABAD DATED 17. 06.2009 FOR ASSESSMENT YEAR 2005-06, 2006-07 & 2007-08 AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005- 06. SINCE COMMON I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 2 ISSUE IS INVOLVED, ALL THESE APPEALS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BE EN WITHDRAWN B Y THE LD. A.R. OF THE ASSESSEE AND HENCE, THE CROSS O BJECTION OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. 3. NOW, WE TAKE UP THE THREE APPEALS OF THE REVENUE :- 4. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY LD. CIT(A) IN PARA 3 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3. THE NEXT ISSUE INVOLVED IN ALL APPEALS RELATE T O DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S.80 IB(10) OF THE IT. ACT . THE CLAIM WHICH IS DISALLOWED IS AS UNDER: ASSESSMENT YEAR DISALLOWANCE 2005-06 RS.41,20,1137- 2006-07 RS.99.67.790/- 2007-08 RS. 1,72,79,9507- THE A.O. NOTICED THAT THE APPELLANT HAD DEVELOPED A HOUSING PROJECT, BEING JEEVANDHARA CO-OPERATIVE HOUSING SOC IETY LIMITED. THE A.O. HAS STATED THAT THE MUNICIPAL AUTHORITIES HAD APPROVED THE PROJECT BY GIVING PERMISSION TO RAJESHKUMAR SAV JIBHAI VASANI BEING POWER OF ATTORNEY HOLDER OF DIFFERENT PERSONS . HE NOTICED THAT THE LAND WAS REGISTERED IN THE NAME OF THE SOC IETY AND PERMISSION FOR DEVELOPMENT WAS ALSO GIVEN IN THE NA ME OF THE SOCIETY. THE APPELLANT HAD SHOWN THE WORK IN PROGRE SS IN THE PROFIT & LOSS ACCOUNT AS ALSO DIRECT AND INDIRECT EXPENSES AS ALSO THE PROFIT IN THE PROFIT & LOSS ACCOUNT OF THE RESPECTI VE YEARS. THE AO HAS REJECTED THE CLAIM OF ASSESSEE FOR DEDUCTION U/ S. 80 IB (10) ON THE FOLLOWING GROUNDS:- (A) THE PROJECT HAS BEEN DEVELOPED ON AN AREA 15378 SQ. MTRS. THE PIECE OF LAND IS OWNED BY SOCIETY I.E. JEEVANDH ARA CO- OPERATIVE HOUSING SOCIETY LIMITED. THE LAY OUT PLAN HAS BEEN APPROVED BY AMC ON 25/06/2004 AND SUBSEQUENT DATES FOR CONSTRUCTION OF 124 UNITS OF RESIDENCES. THUS IT IS CLEAR THAT THE APPELLANT, IS NOT OWNER OF THE PROJECT. , . (B) THE CONSTRUCTION WORK IS DONE AS PER THE D EVELOPMENT/ CONSTRUCTION AGREEMENT AND HENCE THE APPELLANT IS M ERELY A CONTRACTOR FOR THE PURPOSE OF CONSTRUCTION OF THE P ROJECTS. I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 3 (C) APPELLANT'S CLAIM THAT IT HAS PAID MONEY F OR PURCHASE OF LAND AND TAKEN THE POSSESSION FOR DEVELOPMENT AND CONSTR UCTION OF PROJECT AND HENCE IT IS REAL OWNER OF PROJECT, IN V IEW OF SECTION 53A OF TRANSFER OF PROPERTY ACT, IS ALSO NOT ACCEPTABLE BECAUSE OWNERSHIP OF LAND TRANSFERS ONLY WHEN REGISTERED SA LE DEED US EXECUTED. (D) ALL THE EXPENSES ARE BEING DONE ON BEHALF OF THE CO- OPERATIVE SOCIETY AND THE SOCIETY HAS THE ULTIMATE LIABILITY TOWARDS SUCH EXPENSES. (E) AS PER THE TERMS OF THE AGREEMENT, TILL TH E COMPLETION OF THE HOUSING PROJECT, THE WORK IN PROGRESS IS TO BE COMP UTED ON THE BASIS OF WORK CONTRACT. THIS CLAUSE CLEARLY EVIDENC ES THE STATUS OF THE APPELLANT, AS BEING THAT OF A WORKS CONTRACTOR AND. NOT A DEVELOPER OF PROJECT. (F) IN THE BOOKS OF ACCOUNTS, THE APPELLANT FI RM HAS NEVER SHOWN ANY INCOME FROM SALE OF FLATS/BUNGALOWS/ROW HOUSES BUT HAS MERELY SHOWN WORK DONE WHICH HAS BEEN SUBSEQUENTLY TRANSFERRED TO THE SOCIETY. (G) THE DEDUCTION IS NOT AVAILABLE TO APPELLAN T, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPING A LAND AND DOING A LA BOUR WORK FOR CONSTRUCTION FOR OTHER ENTITY. THE DEDUCTION SHALL AVAILABLE ON IF THE UNDERTAKING IS DEVELOPING AND CONSTRUCTING THE HOUSING PROJECT. (H) THE LAND OF AAH MILLS HAS BEEN ARTIFICIAL LY DIVIDED INTO FOUR PARTS AND EACH PART IS CONSTRUCTED BY SEPARATE FIRM. IN THIS WAY, FOUR FIRMS NAMELY, SHRI HARI ASSOCIATES, SHRI NAND CORPORATION, GIRIRAJ CORPORATION AND VASUDEV DEVELO PERS HAVE CARRIED OUT THE CONSTRUCTION WORK. AS PER THE PLAN APPROVED BY THE AMC ON 25/06/2004, THE SCHEME WAS TO HAVE COMMERCIA L BUILT UP AREA OF 10977.04 SQ. MTRS. IN ADDITION, THE REMAINI NG AREA WAS TO HAVE RESIDENTIAL UNITS, OUT OF THE TOTAL AREA OF 56 336.16 SQ. MTRS., AS THE SCHEME WAS APPROVED BY THE LOCAL AUTHORITY JOIN TLY IN THE NAME OF SOCIETIES. THE COMMERCIAL AREA IN THE COMPLEX IS AN INTEGRAL PART OF THE PROJECT APPROVED AS IS EVIDENT BY THE BLUE P RINT OF THE PROJECT. THE AREA OF COMMERCIAL COMPLEX COMES TO 19 .52% OF THE TOTAL AREA OF THE PROJECT WHICH IS MORE THAN THE PR ESCRIBED LIMITS UNDER SECTION 80IB(10). MOREOVER WHEN THE PROJECT I S APPROVED AS 'HOUSING PROJECT VIS-A-VIS COMMERCIAL COMPLEX', IT CANNOT BE SAID TO BE A HOUSING PROJECT ELIGIBLE FOR DEDUCTION. REL IANCE PLACED ON THE DECISION OF HON'BLE ITAT MUMBAI 'C BENCH IN THE CASE OF LAUKIK DEVELOPERS V. DCIT 105 ITD 657 (MUM.) I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 4 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ALL THE THREE YEARS. NOW, THE REVENUE IS IN APPEAL BEFORE US. 6. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). HE FURTHER SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF RADHE DEVELOPERS AS REPORTED IN 341 ITR 403. OUR ATTENTION WAS DRAWN T O PAGE 12 PARA 3.2 OF THE ORDER OF LD. CIT(A) AND IT WAS SUBMITTED THAT T HE ISSUE IN QUESTION WAS DECIDED BY LD. CIT(A) AS PER THIS PARA OF HIS O RDER. IT WAS ALSO SUBMITTED THAT DEVELOPMENT AGREEMENT IS AVAILABLE I N THE PAPER BOOK AND ITS ENGLISH VERSION CAN BE SEEN ON PAGES 50-64 OF T HE COMPILATION FILED BY THE ASSESSEE CONTAINING 137 PAGES. IT IS ALSO SUBM ITTED THAT THE LAND IN QUESTION WAS ALSO PURCHASED BY THE ASSESSEE FIRM FR OM TWO SOCIETIES AND THE CONCERNED AGREEMENT FOR PURCHASE OF THE LAND WA S EXECUTED ON 29.12.2000 AND ENGLISH VERSION OF THIS IS ALSO AVAI LABLE ON PAGES 92-100 OF THE COMPILATION. IT IS ALSO SUBMITTED THAT THE AGREED PRICE OF THE LAND WAS RS.105 LACS OUT OF WHICH THE ASSESSEE ALREADY P AID PART CONSIDERATION OF RS.63.65 LACS AND THE POSSESSION OF THE LAND WAS GIVEN TO THE ASSESSEE BY THE ORIGINAL LAND OWNER BY VIRTUE OF DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE SAID JEEVAN DHARA COO PERATIVE HOUSING SOCIETY, THE OWNER OF THE LAND. IT IS FURTHER SUBM ITTED THAT SINCE AS PER THE PROVISIONS OF SECTION 2(47)(V) OF THE INCOME TAX AC T, 1961, AND SECTION 53 A OF TRANSFER OF PROPERTY ACT, THE ASSESSEE HAS TO BE CONSIDERED AS OWNER OF THE LAND IN QUESTION AND THEREFORE, THE A. O. WAS NOT JUSTIFIED IN DENYING THE SAID BENEFIT OF SECTION 80-IB(10) OF TH E ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 5 JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 3.2 OF H IS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 3.2 I HAVE CAREFULLY CONSIDERED THE ABOVE ASSESSME NT ORDER AND THE SUBMISSIONS ON THE ISSUE. IT IS NOTICED THAT TH E APPELLANT HAS ENTERED INTO AGREEMENT FOR DEVELOPMENT OF THE HOUSI NG PROJECT WITH JEEVANDHARA CO-OP. HSG. SOCIETY. THE APPELLANT HAS AS PER DEVELOPMENT AGREEMENT CARRIED OUT THE WORK OF DEVEL OPMENT OF THE TWO SOCIETIES. THE A.O'S ARGUMENTS ARE MAINLY BASED ON THREE GROUNDS I.E. THE LAND WAS REGISTERED IN THE NAME OF SOCIETY AND THAT THE PERMISSION FOR DEVELOPMENT WAS IN THE NAME OF S OCIETY, SECONDLY, IN THE ACCOUNTS THE SALE WAS NOT SHOWN BU T THE PROFIT WAS SHOWN AND THIRDLY, ON TOTAL AREA OF LAND OF M.H. MI LLS, THERE IS COMMERCIAL CONSTRUCTION OF 19.20 OF TOTAL AREA.. AS AGAINST THIS, THE APPELLANT HAS CLARIFIED AND PROVED THAT THE DEVELOP MENT WAS CARRIED OUT BY THEM. EVEN THE COST FOR OBTAINING PE RMISSION WAS BORNE BY THE APPELLANT. THE APPELLANT HAD ENTERED I NTO BOTH THE AGREEMENTS FOR DEVELOPMENT AS ALSO BANAKHAT FOR PUR CHASE OF LAND WITH THE TWO SOCIETIES AND AS PER THE AGREEMENT THE Y HAVE CARRIED OUT THE DEVELOPMENT WORK. THUS, APPELLANT IN PRESEN T CASE HAS ACQUIRED DOMINANT CONTROL OVER THE LAND AND AS PER BANAKHAT AGREEMENT ENTERED WITH SOCIETIES; DEVELOPER WAS BOU ND TO PAY AMOUNT FOR ACQUIRING THE LAND IRRESPECTIVE OF THE F ACT WHETHER IT NO.CIT[A]-I/CC-L(3)/450 TO 452 708-09 ASSESSMENT YE AR : 2005- 06 TO 07-08 IS ABLE TO SELL THE UNITS. POSSESSION O F THE LAND WAS ALSO GIVEN TO APPELLANT DEVELOPER AND RISKS ASSOCIATED W ITH HOUSING PROJECT WERE ON IT. THE APPELLANT IS NOT EARNING RE MUNERATION AT FIXED RATE. APPELLANT SUBMITTED THAT IT WAS FOLLOWING PERCENTAG E OF THE PROFIT/LOSS IN RESPECT OF THE PROJECT WAS SHOWN ON YEAR TO YEAR BASIS AND IT WAS NOT CORRECT TO SAY THAT THE APPELLANT HA D NOT SHOWN ANY INCOME ON SALE OF UNITS. IT IS ALSO SEEN FROM THE A GREEMENT FOR DEVELOPMENT AS WELL AS THE BANAKHAT AGREEMENT THAT THE RISK FOR DEVELOPMENT INCLUDING COST IS TO BE BORNE BY THE AP PELLANT. IT IS NOTICED THAT APPELLANT IS FOLLOWING PERCENTAGE CO MPLETION METHOD OF ACCOUNTING AND PROFIT IS SHOWN WITH REFERENCE TO WORK IN I.E PROJECT WORK CARRIED OUT DURING THE YEAR. OTHER CON DITIONS OF SECTION 80IB(10) ARE NOT DISPUTED BY THE AO AND ASS ESSEE HAS FURNISHED ALL INFORMATION THERETO. I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 6 IN THE PRESENT CASE THE ASSESSEE HAS CARRIED DEVELO PMENT ACTIVITY ONLY FOR 15,378 SQUARE METRES AND HAS NOT CARRIED O UT ANY COMMERCIAL CONSTRUCTION ON LAND WHICH IS ACQUIRED B Y ASSESSEE WITH DOMINANT CONTROL. THE APPELLANT HAS NO CONNECT ION WITH COMMERCIAL ACTIVITY CARRIED OUT BY OTHER FIRM ON AD JOINING LANDS. THE DECISION OF LAUKIK DEVELOPERS V/S DEPUTY COMMIS SIONER OF INCOME TAX RELIED UPON BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO APPELLANT'S CASE, AS IN THE SAID CASE THE FIRM HAS CARRIED OUT COMMERCIAL ACTIVITY WHEREAS IN THE PRE SENT CASE, ASSESSEE HAS NOT CARRIED OUT ANY COMMERCIAL ACTIVIT Y. HENCE, DEDUCTION UNDER SECTION 80 IB(10) CANNOT BE DENIED. ACCORDINGLY THE APPELLANT WAS ENTITLED TO DEDUCTION U/S.80 IB(10). ON CONSIDERATION OF ALL THESE ASPECTS AND THE RATIO OF THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF RADHE DEVELOPERS AND SUBSEQUENT DECISION IN THE CASE OF SHAKTI DEVELOPER S THE A.O. IS DIRECTED TO ALLOW DEDUCTION U/S. 80 IB (10) TO THE APPELLANT. 8. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT HE HAS DECIDED THIS ISSUE BY FOLLOWING THE TRIBUNAL DE CISION RENDERED IN THE CASE OF RADHE DEVELOPERS AND THE SUBSEQUENT DECISIO N OF THE TRIBUNAL IN THE CASE OF SHAKTI CORPORATION. SINCE NOW, THIS IS SUE IS COVERED BY THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT CITED BY TH E LD. A.R. OF THE ASSESSEE, INSTEAD OF REFERRING TO THESE TRIBUNAL DE CISIONS, NOW, WE CONSIDER THIS JUDGMENT OF HONBLE GUJARAT HIGH COUR T RENDERED IN THE CASE OF RADHE DEVELOPERS AS REPORTED IN 341 ITR 403 . THE ISSUE IN QUESTION WAS DECIDED BY THE HONBLE GUJARAT HIGH CO URT AS PER PARA 36 OF THIS JUDGMENT WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 36 WE HAVE NOTED AT SOME LENGTH, THE RELEVANT TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENTS BETWEEN TH E ASSESSEES AND THE LAND OWNERS IN THE CASE OF RADHE DEVELOPERS . WE ALSO NOTED THE TERMS OF THE AGREEMENT OF SALE ENTERED IN TO BETWEEN THE PARTIES. SUCH CONDITIONS WOULD IMMEDIATELY REVEAL T HAT THE OWNER OF THE LAND HAD RECEIVED PART OF SALE CONSIDERATION . IN LIEU THEREOF HE HAD GRANTED DEVELOPMENT PERMISSION TO THE ASSESS EE. HE HAD I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 7 ALSO PARTED WITH THE POSSESSION OF THE LAND. THE DE VELOPMENT OF THE LAND WAS TO BE DONE ENTIRELY BY THE ASSESSEE BY CON STRUCTING RESIDENTIAL UNITS THEREON AS PER THE PLANS APPROVED BY THE LOCAL AUTHORITY. IT WAS SPECIFIED THAT THE ASSESSEE WOULD BRING IN TECHNICAL KNOWLEDGE AND SKILL REQUIRED FOR EXECUTIO N OF SUCH PROJECT. THE ASSESSEE HAD TO PAY THE FEES TO THE AR CHITECTS AND ENGINEERS. ADDITIONALLY, THE ASSESSEE WAS ALSO AUTH ORISED TO APPOINT ANY OTHER ARCHITECT OR ENGINEER, LEGAL ADVI SER AND OTHER PROFESSIONALS. HE WOULD APPOINT SUB-CONTRACTOR OR L ABOUR CONTRACTOR FOR EXECUTION OF THE WORK. THE ASSESSEE WAS AUTHORISED TO ADMIT THE PERSONS WILLING TO JOIN THE SCHEME. TH E ASSESSEE WAS AUTHORISED TO RECEIVE THE CONTRIBUTIONS AND OTHER D EPOSITS AND ALSO RAISE DEMANDS FROM THE MEMBERS FOR DUES AND EXECUTE SUCH DEMANDS THROUGH LEGAL PROCEDURE. IN CASE, FOR SOME REASON, THE MEMBER ALREADY ADMITTED IS DELETED, THE ASSESSEE WO ULD HAVE THE FULL RIGHT TO INCLUDE NEW MEMBER IN PLACE OF OUTGOI NG MEMBER. HE HAD TO MAKE NECESSARY FINANCIAL ARRANGEMENTS FOR WH ICH PURPOSE HE COULD RAISE FUNDS FROM THE FINANCIAL INSTITUTION S, BANKS, ETC. THE LAND OWNERS AGREED TO GIVE NECESSARY SIGNATURES, AG REEMENTS, AND EVEN POWER OF ATTORNEY TO FACILITATE THE WORK OF TH E DEVELOPER. IN SHORT, THE ASSESSEE HAD UNDERTAKEN THE ENTIRE TASK OF DEVELOPMENT, CONSTRUCTION AND SALE OF THE HOUSING UNITS TO BE LO CATED ON THE LAND BELONGING TO THE ORIGINAL LAND OWNERS. IT WAS ALSO AGREED BETWEEN THE PARTIES THAT THE ASSESSEE WOULD BE ENTITLED TO USE THE FULL FSI AS PER THE EXISTING RULES AND REGULATIONS. HOWEVER, IN FUTURE, RULES BE AMENDED AND ADDITIONAL FSI BE AVAILABLE, THE ASSESS EE WOULD HAVE THE FULL RIGHT TO USE THE SAME ALSO. THE SALE PROCE EDS OF THE UNITS ALLOTTED BY THE ASSESSEE IN FAVOUR OF THE MEMBERS E NROLLED WOULD BE APPROPRIATED TOWARDS THE LAND PRICE. EVENTUALLY AFTER PAYING OFF THE LAND OWNER AND THE ERSTWHILE PROPOSED PURCHASER S, THE SURPLUS AMOUNT WOULD REMAIN WITH THE ASSESSEE. SUCH TERMS A ND CONDITIONS UNDER WHICH THE ASSESSEE UNDERTOOK THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FROM THE ORIGI NAL OWNER, LEAVES LITTLE DOUBT IN OUR MIND THAT THE ASSESSEE H AD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. THE ASS ESSEE COULD PUT THE LAND TO USE AS AGREED BETWEEN THE PARTIES. THE ASSESSEE HAD FULL AUTHORITY AND ALSO RESPONSIBILITY TO DEVELOP THE HO USING PROJECT BY NOT ONLY PUTTING UP THE CONSTRUCTION BUT BY CARRYIN G OUT VARIOUS OTHER ACTIVITIES INCLUDING ENROLLING MEMBERS, ACCEP TING MEMBERS, CARRYING OUT MODIFICATIONS ENGAGING PROFESSIONAL AG ENCIES AND SO ON. MOST SIGNIFICANTLY, THE RISK ELEMENT WAS ENTIRE LY THAT OF THE I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 8 ASSESSEE. THE LAND OWNER AGREED TO ACCEPT ONLY A FI XED PRICE FOR THE LAND IN QUESTION. THE ASSESSEE AGREED TO PAY OF F THE LAND OWNER FIRST BEFORE APPROPRIATING ANY PART OF THE SALE CON SIDERATION OF THE HOUSING UNITS FOR HIS BENEFIT. IN SHORT, THE ASSESS EE TOOK THE FULL RISK OF EXECUTING THE HOUSING PROJECT AND THEREBY MAKING PROFIT OR LOSS AS THE CASE MAY BE. THE ASSESSEE INVESTED ITS OWN F UNDS IN THE COST OF CONSTRUCTION AND ENGAGEMENT OF SEVERAL AGENCIES. THE LAND OWNER WOULD RECEIVE A FIX PREDETERMINED AMOUNT TOWA RDS THE PRICE OF LAND AND WAS THUS INSULATED AGAINST ANY RISK. BY NO STRETCH OF IMAGINATION CAN IT BE SAID THAT TH E ASSESSEE ACTED ONLY AS A WORKS CONTRACTOR. THE TERMS 'WORKS CONTRA CTOR' HAS BEEN RECEIVING JUDICIAL ATTENTION IN SEVERAL CASES IN TH E CASE OF CIT V. GLENMARK PHARMACEUTICALS LTD. [2010] 324 ITR 199 (B OM), THE BOMBAY HIGH COURT OBSERVED AS UNDER (PAGE 207) : 'CONTRACT OF WORK OR A CONTRACT OF SALE 9. FROM THE ABOVE PARA OF THE JUDGMENT OF HONBLE G UJARAT HIGH COURT, WE FIND THAT IT IS NOTED BY THE HONBLE GUJA RAT HIGH COURT THAT IN THAT CASE, THE ASSESSEE DEVELOPER WAS AUTHORIZED TO HAVE THE POSSESSION OF THE LAND FOR DEVELOPMENT OF THE HOUSING PROJECT AND THE ASSESSEE WAS ALSO AUTHORIZED TO RECEIVE THE CONTRIBUTION AND OTHER DE POSITS AND ALSO RAISE DEMANDS FROM THE MEMBERS FOR THE DUES AND EXECUTE S UCH DEMANDS THROUGH LEGAL PROCEDURES. IT IS ALSO NOTED BY HON BLE GUJARAT HIGH COURT IN THAT CASE THAT THE ASSESSEE HAD UNDERTAKEN ENTIR E RISK OF DEVELOPMENT, CONSTRUCTION AND SALE OF THE HOUSING UNITS TO BE LO CATED ON THE LAND BELONGING TO THE ORIGINAL LAND OWNER. IT IS ALSO NOTED BY THE HONBLE GUJARAT HIGH COURT THAT FROM THE TERMS & CONDITIONS OF THE DEVELOPMENT AGREEMENT UNDER WHICH THE ASSESSEE HAD TO UNDERTAKE THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FR OM THE ORIGINAL OWNER, THERE IS LITTLE DOUBT IN THEIR MINDS THAT THE ASSES SEE HAD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. IT IS ALSO NOTE D BY THE HONBLE GUJARAT HIGH COURT THAT THE ASSESSEE HAD FULL AUTHORITY AND ALSO RESPONSIBILITY TO DEVELOP THE HOUSING PROJECT BY NOT ONLY PUTTING CON STRUCTION BUT ALSO I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 9 CARRYING OUT VARIOUS OTHER ACTIVITIES INCLUDING ENR OLLING MEMBERS, ACCEPTING MEMBERSHIP, CARRYING OUT MODIFICATION, EN GAGE PROFESSIONAL AGENCY AND SO ON AND MOST SIGNIFICANTLY RISK ELEMEN T WAS ENTIRELY THAT OF THE ASSESSEE. 10. NOW, IN THE LIGHT OF THESE FACTS OF THAT CASE, WE EXAMINE THE DECISION OF LD. CIT(A) IN THE PRESENT CASE. WE FIND THAT LD. CIT(A) HAS DECIDED THE ISSUE BY OBSERVING THAT IT IS SEEN FROM THE AGREEMENT FOR DEVELOPMENT AS WELL AS BANAKHAT FOR PURCHASE OF LAN D THAT RISK FOR DEVELOPMENT INCLUDING COST IS TO BE BORNE BY THE AS SESSEE BUT HE HAS NOT GIVEN ANY BASIS REGARDING THIS FINDING. FROM THE A SSESSMENT ORDER, WE FIND THAT IT IS OBSERVED BY THE A.O. THAT FROM BOOK S OF ACCOUNT, THE ASSESSEE NEVER SHOWN ANY INCOME FROM SALE OF FLATS / BUNGALOWS / RAW HOUSES BUT HAS MERELY SHOWN WORK DONE SUBSEQUENTLY TRANSFERRED TO THE SOCIETY. THIS FINDING OF THE A.O. HAS NOT BEEN DIS LODGED BY LD. CIT(A) AND WITHOUT DOING SO AND WITHOUT DISLODGING THIS AR GUMENT OF THE A.O., IT CANNOT BE SAID THAT THE ASSESSEE HAD TOTAL AND COMP LETE CONTROL OVER THE LAND IN QUESTION. MOREOVER, THERE IS ONE MORE OBJE CTION OF THE A.O. THAT THE COMMERCIAL COMPLEX AREA IS 19.52% OF THE TOTAL AREA OF THE PROJECT WHICH IS MORE THAN THE PRESCRIBED LIMIT U/S 80-IB(1 0). FOR WORKING OUT THIS AREA OF COMMERCIAL COMPLEX, THE A.O. HAS CONSI DERED THE TOTAL AREA OF 56336.16 SQ. MTRS. AND COMMERCIAL BUILT-UP AREA OF 10977.04 SQ. MTRS. AS PER PLAN APPROVED BY AMC ON 25.06.2004. REGARDI NG THIS OBJECTION OF THE A.O., LD. CIT(A) HAS SIMPLY STATED THAT THE ASSESSEE HAS CARRIED OUT DEVELOPMENT ACTIVITY ONLY FOR 15378 SQ. MTRS. A ND HAS NOT CARRIED OUT ANY COMMERCIAL CONSTRUCTION ON THE LAND, WHICH IS A CQUIRED BY THE ASSESSEE WITH DOMINANT CONTROL. HE FURTHER OBSERV ED THAT THE ASSESSEE HAS NO CONNECTION WITH COMMERCIAL ACTIVITIES CARRIE D OUT BY OTHER FIRM AT THE ADJOINING LAND. BUT HE HAS NOT GIVEN ANY BASIS OF THESE OBSERVATIONS. I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 10 THIS IS NOT COMING OUT AS TO WHO HAD CARRIED OUT TH E CONSTRUCTION OF COMMERCIAL BUILT UP AREA APPROVED BY AMC ON 25.06.2 004 AND WHETHER THERE IS SEPARATE APPROVAL OF AMC IN RESPECT OF 153 78 SQ. MTRS., ON WHICH CONSTRUCTION HAD BEEN CARRIED OUT BY THE ASSE SSEE. IF THE APPROVAL OF AMC IS COMMON AND ONE FOR THE ENTIRE AREA OF 563 36.16 SQ. MTRS., WHICH HAS BEEN DIVIDED INTO FOUR DEVELOPERS THEN, H OW THE COMMERCIAL AREA OF THE ENTIRE PROJECT CAN BE DISREGARDED FOR W ORKING OUT THE PERCENTAGE OF COMMERCIAL BUILT UP AREA IN THE HOUSI NG PROJECT UNDERTAKEN BY THE ASSESSEE. ON THIS ASPECT ALSO, NO LIGHT HAS BEEN THROWN BY LD. CIT(A) AND HE HAS SIMPLY STATED THAT THE TRIBUNAL D ECISION RENDERED IN THE CASE OF LOKIK DEVELOPERS VS DCIT RELIED UPON BY THE A.O. IS NOT APPLICABLE IN THE PRESENT CASE ON THIS BASIS THAT I N THE PRESENT CASE, THE ASSESSEE HAS NOT CARRIED OUT ANY COMMERCIAL ACTIVIT Y BUT WITHOUT EXAMINING THE APPROVAL OF AMC IN RESPECT OF 15378 S Q. MTRS, IF ANY GRANTED, IT CANNOT BE SAID THAT OUT OF ONLY ONE HOU SING PROJECT APPROVED BY AMC, IF HOUSING PORTION IS DEVELOPED/CONSTRUCTED BY ONE PERSON AND THE COMMERCIAL PORTION IS CONSTRUCTED/DEVELOPED BY ANOTHER PERSON, THEN IN RESPECT OF THIS PERSON WHO HAS CONSTRUCTED THE H OUSING PORTION, COMMERCIAL PORTION HAS TO BE DISREGARDED FOR THE PU RPOSE OF WORKING OUT THE PERCENTAGE OF COMMERCIAL BUILT UP AREA IN THE H OUSING PROJECT. IN THE CASE OF BRAHMA ASSOCIATES VS JCIT AS REPORTED IN 11 9 ITD 255 (SB) PUNE, THIS QUESTION WAS RAISED BEFORE THE SPECIAL B ENCH OF THE TRIBUNAL THAT IF COMMERCIAL AREA IS MORE THAN THE PRESCRIBED AREAS OF COMMERCIAL SPACE IN A HOUSING PROJECT, THEN THE PROPORTIONATE DEDUCTION WOULD BE ALLOWED OR NOT AND IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL THAT PROPORTIONATE DEDUCTION IS ALLOWABLE IF THE PERCENT AGE OF COMMERCIAL USE IS NOT MORE THAN 10%. BUT IF THE PROFIT OF RESIDEN TIAL PORTION CAN BE WORKED OUT INDEPENDENTLY, THEN THE DEDUCTION COULD BE CONFINED ONLY TO I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 11 THE PROFITS OF THE HOUSING PROJECT. AFTER THIS DEC ISION OF SPECIAL BENCH OF THE TRIBUNAL, THERE IS JUDGMENT OF HONBLE BOMBAY H IGH COURT IN THE SAME CASE IN INCOME TAX APPEAL NO.1194/10 DATED 20. 02.2011 AND THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL WAS PARTL Y REVERSED. HENCE, THIS ISSUE SHOULD BE DECIDED AFTER CONSIDERING THE JUDGM ENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF BRAHMA AS SOCIATES (SUPRA) AND ALSO AFTER FINDING OUT WHETHER THERE IS DOMINAN T CONTROL OF ASSESSEE OR NOT AND WHETHER SEPARATE APPROVAL IS GRANTED BY AMC FOR THE PORTION OF THE HOUSING PROJECT UNDERTAKEN BY THIS ASSESSEE. I N VIEW OF THE ABOVE DISCUSSION, WE FEEL THAT THE ENTIRE MATTER SHOULD G O BACK TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION AND HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF L D. CIT(A) FOR A FRESH DECISION. HE SHOULD PASS NECESSARY ORDER AS PER LA W IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 11. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. OF THE ASSESSEE I S DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 2707-2709/AHD/2009 C.O.271/AHD/2009 12 1. DATE OF DICTATION 2/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.10/4 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 13/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.13/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13/4 /12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .