The DCIT, Circle-2(2), Baroda V. M/s. Shreeji Associets, Baroda

ITA 2736/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0985 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDHAN
• Keywords: Opportunity of being heard
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2736/AHD/2011 / ASSESSMENT YEAR : 2008-09 THE DCIT, CIRCLE 2(2), BARODA VS M/S. SHREEJI ASSOCIATES, SATYAM COMPLEX, OPP. ZENITH TINS, CHHANI ROAD, BARODA-390007 PAN : ABGFS 7994 G / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI K. MADHUSUDHAN, SR DR ASSESSEE BY : SHRI URVASHI SHODHAN, AR / DATE OF HEARING : 26/07/2016 / DATE OF PRONOUNCEMENT: 28/07/2016 / O R D E R PER R.P. TOLANI, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-II, BARODA DAT ED 01.08.2011 FOR ASSESSMENT YEAR 2008-09. 2. FOLLOWING TWO GROUNDS ARE RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 80IB(10) R.W.S. 80IB(1) OF THE INCOME-T AX ACT TO THE ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/S. RADHE DEVELOPERS IN ITA NO.2482/AHD/2006 DATED 29.06. 2007, WITHOUT APPRECIATING THAT THE APPROVAL BY THE LOCAL AUTHORI TY AS WELL AS COMPLETION CERTIFICATE WAS NOT GRANTED TO THE ASSES SEE BUT TO THE LANDOWNER AND THE RIGHTS AND THE OBLIGATIONS UNDER THE SAID APPROVAL WERE NOT TRANSFERABLE, AND THAT TRANSFER OF DWELLIN G UNITS IN FAVOIUR OF THE END-USERS WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE. ITA NO. 2736/AHD/2011 DCIT VS. SHREEJI ASSOCIATES AY : 2008-09 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 80IB(10) R.W.S. 80IB(1) OF THE INCOME-T AX ACT TO THE ON PROFIT DERIVED FROM SALE OF UNUTILIZED FSI, WITHOUT APPRECIATING THAT THIS PROFIT NOT AN ELEMENT OF PROFITS DERIVED FROM THE B USINESS ACTIVITY OF DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT RELATING TO THE SALE OF TENEMENTS. 3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE ASSESSING OFFICER AND CONTENDS THAT VARIOUS OBSERVA TIONS ARE MADE BY LD. ASSESSING OFFICER IN THE ASSESSMENT ORDER ELUCIDATI NG AS TO WHY THE ASSESSEE IS MERELY A CONTRACTOR AND NOT A DEVELOPER. THEY HA VE NOT BEEN CONSIDERED BY THE LD. CIT(A) IN A PROPER MANNER AND ENTIRE REL IEF HAS BEEN GIVEN TO THE ASSESSEE MERELY RELYING ON THE ITAT JUDGMENT IN THE CASE OF M/S. RADHE DEVELOPERS IN ITA NO.2482/AHD/2006 DATED 29.06.2007 . A REQUEST IS MADE TO CONSIDER THE OBSERVATIONS OF THE ASSESSING OFFIC ER AND REVERSE THE ORDER OF LD. CIT(A). 4. APROPOS GROUND NO.2, RELIANCE IS PLACED ON HONB LE GUJARAT HIGH COURT JUDGMENTS IN THE CASE OF CIT VS. DESAI DEVELO PERS, [2014] 52 TAXMANN.COM 331 (GUJ) AND CIT VS. MOON STAR DEVELOP ERS, [2014] 367 ITR 621 (GUJ) LAYING DOWN THAT DEDUCTION U/S 80IB(10) C ANNOT BE GRANTED ON UNUTILIZED FSI. THE RELIEF ACCORDED BY LD. CIT(A) B EING CONTRARY TO BINDING GUJARAT HIGH COURT JUDGMENT DESERVES TO BE REVERSED . 5. LD. COUNSEL FOR THE ASSESSEE, IN REPLY, CONTEND S THAT THE REVENUE GROUND IS MISPLACED INASMUCH AS LD. CIT(A) HAS NOT GIVEN OUTRIGHT RELIEF ON THE ISSUE. IT HAS BEEN RESTORED THE ISSUE TO LD. AO FOR VERIFICATION OF THE ASPECTS OF ITAT JUDGMENT IN THE CASE OF M/S. RADHE DEVELOPERS WHICH HAS BEEN UPHELD BY THE HONBLE GUJARAT HIGH COURT AND I S REPORTED IN [2012] 341 ITR 403. RELEVANT OBSERVATION OF LD. CIT(A) AR E AS UNDER: FOR THE YEAR UNDER CONSIDERATION, FOLLOWING THE AB OVE MENTIONED JUDGMENTS OF HONBLE AHMEDABAD ITAT, THE CLAIM OF TH E APPELLANT FOR ITA NO. 2736/AHD/2011 DCIT VS. SHREEJI ASSOCIATES AY : 2008-09 3 DEDUCTION U/S 80IB(10) IS ALLOWED, SUBJECT TO THE ASS ESSING OFFICER FINDING THE ASSESSEE PASSES THE TEST LAID DOWN IN T HE CASE OF M/S. SHAKTI CORPORATION AND OTHERS. THE ASSESSING OFFICER SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE LAN DOWNER(S) AND DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER(S) AND HAS DEVELOPE D THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE ASSESSING OFFICER FINDS THAT PRACTICALLY THE LAND HA S BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OV ER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, T HE ASSESSING OFFICER SHALL ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB( 10). IN CASE THE ASSESSING OFFICER FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDOWNER AND HAS GOT A FIXED CONSIDERATION FROM TH E LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE S HALL NOT BE ALLOWED DEDUCTION U/S 80IB(10). 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THERE IS MERIT IN THE CONTENTION OF LD. COUNSEL THAT LD. CIT (A) HAS NOT GIVEN OUTRIGHT RELIEF AS IT HAS BEEN RESTORED TO LD. AO FOR VERIFI CATION APPLICABILITY OF THE ASPECTS OF JUDGMENT IN THE CASE OF M/S. RADHE DEVEL OPERS. THEREFORE, RESPECTFULLY FOLLOWING THE HONBLE GUJARAT HIGH COU RT JUDGMENT IN THE CASE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. THIS GROUND OF THE REVENUE IS DISMISSED. 7. APROPOS GROUND NO.2, THE LD. COUNSEL FOR THE ASS ESSEE CONTENDS THAT THE MOON STAR DEVELOPERS (SUPRA) JUDGMENT HAS BEEN RENDERED BY HONBLE GUJARAT HIGH COURT ON 11.03.2014; WHEREAS, IN THE C ASE OF CIT VS. SHREENATH INFRASTRUCTURE, [2014] 44 TAXMANN.COM 461 (GUJ) THE SAME BENCH OF HONBLE GUJARAT HIGH COURT HAS HELD THAT MARGINAL UNDER-UTI LIZATION OF FSI (25 30%) WOULD NOT BE HIT BY DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB. THE RELEVANT OBSERVATIONS OF THE HONBLE GUJARAT HI GH COURT IN THE CASE OF SHREENATH INFRASTRUCTURE (SUPRA) ARE REPRODUCED AS UNDER:- 4. IN THE PRESENT CASE, THE FACTS ARE SOMEWHAT DI FFERENT. THE ASSESSEE, IN THE PROCESS OF DEVELOPING TWO HOUSING PROJECTS, HAD UTI LIZED 9595.64 SQ. M. OF BUILD-ABLE AREA AGAINST THE MAXIMUM PERMISSIBLE ARE A OF 13004 SQ. M AND IN ITA NO. 2736/AHD/2011 DCIT VS. SHREEJI ASSOCIATES AY : 2008-09 4 OTHER CASES, PUT UP CONSTRUCTION OF 5997.28 SQ. M. AGAINST MAXIMUM PERMISSIBLE CONSTRUCTION ON 8127.75 SQ. M. UNDER UTILIZATION, IF AT ALL WAS IN THE MARGINAL RANGE OF 25% TO 30%. AS HELD BY THI S COURT IN CASE OF MOON STAR DEVELOPERS (SUPRA) EVERY CASE OF EVEN MARGINAL UNDER UTILIZATION OF FSI WOULD NOT BE HIT BY DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 8. LD. DEPARTMENTAL REPRESENTATIVE, IN REPLY, CONTE NDS THAT THE DESAI DEVELOPERS (SUPRA) JUDGMENT HAS BEEN DELIVERED ON 1 5.07.2014 IN WHICH THE JUDGMENT OF SHREENATH INFRASTRUCTURE (SUPRA) HAS BE EN CONSIDERED AND FOLLOWED AND NO MARGINAL RELIEF HAS BEEN GIVEN. 9. LD. COUNSEL, IN REJOINDER, CONTENDS THAT IN DESA I DEVELOPERS CASE THERE WAS HEAVY UNDERUTILIZATION, THEREFORE, THIS A SPECT NEVER CAME UP FOR HONBLE COURT'S CONSIDERATION. ALTERNATIVELY IT IS PLEADED THAT THIS ISSUE MAY BE SET ASIDE AND RESTORED BACK TO AO FOR VERIFICATI ON OF USE OF FSI IN VIEW OF THE APPLICABLE JUDGMENTS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD ON THE SECOND REVENUE GROUND. IT IS IN THE F ITNESS OF THE THINGS THAT THIS ISSUE IS REEXAMINED BY LD. AO IN ACCORDANCE WI TH LAW AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD TO ASSESSEE. 11. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 28 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (R.P. TOLANI) JUDICIAL MEMBER AHMEDABAD; DATED 28/07/2016 *BIJU T. ITA NO. 2736/AHD/2011 DCIT VS. SHREEJI ASSOCIATES AY : 2008-09 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD