The ACIT,(OSD) Circle-9, Ahmedabad V. Shri Sharad Kaniyalal Shah, Ahmedabad

ITA 281/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63234 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: S N SOPARKAR
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEEN A, ACCOUNTANT MEMBER ASST. CIT(OSD), CIRCLE-9 AHMEDAD (APPELLANT) VS. SRI SHARAD KANAIYALAL SHAH, 46, PRENATHIRTH-I, B/H SOMESHWAR-II, SATELLITE RAOD, AHMEDABAD (RESPONDENT) PAN: AGSPS 7320 P REVENUE BY : SRI D.K.SINGH, SR. D.R. ASSESSEE BY : SRI S.N.SOPARKAR, A.R. DATE OF HEARING : 29-11-2012 DATE OF PRONOUNCEMENT : 14 -12-2012 / ORDER PER : T.R.MEENA, ACCOUNTANT MEMBER:- THIS IS THE REVENUES APPEAL EMANATING FROM THE ORD ER OF LD. CIT(A)- XV, AHMEDABAD 25 TH NOVEMBER, 2009. THE SOLE GROUND OF APPEAL IS ALLOWING DEDUCTION U/S 80IB(10) OF THE I.T. ACT AMO UNTING TO RS. 1,96,83,127/-. ITA NO. 281/AHD/2010 A.Y.:-2006-07 ITA NO. 281/AHD/2010 A.Y. 2006-07 PAGE NO ASST. CIT(OSD) VS. SRI SHARAD KANAIYALAL SHAH 2 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSES SEE IS ENGAGED IN CONSTRUCTION OF HOUSING PROJECT. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE HAD CARRIED OUT BUSINESS IN HIS INDIVIDUAL CAPACITY IN TWO PROPRIETARY CONCERNS (1) M/S. KALA INFRASTRUCTURE A ND (2) M/S. SHARAD K SHAH. IN KALA INFRASTRUCTURE HE HAS CARRIED OUT H OUSING PROJECT ON BEHALF OF KALASGAR-4 (VEJALPUR) CO-OP HOUSING SOCIETY LIMITED , WHEREIN HE HAS CLAIM DEDUCTION OF RS. 1,96,83,127/- UNDER SECTION 80IB (10) OF I.T. ACT. THE ASSESSEES BOOKS OF ACCOUNTS ARE AUDITED U/S 44 AB OF THE ACT AND THE AUDITORS REPORT IS ENCLOSED WITH THE RETURN OF INC OME. 3. THE ASSESSEES CASE WAS SCRUTINIZED BY THE AO AN D IT WAS OBSERVED THAT THE LAND WAS PURCHASED IN THE NAME OF KALASAGA R (VEJALPUR CO- OPERATIVE HOUSING SOCIETY LIMTIED) AND THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH THE PROJECT WAS DEVELOPED. THE O RIGINAL DEVELOPMENT PERMISSION WAS GRANTED IN THE NAME OF THE SOCIETY O N 08-12-2004 BY THE AUDA WHICH WAS REVISED ON 13-07-2005. THE SOCIETY IS A SEPARATE ENTITY AND THE ASSESSEE ACTED MERELY AS AN AGENT. THE LD. AO HAD CONSIDERED THE TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT B ETWEEN THE ASSESSEE AND THE SOCIETY. THE LD. AO HAD CONSIDERED INTEGRA L PART OF HOUSING SOCIETY IS LAND OWNERSHIP. THE BUILDING ACTIVITY CARRIED O UT BY THE APPELLANT WAS HELD AS A CONTRACTOR OR AS AN AGENT OF THE LAND OWN ER. THEREFORE, HE DISALLOWED THE DEDUCTION CLAIMED BY THE APPELLANT U /S 80IB OF THE I.T. ACT AT RS. 1,96,83,123/-. 3.1 BEING AGGRIEVED BY THE ORDER OF THE AO, THE AP PELLANT CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAD ALLOWED THE AS SESSEES CLAIM BY FOLLOWING THE CO-ORDINATE BENCH DECISION IN THE CAS E OF SHAKTI CORPORATION BARODA IN ITA NO. 1503/AHD/2008 FOR A.Y. 2005-06. THE LD. CIT(A) HAD CONSIDERED THE ASSESSEES REPLY DATED 25-11-2009 AN D VERIFIED THE TERMS AND ITA NO. 281/AHD/2010 A.Y. 2006-07 PAGE NO ASST. CIT(OSD) VS. SRI SHARAD KANAIYALAL SHAH 3 CONDITIONS OF THE DEVELOPMENT AGREEMENT DATED 24-06 -2004. SHE HAS CONSIDERED THE DATE OF COMMENCEMENT OF THE PROJECT I.E. AFTER 01-10-1989 AND COMPLETION OF PROJECTION WITHIN 4 YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT WAS APPROVED BY THE LO CAL AUTHORITY I.E. APPROVAL WAS GIVEN ON AFTER 1 ST APRIL 2004 AS DISCUSSED ABOVE THAT DEVELOPMENT PERMISSION WAS GIVEN BY AUDA ON 18-12-2 004 AND 13-07- 2005 TO THE SOCIETY AND THE PROJECT WAS COMPLETED O N 29-06-2006. THE APPELLANT HAD CLAIMED DEDUCTION U/S 80IB(10) ON THE BASIS OF COMPLETION METHOD. THE PROFIT HAD BEEN WORKED OUT ON THE BASI S OF BOOKING OF FLAT AS WELL AS THE STAGE OF COMPLETION OF FLAT. THE OTHER CONDITION LIKE PLOT SIZE SHOULD BE MINIMUM AREA OF 1 ACRE AND RESIDENTIAL UN IT MAXIMUM BUILT UP AREA 1500 SQUARE FEET WHICH HAS ALSO BEEN VERIFIED BY THE LD. CIT(A) AND SATISFIED HERSELF. SIMILARLY, BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PROJECT DOES EXCEED 5 PER CENT OF THE AGGREGATE BUILT UP AREA OR 2000 SQUARE FEET WHICHEV ER IS LESS HAD VERIFIED AS CLAIMED BY THE APPELLANT, THERE WAS NO COMMERCIAL E STABLISHMENT/SHOPS CONSTRUCTED IN THIS PROJECT. THE DOMINANT CONTROL OVER THE PROJECT WAS ACQUIRED BY THE APPELLANT. THE COST AND RISK BORE BY THE APPELLANT. THE APPELLANT PAID A SUM OF RS. 231 LACS TOWARDS COST O F THE LAND INCURRED BY THE SOCIETY AND THE APPELLANT WAS FOUND DEFECTO OWNER O F THE LAND FOR ALL PRACTICAL PURPOSES AND HAD DEVELOPED THE HOUSING PR OJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREON. THE APPELLANT-FIRM WAS NOT MERELY A CONTRACTOR OF THE LAND OWNER OF FIXED REMUNERATION. THE LAND OWNERS WHO ARE ELIGIBLE TO GET PRICE OF LAND FIXED BY THE DEVELOPMENT AGREEMENTS AND NOT TO GET ANY SHARE IN THE DEVELOPM ENT PROFIT OF THE PROJECT. FINALLY, SHE HELD THAT THE APPELLANT IS ENTITLED OF DEDUCTION U/S 80IB(10) OF THE I.T. ACT. ITA NO. 281/AHD/2010 A.Y. 2006-07 PAGE NO ASST. CIT(OSD) VS. SRI SHARAD KANAIYALAL SHAH 4 4. NOW, THE REVENUE IS BEFORE US. THE LD. D.R. VEH EMENTLY ARGUED AND RELIED UPON THE ORDER OF THE AO AND CLAIMED THAT TH E LAND WAS OWNED BY THE SOCIETY. THE PERMISSION FOR CONSTRUCTION WAS GRANT ED BY THE AUDA IN THE NAME OF THE SOCIETY. HE HAS ALSO DRAWN OUR ATTENTI ON ON PAGE 3 OF THE ASSESSMENT ORDER ON THE TERMS AND CONDITIONS OF DEV ELOPMENT AGREEMENT ON ABSOLUTE OWNERSHIP OF LAND OF THE SOCIETY. THE SOC IETY HAS DESIRED TO DEVELOP THE SAID LAND BY CONSTRUCTING RESIDENTIAL P ROJECT ON THE LAND FOR THE BENEFIT, WELFARE AND INTEREST OF THE MEMBER. THERE WAS NO DISCRETION AVAILABLE WITH THE ASSESSEE. ACCORDINGLY, THE DEDU CTION U/S 80IB(10) WOULD BE AVAILABLE FOR SOCIETY NOT THE ASSESSEE. HE FURT HER ARGUED THAT THE BUSINESS PROFITS ALSO INCLUDED THE PRICE INCREASE OF THE LAN D WHICH WAS RECEIVED THROUGH THE SALE OF THE FLAT BY THE ASSESSEE ON WHI CH NO DEDUCTION U/S 80IB(10) IS ALLOWED AS PROFIT CONTAINED ON RISE OF LAND PRICE RECEIVED THROUGH FLAT SALE WAS NOT PART OF BUILDING ACTIVITY . 4.1 HE FURTHER RELIED ON A BENCH DECISION IN THE CASE OF ACIT VS. SHIKHAR DEVELOPERS IN ITA NO. 854/AHD/2010 FOR A.Y. 207-08 WHEREIN THE PARAMETERS OF DEDUCTION U/S 80IB(10) HAS BEEN FIXED BY THE HONBLE BENCH BY FOLLOWING THE HONBLE GUJRAT HIGH COURT DECISION IN THE CASE OF RADHE DEVELOPERS AND THE MATTER HAS BEEN SET ASIDE TO THE AO. THUS, HE REQUESTED TO SET ASIDE THIS CASE TO THE AO TO VERIFY THE PARA METER DECIDED BY THE HONBLE GUJRAT HIGH COURT IN THE CASE OF RADHE DEVE LOPERS 341 ITR 403(2012). FROM THE SIDE OF THE APPELLANT LD. SR. COUNSEL SRI S.N. SOPARKAR CONTENDED THAT THE APPELLANT IS SQUARELY COVERED BY THE HONBLE GURJAT HIGH COURT DECISION IN THE CASE OF RADHE DEVELOPERS (SUP RA) FOR WHICH HE HAS FILED THE PAPER BOOK CONTAINING 408 PAGES WHICH INC LUDE COPY OF WRITTEN REPLY SUBMITTED TO THE AO, COPY OF BANK ACCOUNT, C OPY OF LEDGER ACCOUNT OF ITA NO. 281/AHD/2010 A.Y. 2006-07 PAGE NO ASST. CIT(OSD) VS. SRI SHARAD KANAIYALAL SHAH 5 VARIOUS EXPENSES, COPY OF PLAN APPROVED, COPY OF BU ILT UP AREA OF UNIT, COPY OF RECEIPT OF PAYMENT TO THE AUDA, COPY OF DEVELOPM ENT AGREEMENT (PAGE 161-168), COPY OF ALLOTMENT LETTER (PAGE 183-186), COPY OF DETAILS OF AMOUNT RECEIVED BY THE APPELLANT FROM MEMBERS OF THE SOCIE TY, COPY OF RECEIPT ISSUED TO THE MEMBER, COPY OF LEDGER ACCOUNT OF ELE CTRIC CONNECTION CHARGES, COPY OF POSSESSION LETTER ISSUED IN FAVOUR OF THE FLAT OWNER, COPY OF LEDGER ACCOUNT OF GARDEN AND MAINTENANCE EXPENSES, SALARY OF SECURITY PERSONNEL AND LIFT EXPENSES, COPY OF REGISTRATION NO. OF AUDA AS DEVELOPER, COPY OF DETAIL OF PAYMENT MADE FOR PURCHASE OF LAND WITH SO URCE (PAGE 363-376), COPY OF WRITTEN SUBMISSION MADE BEFORE THE LD. CIT( A), COPY OF REMAND REPORT OF THE AO AND REQUESTED TO CONFIRM THE ORDER OF THE LD. CIT(A). 5. HAVING HEARD BOTH THE SIDES, WE ARE OF THE CONSI DERED VIEW THAT THE ISSUE OF ADMISSIBILITY OF DEDUCTION U/S 80IB(10) I S NOW TO BE DECIDED AS PER THE OBSERVATION MADE BY THE HONBLE GUJRAT HIGH COU RT IN THE CASE OF RADHE DEVELOPERS INDIA LIMITED (SUPRA). THE HONBLE COUR T HAS GIVEN FINDING IN THAT CASE AFTER EXAMINATION OF CERTAIN FACTS TO SAT ISFY THE CONDITIONS PRESCRIBED U/S 80IB(10). ONLY AFTER GIVING A FINDI NG OF FACTS, THE HOBBLE COURT HAS ALLOWED THE DEDUCTION U/S 80IB(10). THOS E REQUIREMENTS HAVE TO BE FULFILLED BY A DEVELOPER TO STAKE A CLAIM OF DED UCTION. THE REQUISITE INFORMATION HAD PARTLY BEEN FURNISHED BY THE APPELL ANT BEFORE THE LD. CIT(A) AND FULL BEFORE US. WE HAVE EXAMINED THE RE QUISITE INFORMATION IN THE LIGHT OF THE HONBLE HIGH COURT DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) AS PER DEVELOPMENT AGREEMENT THE APPELLANT WAS GRANTED A RIGHT TO CONSTRUCT A HOUSING PROJECT BY THE SOCIETY. THE TE RMS AND CONDITIONS OF THE AGREEMENT WAS FOR DEVELOPMENT CONTRACT. THE APPELL ANT HAD TAKEN FULL RESPONSIBILITY FOR EXECUTION OF THE SAID PROJECT. THE APPELLANT HAD GIVEN FULL DOMINANCE OVER THE CONSTRUCTION OF RESIDENTIAL UNIT WHO IS ENGAGED ITA NO. 281/AHD/2010 A.Y. 2006-07 PAGE NO ASST. CIT(OSD) VS. SRI SHARAD KANAIYALAL SHAH 6 PROFESSIONALS FOR COMPLETION OF CONSTRUCTION OF HOU SING PROJECT. THE APPELLANT HAD ENROLLED THE MEMBERS AND COLLECTED TH E CHARGES FROM THE BUYERS OF THE RESIDENTIAL UNIT. THE OWNERSHIP OF T HE LAND WAS IN THE NAME OF THE SOCIETY BUT THE DOMAIN OVER THE LAND AND THE CO NTROL OVER THE PROJECT WAS WITH THE APPELLANT. THE APPELLANT HAD PAID FIXED C ONSIDERATION TO THE LAND OWNER I.E. SOCIETY IN TURN IT HAD GIVEN POSSESSION OF LAND TO THE ASSESSEE. THE ASSESSEE HAD BORE THE PROFIT AND LOSS ON HOUSIN G PROJECT. THE APPELLANT HAD ARRANGED THE FUND FROM THE PRIVATE PARTIES. TH E APPELLANT HAD FILED CERTIFICATE OF SIZE OF FLAT AS WELL AS BUILT UP ARE A OF HOUSING UNIT IN THE PAPER BOOK. THEREFORE, WE HAVE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO GET DEDUCTION U/S 80IB(10) OF THE I.T. ACT. THUS, WE C ONFIRM THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (D.K. TYAGI) (T.R. MEENA) JUDCICIAL MEMBER ACCOUNTAN T MEMBER AHMEDABAD : DATED 14/12/2012 A.K. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#