The ITO, Ward-2(6), Baroda V. M/s. Shreeji Corporation, Baroda

ITA 2858/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0014 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 24-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIPKUMAR MAJUMDAR
• Assessee Lawyers: SURENDRA MODIONI
• Keywords: Competent authority
• Section: 143(3); 80IB

Judgement Text

I.T.A. NO . 2858 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] I.T.A. NO. 2858 /AHD/ 20 1 3 ASSESSMENT Y EAR : 200 9 - 10 INCOME TAX OFFICER , WARD 2(6), BARODA. . . . APP ELLANT VS. SHREEJI CORPORATION, .... ... .. RESPONDENT GF - 10, ALAKNANDA COMPLEX, OPP. PETROL PUMP, MUJMAHUDA, BARODA 390 020. [P AN: A BHFS 3006 J ] APPEARANCES BY: PRADIP KUMAR MAJUMDAR, FOR THE APPELLANT SURENDRA MODIONI , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 2 4 . 11 .2016 DATE OF PRONOUNCING THE ORDER : 29 . 11 .2016 O R D E R 1 . BY WAY OF THIS APPEAL, THE ASSESSING OFFICER APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 24.09.2013, PASSED BY THE LEARNED CIT (A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10, ON THE FOLLOWING GROUND : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN ALLOWING DEDUCTION OF RS.35,54,216/ - U/S 80IB(10) O F THE INCOME TAX A CT WITHOUT APPRECIATING THAT THE LEGAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE END USER OF THE UNITS WAS THAT OF WORK CONTRACT . 2. TO ADJUDICATE ON THIS APPEAL , ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFOR E US IS ENGAGED IN THE BUSINESS AS A BUILDER AND DEVELOPER. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT FOR AN AMOUNT OF I.T.A. NO . 2858 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 2 OF 4 RS.35 , 54 , 216/ - , WHICH IS EQUIVALENT TO THE PROFIT ON SALE OF RESIDENTIAL UNIT CONSTRUCTED BY THE ASSESSEE. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE LAND ON WHICH THE PROJECT WAS BUILT WAS OWNED BY ONE SHRI SUNILK UMAR T HAKORLAL SHETH, AND THE NECESSARY APPROVAL FROM THE LOCAL AUTHORITY WAS ALSO OBTAINED IN HIS NAME. THE AS SESSING OFFICER WAS OF THE VIEW THAT SINCE THE LAND WAS NOT OWNED BY THE ASSESSEE AND SINCE THE APPROVAL OF THE COMPETENT AUTHORITY OF THE HOUSING PROJECT WAS ALSO NOT IN THE NAME OF THE ASSESSEE, THE ASSESSEE WAS NO MORE THAN A WORK CONTRACTOR AS HE IS NOT CAPABLE OF PASSING ON CLEAR TITLE OVER THE DWELLING UNIT TO THE CUSTOMER WITHOUT INVOLVING THE LANDOWNER IN THE CONTRACT. IT WAS IN THIS BACKDROP THE ASSESSING OFFICER DECLINED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT . WHILE DOING SO , HOWEVER, HE TOOK NOTE OF THE DECISION OF CO - ORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF RADHE DEVELOPER S VS. ITO (2008) 23 SOT 420 BUT STATED THAT SINCE THE SAID DECISION OF THE T RIBUNAL HAS NOT BEEN ACCEPTED BY THE INCOME TAX DEPARTMENT AND FURTHER A PPEAL IS PENDING BEFORE THE HON BLE GUJARAT HIGH COURT, ASSESSEE S RELIANCE ON THE SAID DECISION IS OF NO CONSEQUENCE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A). LEARNED CIT(A) NOTED THAT THE HON BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (2012) 341 ITR 403 (GUJ) HAS DIRECTED TO FOLLOW THE STAND TAKEN BY THIS TRIBUNAL AND HAS HELD THAT OWNERSHIP OF THE LAND IS NOT A CONDITION PRECEDENT FOR DEVELOPING THE HOUSING PROJECT. IT WAS ON THIS BASIS AND ON THE BASIS OF CERTAIN OTHER JUDICIAL PRECEDENTS , AS REFERRED IN THE L EARNED CIT(A) S ORDER, THE LEARNED CIT ( A ) REVERSED T HE ACTION OF THE A SSESSING OFFICER AND UPHELD THE ASSESSEE S CLAIM FOR DEDUCTION UNDER SECTION 80IB(10) . THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE ME. 3. I 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. . I.T.A. NO . 2858 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 3 OF 4 4. AS LEARNED CIT(A) HAS RIGHTLY NOTED , THE ISSUE IN APPEAL IS NO LONGER RES INTEGRA . I T HAS BEEN HELD BY THE HON BLE JURISDICTIONAL HIGH COURT THAT THE OWNERSHIP OF THE LAND ON WHICH HOUSING PROJECT IS DEVELOPED IS NOT A CONDITION PRECEDENT FOR GRAN T OF DEDUCTION UNDER SECTION 80 IB(10) . T HE VERY BASIS OF DISALL OWANCE MADE BY THE ASSESSING O FFICER IS THUS DEV OID OF LEGALLY SUSTAINABLE MERIT . W HILE ON THIS ISSUE , WE MAY REFER TO THE DECISION OF A CO - ORDINATE BENCH OF THIS TRIBUNAL , IN THE CASE OF SHRI UMEYA CORPORATI ON VS. ITO (ITA NO.211/AHD/2010 - ORDER DATED 7 TH JULY, 2015 ) WHEREIN THE DIVISION BENCH , SPEAKING THROUGH THE UNDERSIGNED , HAS INTER ALIA OBSERVED AS FOLLOWS : - 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: 3 2. 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 BEEN 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 I.T.A. NO . 2858 /AHD/201 3 A SSESSMENT Y EAR: 200 9 - 10 PAGE 4 OF 4 ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF 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 S UCH 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 O F THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND REWARDS OF DEVELOPING THE HOUSING PROJECT, IN SUBSTANCE, REMAIN WITH 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 DEVELO PING 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 H OUSING PROJECT. 5. IN VIEW OF THE ABOVE DISCUSSION S AND BEARING IN MIND ENTIRETY OF THE CASE, I SEE NO REASONS TO DISTURB THE FINDINGS OF LEARNED CIT(A). THE RELIEF GRANTED BY HIM MEE T S MY APPROVAL AND I CONFIRM THE SAME. 6. IN THE RESULT, APPEAL IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF NOVEMBER , 2016. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 29 TH DAY OF NOVEMBER , 2016. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD