The ITO, Ward-2(6), Baroda V. M/s. Sahajanand Developers, Baroda

ITA 2909/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76687 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Keywords: Assessment record
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2909 /AHD/2010 (ASSESSMENT YEAR: 2005-06) THE ITO WARD 2(6), BARODA V/S M/S. SAHAJANAND DEVELOPERS, 14, MILAN PARK SOCIETY, NIZAMPURA, BARODA (APPELLANT) (RESPONDENT) PAN: ABBFS0409D APPELLANT BY : SHRI K.C. MATHEWS, SR. D.R . RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 15-04-20 14 DATE OF PRONOUNCEMENT : 24 -04-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-V, BARODA DATED 01.07.2009 FOR A.Y. 2005-06. 2. NOTICE WAS SERVED TO ASSESSEE ON 11.03.2014 THROUGH I.T.O, BARODA, WHICH IS CONFIRMED BY THE LETTER OF ITO DATED 13.03 .2014 AND WHICH IS PLACED ON RECORD. ON THE DATE OF HEARING, NONE APPE ARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS MOVED ON ITS BEHALF. WE THEREFORE PROCEED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE. ITA NO 2909/AHD/2010 . A.Y. 2005-0 6 2 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF DEVELOPING AND BUILDING HOUSING PROJECT. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2006-07. ASSESSMENT WAS THEREAFTER FRAMED UNDER SE CTION 143(3) VIDE ORDER DATED 24.12.2008 AND THE TOTAL INCOME WAS DET ERMINED AT RS. 13,80,630/-. AGGRIEVED BY THE ORDER OF A.O, ASSESS EE PREFERRED THE APPEAL BEFORE CIT(A). CIT(A) VIDE ORDER DATED 01.07 .2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY TH E ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAIS ED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ID CIT (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCT ION TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS PURCHASED THE LAND FOR A FIXED CONSIDE RATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSE PROJECT AT ITS OWN COST AND RISKS INVOLVE D, IN RESPECT OF ISSUE REGARDING DEDUCTION U/S.80IB(10) R.W.S.80IB(1) CLAIMED BY THE ASSESSEE, WITHOUT APPRECIATING THE FACT THAT THE APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COMPLETION CERTIF ICATE WAS NOT GRANTED TO THE ASSESSEE BUT TO THE LAND OWNER AND THE RIGHTS AND OBLIGATION UNDER THE SAID APPROVAL WERE NOT TRANSFERABLE, AND THAT TRANSFER OF DWELLING UNITS IN FAVOR OF THE END-USER S WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE THE ONLY DISPUTE IS WITH RESPECT TO DEDUCTION U/ S. 80IB(10). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE FIRM HAS CONSTRUCTED HOUSING PROJECT AND SHOWN TOTA L NET PROFIT OF RS. 11,35,963/- WHICH WAS CLAIMED AS EXEMPT UNDER SECTI ON 80IB(10) OF THE ACT. A.O NOTICED THAT ASSESSEE WAS NOT THE OWNER O F THE LAND ON WHICH CONSTRUCTION ACTIVITY WAS CARRIED OUT, ASSESSEE HAD NOT TAKEN APPROVAL OF THE HOUSING PROJECT FROM THE LOCAL AUTHORITIES BUT THE SAME WAS TAKEN BY OTHER PERSONS WHO ARE SEPARATE ENTITY IN THE EYES O F LAW, THE LAND OWNERS ITA NO 2909/AHD/2010 . A.Y. 2005-0 6 3 HAD SOLD THE LAND TO UNIT HOLDERS DIRECTLY AND THE ASSESSEE HAD ACTED MERELY AS A CONFIRMING PARTY, ASSESSEE HAD ACTED M ERELY AS A CONTRACTOR AS IT HAD ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDERS, ASSESSEE HAD NEVER SOLD THE HOUSE TO THE UNIT HOLDE RS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF. A.O. ALSO N OTICED THAT ASSESSEE HAD CARRIED OUT CONSTRUCTION ACTIVITY ON THE LAND W ITHOUT FULLY UTILIZING THE PERMISSIBLE FLOOR SPACE INDEX (FSI). HE ALSO NO TICED THAT THE PART OF UN-UTILIZED FSI RELATING TO THE APPROVED UNITS WERE NOT CONSTRUCTED OR DEVELOPED BUT WERE SOLD DIRECTLY AS RIGHTS ATTACHED WITH THE SALE OF PLOT OF LAND. HE ALSO NOTICED THAT ASSESSEE HAD TOTAL PLOT AREA OF 8900.32 SQ. MTRS OF LAND FOR DEVELOPMENT BUT ASSESSEE HAD CONSTRUCTE D THE HOUSING PROJECT BY DEPLOYING CONSTRUCTION OF ONLY 4067.58 SQ. MTRS OF FSI. IN VIEW OF THE AFORESAID FACTS, A.O. WAS OF THE VIEW THAT ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER 80IB(10) AND ACCORDINGLY DENIED THE DEDUCTION U/S. 80IB(10) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION B Y HOLDING AS UNDER:- 5.3. I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE, SU BMISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSESSING OFFICER. ON THE MAIN ISS UE OF DEDUCTION U/S. 80IB (10), IT IS SEEN THAT ALTHOUGH, THE ISSUE WAS DECIDED IN FAVOR OF THE APP ELLANT AND AGAINST REVENUE BY THE ORDER OF THE JURISDICTIONAL ITAT, IN THE CASE OF RADHE DEVELOPERS VS ITO WARD 3(2) BARODA NO 2482/AHD/2006 A BENCH AHMEDABAD. THE SAID DECISION HAS ALSO DECIDED THE MATTER OF PROPORTIONATE PROFIT FROM UNUTILIZED FSI ALSO IN FA VOUR OF THE APPELLANT. THUS THE ALTERNATE PLEA OF THE AO IS REJECTED. HOWEVER THE DECISION WAS PAR TLY MODIFIED BY THE SUBSEQUENT DECISION IN THE CASE OF ITO VS M/S. SHAKTI CORPORATION ITA NO. 1503/AHD/2008 DATED 07/11/2008 WHEREIN, THE HON'BLE ITAT HAS INDICATED THAT THE BENEFIT UND ER 801B(10) WOULD BE AVAILABLE IF THE DEVELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND THE BENEFIT WOULD BE DENIED IF THE ASSESSE E HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERATION AS A CONTRACTOR TO CONSTRUCT OR DEVELO P THE PROJECT ON BEHALF OF THE LAND OWNER. 5.3.1 I HAVE CALLED FOR THE ASSESSMENT RECORDS FOR A.Y. 2005-06 AND HAVE OBSERVED THAT IN THE SET ASIDE PROCEEDINGS FOR A.Y. 2005-06 ON IDENTICAL MAT TER THE AO HAS EXAMINED THE DECISION IN THE CASE OF M/S. SHAKTI CORPORATION AND HAS MENTIONED T HAT RISKS AND COSTS ARE BORNE BY THE APPELLANT. AS THE FACTS DURING THE CURRENT YEAR ARE IDENTICAL, THE APPELLANT IS ENTITLED TO DEDUCTION U/S. 801B(10). GROUND NO. 1 IS ALLOWED. ITA NO 2909/AHD/2010 . A.Y. 2005-0 6 4 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US . 7. BEFORE US THE LD. D.R. SUBMITTED THAT IN THE PRESEN T CASE, THE A.O. APART FROM DENYING THE DEDUCTION FOR THE REASON THAT ASSE SSEE WAS NOT THE OWNER OF LAND HAD ALSO DENIED THE DEDUCTION TO ASSE SSEE AS THE ASSESSEE HAD NOT FULLY UTILIZED THE FSI. HE FURTHER SUBMITT ED THAT IN A RECENT DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F MOON DEVELOPERS (TAX APPEAL NO. 549 OF 2008 AND ORS.) ORDER DATED 5 & 11/3/2014, THE HONBLE HIGH COURT HAS HELD THAT WHAT IS AVAILABLE FOR DEDUCTION U/S 80IB(10) OF THE ACT IS THE PROFIT OF AN UNDERTAKING DERIVED FROM DEVELOPING AND BUILDING A HOUSING PROJECT. MERE SAL E OF OPEN LAND OR UNUSED FSI AS PART OF HOUSING PROJECT WHERE UTILIZA TION OF THE FSI IS WAY SHORT OF PERMISSIBLE LIMITS CANNOT BE SAID TO HAVE BEEN DERIVED FROM HOUSING PROJECT. HE FURTHER SUBMITTED THAT CIT(A), WHILE DECIDING THE ISSUE HAS GIVEN NO FINDING WITH RESPECT TO SALE OF FSI. HE THEREFORE SUBMITTED IN VIEW OF THE DECISION IN THE CASE OF MO ON STAR DEVELOPERS (SUPRA), THE ISSUE NEEDS TO RE-EXAMINED AT THE END OF CIT(A) AND THEREFORE SUBMITTED THAT THE MATTER MAY BE REMANDED BACK TO CIT(A). 8. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE A.O WHILE DENYING THE DEDUCTION TO THE ASS ESSEE U/S 80IB(10) HAD APART FROM THE FACT THAT ASSESSEE IS NOT THE OW NER OF LAND BUT HAD ACTED AS A CONTRACTOR HAD ALSO NOTED THAT ASSESSEE HAD NOT FULLY UTILIZED THE FSI AVAILABLE TO IT FOR THE CONSTRUCTION OF PRO JECT AND HAD UTILIZED ONLY 4068.58 SQ. MT. OUT OF THE TOTAL AREA OF 8900.32 SQ . MT. OF LAND. WE FURTHER FIND THAT CIT(A) WHILE ADJUDICATING THE ISS UE HAS NOT DEALT WITH ITA NO 2909/AHD/2010 . A.Y. 2005-0 6 5 THE ASPECT OF FSI. WE ALSO FIND THAT IN A RECENT D ECISION IN THE CASE OF MOON STAR DEVELOPERS (SUPRA) THE HONBLE GUJARAT HI GH COURT HAS NOTED AS UNDER:- 31. IT IS TRUE THAT SECTION 80IB(10) OF THE ACT DOE S NOT PROVIDE THAT FOR DEDUCTION, THE UNDERTAKING M UST UTILIZE 100% OF THE FSI AVAILABLE. THE QUESTION HOW EVER IS, CAN AN UNDERTAKING UTILIZE ONLY A SMALL PORTION OF THE AVAILABLE AREA FOR CONSTRUCTION, SEL L THE PROPERTY LEAVING AMPLE SCOPE FOR THE PURCHASE R TO CARRY ON FURTHER CONSTRUCTION ON HIS OWN AND CLA IM FULL DEDUCTION UNDER SECTION 80IB(10) OF THE ACT ON THE PROFIT EARNED ON SALE OF THE PROPERTY? IF TH IS CONCEPT IS ACCEPTED, IN A GIVEN CASE, AN ASSESSE E MAY PUT UP CONSTRUCTION OF ONLY 100 SQ. FT. ON THE ENTIRE AREA OF ONE ACRE OF PLOT AND SELL THE SAME T O A SINGLE PURCHASER AND CLAIM FULL DEDUCTION ON THE PR OFIT ARISING OUT OF SUCH SALE UNDER SECTION 80IB(10 ) OF THE ACT. SURELY, THIS CANNOT BE STATED TO BE DEV ELOPMENT OF A HOUSING PROJECT QUALIFYING FOR DEDUCT ION UNDER SECTION 80IB(10) OF THE ACT. THIS IS NOT TO S UGGEST THAT FOR CLAIMING DEDUCTION UNDER SECTION 80 IB (10) OF THE ACT, INVARIABLY IN ALL CASES, THE ASSES SEE MUST UTILIZE THE FULL FSI AND ANY SHORTAGE IN S UCH UTILIZATION WOULD INVITE WRATH OF THE CLAIM UNDER S ECTION 80IB(10), BEING REJECTED. THE QUESTION IS WHERE DOES ONE DRAW THE LINE. IN OUR OPINION, THE I SSUE HAS TO BE SEEN FROM CASE TO CASE BASIS. MARGINAL UNDER-UTILIZATION OF FSI CERTAINLY CANNOT BE A GROUND FOR REJECTING THE CLAIM UNDER SECTION 80IB(10) OF THE ACT. EVEN IF THERE HAS BEEN CONSIDE RABLE UNDER-UTILIZATION, IF THE ASSESSEE CAN POINT OUT ANY SPECIAL GROUNDS WHY THE FSI COULD NOT BE FULLY UTILIZED, SUCH AS, HEIGHT RESTRICTION BECAUSE OF SPECIAL ZONE, PASSING OF HIGH TENSION ELECTRIC WIRE S OVERHEAD, OR ANY SUCH SIMILAR GROUNDS TO JUSTIFY UNDER UTILIZATION, THE CASE MAY STAND ON A DIFFEREN T FOOTING. HOWEVER, IN CASES WHERE THE UTILIZATION OF FSI IS WAY SHORT OF THE PERMISSIBLE AREA OF CONSTRU CTION, LOOKING TO THE SCHEME OF SECTION 80IB(10) OF THE ACT AND THE PURPOSE OF GRANTING DEDUCTION ON TH E INCOME FROM DEVELOPMENT OF HOUSING PROJECTS ENVISAGED THEREUNDER, BIFURCATION OF SUCH PROFITS A RISING OUT OF SUCH ACTIVITY AND THAT ARISING OUT OF THE NET SELL OF FSI MUST BE RESORTED TO. IN THE PRESENT CASE, NONE OF THE ASSESSEES HAVE MADE ANY SPECIAL GROUND FOR NON-UTILIZATION OF THE FSI. 32. THE CONTENTION OF THE COUNSEL FOR THE ASSESSEE THAT AS LONG AS THERE HAS BEEN 100% UTILIZATION OF THE MAXIMUM PERMISSIBLE AREA ON THE GROUND FLOOR, DEDUC TION UNDER SECTION 80IB(10) OF THE ACT CANNOT BE DECLINED, CANNOT BE ACCEPTED. AS NOTED EARLIER, IN CASE OF M/S. MOON STAR DEVELOPERS AND MANY OTHER ASSESSES, SUCH FULL UTILIZATION OF THE GROUND FLOOR AREA AVAILABLE FOR CONSTRUCTION RESULTED INTO BARE LY 20% TO 25% OF THE FSI BEING USED, REMAINING MORE TH AN 75% BEING LEFT UNUSED. 33. WHAT IS AVAILABLE FOR DEDUCTION UNDER SECTION 8 0IB(10) OF THE ACT IS THE PROFIT OF AN UNDERTAKING DERIVED FROM DEVELOPING AND BUILDING A HOUSING PROJ ECT. MERE SALE OF OPEN LAND OR UNUSED FSI AS PART OF THE HOUSING PROJECT WHERE UTILIZATION OF THE FSI IS WAY SHORT OF PERMISSIBLE LIMITS CANNOT BE SAID TO HAVE BEEN DERIVED FROM SUCH HOUSING PROJECT. 9. IN THE PRESENT CASE, AS NOTED FROM THE ORDER OF CIT (A), THERE IS NO FACTUAL FINDING BY CIT(A) WITH RESPECT TO THE ASSESSEES EL IGIBILITY OF DEDUCTION U/S 80IB(10) WITH RESPECT TO UTILIZATION OF FSI. WE THEREFORE ARE OF THE VIEW THAT THE AFORESAID FACTUAL ISSUE NEEDS RE-EXAM INATION IN THE LIGHT OF THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF MOON STAR DEVELOPERS (SUPRA). WE THEREFORE REMIT THE MAT TER TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF T HE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT. NEEDLESS TO STATE THAT CIT(A) SHALL GRANT ITA NO 2909/AHD/2010 . A.Y. 2005-0 6 6 ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES . WE ALSO DIRECT THE ASSESSEE TO FURNISH PROMPTLY ALL THE REQUIRED DETAI LS FOR DECIDING THE ISSUE. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 24 - 04- 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD