The ACIT, Circle-4, Baroda V. M/s. Narayan Realty Limited, Baroda

ITA 2949/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8576 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K K PARIKH
• Section: 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2949/AHD/2014 ( / ASSESSMENT YEAR : 2011-12) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4, BARODA / VS. M/S. NARAYAN REALTY LIMITED. A-4, AMARKUNJ SOCIETY -2 B/H, SPANDAN APPT. URMI VACCINE ROAD BARODA. ./ ./ PAN/GIR NO. : AACCN 7562 N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MUDIT NAGPAL, SR.D.R. / RESPONDENT BY : SHRI K. K. PARIKH, A.R. / DATE OF HEARING 25/07/2017 !'# / DATE OF PRONOUNCEMENT 05/09/2017 $% / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-III, BARODA, DA TED 20/08/2014, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEA R (AY) 2011-12, ON THE FOLLOWING GROUNDS: WHETHER THE LD. CIT(A) WAS CORRECT IN FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW IN ALLOWING THE DEDUCTION U/S.80IB( 10) OF THE ACT, TO THE ASSESSEE, WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE HAS ENTERED INTO SEPARATE AGREEMENTS WITH INDIVIDUAL BUYERS FOR CONSTRUCTION WORK AND THUS CARRIED OUT CONSTRUCTION OF RESIDENTIAL HO USES AS A CONTRACTOR, RENDERING IT INELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 2 - 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN CONSTRUCTION AND DEVELOPMENT OF HOUSING PROJECT AND PURCHASE AND SALE OF LAND AND SHOWN TOTAL NET PROFI T (BEFORE TAX) AT RS. 5,39,32,763/-. THE PROFIT OF BUSINESS HAS BEEN CLAI MED AS DEDUCTION AT 100% FROM THE TOTAL INCOME OF THE ASSESSEE COMPANY U/S.80IB(10) OF THE ACT FOR RS. 60,25,639/- ON THE SCHEME OF NARAYAN GA RDENS, BARODA. 2.2 TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE HAS FIL ED COPY OF LAYOUT PLAN, THE AUDIT 'REPORT IN FORM 10CCB ETC. FOR THE HOUSING PROJECT. HOWEVER, ON PERUSAL OF SUPPORTING DOCUMENTS FILED I N FAVOUR OF THE CLAIM OF DEDUCTION U/S.80IB(10), IT HAS BEEN OBSERVED THA T PERMISSION FOR DEVELOPMENT / RAJA CHITTHI ISSUED BY THE LOCAL AUTHORITY, VADODARA MAHANAGAR PALIKA, SHOWS NAME OF THE APPLICANTS IN W HOSE NAME THE PROJECT IS APPROVED AS RATILAL BHIKHABHAI AND OTHER SIX I.E. TOTAL SEVEN SUCCESSORS OF CHANDUBHAI CHHOTABHAI. THIS DOCUMENT CATEGORICALLY STATES THAT PERMISSION FOR CONSTRUCTION IS GRANTED AS PER THE APPROVED PLAN ENCLOSED WITH IT AND THE PERMISSION IS SUBJECT TO V ARIOUS RULES AND BYE LAWS LAID DOWN BY THE GUJARAT TOWN PLANNING AND URB AN DEVELOPMENT RULES, VADODARA URBAN DEVELOPMENT AUTHORITY, GENERA L DEVELOPMENT CONTROL REGULATION ETC. 2.3 AS PERUSED FROM THE DOCUMENTS FURNISHED, IT IS NOTICED THAT THE PERMISSION FOR DEVELOPMENT / RAJA CHITTHI ISSUED BY THE LOCAL AUTHORITY IS NOT IN THE NAME OF THE ASSESSEE. MOREOVER, THE LAND ON WHICH THE HOUSING ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 3 - PROJECT CONSTRUCTED IS ALSO NOT OWNED BY THE ASSESS EE. AS PER SECTION 801B(10) OF THE ACT, THE BASIC REQUIREMENT FOR CLAI MING DEDUCTION IS APPROVAL OF HOUSING PROJECT BY LOCAL AUTHORITY IN T HE NAME OF AN UNDERTAKING DEVELOPING AND BUILDING PROJECTS. IT IS ALSO REQUIRED THAT THE AREA OF LAND ON WHICH THE HOUSING PROJECT IS CONSTR UCTED BE OWNED BY THE ASSESSEE. 2.4 ACCORDINGLY, ONE OF THE LAID DOWN IN THE PROVIS IONS OF SECTION 801B(10) OF THE ACT, RELATING TO THE APPROVAL OF TH E SAID PROJECT HAD NOT BEEN COMPLIED WITH BY THE ASSESSEE IN AS MUCH AS IT HAD NOT TAKEN THE APPROVAL FROM LOCAL AUTHORITIES FOR THE DEVELOPMENT AND CONSTRUCTION OF THE SAID PROJECT. HENCE, THE ASSESSEE COULD NOT BE REGARDED AS THE BUILDER AND DEVELOPER WITHIN THE MEANING OF THE PROVISIONS OF SECTION 80IB(10) OF THE ACT AND THEREFORE DID NOT BECOME ELIGIBLE FO R DEDUCTION U/S.80IB (10) OF THE ACT, AS CLAIMED BY IT. 2.5 THEREAFTER, A SHOW CAUSE NOTICE WAS SERVED TO T HE ASSESSEE THEN ASSESSEE VIDE ITS LETTER DATED 30/12/2013 SUBMITTED AS UNDER: 01. JUSTIFICATION FOR ME CLAIM UNDER SECTION 80IB(1 0): WE WOULD LIKE TO STATE THAT: THE ASSESSEE IS ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER AT BARODA AND THE ISSUES RAISED BY YOUR G OOD SELVES HAVE BEEN ARISEN MAINLY IN BARODA ONLY, LOOKING TO THE S IMILAR MODUS OPERANDY APPLIED BY MOST OF THE ASSESSES ENGAGED I N THE SIMILAR BUSINESS IN BARODA. THE INCOME TAX APPELLANT TRIBUN AL, AHMEDABAD BENCHES-A, HAS DECIDED ALL THE ISSUES RAISED IN THE CASE OF YO UR ASSESSEE IN THE CASE OF M/S RADHE DEVELOPERS AND OT HERS - ITA NO. 2482/AHD/2006, A.Y.2003-04 ALONG WITH OTHER 44 CASES VIDE THEIR ORDER DATED 29-06-2007. SINCE THE FACTS OF YOUR ASSESSEE ARE IDENTICAL TO THAT OF OTHERS AS SPECIFIED IN THE SAID ITAT ORDER, WE R EQUEST YOUR GOOD ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 4 - SELVES TO DECIDE THE CASE ON THE MERITS OF THE CASE AS DECIDE D IN THE CASES REFERRED HEREINABOVE AND ALLOW THE DEDUCTION U/S. 80 IB (10) OF THE INCOME TAX ACT, 1961 AS CLAIMED BY YOUR APPELLA NT AND DELETE THE ADDITION MADE BY THE LAO. WE WOULD ALSO LIKE TO SUBMIT HEREWITH THAT THE LAO HAS DISALLOWED OUR CLAIM IN THE EARLIER ASSESSMENT YEAR S I.E. A.Y.2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 ALSO, FOR WHI CH WE PREFERRED AN APPEAL WITH CIT(A) BARODA, AND THE SAME HAS BEEN ALLOWED IN OUR FAVOUR BY THE CIT(A), THEN THE DEPARTMENT PREFERRED THE APPEAL WITH ITAT, AHMEDABAD, WHICH HAS ALSO BEEN DECIDED IN FAV OUR OF YOUR ASSESSEE, WE THEREFORE REQUEST YOUR GOOD SELVES TO ALLOW THE CLAIM U/S.80IB(10). WITHOUT PREJUDICE TO ABOVE WE WOULD ALSO LIKE TO ST ATE THAT: THE AMENDED PROVISIONS OF SECTION 80IB(10) OF THE INCOME TAX ACT, 1961 PROVIDE FOR COMPLETE FAX EXEMPTION IN RESPECT OF INCOME DERIVED BY AN UNDERTAKING ENGAGED IN DEVELOPING AND CONSTRUCTION OF RESIDENTIAL HOUSING PROJECTS WITHIN A DEMARCATED AREA. FOR READY REFERENCE THE EXACT EXTRACT OF THE MID SECTION 8018(10) AS AMENDED UP TO DATE BY THE FINANCE ACT 2003, IS AS FOLLOWS: SECTION SO IB (10) THE AMOUNT OF PROFIT IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31 ST DAY OF MARCH, 2006 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOP MENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998. B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY FIVE KILOMETERS FROM THE MUNICIPAL LIMIT OF THESE CITIES AND ONE THOUSAND AN D FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; AND THUS, THE SALIENT FEATURES OF THE SCHEME TO ENJOY T AX-FREE INCOME IN RESPECT OF RESIDENTIAL HOUSING PROJECT ARE AS UNDER: ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 5 - D) THE HOUSING PROJECT SHOULD BE APPROVED LATEST BEFOR E 31.03.2006 BY A LOCAL AUTHORITY, E) THE COMMENCEMENT OF DEVELOPMENT AND CONSTRUCTION SH OULD START ON OR AFTER 01.10.1998. F) THE PROJECT OF RESIDENTIAL HOUSING SHOULD BE ON A M INIMUM AREA OF ONE ACRE LAND. G) EACH OF THE RESIDENTIAL UNITS MUST NET HAVE A BUILT -UP AREA IN EXCESS OF 1000 SQ.FT. FOR DELHI & MUMBAI OR IN ITS NEIGHBO RHOOD OF 25 KILOMETERS. FOR OTHER TOWNS AND VILLAGES THE MAXIMU M BUILT-UP AREA IS OF 1500 SQ. FEET. THUS, FROM THE ABOVE DISCUSSION WE COME TO THE CONCLUSION THAT TO ENJOY THE TAX FREE INCOME FROM THE HOUSING PROJE CTS THE MAST IMPORTANT CONDITION IS THE FORMAL APPROVAL OF THE B UILDING PLANS MUST BE DONE FROM THE LOCAL AUTHORITY LATEST BEFORE 31.03.2006. ANOTHER IMPORTANT CONDITION IS THAT THE SIZE OF THE HOUSING PROJECT HAS TO BE ON A MINIMUM AREA OF ONE ACRE BUT THERE IS NO RESTRICTION ON THE UPPER LIMIT FOR THE SIZE OF THE PLOT. SIMILA RLY, THERE IS A RESTRICTION ON THE MAXIMUM BUILT-UP AREA OF A RESID ENTIAL UNIT BUT THERE IS NO RESTRICTION ON THE MINIMUM AREA OF EACH RESIDENTIAL UNIT. FROM THE ABOVE DISCUSSION WE COME TO THE CONCLUSION, AS A BUSINESS-ENTITY-ASSESSEE TO ENJOY SHARE OF TAX FREE INCOME FROM RESIDENTIAL HOUSING, OUR EFFORTS HAVE BEEN TO IDENTIFY THE LAND & PROCEED 1A GET THE PLAN APPROVED. NOW FROM ALL THE ABOVE DISCUSSIONS & IN VIEW OF THE SALIENT FEATURES OF THE SCHEME TO ENJOY TAX FREE INCOME IN RESPECT OF RESIDENTIAL HOUSING PROJECT, WE NOW WRITE TO SUBMIT ON YOUR REASONS - 'THAT SINCE THE LAND OF THE SCHEME DO NOT PER TAINS TO US, SINCE THE OWNERSHIP OF LAND OF THE SCHEME ......... ... LIES IN THE HANDS OF PERSONS OTHER THAN OUR FIRM, BESIDES THE PERMISS ION OF THE SCHEME ......... ISSUED BY THE LOCAL AUTHORITY IS ALSO TO THE PERSONAL OTHER THAN OUR FIRM & IT IS THEREFORE PROPOSED TO DISALLOW THE CLAIM U/S.80IB(10) OF THE ACT,' AS UNDER: NO WHERE EITHER WITHIN MAIN PROVISIONS OF SECTION 8 0IB(10) NOR WITHIN ANY EXPLANATIONS (IF ANY) GIVEN IN FOLLOW UP WITH MAIN PROVISIONS OF SECTION 80IB(10) IF IS MENTIONED THAT THE OWNERSHIP OF THE LAND SHOULD BE OR OUGHT TO BE IN THE NAME OF TH E UNDERTAKING OR THAT THE OWNERSHIP OF THE LAND OF THE SCHEME .. S HOULD LIE IN THE ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 6 - HANDS OF THE UNDERTAKING ENGAGED IN THE DEVELOPMENT & CONSTRUCTION OF THE HOUSING PROJECT. NO WHERE EITHER WITHIN MAIN PROVISIONS OF SECTION 8 0IB(10) NOR WITHIN ANY EXPLANATIONS (IF ANY) GIVEN IN FOLLOW UP WITH MAIN PROVISIONS OF SECTION 80IB(10) IF IS MENTIONED THAT THE FORMAL APPROVAL OF THE BUILDING PLAN MUST BE DONE FROM THE LOCAL AUTHORITY MUST BE IN THE NAME OF THE UNDERTAKING OR MUST BE O R OUGHT TO BE ISSUED BY THE LOCAL AUTHORITY IN THE NAME OF THE UN DERTAKING ENGAGED IN THE DEVELOPMENT & CONSTRUCTION OF THE HOUSING PR OJECT. 3. FROM THE ABOVE PARA 01 & 02 IMMEDIATE HERE IN AB OVE WE WRITE TO SUBMIT THAT IN ORDER TO ENJOY THE TAX FREE INCOME WITHIN THE PROVISION OF SECTION 80IB(10) THE VERY IMPORTANT CO NDITION IS THAT THE HOUSING PROJECT IS REQUIRED TO BE ON A MINIMUM AREA OF ONE ACRE LANE IRRESPECTIVE OF THE FACT WHO OWNS THE SAID LAN D. IF IS THEREFORE SUBMITTED THAT IN ORDER TO ENJOY THE TAX FREE INCOM E WITHIN THE PROVISION OF SECTION 80IB(10) THE UNDERTAKING ENGAG ED IN THE DEVELOPMENT & CONSTRUCTION OF THE HOUSING PROJECT S HOULD BE IN POSSESSION OF LAND HAVING MINIMUM AREA OF ONE ACRE FOR SUCH PURPOSE WITHOUT HAVING ANY OWNERSHIP RIGHTS OF SUCH LAND BUT WITH DEVELOPMENT RIGHTS FOR THE HOUSING PROJECT TO BE BU ILT & CONSTRUCT ON SUCH LAND FROM THE PERSON OR PERSONS WHO OWNS OR OW N SUCH LAND. 4. FROM THE ABOVE PARA 01 & 02 IMMEDIATE HERE IN AB OVE WE WRITE TO SUBMIT THAT IN ORDER TO ENJOY THE TAX FREE INCOM E WITHIN THE PROVISION OF SECTION 8016(10) THE SECOND VERY IMPOR TANT CONDITION IS THAT THE FORMAL APPROVAL OF THE BUILDING PLAN MUST BE DONE FROM THE LOCAL AUTHORITY & IT IS THEREFORE STATED THAT THE I MPORTANCE IS OF FORMAL APPROVAL OF THE BUILDING PLAN FROM THE LOCAL AUTHORITY & THAT IMPORTANCE IS NOT OF THE FACT THAT THE FORMAL APPRO VAL OF THE BUILDING PLANS IS DONE IN THE NAME OF OR ISSUED IN THE NAME OF PERSON OR PERSONS OWNING THE LAND & THAT THE FORMAL APPROVAL OF THE BUILDING PLAN IS NOT ISSUED IN THE NAME OF THE UNDERTAKING E NGAGED IN DEVELOPMENT & CONSTRUCTION OF THE HOUSING PROJECT. WE HAVE TO STATE THAT THE LOCAL AUTHORITY USE TO ISSUE THE FORMAL AP PROVAL OF THE BUILDING IN THE NAME OF THE LAND OWNING PERSON OR P ERSONS & SINCE AS PER THE RULES & REGULATIONS OF THE LOCAL AUTHORITY, THE FORMAL APPROVAL OF THE BUILDING REQUIRED TO BE ISSUED IN T HE NAME OF THE LAND OWNING PERSON & PERSONS IRRESPECTIVE, OF THE F ACT WHO IS GOING TO DEVELOP & CONSTRUCT SUCH BUILDING OF THE HOUSING PROJECT. THUS, ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 7 - THE VERY IMPORTANT CONDITION IS ONE THAT FORMAL APP ROVAL OF THE BUILDING PLAN IS DONE BY THE LOCAL AUTHORITY & NOT ONE THAT IT IS NOT ISSUED IN THE NAME OF THE UNDERTAKING ENGAGED IN TH E DEVELOPMENT & CONSTRUCTION OF THE HOUSING PROJECT BUT IN THE NAME OF THE PERSON OR PERSONS OWNING THE LANE OF SUCH HOUSING PROJECT. UNDER OUR FORGOING CORE SUBMISSION WE FARTHER NOW S UBMIT THAT: (A) WE ARE ENGAGED IN THE DEVELOPMENT, BUILDING & CONST RUCTION OF HOUSING PROJECT NAMELY NARAYAN GARDEN ON LAND OWN ED BY VARIOUS FARMERS WHOSE POWER OF ATTORNEY OBTAINED ON PAYMENT OF CONSIDERATION FOR LAND, BY THE PARTNERSHIP FIRM M/S . NARAYAN REALTY (FORMERLY NARAYAN LAND & ESTATE CO.), IN THE NAME OF ONE OF THE PARTNERS SHRI JAYANTIBHAI D. PANCHAL AND /OR SHRI PRANAV J. PANCHAL/OR SHRI KARTIK J. PANCHAL & AT TH E SAME TIME OUR FIRM IS ENGAGED AS BUILDERS & DEVELOPERS OF THI S HOUSING SCHEMES NARAYAN GARDEN UNDER MEMORANDUM OF ARRANGEMENTS IN REGARD TO THE DEVELOPMENT & CONSTRU CTION RIGHTS OF THE SAID SCHEME. SINCE ALL THE BASIC TERM S & CONDITIONS AS REQUIRED TO BE COMPLIED WITHIN THE PROVISIONS OF SECTION 80IB(10) OF THE IT ACT, 1961 HAVE BEEN FULLY COMPLI ED WITH WITHOUT ANY VIOLATION INCLUDING THAT OF HAVING FURN ISHED AUDIT REPORT IN PRESCRIBE FORM WITH RETURN OF THE ACCOUNT ANT I.E. CHARTERED ACCOUNTANT WHO WITHIN HIS SUCH REPORT EXP RESSED HIS OPINION THAT THE UNDERTAKING SATISFIES THE CONDITIO NS STIPULATED IN SECTION 80IB(10) AND THE AMOUNT OF DEDUCTION CLAIM AS PER THE PROVISION OF INCOME TAX ACT AND MEETS OUT THE REQUI RED CONDITION AFTER AUDITED THE BOOKS OF ACCOUNT OF THE UNDERTAKING RELATING TO THE SAID HOUSING PROJECT. IN VIEW OF SU CH FULL & COMPLETE STATUTORY COMPLIANCE IN THE IMPLEMENTATION OF THE HOUSING PROJECTS 'NARAYAN GARDEN' WE WRITE TO SUBMI T THAT OUR UNDERTAKING IS FULLY ENTITLED TO THE CLAIM OF DEDUC TION UNDER SECTION 80IB(10) IN RESPECT OF THIS SCHEME, SINCE W E HAVE RIGHTLY CLAIMED THE DEDUCTION (IF ANY) IN RESPECT OF OUR HO USING PROJECTS 'NARAYAN GARDEN AFTER HAVING SATISFIED ALL THE CONDITIONS STIPULATED IN SECTION 80IB(10) AND THE AMOUNT OF DE DUCTION CLAIM AS PER THE PROVISIONS OF INCOME TAX ACT AND MEETS O UT THE REQUIRED CONDITIONS AFTER HAVING AUDITED THE BOOKS OF ACCOUNT OF THE UNDERTAKING RELATING TO THE SAID HOUSING PROJEC T. IN VIEW OF SUCH FULL & COMPLETE STATUTORY COMPLIANCE IN THE IM PLEMENTATION OF THE HOUSING PROJECT NARAYAN GARDEN WE WRITE TO SUBMIT THAT OUR UNDERTAKING IS FULLY ENTITLED TO THE CLAIM OF DEDUCTION (IF ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 8 - ANY) IN RESPECT OF OUR HOUSING PROJECTS NARAYAN GA RDEN AFTER HAVING SATISFIED ALL THE CONDITIONS STIPULATED IN S ECTION 80IB(10) AND MEETS THE REQUIRED CONDITION OF THE SAID SECTIO N. 2.5 THE ASSESSEE HAS SUBMITTED THAT IT HAD DERIVED INCOME FROM CONSTRUCTION / DEVELOPMENT ACTIVITY OF HOUSING PROJ ECT, THEREFORE, ITS INCOME IS ELIGIBLE FOR 100% DEDUCTION U/S.80IB(10) OF THE I.T. ACT AS IT HAD SATISFIED ALL THE CONDITION LAID DOWN UNDER THE ACT. IT HAS ALSO CONTENDED THAT, IN THE ACT IT IS NO WHERE PROVIDED THAT THE PERSON SHOULD BE OWNER OF THE LAND ON WHICH THE HOUSING PR OJECT. THE HOUSING PROJECT WAS SATISFYING THE CONDITIONS OF AR EA AND WAS DULY APPROVED BY THE LOCAL AUTHORITY. IN RESPECT OF APPR OVAL OF THE LOCAL AUTHORITY IN THE NAME OF ORIGINAL LAND OWNER IT WAS SUBMITTED THAT THE HOUSING PROJECT UNDER CONSIDERATION WAS DULY AP PROVED BY THE LOCAL AUTHORITY AS PRESCRIBED PROVISION OF SECTION 80IB OF THE ACT. THERE IS NO SPECIFIC PROVISION IN THE RELEVANT SECT ION THAT THE APPROVAL OF THE LOCAL AUTHORITY MUST THE OBTAINED B Y THE PERSON WHO CARRIES ON CONSTRUCTION ACTIVITY. THE ASSESSEE FIRM HAD CARRIED OUT NECESSARY ACTIVITIES TO DEVELOP THE HOUSING PROJE CT THEREFORE IT WAS CLAIMED THAT DEDUCTION U/S.80IB OF THE ACT IS ALLOW ABLE IN THE CASE. THE ASSESSEE HAS RELIED UPON THE HONBLE ITAT AHMED ABADS DECISION IN THE CASE OF RADHE DEVELOPERS AND OTHERS - ITA NO. 2482/AHD/2006, A.Y. 2003-04 ALONG WITH OTHER 44 CAS ES VIDE THEIR ORDER 29.06.2007. 3.6 THE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CO NSIDERED. IN ASSESSEE'S OWN CASE IN AY 2009-10 & 2010-11, THE AO HAD DISALLOWED THE CLAIM U/S.80IB(10) OF THE ASSESSEE AND THE ACT ION OF THE AO WAS ALSO UPHELD BY THE C1T(A), IN AY 2010-11, THE FINDI NGS OF THE AO ARE REPRODUCED AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE ASSESSEE. ON VERIFICATION OF THE DEVELOPMENT AGREEMENT AND OTHER FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS OBSERVE D THAT THE ASSESSEE HAD ATTEMPTED TO VINDICATE OTHER MEANS OF PURCHASE VIS--VIS VARIOUS AGREEMENT FOR PURCHASE OF LAND BY VIRTUE OF AN AGRE EMENT PURPORTED FOR DEVELOPMENT AS BEING THE EQUIVALENT OF A VALID PURC HASE AGREEMENT THE REGISTRATION OF WHICH IMMINENTLY ALTERS THE OWNERSH IP OF SUCH LAND FROM THE ERSTWHILE OWNERS TO THE ASSESSEE. HOWEVER, IN T HE OF THE ASSESSEE FOR THE HOUSING PROJECT, THE OWNERS OF THE LAND HAVE BE EN SHOWN AS OTHER THAN THE BUILDER AND DEVELOPER. IT IS TO BE STATED HERE THAT THE RIGHT OF ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 9 - POSSESSION IS SEPARATE AND DISTINGUISHABLE FROM THE OWNERSHIP RIGHT THE OWNERSHIP RIGHTS ARE UNENCUMBERED IN THAT IT DOES NOT SUFFER FROM HARDSHIPS OF ANY KIND, LEGAL OR OTHERWISE, TO FACIL ITATE THE FREEDOM APPURTENANT TO SUCH RIGHTS FOR ITS COMPLETE ENJOYME NT. ON VERIFICATION OF REPLY VIS-A-VIS DETAILS & DOCUMENTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOLLOWING FACTS HAVE EMERGE D: I) THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WAS BUILT UP. II) THE HAS NOT TAKEN THE APPROVAL OF THE HOUSING PROJE CT FROM THE LOCAL AUTHORITY. THE SAM3.E WAS TAKEN BY THE OTHER PEOPLE WHO ARE ENTIRE SEPARATE ENTITY IN THE EYES OF LAW. III) THE LAND OWNERS HAVE SOLD THE PIECES OF LAND TO UNI T HOLDERS DIRECTLY AND ASSESSEE HAD ACTED AS A CONFIRMING PARTY. IV) ASSESSEE HAS ACTED MERELY AS A CONTRACTOR AS IT HAS ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDERS. V) THE ASSESSEE HAS NEVER SOLD THE HOUSE TO THE UNIT H OLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF. 3. BUT LEARNED AO WAS NOT CONVINCED WITH THE REPLY OF THE ASSESSEE AND TOTAL ADDITION OF RS.5,30,91,460/-. 4. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LEARNED AR CITED AN ORDER OF COORDINATING BENCH IN ASSESSEES OWN CASE IN ITA NOS.2293/AHD/2012 AND 2095/AHD/2013 FOR A.YS 2009-10 & 2010-11 RESPECTIVELY. IN THIS CASE, HONBLE BENCH OBSERVED AS FOLLOWS: IN VIEW OF THE AFORESAID FACTS, WE RESPECTFULLY FOL LOWING THE CASE OF SATSANG DEVELOPMENTS IN ITA NO.1011, 2498 AND 1221 OF 2012 ORDER DATED 12/11/2013 HAS ALLOWED THE DEDUCTION TO ASSESSEE BY HOLDING AS UNDER:- ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 10 - 4.2. IN ADDITION TO ABOVE TWO OBJECTIONS, THE LD.C IT (A) HAS RAISED ONE MORE OBJECTION THAT THE ASSESSEE HAS SOLD THE LAND TO THE UNIT HOLDERS SEPARATELY AND HAS DONE THE CONSTRUCTION OF UNITS U NDER SEPARATE AGREEMENT/CONTRACT AND, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT BECAUSE AS PER LD .CIT(A), PROFIT EARNED BY THE ASSESSEE IN RESPECT OF SALE OF LAND I S NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT AND SIMILARLY, TH E PROFIT EARNED BY THE ASSESSEE FOR CONSTRUCTION ACTIVITIES IS NOT ELIGIBL E FOR DEDUCTION U/S. 80IB(10) BECAUSE THE ASSESSEE IS DOING THE CONSTRUC TION AS A CONTRACTOR FOR A WORK AND NOT AS A BUILDER OR DEVELOPER AND, T HEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. AGAINST THESE OBJECTIONS OF LD.CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 5.2 REGARDING THE 3 RD OBJECTION THAT THE ASSESSEE HAS SOLD LAND TO THE UNIT HOLDERS SEPARATELY AND HAS DONE THE CONSTRUCTI ON UNITS UNDER A PROJECT AGREEMENT/CONTRACT, IT WAS SUBMITTED THAT I T IS A JOINT ACTIVITY ALTHOUGH THE AGREEMENT AND LAND SALE-DEED ARE EXECU TED SEPARATELY, BUT FOR THIS REASON ALONE, IT CANNOT BE SAID THAT THE A SSESSEE IS NOT A BUILDER OR A DEVELOPER. HE PLACED RELIANCE ON THE FOLLOWING TRIBUNAL DECISIONS:- SL.NO (S) DECISION IN THE CASE OF. ... REPORTED IN.... 1. DCIT VS. SMR BUILDERS (P.)LTD (2012)24 TAXMAN.COM 194 (HYD.) 2. SKY BUILDERS & DEVELOPERS VS. ITO (2011)14 TAXMAN.COM 78 (INDORE) 3. M/S. VARDHMAN BUILDERS AND DEVELOPERS VS. ITO ITA NO.559/IND/2010 DATED 09/05/2012 4. RAGHAVA ESTATES VS. DY.CIT ITA N OS. 248 & 49/VIZAG/2009 DATED 04/08/2011 5.2 HE SUBMITTED THAT IN THE CASE OF VARDHMAN BUILDERS & DEVELOPERS (SUPRA) ALSO, THE ASSESSEE HAD ENTERED I NTO A SEPARATE AGREEMENT FOR SALE OF LAND AND SEPARATE AGREEMENT F OR CONSTRUCTION OF HOUSING ON SUCH LAND AND UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT MERELY BECAUSE OF TWO SEPARATE AG REEMENTS, THE CLAIM ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 11 - OF THE ASSESSEE FOR DEDUCTION U/S.80IB (10) OF THE ACT CANNOT BE DECLINED IF OTHER CONDITIONS ARE BEING SATISFIED. 5.3. HE FURTHER SUBMITTED THAT IN THE CASE OF DCIT VS. SMR BUILDERS (P) LTD. (SUPRA) ALSO, THE FACTS WERE THAT THE ASSESSEE HAD SOLD FLATS IN A SEMI-FINISHED STAGE. IN THAT CASE, THE AO HAD NOTED THAT AS PER THE SALE- DEED, THE ASSESSEE-COMPANY HAS SOLD UNDIVIDED SHARE OF LAND WITH SUPER-STRUCTURE OF SEMI-FINISHED BUILT-UP AREA FOR A CERTAIN CONSIDERATION. THE AO HELD THAT THE SEMI-FINISHED S TRUCTURE HAS NEVER BEEN CONSIDERED AS A RESIDENTIAL UNIT. IT WAS ALSO NOTED BY THE AO IN THAT CASE THAT ON THE SAME DATE WHEN THE SALE DEED WAS EXECUTED, A CONSTRUCTION AGREEMENT WAS ALSO ENTERED INTO WITH T HE TRANSFEREE FOR FURTHER CONSTRUCTION OF THE SAME FLATS BY THE BUILD ER COMPANY ITSELF. HE SUBMITTED THAT THE FACTS IN THE PRESENT CASE ARE SI MILAR. HE ALSO POINTED OUT THAT IN THAT CASE, IT WAS HELD BY THE TRIBUNAL THAT THE STAND OF THE REVENUE WITH REGARD TO THE SEMI-FINISHED CONDITION OF THE FLATS IS DEVOID OF ANY MERIT IN AS MUCH AS WHAT IS SOUGHT TO BE CON STRUCTED AND SOLD BY THE ASSESSEE IS A RESIDENTIAL UNITS AND WHAT IS SOU GHT TO BE PURCHASED BY THE BUYER IS THE OWNERSHIP OF THE SPECIFIED UNIT AN D REGISTRATION OF FLAT IN SEMI-FINISHED CONDITION IS ONLY TO FACILITATE THE C ONVENIENCE OF THE PARTIES AND AGREEMENT FOR DEVELOPMENT AND COMPLETIO N OF BALANCE WORK IN RELATION TO THE FLATS IS ONLY AN INCIDENTAL FORM ALITY AND THIS CANNOT BE VIEWED AS FATAL TO THE CLAIM OF THE ASSESSEE FOR DE DUCTION U/S.80IB(10) OF THE ACT. IT WAS ALSO HELD BY THE TRIBUNAL THAT THE ENTIRE WORK FROM THE STAGE OF THE COMMENCEMENT TO THE STAGE OF MAKING TH E RESIDENTIAL UNIT HABITABLE HAVE BEEN CARRIED OUT BY THE ASSESSEE ONL Y AND, THEREFORE, ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. 9.2. NOW WE TAKE UP THE THIRD AND LAST OBJECTION OF LD.CIT (A) THAT THE ASSESSEE HAD SOLD THE LAND SEPARATELY AND UNDERTOOK THE CONSTRUCTION WORK AS PER A SEPARATE AGREEMENT AND, THEREFORE THE ASSESSEE IS NOT A BUILDER OR A DEVELOPER BUT A LAND DEALER AND CONTRA CTOR. IN THIS REGARD, IN OUR CONSIDERED OPINION, THE ISSUE INVOLVED IS SQ UARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF ITAT INDORE B ENCH RENDERED IN THE CASE OF M/S.VARDHMAN BUILDERS AND DEVELOPERS VS. IT O (SUPRA). IT IS NOTED BY THE TRIBUNAL IN THAT CASE THAT THE ASSESSE E HAD ENTERED INTO AN AGREEMENT FOR A SALE OF LAND AND A SEPARATE AGREEME NT FOR CONSTRUCTION OF THE HOUSE ON THE LAND AND, THEREFORE, THE FACTS ARE SIMILAR. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL IN THAT CA SE THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80-IB(10) OF THE ACT CAN NOT BE DECLINED IF OTHER CONDITIONS ARE BEING SATISFIED. SIMILARLY, IN THE CASE OF DCIT VS. ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 12 - SMR BUILDERS (P.) LTD. (SUPRA) ALSO, THE ASSESSEE S OLD THE LAND ALONG WITH SEMI-FINISHED STRUCTURE TO THE BUYERS AND AS P ER SEPARATE AGREEMENT, AGREED FOR CONSTRUCTION FOR COMPLETION O F BALANCE WORK. HENCE, THE FACTS OF THIS CASE ARE ALSO SIMILAR BECA USE IN THAT CASE ALSO, THE LAND WAS SOLD SEPARATELY ALONG WITH PARTIAL AND UNFINISHED CONSTRUCTION OF FLATS AND, THEREAFTER, CONSTRUCTION AGREEMENT WAS ENTERED INTO TO CARRY OUT THE BALANCE CONSTRUCTION WORK AND UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL IN THAT CASE THA T SUCH AGREEMENT FOR CONSTRUCTION TO COMPLETE THE BALANCE WORK IS ONLY A N INCIDENTAL FACILITATION TO PROTECT INTEREST OF THE PARTIES AND THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. SIMILARLY, IN THE CASE OF RAGHAVA ESTATES VS. DY. CIT (SUPRA) ON WHICH RELIAN CE WAS PLACED BY THE ID.AR OF THE ASSESSEE, THE FACTS ARE SIMILAR. I N THAT CASE ALSO, THE ASSESSEE HAD SOLD THE PLOTS SEPARATELY AND THEREAFT ER, CONSTRUCTED THE HOUSES AND UNDER THESE FACTS, THE REVENUE HELD THAT THE ASSESSEE HAS TO BE CONSIDERED AS A MERE CONTRACTOR AND, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80-IB(10) OF THE ACT. TH IS GOES TO SHOW THAT THE FACTS IN THAT CASE WERE IDENTICAL. IN THAT CASE , IT WAS NOTED BY THE TRIBUNAL THAT THE ASSESSEE HAD CHOSEN TO REGISTER T HE PLOT IN THE NAME OF THE BUYER ON PAYMENT OF SPECIFIED AMOUNT IN ORDER T O ACHIEVE COST SAVING AND TO ENSURE RELIABILITY AND THEREAFTER, TH E ASSESSEE HAD PROCEEDED TO CONSTRUCT THE HOUSE AS PER BUILDING PL AN OBTAINED IN THE NAME OF THE PLOT-OWNERS ON PAYMENT OF SUBSEQUENT IN STALLMENTS. IT IS ALSO NOTED THAT THE ASSESSEE HAD ALSO DEVELOPED VAR IOUS PUBLIC AMENITIES WITHIN THE PROJECT. THEREAFTER, IT WAS HE LD BY THE TRIBUNAL THAT ON A TOTALITY OF A FACT, THE TRIBUNAL IS OF THE VIE W THAT THE ASSESSEE HAS UNDERTAKEN DEVELOPING AND BUILDING HOUSING PROJECTS AS PER THE SCHEME PROVIDED IN SECTION 80-IB (10) OF THE ACT. 9.3. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILA R TO THE FACTS IN ABOVE NOTED THREE TRIBUNAL DECISIONS, WE DO NOT FIND ANY DEFECT IN THE CONSTRUCTION IN THE PRESENT CASE AND HENCE RESPECTF ULLY FOLLOWING THESE DECISIONS, WE DECIDE THE ISSUE IN FAVOUR OF THE ASS ESSEE. THERE IS NO OTHER OBJECTION OF THE LD. CIT(A) REGARDING ALLOWAB ILITY OF DEDUCTION TO THE ASSESSEE U/S. 80IB(10) OF THE ACT. HENCE, WE DI RECT TO GRANT THE DEDUCTION TO THE ASSESSEE U/S. 80IB(10) OF THE ACT. 9. BEFORE US, THE REVENUE COULD DID NOT PLACE ANY C ONTRARY DECISION ON RECORD NOR COULD DISTINGUISH THE FACTS OF THE CASE WHICH WAS RELIED BY THE ASSESSEE. IN VIEW OF THE AFORESAID FACTS, WE RE SPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN THE ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 13 - CASE OF SATSANG DEVELOPERS (SUPRA) HOLD THAT ASSESS EE IS ELIGIBLE FOR DEDUCTION U/S 80IB(10). THUS THIS GROUND OF ASSESSE E IS ALLOWED. 10. THIS THE APPEAL OF ASSESSEE IS ALLOWED. 6. THE ASSESSEE HAS DERIVED INCOME FROM CONSTRUCTIO N/DEVELOPMENT ACTIVITY OF HOUSING PROJECT, THEREFORE, ITS INCOME IS ELIGIBLE FOR 100% DEDUCTION U/S.80IB(10) OF THE I.T. ACT AS IT HAS SA TISFIED ALL THE CONDITION LAID DOWN UNDER THE ACT. IN THE ACT IT IS NO WHERE PROVIDED THAT THE PERSON WHO IS CLAIMING DEDUCTION SHOULD BE OWNER OF THE LAND OF THE HOUSING PROJECT. THE HOUSING PROJECT WAS SATISFYING THE CONDITIONS OF AREA AND WAS DULY APPROVED BY THE LOCAL AUTHORITY. THE ASSESSEE FIRM CARRIED OUT NECESSARY ACTIVITIES TO DEVELOP THE HOU SING PROJECT, THEREFORE, IT WAS CLAIMED THAT DEDUCTION U/S.80IB OF THE ACT I S ALLOWABLE IN THE CASE AND SAME IS ALLOWABLE IN THIS CASE. 7. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05/09/2017 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/09/2017 PRITI YADAV, SR.PS ITA NO.2949 /AHD/2014 ACIT VS. NARAYAN REALTY LIMITED ASST.YEAR 2011-12 - 14 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-III, BARODA. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 28/08/2017 (DICTATION-PAD 3 PAGES ATTACHED AT THE END OF THIS APPEAL- FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30/08/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER