The ITO, Ward-3(2)(5), Ahmedabad V. Shree Shreyanshnath Developers, Ahmedabad

ITA 3053/AHD/2015

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3977 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-11-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Set aside
• Section: 143(3); 113; 43; 48; 22

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.3053/Ahd/2015 Assessment Year :2007-08 ITO, Ward-3(2)(5) Ahmedabad. Vs Shree Shreyansnath Developers Block No.832, Binor bungalows Ghuma Gam Tal. Daskroi, Ahmedabad. PAN : AAXFS 3932 L (Applicant) (Responent) Assessee by : Shri Ketan H. Shah, AR and Shri Aman Shah,AR Revenue by : Ms.Saumya Pandey Jain, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 23/11/2024 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t: 07/02/2024 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the Revenue against order passed by the Ld.Pr.Commissioner of Income-Tax(Appeals)-3, Ahmedabad(hereinafter referred to as “ld.CIT(A)”)dated 11.8.2015 under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2007-08. 2. Grounds raised in the appeal are as under: “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,65,62,790/- on account of disallowance of deduction u/s.80-IB(10) of the Act. ITA No.3053/Ahd/2015 2 2. The Ld. CIT(A) has erred in law and on facts by not appreciating the facts that the assessee firm was only a contractor assigned for the purpose of construction of project in not eligible for deduction u/s.80-IB(10) of the act. 3. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. Commissioner of Income Tax(A) may be set-aside and that of the Assessing Officer be restored.” 3. Solitary issue in the present appeal relates to the claim of the assessee to deduction under section 80IB(10) of the Act amounting to Rs.1,65,62,789/- which was allowed by the ld.CIT(A). 4. A perusal of the order of the ld.CIT(A) reveals that this matter has come up before us in second round; that in the first round, the AO during the assessment proceedings had noted the fact that the assessee firm had constructed a housing project during the year and shown net profit of Rs.1,65,62,789/- therefrom. This entire net profit had been claimed as deduction under section 80IB(10) of the Act. The AO had disallowed this claim of the assessee in entirety noting that the assessee was not a “developer” of the project as required by the provisions of section 80IB(10) of the Act. He noted certain facts relating to the assessee that he had neither conceptualized this project nor did he own the project, and even the approval was not granted to him by the local authority for construction of the project. He further noted that the assessee had merely undertaken the job of construction of the project as a “contractor” and noting that as per the provisions of section 80IB(10) of the Act, as amended by the Finance Act, 2009, a work-contractor was not eligible to deduction under the said section. He denied the assessee’s claim to deduction under section 80IB(10) of the Act. The matter was carried in appeal before the ld.CIT(A) who allowed the claim of the assessee. ITA No.3053/Ahd/2015 3 5. When the matter travelled to the ITAT, the Tribunal noted that the ld.CIT(A) has not decided the issue considering the facts pointed out by the AO relating to the finding that the assessee was a work- contractor. Accordingly, the ITAT restored the issue back to the ld.CIT(A) to pass a speaking order after examining complete facts and directed the ld.CIT(A) to give a clear finding as to whether the assessee was taking entire risk and was entitled for the entire rewards in the projects as per the facts of the case. Reference in this regard was made to the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. Radhe Developers Vs.CIT, 341 ITR 403 (Guj. Accordingly, in pursuance to this order of the ITAT, the matter came up back to the ld.CIT(A) who again held the assessee eligible to deduction under section 80IB(10) of the Act, and against this order of the ld.CIT(A) the department has come in appeal before us. 6. During the course of arguments made before us, both the parties heavily relied on the different clauses of the development agreement to make their points, and establish whether the assessee could be held to be a “developer” of the project or not, so as to entitle it to claim deduction under section 80IB(10) of the Act. Submissions in writing were also made by both the parties, which were to the same effect, pointing out various clauses to the development agreement to buttress their points. Copy of the development agreement was also placed before us. 7. We have considered contentions of both the parties, and we now proceed to adjudicate the issue before us. The issue, we gather, primarily is, whether the ld.CIT(A) has adjudicated the assessee’s claim of deduction under section 80IB(10) ITA No.3053/Ahd/2015 4 of the Act in accordance with the direction of the ITAT in the first round. 8. To proceed, therefore, it is necessary to reproduce the specific findings and directionsof the ITAT in the first round. The same is reproduced at para 1.2 of the ld.CIT(A) as under: “....From the above para of the order of the CIT(A), we find that there is no whisper about this objection of the AO that the assessee is only a contractor. We also find that as per page no.70 of the paper book i.e. page no.4 of the development agreement, the assessee was required to construct bungalows of the society along with material at fixed price. The CIT(A) has not decided the issue in dispute in the light of this para in the development agreement. As per the judgment of the Hon’ble Gujarat High Court rendered in the case of CIT Vs. Radhe Developers(supra), it is one of the essential requirement that the assessee must have a dominant control over the property in question, and the assessee should bear the entire risk and should be eligible for entire reward. We fail to understand that when the assessee was working for fixed price, how it can be said that the assessee was undertaking entire risk and was entitled to entire reward. The learned AR of the assessee has also filed a supplementary paper book of 263 pages on 30.7.2013 as per leave allowed by the Bench, but from the same also, it is not coming out that the assessee is not working for a fixed price. Hence, in our considered opinion, the order of the learned CIT(A) is not sustainable as per our above discussion, but still we feel that in the interest of justice, this matter should go back to the file of the learned CIT(A) for fresh decision on this issue, and hence, we set aside the order of the CIT(A) and restore this matter back to his file for fresh decision. He should pass a speaking order after examining the complete facts and should give a clear finding as to whether the assessee was taking entire risk and was eligible for entire reward in the facts of the present case, as has been held by the Hon’ble Gujarat High Court in the case of CIT Vs. Radhe Developers (supra). He should examine the facts of the present case in the light of the ratio laid down by the Hon’ble Gujarat High Court, and then pass necessary orders as per law in the light of the above discussion, after providing reasonable opportunity of being heard to the assessee. 9. A perusal of the above would reveal that the ITAT ,taking note of the decision of the Hon’ble Gujarat High Court in the case of Radhe Developers (supra), held that essential requirement to entitle the assessee to claim deduction under section 80IB(10) of the Act was that – ITA No.3053/Ahd/2015 5 i) It must have dominant control over the property in question; ii) The assessee should bear entire risk and be eligible for entire reward of the project. 10. We have noted that the ITAT also took of the fact, albeit adversely that the assessee was working for a fixed price. The ITAT accordingly observed that in the light of this fact, it could not be said that the assessee was undertaking entire risk and was entitled to entire reward of the project. However, the ITAT restored the matter back to the ld.CIT(A) giving specific directions to the ld.CIT(A) to give a clear finding as to whether the assessee was taking entire risk and is eligible entire reward in the facts of the present case for adjudicating the assesses claim to exemption u/s 80-IB(10) of the Act. 11. Therefore, limited aspect which the ld.CIT(A) was supposed to consider in the light of the facts of the case was, whether in terms of development agreement, it could be stated that the assessee was taking entire risk and was entitled to entire rewards of the projects. In this regard, the ld.DR drew our attention to the development agreement, copy of which was placed before us at PB Page No.153 onwards, to buttress her contentions that the assessee was only a work-contractor and did not undertake any risk in the project. She drew our attention to the following clauses of the development agreement (page no.155 of PB). ITA No.3053/Ahd/2015 6 ITA No.3053/Ahd/2015 7 12. She drew our attention to the main body of the agreement wherein after identifying the assessee as a party to the second part of the agreement, the agreement specifically mentioned the fact that the engineers, architects for the project would be engaged by the society, and the assessee was required to construct the bungalows in the society along with material in fixed price as per the specifications and the plan prepared by the engineers of the society. In this regard, our attention was drawn to page no.155 and 156 of the PB containing the above portion of the agreement. 13. The ld.DR contended that it is evident that the assessee had no role in the conceptualization of the project which was entirely the job of the society who were to engage engineers and architects for drawing up of the project and the assessee was only to required to execute as per the plan and drawings finalized by the society, at a fixed price. She contended that it is categorically proved that the assessee’s role was only that of the work-contractor. Thereafter she drew our attention to various clauses of the development agreement to buttress her contention that the assessee had no risk in the project nor was entitled to any rewards and was entitled to get a fixed price only for the construction work undertaken. Our attention in this regard was drawn to condition nos. (1), (2), (3), (4), (6) and (10) of the development agreement as under: “1) The construction has to be carried out as per the plan and specification prepared by the Engineer. 2) The said work of construction is handed over alongwith materials and labour and the materials required for that includes, contingency with regard to labour, materials, shadow iron bucket, spades, centering,, labours, workmen etc. ITA No.3053/Ahd/2015 8 (3) The Developer will do the construction with labour at his own or shall give in subcontract with materials or with labour i.e. the said contractor can get done the said construction by other materials, similarly he can give the work on labour contract also and as the construction has to be started or got started, the possession of the said land of said Twin Bungalows is handed over today to the Contractor Shri Shreyansnath Developer and the possession shall continue till the construction is over. (4) In unavoidable circumstances/ if any dispute or differences may arise between both the parties, then both the parties will not have to rush to the Court but whatever decision the Engineer of the Society decides the same shall be accepted by both the parties and if during the construction if the parties are required to be dissolved by the agreement then as per the opinion of the Engineer, the price decided by him, temporary stock and the stock lying at the site and to fix the price of the raw material lying at the place for construction, and the expenses incurred for water required for the construction, whatever the total expenses may arise, the said expense, and over and above total amount for the complete /construction as per the agreement that may be carried out with percentage of loss whatever the total that may comes, the said amount has to be paid to the developers i.e. party of Second Part by the Party of First Part and-thereafter only the contract will release the possession of the land and existing construction. Thereafter in that quarrel shall be raised or claimed by Party of First Part o£ concerned Member. (5) During the construction if any loss occurs to the other's property then the responsibility for the same will be of Contractor. (6) Shri Shreyansnath Developer can demand the amount of the said bungalows from the members. As per the resolution passed in General Meeting of the Society, the development activity of the society has been handed over to Shri Shreyansh Developers. Accordingly Shri Shreyansh Developers can demand moneys from the members and on behalf of society and have make all the payment of money on behalf of the society. From time to time the amount shall be debited and credited as per the statement of Shri Shreyansh Developers, in the society. 1O) During the construction or after possession of the construction is handed over the natural calamities like fire, excessive rainfall, flood of water of river or rain, earthquake any damage is caused to the continuing construction or completed construction, then it will not be the responsibility of the Party of Second Part i.e. Contractor or Engineer and in that event, the loss occurred shall have to be fulfilled to the Party of Second Part by the Party of First Part. 14. Referring to the above, she pointed out that the conditions clearly brought out that the assessee’s construction work was to be carried out as per the plan and specifications of the engineers employed by the society; that the possession of the land was handed ITA No.3053/Ahd/2015 9 over to the assessee only for the completion of the project; that in case of any dispute between two parties to the agreement, it was the engineer employed by the society who was to settle the dispute between two parties therein showing that the assessee had no dominant role in the settlement of dispute; that the project was to be sold not by the assessee, but by the party to the first part and more importantly, risk resulting from any damage to the project was entirely that of the party to the first part of the agreement and not the assessee, as per clause (10). She also drew to attention to para 2.18, 2.19 and para 2.22 of the AO’s order, which is reproduced herewith: ITA No.3053/Ahd/2015 10 ITA No.3053/Ahd/2015 11 ... .... .... .... ITA No.3053/Ahd/2015 12 15. Her concluding arguments was that the ld.CIT(A) had not dealt with the specific directions of the ITAT, which was to determine as to whether the assessee was undertaking risk in the project and was entitled to reward of the project. She pointed out that the ld.CIT(A) only confined to the aspect of whether the assessee was getting a fixed price for the project or not, which she, in any case, pointed out, the assessee was getting as per the development agreement, and the ld.CIT(A) has given an incorrect finding that the assessee was not getting fixed price for the project. She, therefore, stated that the ld.CIT(A)’s order, being not in consonance with the directions of the ITAT and documents proving and establishing beyond doubt that the assessee was only work-contractor, undertaking no risk relating to the project, and neither being entitled to any rewards of the project, was incorrect in holding that the assessee was entitled to claim deduction under section 80IB(10) of the Act. She pleaded therefore that the order of the Ld.CIT(A) be set aside and that of the AO restored. 16. The ld.counsel for the assessee, on the other hand, heavily relied on the finding of theld.CIT(A) which are reproduced hereunder: “6. I have carefully considered the facts of the case and submissions and paper book filed before me as well as the arguments taken place during the course of hearing. In this case, the earlier assessment order has been passed on 15.12.2009 and first appeal decided by C.I.T.(Appeals) vide order dated 07.01.2011, wherein the appeal of the appellant has been allowed and thereafter, in Department's Appeal N0.3254/A/2010, learned ITAT vide order dated 02.08.2013 has remanded the matter to the file of C.I.T.(Appeals). I have considered the written submissions made to C.I.T.(Appeals) during the course of first round dated 22.02.2010, 23.03.2010, 05.10.2010, 18.10.2010 and 27.10.2010, which were also forwarded to the learned Assessing Officer. I have also called for to produce books of accounts and various invoices and vouchers which were earlier produced before the Assessing Officer during the course of assessment proceedings. I have also gone through various clauses of Development Agreement, more particularly, the relevant clause mentioned by the learned Tribunal and has also gone through the factualaspect as to whether who has taken risk of the whole project undertaken by the appellant by virtue of ITA No.3053/Ahd/2015 13 Development Agreement. Reliance is placed on the ratio in the case of Motor & General Stores Pvt. Ltd. 69 ITR 692 (SC) which is "the name 7, to a transaction by the parties concerned does not necessarily decide the f transaction, the question a/ways is what is the real character of the transaction and not what parties call it". Further, Hon'ble Supreme Court in the case of Sundaram Finance Ltd. 1966 AIR 1178 (SC) says "where terms of transaction are embodied in a document the true effect of transaction may be determine from the terms of document/agreement considered in the light of surrounding circumstances." In view of ratio laid down by Apex Court vis-a-vis documents on record, it is the appellant who has undertaken the whole risk of the project inter-alia has also made payment for purchase of two lands for Block Nos.832, 833 and 834 and the payment has been made by the appellant from the bank account referred above. I have also carefully considered the clause of the Development Agreement, wherein there is mention regarding "Fixed Price along with Material" which is as per the specification and project prepared by the Engineer. In reference to this, I have gone through the paper book filed before me and as per the relevant pages 98 to 110, it is found that the appellant has sold various units to various members and from the aforesaid chart as per Sr. No.1 to 128, it is found that the appellant has_not charged uniform sale price from every member and the price has been charged on the basis of location of particular unit etc. Therefore, the question of charging fixed price from any members gets clearly diluted. Thereafter, on going through the submissions dated 24.02.2015, and also on going through various expenditure accounts and books of accounts along with the vouchers on records, it is found that there is no such fixed price charged even in reference to the expenditure incurred. It is settled law that for claiming relief u/s.80IB(10), what is important is "dominant control" over the whole scheme and in this case, it is the appellant, who has incurred various expenditure for running the whole project starting from Asst. Year 2005-06 and onwards, wherein the appellant has incurred various expenditure like material purchased, labour expenditure, advertisement, architecture's fees, designer's fees, salary expenditure etc. Sales consideration in fact has been received by the appellant. It is the appellant, who has got power to remove various members and to forfeit the part amount given if they failed to make remaining payment. Therefore, I come to the conclusion that the appellant was having dominant control over the whole scheme undertaken by way of Development Agreement and has taken risk by making various payments to various parties from bank account with Ahmedabad DistrictCo-operative Bank since inception of the project. I also found that even on going, through the audited books of accounts and receipt account, it is found that there is no evidence that the appellant has charged fixed rate in respect of any expenditure and/or in reference to any receipt from Asst. Year 2005-06 upto Asst. Year 2007-08. The Development Agreement is dated 01.11.2004, and therefore, the first Asst. Year for the scheme is Asst. Year 2005-06 and for this, there is assessment u/s.143(3) dated 11.04.2007 and for the Asst. Year 2006-07 also there is assessment u/s. 143(3) dated 07.04.2008. For both these preceding Asst. Years there is no such finding that the appellant used to charge 'fixed price' or to make any expenditure as 'fixed price'. Although there is mention regarding 'fixed price' but on going through the 'Development Agreement' as a whole, I found that the appellant has not to charge any fixed price but has to incur various expenditure at its own and ITA No.3053/Ahd/2015 14 also to collect the receipt and to have a power to cancel the booking. It is the substance of agreement (MOU) and not the wording of its drafting as per ratio laid down in judgments (supra) is required to be considered while deciding the issue. Therefore, I found that there is no evidence that appellant has undertaken the whole project on the basis of 'fixed price' nor it is found from the receipt account of Rs.6,01,81,723/- for the Financial Year 2006-07 at some fixed rate and also on going through the audited account, it is found that there is no such payment made by the appellant based on any such fixed price. Therefore, I decide that the appellant is entitled to get the claim u/s.80IB(10) amounting to Rs.1,65,62,789/-.” The ld.counsel for the assessee also referred to the submissions before the ld.CIT(A) reproduced at page no.3 as under: 3. During the course of the appellate proceedings, the learned A.R. of the assessee, Shri Ketan H. Shah, Advocate filed Power of Attorney, and has filed the following written submissions as well as paper book, which are reproduced appropriately hereunder for ready reference. 3.1 Submission dated 17.04.2013 filed by the assessee reads as under: "In reference to the above, I hereby enclose Letter of Authority in my favour. The facts run as under: 1. That the assessee has given a letter dated 06.03.2014 before Your Honour submitting copy of the order passed earlier u/s. 143(3), order 'of C.I.T.(Appeals) in first round and order of the I.T.A.T. The Hon'ble I.T.A.T. has remanded the matter back to the file of the C.I.T.(Appeals) and therefore, this appeal arises for disposal. 2. Originally, the assessment order has been completed u/s. 143(3) for the Asst. Year 2007-08 vide order dated 15.12.2009 wherein the claim u/s.80IB(10) has been disallowed by the Assessing Officer on the ground that the assessee is not 'Developer' but 'Contractor' amongst other grounds. 3. The C.I.T.(Appeals) has vide order dated 28.10.2010 has disposed off the appeal allowing the appeal of the assessee and directed the Assessing Officer to allow the claim of the assessee in view of the decision of Ahmedabad Bench in the case of Shakti Corporation. 4. The Department has carried the matter to the I.T.A.T. in I.T.A. No.3254/Ahd/2010 and the Hon'ble I.T.A.T. has vide order dated 02.08.2013 has remanded the matter to the file of C.I.T.(Appeals) as per I.T.A.T. order pages 3 and 4 para 4, wherein the Hon'ble I.T.A.T. has directed to determine the facts as to whether the assessee is entitled to the fixed amount/price according to the development agreement page 4. 5. We enclose herewith copy of Development Agreement entered into in Gujarat pages 48 to 55 of the paper book, wherein the relevant wording in as per page 3 (Paper book page 50) of the agreement runs as under: ITA No.3053/Ahd/2015 15 “Bijitarafwalahavethi aa karar ma developers ya to tamo tamara tariketekejemane society na twins bunglow nu maal saman sathenubanghkam je te bung/owsuchakkimmat ma, society na engineer e janavel specification tatha plan pramanekarvanucheya to karavanuche, Tema temnavakhatvakhatnabhagidaro ,vahivatidaro , vakilo , esaeynio, vagere no samaveshthayche . " 6. Now, the free English translation of the aforesaid development agreement, as filed before the Hon'ble I. T.A. T. is again enclosed as per page 4 middle para, which runs as under (Paper Book Page 56 to 66, relevant page 59): "The party of Second Part will hereinafter referred to as "Developers" or "You" or "Your" who has to construct the Twin Bungalows of the Society along with materials in fixed price, as per the specification and plan prepared by the Engineer of the Society or to get done which includes the said Party of Second Part Partnership Firm, its Partners, administrators, Advocates, Assignees etc. " 7. The issue to be decided in view of the Development Agreement entered into is as to whether ‘defecto' the assessee has taken the fixed price from "Binori Co-op. Housing Society" or has collected the actual sales consideration from the members who have booked the residential house, is required to be decided by Your Honour. 7.1 We enclose herewith copy of computation of income for the Asst. Year 2007-08 at paper book pages 1 to 4, wherein the claim u/s.80IB(10) has been made. 7.2 Copy of Form No.3CB as on 31.03.2007 and Form No. BCD are enclosed as per paper book pages 5 to 22 along with Profit & Loss Account and the Balance Sheet and other schedules. 7.3 Copy of Form No.10CCB i.e. audit report in reference to claim u/s.80IB(10) is also enclosed herewith at paper book pages 23 to 30 wherein as per Sr. No. 9, it was mentioned that the initial assessment year is Asst. Year 2006-07. 7.4 Copy of Construction Income Account for the F.Y. 2006-07 for construction income shown of Rs.6,01,81,723/- is enclosed herewith at paper book page 31 to 38, which is tallied as per construction income shown in the Profit & Loss Account enclosed at paper book page 19. 7.5 of Profit & Loss Account for the year ended on 31.03.2005, wherein construction income of Rs.1,55,43,356/- has been shown for the same project is enclosed herewith along with Balance Sheet as per paper book pages 39 to 40. That copy of the order u/s. 143(3) dated 11.04.2007 at paper book pages 43 to 44 wherein upon identical facts and same Development Agreement, the same has been allowed. 7.6 Copy of Profit & Loss Account for the year ended on 31.03.2006, wherein construction income of Rs.4,66,37,750/- has been shown for the same project, is enclosed herewith along with Balance Sheet as per paper ITA No.3053/Ahd/2015 16 book pages 41 and 42. That copy of the order u/s.143(3) dated 07.04.2008 at paper book pages 45 to 47 wherein upon identical facts and same Development Agreement, the same has been a/lowed. In view of the aforesaid facts of the case, Your Honour would please to appreciate that it is the assessee, who has collected the entire booking of various residential units from members directly and there was no such fixed price collected. Here, in the Development Agreement entered into Gujarati dated 01.11.2004 (i.e. 1st year Asst. Year 2005-06), it was-mentioned that it is "Uchchak" price meaning thereby not fixed price but it is agreed price and overall clauses of the agreement itself shows that it is the assessee, who has undertaken all the risks to incur all types of expenditure pertaining to earning of the aforesaid booking receipts. The Profit & Loss Account for the period 31.03.2007 is at paper book page No. 19, period 31.03.2005 at paper book page 39 and for the period 31.03.2006 at page 41 show all the nature of expenditure incurred and allowed for all the three years including the Asst. Year 2007-08. 8. In view of the analysis of all the clauses of the agreement, it is found that assessee is "defecto" Developer and not Contractor." 3.2 Another submission is dated 29.10.2014 filed by Shri Ketan Shah, which is also reproduced hereunder: "In reference to the above and in continuation of the earlier submissions, I hereby further clarify the following position: 1. Copy of development agreement entered into between the assessee- firm with Binori (Ghuma) Co-op. Housing Society Ltd dated 01.11.2004 is at paper book pages 56 to 66 of submissions dated 17.04.2014. On going through the aforesaid agreement entered into, as per paper book page 59, it is observed that there is a condition regarding construction of twin bungalow of the society along the material in a fixed price, as per the specification and prepared by the Engineer of the Society or to get done, which includes aid party of the Second Part, partnership firm, its partners etc. On the basis of this condition itself, the Hon'ble I.T.A.T. has sent back the issue to the file of CIT(Appeals) after considering the decision of the Hon'ble Gujarat High Court in the case of Radhe Developers reported in 341 ITR 403, now enclosed at paper book pages 66 to 97 along with this submissions. The short issue which is required to be decided is as to whether the assessee-firm has charged any fixed price from the society or not along with material. In this connection, the attention is drawn to the factual aspect of the case. Now, kindly refer to earlier paper book page 17 for Asst. Year 2007-08 i.e. Annexure-2, wherein gross profit and net profit has been reflected as per the books of the assessee. Therefore, it is the assessee/firm who has undertaken the risk of the whole scheme. For the Asst. Year 2007-08, profit and loss account is as per earlier paper book page 19 from which it is found that it is the assessee firm who has incurred various expenditure like purchases, labour expenses, transportation, salary legal consultancy and also claimed depreciation and construction income shown for the Asst. Year 2007-08 is Rs.6,01,81,723/-. This construction income has been assessed on substantive basis and no protective addition has been made in the case of the said society. It is the assessee who has ITA No.3053/Ahd/2015 17 received maintenance deposit of Rs.25,60,000/- from the members, who has booked the residential unit. Copy of construction income account for the Asst. Year 2007-08 for Rs.6,01,81,723/- is as per paper book pages 31 to 38. 2. Now, for the Asst. Year 2005-06, profit and loss account is as per earlier paper book page 39, from which it is again found that the assessee has made various purchases and a/so incurred various expenditures for which payment has been made. Therefore, the assessee has undertaken the entire risk of development of the whole project, and therefore, in this year also, there is construction income of Rs.1,55,43,356/- and this income has again been assessed on substantive basis. All expenditures claimed have been a/lowed by the Assessing Officer u/s. 143(3) of the Act while passing order as per paper book pages 43 and 44. 3. Now, for the Asst. Year 2006-07, the profit and loss account is as per paper book page 41, from which it is found that the assessee has made various expenditures, which have been allowed, and thereafter, received construct/on income of Rs.4,66,37,750/-, which has been assessed u/s. 143(3) of the Act as per order at paper book pages 45 to 47 filed earlier." 3.3 Another submission dated 24.02.2015 has also-been filed and is reproduced hereunder: “Kindly refer our earlier submission dated 29.10.2014, 17.04.2014 as well as Paper Book Page 1 to 172. In continuation thereof, also as per the discussion. We had during course of last hearing, I hereby clarify the factual position in reference to the finding given by ITAT in order dated 02.08.2013, Paper Book Page 113 to 118, relevant Page 116. 1. Kindly refer to the submission dated 17.04.2014, para 5 wherein, there is relevant abstract of development agreement page 4. The attention is drawn to page 19 i.e. profit and loss account for the year ended 31.03.2007 wherein various expenditure has been debited to profit and loss account. A details profit and loss account is enclosed herewith in a box file which includes various expenditure claimed as under: Sr. No. Nature of Expenditure Amount 1 Bricks Purchase 1,65,986/- 2 Cement Purchase 2,37,955/- 3 Marbles, Tiles, Stones Purchase 6,95,946/- 4 Misc. Hardware Purchase 5,49,102.02/- 5 Misc Purchase 1, 78, 997/- ITA No.3053/Ahd/2015 18 6 Paints Purchase' 1,60,191/- 7 Purchase Account 1, 58,07, 900/- 8 Soil and Concrete Purchase 4,380/- 9 Steel Purchase 59,486/- 10 Labour Expenses (Other) 17,83,482/- 11 Labour Expenses 59,36,763/- 12 Opening WIP 1,68,95,026/- 13 Transportation and Carting Expenditure 98,400/- 1.1 A complete account with sample copy of invoices is attached herewith from which it is found that, there is no fix price paid by us for any expenditure for year 31.03.2007, there is opening WIP of Rs. 1,68,95,026/- which the various expenditure from 01.04.2004 up to 31.03.2006 taken as WIP. It is not out of place mention here that, the assessment for the AY.2005-06 has been accepted u/s. 143(3) vide order dated 11.04.2007 as per submission dated 29.10.2014, page 43 to 44 and also for AY.2006-07, the same has been accepted as per Paper Book Page 45 to 47, wherein the claim u/s.80IB(10) has been a/lowed after due verification. From the copies of the box file enclose herewith, it is found that assessee has never paid any fixed price of any materials/expenses incurred. 2. The attention is again drawn to ITAT order Paper Book Page 116, order page 4 wherein there is, there is one rider in last four lines that whether assessee has under taken risk or not?, in view of Radhe Developer case. The copy of decision of 341 ITR 403 (Guj) in Radhe Developers is at page 66 to 97. The copy of land purchase account is at page 15 to 16 as well as bank statement is at page 18 to 54. The copy of another land purchase account is at page 43 along with the bank statement from page 44 to 54. All the expenditure has been admittedly incurred including land purchase from AY.2005-06 and 2006-07 and, therefore, it is the assessee who has paid land cost, labor cost, other expenditure, advertisement expenditure etc and, therefore, it cannot be said that the assessee has not under taken any risk of development. If the scheme fails of account of no booking than it would be loss to the assessee firm of not to the society of the scheme. This can be verifiable from audited account also of 2005-06 up to 2007-08. In a summary manner, we hereby say that.... That, there is no fixed price paid by the assessee. That, it is the assessee who has undertaken all the risk to develop the project. ITA No.3053/Ahd/2015 19 3. At the out set, we enclose herewith the following judgments of Cujarat High Court, wherein, decision of Radhe Developers has been followed”. 17. His contention was that – i) The assessee had dominant control over the scheme; ii) It was the assessee who had power to admit the members; iii) Price was fixed by the assessee and not by the society; iv) All raw-material, labour cost was tobe incurred by the assessee. All these points were made from the findings the ld.CIT(A), which have been reproduced above. 18. In his submissions before us, he referred to clause (3), (5), (6), (7), (8), (11) and (12) of the development agreement to buttress his contentions that the assessee was the “developer” of the project undertaking entire risk involved in the project. Such clauses are reproduced hereunder: ITA No.3053/Ahd/2015 20 ITA No.3053/Ahd/2015 21 ITA No.3053/Ahd/2015 22 ITA No.3053/Ahd/2015 23 19. Having carefully heard contentions of both the parties, and having gone through the various clauses of development agreement, which has been pointed out to us by both the parties, we hold that the ld.CIT(A) has wrongly held the assessee to be eligible to deduction under section 80IB(10) of the Act. 20. As noted above, the limited scope before the ld.CIT(A) in terms of directions of the ITAT was to determine whether as per various terms of the agreement, the assessee was undertaking the entire risk of the contract, and was entitled to reward of the contract so as to entitle to it to claim deduction of profits under section 80IB(10) of the Act. The ld.CIT(A)’s finding, we find, completely faulted in fulfilling this directions of the ITAT. As rightly pointed out by the ld.DR, the ld.CIT(A)’s entire focus has been on the aspect of determining whether the assessee got fixed price for project or not. That was not the direction of the ITAT and this aspect alone does not determine whether the assessee was undertaking entire risk of the project or not. Even otherwise, the ld.DR has pointed out to us that the assessee was entitled to get only fixed price for the project and condition no.6 of the development agreement only gave the assessee right to collect money from the society as already determined to be paid to the contractor and spent on the project. The determination of the amount to be collected was already fixed and the assessee had no role in the same. This point comes out clearly even in the main body of the agreement, where it is categorically mentioned that the assessee has to construct bungalows of the society along with material “in fixed price”. Therefore, even the finding of the ld.CIT(A) that the assessee was entitled to fixed price, we have noted, is incorrect. ITA No.3053/Ahd/2015 24 21. Even otherwise various clauses of the agreement, which has been pointed out to us by the ld.DR clearly demonstrate that the entire project as per the development agreement was to be conceptualized and designed by the society , sold by the society and the entire risk or loss or damage to the project was to be borne by the society. The assessee had no role either in the designing or conceptualization of the project, the sale of the project nor was party to any risk on account of any damage causes to the project. This point come out clearly from the main body of the agreement, condition no.6 and condition no.10 respectively. Condition no.4 of the development agreement further states that in case of any dispute it is the engineer of the society whose final decision would prevail. Therefore, as per the development agreement, the assessee had no dominant role in the project as such. 22. We have no doubt therefore in holding that in terms of the development agreement, the assessee was bearing no risk relating to the project nor was entitled to any rewards of the project; that he was merely a works-contractor and in terms of the directions of the ITAT, therefore, in the first round, we have no hesitation in holding that the assessee was not entitled to deduction under section 80IB(10) of the Act. The order of the AO is accordingly upheld. 23. We have already dealt with and set aside the finding of the ld.CIT(A) which have been heavily relied upon by the ld.counsel for the assessee before us. All the conditions of development agreements, which have been pointed out to us by the Ld.Counsel for the assessee, we find are of no assistance to establish the fact of risk and rewards of the project being borne by the assessee. The said clauses/ points are only to the effect that the assessee was given or ITA No.3053/Ahd/2015 25 was entitled to limited risk with respect to labour and material, which he had to procure for the project. But that was only a limited risk, which in any case is borne by any work-contractor, and the actual risk of the project as has been found above, was borne by the society and not the assessee. In view of the above, we allow the appeal of the Revenue. The grounds of appeals are allowed. 24. In the result, the appeal of the Revenue is allowed. Order pronounced in the Court on 7 th February, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 7/02/2024 vk*