ACIT, Bhubaneswar V. KZK Developers, Bhubaneswar

ITA 308/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4422 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 11-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2010
• Court: TRIBUNAL
• Department Lawyers: P K BALMI HIR SAHOO ARS
• Assessee Lawyers: PARAMITA TRIPATHY

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA S NO. 308/CTK/2010 AND 19/CTK/2011 (ASSESSMENT YEAR S 2005 - 06 AND 2003 - 04) ASST.CO MMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR VERSUS KZK DEVELOPERS,M - 4/34, ACHARYA VIHAR, BHUBANESWAR PAN: AAEFK 1073 B (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.BAL/MI HIR SAHOO, ARS FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR ORDE R SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER : THESE TWO APPEALS WERE FILED BY THE DEPARTMENT HAVING BEEN AGGRIEVED BY THE ORDERS OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE AYS 2005 - 06 AND 2003 - 04 IN THE CASE OF THE ASSESSEE. 2. THE DEPARTMENT HAS R AISED THE FOLLOWING TWO ISSUES IN ITA NO.308/CTK/2010. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED I N ALLOWING DEDUCTION U/S 801B(10 ) IN RESPECT OF THE PROJECT SATYASAI, AS THE ASSESSEE HAD ACTED MERELY AS A CONTR ACTOR WHILE EXECUTING THIS PROJECT AND THERE EXISTED PRINCIPAL - AGENT RELATIONSHIP BETWEEN THE DEVELOPER OSHB AND THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S.801B(10) TO THE ASSESS EE EVEN ON PRO - RATA BASIS SINCE SOME OF THE RESIDENTIAL UNITS CONSTRUCTED BY THE ASSESSEE EXCEEDED THE AREA OF 1500 SQ.FEET. 3. IN ITA NO.19/CTK/2011, THE DEPARTMENT HAS RAISED THE SOLE ISSUE AS HERE UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S.80IB(10) IN RESPECT OF THE ITAS NO.308/CTK/2010 AND 19/CTK/2011 2 PROJECT BANAJA, AS THE ASSESSEE HAD ACTED MERELY AS A CONTRACTOR WHILE EXECUTING THIS PROJECT AND THERE EXISTED PRINCIPAL - AGENT RELATIONSHIP BETWEEN THE DEVELOPER OS HB AND THE ASSESSEE. 4. BOTH PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE DEPARTMENT IN THESE TWO APPEALS AND THEIR LEGAL IMPLICATIONS. 5. DURING THE COURSE OF HEARING, THE LEARNED DR HAS VEHEMENTLY ARGUED ASSAILING THE ORDERS OF THE LEARNED CIT (A) FOR BOTH THE ASSESSMENT YEARS CONTENDING INTERALIA THAT THE PROVISIONS CONTAINED IN SECTION 80IB(10) OF COURSE SUBJECT TO SA TISFACTION THAT THE UNITS MUST HAVE BEEN A BUILT UP AREA BELOW 1500 SFT OR 1500 SFT OF EACH UNIT. IN BOTH AYS, THE ASSESSING O FFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80 (10) HOLDING THAT THE ASSESSEE IS NOT A DEVELOPER AND IT HAS ACTED AS AN AGENT OF ORISSA STATE HOUSING BOARD (IN SHORT OSHB) AND THE ASSESSEE WAS GIVEN A CONTRACT TO BUILD THE HOUSING UNI T S AS PER APPROVED PLAN OF THE BDA. IT IS PERTINENT TO NOTE THAT IN THE BANAJA APARTMENT PROJECT ALL THE RESIDENTIAL UNITS HAVE BUILT UP AREA OF LESS THAN 1500 SFT. IN THE CASE OF SATYASAI APARTMENT PROJECT THE ASSESSEE HAS CONSTRUCTED 133 RESIDENTIAL UNIT S OUT OF WHICH 126 UNITS ARE HAVING THE BUILT UP AREA OF LESS THAN 1500 SFT AND IN PRO RATA BASIS THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB(10) FOR BOTH THE AYS. THE ASSESSING OFFICER HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE. HENCE, THE ASSESSEE WENT I N APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) IN BOTH THE AYS HAVE OBSERVED THAT THE ASSESSEE IS ENTITLED FOR CLAIMING DEDUCTION U/S.80IB(10) AND ALSO HELD THAT FOR THOSE HOUSES WHICH HAVE HAVING BUILT UP AREA BELOW 1500 SFT ALSO THE ASSESSEE IS E NTITLED FOR CLAIMING DEDUCTION U/S.80IB(10) ON PRO RATA BASIS EVEN THOUGH THE OTHER UNITS WHICH HAVE BEEN ABOVE THE PRESCRIBED BUILT UP AREA OF 1500 ITAS NO.308/CTK/2010 AND 19/CTK/2011 3 SFT. WHILE DOING SO, THE LEARNED CIT(A) HAS RELIED ON THE DECISION OF ITAT, CUTTACK BENCH DT.11.6.2010 WHIC H WAS PASSED AFTER CONSIDERING THE DECISIONS OF ITAT, KOLKATA RENDERED IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LIMITED V. CIT IN ITA NO. 1995/KOL/2005, WHICH HAS ALSO BEEN CONFIRMED BY THE HONBLE KOLKATA HIGH COURT; OF PUNE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES V. CIT IN ITA NO.417/PUNE/2006; OF NAGPUR BENCH IN THE CASE OF ITO V. AIR DEVELOPERS IN ITA NO.447/NAG/2007; OF ITAT, MUMBAI E - BENCH IN THE CASE OF SAROJ SALES ORGANISATION, REPORTED IN 115 TTJ 485 AND OF ITAT, CHENNI A - BENCH IN T HE CASE OF ARUN EXCELLO FOUNDATION PVT. LTD V. ACIT REPORTED IN 108 TTJ 071. SINCE THE DEPARTMENT IS ALL THE WAY CONTENDING THAT THE ASSESSEE HAS ACTED ONLY A CONTRACTOR WHILE EXECUTING THE PROJECTS IN QUESTION BEING PRINCIPAL AND AGENT RELATIONSHIP WITH OSHB. HENCE, THE DEPARTMENT IS OF THE STAND THAT THE IMPUGNED ORDERS PASSED BY THE LEARNED CIT(A) ARE NOT SUSTAINABLE FOR LEGAL SCRUTINY AND THEREFORE, THEY BE SET ASIDE BY ALLOWING THE APPEALS OF THE DEPARTMENT. 6. CONTRARY TO THIS, THE LEARNED AR OF T HE ASSESSEE HAS VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE LEARNED CIT(A) CONTENDING INTERALIA THAT THE STATUS OF THE ASSESSEE IS PRINCIPAL TO PRINCIPAL AS UPHELD BY THE ITAT, CUTTACK BENCH IN ASSESSEES OWN CASE IN ITA NO.217/CTK/2007 FOR THE ASSE SSMENT YEAR 2004 - 05 WHEREIN WHILE REJECTING THE APPEAL OF THE DEPARTMENT VERY CLEARLY HELD THAT THE ASSESSEE IS NOT A CONTRACTOR OF OSHB BUT IS A DEVELOPER AND IS ENTITLED TO GET THE BENEFIT AS AVAILABLE U/S.80IB OF THE ACT. IN SUPPORT OF THIS, HE HAS QU OTED THE OBSERVATION OF THE TRIBUNAL WHICH PART OF THE ORDER PASSED BY THE CIT(A) . FOR THE ITAS NO.308/CTK/2010 AND 19/CTK/2011 4 ASSESSMENT YEAR 20U05 - 06 ALSO IN ITA NO.190/CTK/2009 ITAT, CUTTACK BENCH HAS DECIDED THE VERY SAME ISSUE IN FAVOUR OF THE ASSESSEE VIDE ITS ORDER DT.9.2.2010. WHILE PASSING THE ORDER FOR THE ASSESSMENT YEAR 2005 - 06, THE CIT(A) RELYING ON THE DECISIONS OF ITAT,KOLKATA BENCH IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LIMITED V. CIT (SUPRA) HAS HELD THAT AS THE FACTS AND CIRCUMSTANCES ARE QUITE IDENTICAL TO THE INS TANT CASE, THE DECISION OF KOLKATA BENCH IS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. IN THAT CASE THE ASSESSEE HAD CONSTRUCTED 261 UNITS OUT OF WHICH 111 UNITS HAD AREA MORE THAN 1500 SFT AND ONLY 150 UNITS HAD AREA LESS THAN 1500 SFT AND IT WAS H ELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE I.T.ACT,1961 ON PRO RATA BASIS. WHILE COMING TO THIS CONCLUSION, THE LEARNED CIT(A) EXAMINED THREADBARE THE PROVISIONS OF SECTION 80IB(10) AND FOUND THAT THE ACTION OF THE ASSESSING OFFI CER IN DECLINING THE CLAIM OF THE ASSESSEE U/S.80IB(10) ON THE GROUND THAT THE ASSESSEE HAS CONSTRUCTED UNITS HAVING AREA OF MORE THAN 1500 SFT DOES NOT STAND FOR LEGAL SCRUTINY AS THE PROVISION IS ONLY FOR BENEFICIAL TO THE DEVELOPERS CONSTRUCTING HOUSING UNIT OF 1500 SFT OR BELOW. THEREFORE MERELY BECAUSE SOME OF THE UNITS ARE MORE THA N 1500 SFT CANNOT BE DISENTITLE TO THE ASSESSEE U/S.80IB(10) AND THIS ORDER OF THE KOLKATA BENCH HAS BEEN UPHELD BY THE HOBNBLE KOLKATA HIGH COURT IN THE APPEAL FILED BY T HE DEPARTMENT U/S.260A. SUMMARIZING THE RATIOS OF DIFFERENT FORUMS, THE LEARNED CIT(A) HAS ULTIMATELY CONCLUDED THAT ONLY FOR 7 FLATS HAVING AREA OF MORE THAN 1500 SFT ARE NOT ELIGIBLE FOR DEDUCTION U/S.80IB. HOWEVER SINCE THE REMAINING 126 FLATS HAVE AREA BELOW 1500 SFT AND FULFILL ALL THE CONDITIONS LAID DOWN U/S.80IB, THE DEDUCTION U/S.80IB IS ALLOWABLE IN RESPECT OF THE SAID FLATS. IN ORDER TO COMPUTE THE ITAS NO.308/CTK/2010 AND 19/CTK/2011 5 PROFIT DERIVED FROM THE ELIGIBLE FLAT S PRO - RATA PROFIT OF THE ASSESSEE HAS TO BE COMPUTED. SINCE TH IS CONCLUSION WAS REACHED BY THE LEARNED CIT(A) AFTER THREADBARE CONSIDERING THE DECISIONS OF VARIOUS JUDICIAL FORUMS DISCUSSED SUPRA, THE STAND OF THE ASSESSEE THAT IT IS ENTITLED FOR DEDUCTION U/S.80IB OF THE ACT IS VERY MUCH RIGHT AND ACCORDINGLY DEPART MENT IS DIRECTED TO GIVE THE BENEFIT TO THE ASSESSEE. 7. THE DEPARTMENT WHILE PASSING THE IMPUGNED ORDERS HAS NOT BEEN ABLE TO POINT OUT ANY DISSIMILARITY OF THE FACTS OF THESE TWO YEARS WITH THAT OF THE FACTS FOR THE EARLIER PERIODS . THEREFORE, IN A WAY THAT THE ISSUES ARE SQUARELY COVERED BY THE PREVIOUS ORDER S OF THIS TRIBUNAL ITSELF RENDERED IN THE CASE OF THE ASSESSEE. HENCE, THE LEARNED AR OF THE ASSESSEE ACCORDINGLY SOUGHT FOR UPHOLDING THE ORDERS PASSED BY THE LEARNED CIT(A) BY DISMISSING THE DEPAR TMENTAL APPEAL FINDING THAT THE ISSUES RAISED BY THE DEPARTMENT IN THESE TWO APPEALS ARE DEVOID OF MERITS. 8. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDERS AND ON COMPARISON WITH THE ORDERS PASSED BY THIS TRIBUNAL FOR THE PREVIOUS AYS IN THE CASE OF THE ASSES S IN ITA NO.217/CTK/2007 FOR THE ASSESSMENT YEAR 2004 - 05, ITA NO.190/CTK/2009 FOR THE ASSESSMENT YEAR 2005 - 06, WE FIND THAT THE FACTS AND CIRCUMSTANCE ON THE CLAIM OF DEDUCTION U/S.80IB ARE MOSTLY SIMILAR. SINCE THE TRIBUNAL HAS ALREADY ADJUDICATED SUCH IS SUES, AS STATED SUPRA, FINDING THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACT OR AND FINDING THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IB(10) AND EVEN THERE ARE CONSTRUCTIONS BEYOND THE PRESCRIBED LIMIT OF 1500 SFT FOR EACH UNIT, THE ASSESSEE IS FOU ND ELIGIBLE FOR THE UNITS BUILT BY IT WHICH ARE HAVING THE AREA OF BELOW 1500 SFT CALCULATING THE PRO RATA DEDUCTION. THEREFORE, WE ARE OF THE ITAS NO.308/CTK/2010 AND 19/CTK/2011 6 CONSIDERED VIEW THAT THE STAND OF THE DEPARTMENT IN THESE TWO APPEALS IS NOT AT ALL SUSTAINABLE FOR LEGAL SCRUTIN Y. THEREFORE, WE HEREBY FOUND THAT THE ISSUES RAISED BY THE DEPARTMENT IN BOTH THESE APPEALS DESERVE TO BE DISMISSED. ACCORDINGLY, THE APPEALS FILED BY THE DEPARTMENT FOR BOTH THE ASSESSMENT YEAR S UNDER CONSIDERATION ARE DISMISSED. 9. IN THE RESULT, BOTH T HE APPEALS FILED BY THE DEPARTMENT ARE DISMISSED. PRONOUNCED IN OPEN COURT ON DT. 20 TH MAY, 2011 SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 20 TH MAY, 2 011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR 2. THE RESPONDENT: KZK DEVELOPERS,M - 4/34, ACHARYA VIHAR, BHUBANESWAR 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.