The ITO, Ward-9(2), Ahmedabad V. M/s. Kamal Corporation, Ahmedabad

ITA 3151/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9525 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Assessee Lawyers: A C BRAHMAKSHATRIYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBE R & SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO: 3151/AHD/2011 (ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER, WARD-9(2), AHMEDABAD VS M/S. KAMAL CORPORATION, 1, GANGOTRI TENAMENTS, B/H. GOPINATH BUNGLOWS, NEW INDIA COLONY, NIKOL, AHMEDABAD 380051 (APPELLANT) (RESPONDENT) PAN: AAAHFK5858K APPELLANT BY : SHRI DEEPAK SUTARIA, SR. D .R. RESPONDENT BY : SHRI A. C. BRAHMAKSHATRIYA, A.R. DATE OF HEARING : 11-01-2 016 DATE OF PRONOUNCEMENT : 12-02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)-XV, AHMEDABAD, DATED 20 TH OCTOBER, 2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECTS. ASSESSEE ELECTRONICALLY FILED ITS ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 2 RETURN OF INCOME FOR A.Y. 2008-09 ON 26.06.2008 DEC LARING TOTAL INCOME AT RS. NIL AFTER CLAIMING DEDUCTION OF RS.1,22,73,851/- U/S.80 IB(10) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 23.11.2010 AND TOTAL INCOME WAS DE TERMINED AT RS.1,22,73,851/- BY DISALLOWING THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 20 TH OCTOBER, 2011 DELETED THE ADDITION. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: 1). THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-X V, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION OF RS.1,22,73,851/- U/S.80IB(10) OF THE I .T. ACT. 2). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD OUGHT TO HAVE UP HELD THE ORDER OF THE ASSESSING OFFICER. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS SESSING OFFICER OBSERVED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,22,73,8 51/- U/S.80IB(10) OF THE ACT. ASSESSING OFFICER ON ANALYZING THE DETAILS FURNISHE D BY ASSESSEE CONCLUDED THAT ASSESSEE WAS A MERE BUILDER WHO HAD ENTERED INTO TH E AGREEMENT WITH THE LANDOWNER FOR CONSTRUCTION OF HOUSING PROJECT AS PE R THE APPROVALS OBTAINED BY THE LANDOWNER FOR CONSTRUCTION ON THE LAND OWNED BY THE LANDOWNER AND THEREFORE ASSESSEE DID NOT SATISFY THE CONDITIONS STIPULATED IN SECTION 80IB(10) OF DEVELOPING AND BUILDING THE HOUSING PROJECT & THEREFORE ASSESS EE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) AND ACCORDINGLY DENIED THE C LAIM OF DEDUCTION U/S.80IB(10). 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 3 5. GROUND NO.2 PERTAINS TO THE DISALLOWANCE OF DED UCTION OF RS.1,22,73,851 U/S.80IB(10). THIS DISALLOWANCE HAS BEEN MADE AS PER PARA 3 OF TH E ASSESSMENT ORDER. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE DEDUCTION WAS DENIE D BY THE AO BECAUSE IN HIS VIEW THE APPELLANT WAS A 'WORKS CONTRACTOR' AND EXECUTED THE WORK AWARDED BY GANGOTRI TENAMENT(NIKOL) COOPERATIVE HOUSING SOCIETY, THROUG H THE DEVELOPMENT AGREEMENT ENTERED BY IT WITH THE SOCIETY. ACCORDING TO THE AO THE ASSESSEE IS NOT A DEVELOPER PRIMARILY BECAUSE IT DID NOT OWN THE LAND ON WHICH THE PROJECT WAS CONSTRUCTED AND IT CONSTRUCTED THE PROJECT AS PER WORK CONTRACT AWARDE D BY THE SOCIETY AND WAS THUS HIT BY THE EXPLANATION INTRODUCED VIDE FINANCE ACT 2009 AC CORDING TO WHICH A PERSON WHO EXECUTES A WORKS CONTRACT CANNOT BE ALLOWED THE DED UCTION U/S.80IB(10). ACCORDING TO THE AO THE APPROVALS FOR CONSTRUCTION OF RESIDENTIA L UNITS WERE GIVEN BY THE LOCAL AUTHORITY NOT TO THE APPELLANT BUT TO THE LAND OWNE RS AND THAT IT DID NOT SELL ANY UNIT BUT IT WAS THE SOCIETY THAT EXECUTED THE SALE DEEDS AND TH E ASSESSEE PARTICIPATED MERELY AS A CONFIRMING PARTY. 6. DEVELOPMENT PERMISSION WAS GIVEN BY AUDA VIDE LE TTER DATED 1.10.2005 AND BU PERMISSION VIDE LETTER DATED 10.11.2008. THE AO HAS NOT DISPUTED ANY OF THE CONDITIONS STIPULATED FROM CLAUSE (A) TO CLAUSE (D) OF SECTION 80IB(10) WITH RESPECT TO TIME LIMIT OF PERMISSIONS, TIME LIMIT OF COMPLETION, AREA OF LAND , BUILT-UP AREA LIMIT PRESCRIBED FOR THE RESIDENTIAL UNITS, AND PERCENTAGE OF COMMERCIAL CON STRUCTION WHICH CAN BE UNDERTAKEN. HIS OBJECTION IS THAT THE APPELLANT IS NOT A DEVELO PER BECAUSE IT IS NOT THE OWNER OF THE LAND ON WHICH THE RESIDENTIAL UNITS WERE CONSTRUCTE D. ACCORDING TO HIM THE APPELLANT IS A WORKS CONTRACTOR EXECUTING CONSTRUCTION AUTHORIZED BY THE COOPERATIVE HOUSING SOCIETY AND IS THUS NOT ELIGIBLE FOR DEDUCTION BECAUSE IT I S HIT BY THE EXPLANATION INSERTED IN THE ACT BY FINANCE ACT 2009 ACCORDING TO WHICH A WORKS CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PERSON IS NOT ELIGIBLE FOR DEDUCTION U/S.801B. THE APPELLANT ACCORDING TO THE AO WORKED AS CONTRACTOR FOR CONSTRUCTING THE RE SIDENTIAL UNITS AS AUTHORIZED BY THE COOPERATIVE HOUSING SOCIETY THROUGH THE DEVELOPMENT AGREEMENT. THIS OBJECTION OF THE AO HAS TO BE SEEN IN THE LIGH T OF THE TESTS LAID DOWN BY HON'BLE ITAT BENCH A AHMEDABAD DECISION DATED 7.11.2008 IN THE C ASE OF M/S.SHAKTI CORPORATION, BARODA IN ITA NO.1503/AHD/2008 IN AY 2005-06 WHEREIN HON'BLE ITAT HAS HELD THAT WHERE THE APPELLANT IS FOUND HAVING PRACTICALLY PUR CHASED THE LAND AND HAS BORNE THE RISK OF DEVELOPMENT DEDUCTION SHOULD BE ALLOWED. 7. THE SUBMISSION OF THE APPELLANT DATED 2.5.2011 I N WHICH IT WAS STATED THAT THE FUNDS TO THE COOPERATIVE HOUSING SOCIETY WERE MADE AVAILABLE BY THE APPELLANT WAS SENT TO THE AO FOR REMAND REPORT. REMAND REPORT OF THE AO WAS R ECEIVED VIDE LETTER DATED 7.9.2011. COUNTER COMMENTS OF THE APPELLANT ON REMAND REPORT WERE RECEIVED VIDE LETTER DATED 17.10.2011. 8. THE AO IN HIS REPORT DATED 7.9.2011 STATED : ' FOUR DIFFERENT CHEQUES HAVE BEEN ISSUED ON 16.9.2 004 WHICH HAS BEEN UTILIZED BY THE GANGOTRI TENEMENTS (NIKOL) COOPERATIVE HOUSING SOCI ETY LTD. TO PURCHASE THE LAND ON WHICH THE PROJECT IS DEVELOPED.' ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 4 THE COPY OF THE BANK ACCOUNT OF THE APPELLANT MAINT AINED IN THE AHMEDABAD DISTRICT COOPERATIVE BANK LTD IS ENCLOSED AS ANNEXURE-1 OF T HIS ORDER SHOWS FOUR CHEQUES TOTALING TO RS.3,49,445 BUT DEBITED ON OTHER DATES OF SEPTEMBER 2004 HAVE BEEN ISSUED. AFTER GOING THROUGH RIVAL SUBMISSIONS FOLLOWING POI NTS EMERGE: A. THE AO HAS NOT DISPUTED THE LAND FUNDING ARGUMEN T OF THE APPELLANT IN THE REMAND REPORT WHICH WAS MADE EVEN DURING THE ASSESS MENT PROCEEDINGS AS CLEAR FROM THE SUBMISSION OF THE APPELLANT REPRODUCED ON PAGE 5 OF THE ASSESSMENT ORDER WHEREIN LAND COST HAS BEEN INFORMED TO BE OF RS.4,08,045. B. SECONDLY THE BANK STATEMENT OF THE APPELLANT ENC LOSED AS ANNEXURE-1 OF THIS ORDER SHOWS FOUR CHEQUES (DEBITS) ISSUED IN SEPTEMB ER 2004 TOTALING TO RS. 3,49,445 CLAIMED TO HAVE BEEN TOWARDS LAND COST. FOUR CHEQUE S HAVE BEEN CONFIRMED IN THE REMAND REPORT BY THE AO. IN VIEW OF THE ABOVE TWO POINTS THE APPELLANT IS FO UND MEETING THE TEST OF HAVING PRACTICALLY PURCHASED THE LAND, SET FORTH IN HON'BL E ITAT DECISION IN THE CASE OF SHAKTI CORPORATION. 9. FURTHER IN THE REMAND REPORT THE AO HAS REITERAT ED THE ARGUMENTS MADE IN THE ASSESSMENT ORDER THAT THE APPELLANT IS NOT THE OWNE R OF THE LAND BECAUSE THE LAND OWNER HAS APPLIED FOR HOUSING PLAN APPROVAL AND GOT THE P ERMISSION TO DEVELOP IN THEIR NAMES. TO EXAMINE THESE ARGUMENTS THE DEVELOPMENT AGREEMEN T HAS TO BE REFERRED TO AS STATED BY HON'BLE ITAT 'A' BENCH AHMEDABAD IN THE CASE OF SHAKTI CORPORATION WHEREIN IN PARA 16 OF THE ORDER IT HAS BEEN DIRECTED THAT THE DEVEL OPMENT AGREEMENT SHOULD BE REFERRED TO FOR CONCLUDING WHETHER THE APPELLANT IS IN THE D OMINANT CONTROL OF THE LAND OR NOT AND WHETHER THE PROJECT IS DEVELOPED AT ITS COST AND RI SK. HONBLE ITAT HAS HELD THAT WHERE THE APPELLANT IS FOUND HAVING PRACTICALLY PURCHASED THE LAND AND HAS BORNE THE RISK OF DEVELOPMENT DEDUCTION SHOULD BE ALLOWED. 10. THE DEVELOPMENT AGREEMENT DATED 16.10.2004 SHOW S THAT THE DOMINANT CONTROL IS THAT OF THE APPELLANT, FOR INSTANCE PAGE 2 OF THE D EVELOPMENT AGREEMENT STATES: 'THE SECOND PARTY (I.E. THE APPELLANT) HAVE SURVEYE D AREA OF NIKOL, AHMEDABAD AND FOUND THAT THE HOUSING PROJECT FOR THE MIDDLE CLASS PEOPLE IS NECESSARY IN THE AREA AND IT HAS TAKEN INITIATIVES, DESIGNED AND CONCEIVED HOUSI NG PROJECT AT NIKOL, AHMEDABAD. THUS, IT HAD DECIDED TO PURCHASE A PIECE OF N.A. LA ND FOR THE PURPOSE. THE PARTNERS OF SECOND PARTY HAD MADE NEGOTIATION WITH THE OWNER OF THE LAND AT SURVEY NO. 472/1 & 2; NIKOL, AHMEDABAD. TO START WITH SMOOTH ADMINISTRATI ON, THE PARTNERS OF THE SECOND PART HAVE DECIDED TO FORM A BODY WHERE IN NEAR RELATIVES SHALL BE THE OFFICE BEARERS. AFTER FORMING THE HOUSING SOCIETY FOR THE PURPOSE, THE PARTNERS OF THE SECOND PART HAS ARRANGE THE FUND TO PURCHASE THE SAID LAND IN THE N AME OF THE SOCIETY, THE POSSESSION WAS TAKEN IN LIEU OF POA IN THE NAME OF THE SOCIETY. AF TER TAKING POSSESSION OF THE LAND FOR THE HOUSING PROJECT, THE SECOND PARTY HAS PREPARED/ GOT PREPARED A LAY-OUT PLAN, FILED THE PLAN BEFORE THE LOCAL AUTHORITY, MADE FOLLOW UPS AN D GOT IT APPROVED.' CLAUSES OF THE DEVELOPMENT AGREEMENT WHICH SHOW DOM INANT CONTROL ARE MENTIONED BELOW: ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 5 'CLAUSE (12) THE DEVELOPER SHALL OBTAIN THE SALE CO NSIDERATION FROM THE MEMBERS OF THE SOCIETY AGAINST THE WORK OF DEVELOPMENT AND BUI LDING THE HOUSE BY GIVING THE 'RECEIPT'. AFTER OBTAINING SUCH AGREED CONSIDERATIO N AND FULFILLMENT OF OTHER CONDITIONS, THE MEMBERS SHALL BE ALLOTTED THE HOUSE BY THE DEVE LOPER. CLAUSE (14) THE SECOND PARTY IS RESPONSIBLE TO ADMI T THE MEMBERS OF THE SOCIETY AND FOR THAT PURPOSE, THE SECOND PARTY FREE TO DO THE N ECESSARY PROCEDURE. THE SOCIETY SHALL NOT ADMIT ANY MEMBER/ENROLL NAY MEMBER WITHOUT PERM ISSION OF THE DEVELOPER-SECOND PARTY. CLAUSE (15) THE SECOND PARTY IS AUTHORIZED TO COLLECT THE AGREED CONSIDERATION FROM THE MEMBER AGAINST THE CONSTRUCT ION OF THE HOUSING UNIT. UNTIL THE RECEIPT OF THE AGREED CONSIDERATION, THE SECOND PAR TY, DEVELOPER SHALL HAVE CONTRACTUAL LIEN' ON THE LAND OWNED TO THE SOCIETY ALIAS THE SECOND PARTY SHALL HAVE ABSOLUTE POSSESSION ON THE LAND AND THAT CLEAR CONS ENT IS GIVEN BY THE FIRST PARTY.' 11. AS THE APPELLANT HAS NOT BEEN FOUND VIOLATING A NY OF THE CONDITIONS STIPULATED FROM CLAUSE (A) TO CLAUSE (D) OF SECTION 8016(10) AND IS FOUND FULFILLING THE TESTS LAID DOWN BY HON'BLE ITAT OF HAVING PRACTICALLY PURCHASED THE LA ND AND POSSESSING DOMINANT CONTROL OVER THE PROJECT, IN MY VIEW THERE IS NO JUSTIFICAT ION IN DENYING THE DEDUCTION TO THE APPELLANT. THE CASE LAWS CITED BY THE AO ARE NOT AP PLICABLE IN THIS CASE BECAUSE THE APPELLANT ACTUAL CONCEIVED AND DEVELOPED THE HOUSIN G PROJECT AND IS NOT MERELY A CONTRACTOR. THE AO IS DIRECTED TO DELETE THE ADDITI ON MADE U/S.80IB(10). 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US. 5.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF ASSE SSING OFFICER. ON OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE ASS ESSING OFFICER AND CIT(A) AND SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DE LETING THE DISALLOWANCE OF DEDUCTION U/S.80IB(10) OF THE ACT. THE CLAIM OF TH E ASSESSEE FOR DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER MAINLY FOR THE REASON THAT ASSESSEE DID NOT OWN THE LAND ON WHICH THE PROJECT WAS CONSTRUCTED A ND THE ASSESSEE WAS A WORKS CONTRACTOR AND THAT THE APPROVAL FOR CONSTRUCTION O F RESIDENTIAL UNITS WAS GIVEN BY THE LOCAL AUTHORITY TO THE LAND OWNERS AND NOT TO T HE ASSESSEE. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REM AND REPORT FROM THE ASSESSING ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 6 OFFICER HAS GIVEN A FINDING THAT ASSESSEE HAD PRACT ICALLY PURCHASED THE LAND. LD. CIT(A) FURTHER AFTER PERUSING THE DEVELOPMENT AGREE MENT HAS GIVEN A FINDING THAT THE ASSESSEE WAS HAVING DOMINANT CONTROL OVER THE L AND AND WAS FOUND TO HAVE BEEN FULFILLING THE TESTS LAID DOWN BY THE TRIBUNAL IN THE CASE OF M/S. SHAKTI CORPORATION IN ITA NO.1503/AHD/2008, ORDER DATED 07 .11.2008. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDINGS OF LD. CIT(A) AND HAS NOT BROUGHT ON RECORD ANY CONTRARY B INDING DECISION. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD.CIT(A) AND THUS, THE GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12/02/2016 SD/- SD/- (SHAILENDRA KUMAR YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED. 12/02/2016 TRUE COPY S K SINHA 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 ITA NO .3151 /AHD/2011 . A.Y. 2008-0 9 7 1.DATE OF DICTATION 11.01.2016 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE OT HER MEMBER 12-01-2016 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 12.02.2016 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 12.02.2016 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 12.02.2016 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15.02.2016 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER