The ITO, Ward-5(1), Baroda V. M/s. Shree Narayan Associates, Baroda

ITA 3176/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6416 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 3176/AHD./2009 : ASSESSMENT YEAR 200 6-07 ITO, WARD-5(1), BARODA VS- M/S. SHREE NARAYAN ASSOCIATES, BARODA (PAN : ABBFS 2999G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR, SR. D.R. RESPONDENT BY: NONE (WRITTEN SUBMISSION) O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-V, BARODA DATED 08.09.2009 FOR THE ASSESSMENT YEAR 2006-2007. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND CONSTRUCTION OF RESIDENTIAL BUILDING. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE FILED TH E RETURN OF INCOME DECLARING INCOME OF RS. NIL. THE AO FRAMED THE ASSESSMENT UND ER SECTION 143(3) OF THE I.T. ACT, 1961 ON 29.12.2008 WHEREIN HE DISALLOWED DEDUC TION CLAIMED UNDER SECTION 80IB(10) AMOUNTING TO RS.88,37,768/-. 3. ON APPEAL, THE LD. CIT(A) DIRECTED THE AO TO VER IFY THE AGREEMENT AND OTHER DETAILS IN THE LIGHT OF THE DECISION OF THE ITAT DA TED 07/11/2008 IN THE CASE OF M/S. SHAKTI CORPORATION IN ITA NO.1503/AHD./2008. THE RE LEVANT FINDING/DIRECTION OF THE LD. CIT(A) IS CONTAINED IN PARA 4.3, WHICH READS AS UNDER: 4.3. I HAVE CAREFULLY EXAMINED THE FACTS OF THE CA SE, SUBMISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSESSIN G OFFICER. ALTHOUGH, THE ISSUE WAS DECIDED IN FAVOR OF THE APPELLANT AND AGA INST REVENUE BY THE ORDER OF THE JURISDICTIONAL ITAT, IN THE CASE OF RADHE DEVELOPERS VS ITO WARD 3(2) BARODA NO 2482/AHD/2006 A BENCH AHMEDABAD, HOWEVER THE DECISION WAS 2 ITA NO.3176/AHD./2009 PARTLY MODIFIED BY THE SUBSEQUENT DECISION IN THE C ASE OF ITO VS M/S. SHAKTI CORPORATION ITA NO. 1503/AHD/2008 DATED 07/11/2008 WHEREIN, THE HON'BLE ITAT HAS INDICATED THAT THE BENEFIT UNDER 8016(10} WOULD BE AVAILABLE IF THE DEVELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND THE BENEFIT WOULD BE DENI ED IF THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR A FIXED REMUNERATION AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE PROJECT ON BEHALF OF THE LAND OWNER. THE AO IS ACCORDINGLY, DIRECTED TO VERIFY THE AGREEMENT AND OTHER DETAILS IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SHAKTI DEVELOPERS. THE GROUND IS ALLOWED SUBJECT TO VERIFICATION. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.88,37,768/- UNDER SECTI ON 80IB(10)OF THE INCOME- TAX ACT DESPITE THE ASSESSEE'S UNDERTAKING NOT BEIN G APPROVED BY THE LOCAL AUTHORITY. THE LEARNED CIT(A) RELIED ON THE ITAT'S DECISION IN THE CASE OF M/S. SHAKTI DEVELOPERS. THE SAID DECISION HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL TO THE HIGH COURT HAS BEEN FILED. 2 THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH AT THE APPROVAL FOR DEVELOPING AND BUILDING HOUSING PROJECTS WAS GRANTE D TO THE ORIGINAL OWNERS OF THE LAND AND NOT TO THE ASSESSEE, WHO ACTED ONLY AS AN AGENT FOR EXECUTION OF THE PROJECT OF POOJA ENTERPRISE, WHICH RIGHTS WERE OBTAINED BY THE ASSESSEE FIRM FROM THE ORIGINAL OWNERS. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LAND BEING AN ESSENTIAL AND INTRINSIC PART OF DEVELOPING AND BUILDING OF A HOUS ING PROJECT, APPROVAL IS GRANTED BY THE LOCAL AUTHORITY TO THE OWNER OF THE LAND FOR DEVELOPING AND BUILDING HOUSING PROJECTS THEREON, AND ANY OTHER PE RSON, TO WHOM HE ENTRUSTS THE WORKS CONNECTED WITH THE EXECUTION OF THE PROJE CT INSTEAD OF TAKING IT UP HIMSELF, CANNOT BE SAID TO BE AN 'UNDERTAKING DEVEL OPING AND BUILDING HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY' WITHIN TH E MEANING OF SECTION 80IB{10) OF THE ACT. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IT IS THE OWNERS OF THE LAND WHO ENTERED INTO AGREEMENTS FOR SATE OF THE DEVELOPED U NITS TO THE BUYERS AND THE ASSESSEE ACTED ONLY AS A CONFIRMING PARTY WHICH REN DERS THE OWNERS OF THE LAND AND NOT THE ASSESSEE AS 'AN UNDERTAKING' IN TERMS O F SECTION 80IB(10). 5. THE LEARNED CIT(A) ERRED IN ADOPTING LIBERAL INT ERPRETATION OF A BENEVOLENT PROVISION DESPITE THE SAME DOING VIOLENCE TO THE EX PRESS LANGUAGE USED IN THE PROVISION IN CONTRAVENTION OF THE RATIO SETTLED IN THE CASE OF PETRON ENGINEERING CONSTRUCTION P. LTD. VS C.B.D.T.175 ITR 523 (SC), C IT VS BUDHARAJA & CO 3 ITA NO.3176/AHD./2009 204 ITR 412 (SC), PANDIAN CHEMICALS LTD. VS CIT 262 ITR 278 (SC) AND IPCA LABORATORIES LTD VS CIT 262 ITR 278 (SC). 5. AT THE TIME OF HEARING BEFORE US, NONE WAS PRESE NT FROM THE SIDE OF THE ASSESSEE. HOWEVER, WRITTEN SUBMISSIONS WERE PLACED ON RECORD VIDE LETTER DATED 23.03.2011. IN THIS WRITTEN SUBMISSIONS, IT IS MENT IONED THAT IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06. THE COPY OF THE DECISION O F THE ITAT SMC BENCH DELIVERED ON 24.09.2008 IN ITA NO.2655/AHD/2008 FOR THE ASSESSMENT YEAR 2005-06 IS ALSO PLACED ON RECORD. THE LD. D.R., AFTER GOING THROUGH THE WRITTEN SUBMISSIONS, POINTED OUT THAT IN THE IMPUGNED ORDER, THE LD. CIT (A) RELIED ON THE ITAT DECISION IN THE CASE OF M/S. SHAKTI CORPORATION AND THE SAID DE CISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL TO THE HONBLE HIGH COURT HAS BEEN FILED. HE FURTHER POINTED OUT THAT APPROVAL FOR DEVELOPING AND BUILDI NG HOUSING PROJECT WAS GRANTED TO THE ORIGINAL OWNER OF THE LAND AND NOT TO THE ASSES SEE. THE ASSESSEE MERELY ACTED ONLY AS AN AGENT FOR THE EXECUSION OF THE PROJECT OF POO JA ENTERPRISE, WHICH RIGHTS WERE OBTAINED BY THE ASSESSEE FIRM FROM THE ORIGINAL OWN ER OF LAND. THE LD. D.R. ALSO POINTED OUT THAT THE OWNER OF LAND WHO ENTERED INTO AGREEMENT FOR SALE OF THE DEVELOPED UNIT TO THE BUYERS AND ASSESSEE HAS MEREL Y ACTED ONLY AS A CONFIRMING PARTY WHICH RENDERS THE OWNER OF THE LAND AND NOT THE ASS ESSEE AS AN UNDERTAKING IN TERMS OF SECTION 80IB(10) OF THE I.T. ACT, 1956. 6. AFTER HEARING THE LD. D.R., WE HAVE CAREFULLY GO NE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AS WELL AS THE DE CISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 ( SUPRA ). ADMITTEDLY, IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS RELIED ON THE DECISION OF ASSESS EES OWN CASE FOR THE ASSESSMENT EYAR 2005-06 AS WELL AS THE DECISION IN THE CASE OF SHAKTI DEVELOPERS ( SUPRA ). SINCE, IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A) DIRECTING THE AO 4 ITA NO.3176/AHD./2009 TO VERIFY THE AGREEMENT AND OTHER DETAILS, IN THE L IGHT OF THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SHAKTI DEVELOPERS. WE, THEREFORE, DECLINE TO INTERFERE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.