The ITO, Ward-3(2), Baroda V. M/s. Parashwanath Developers, Baroda

ITA 3265/AHD/2009

• Counselvise Citation: 326520514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Section: 80IB

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.3265/AHD/2009 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER WARD-3(2) BARODA & & & & / VS. M/S.PARSHWANATH DEVELOPERS 2, SUDAN LAXMI JAIN SOCIETY SUBHANPURA, BARODA ( '# ./)* ./ PAN/GIR NO. : AAGFP 0761 K ( (+ / // / APPELLANT ) .. ( ,-(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. ,-(+ / . ' / RESPONDENT BY : SHRI P.M.MEHTA &0 / #/ // / DATE OF HEARING : 14/6/2012 12' / # / DATE OF PRONOUNCEMENT : 22/06/2012 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF THE LD.CIT(A)-II, BARODA DATED 18.9.2009 AND THE GROUN DS RAISED ARE REPRODUCED BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(APPEALS) ERRED IN ALLOWING THE DEDUCTION U/S.80IB(10) TO THE ASSESSEE, WHO WAS NOT GRANTED A PPROVAL BY THE LOCAL AUTHORITY TO CARRY ON THE BUSINESS OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS, IN CONTRA VENTION OF A PLAIN READING OF SECTION 80IB(10) R.W.S. 80IB(1), EXPLANATION TO SECTION 80IB(10) AND RULE 18BBB. ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 2 - 2. THE LD.CIT(APPEALS) FAILED TO MAKE A COMBINED READI NG OF SECTION 80IB(1), WHICH IS THE SUBSTANTIVE PROVISION , AND SECTION 80IB(10), WHICH IS A MACHINERY PROVISION, POSTULATI NG COMPLETE IDENTITY BETWEEN THE ASSESSEE AS REFERRED TO IN SECTION 80IB(1), AND THE UNDERTAKING DEVELOPING AND BUILDIN G HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS REFERRE D TO IN SECTION 80IB(10), NOT PERMITTING SUCH SPLITTING BET WEEN THE ASSESSEE AND THE PERSON WHO IS GRANTED APPROVAL BY THE LOCAL AUTHORITY FOR DEVELOPING AND BUILDING HOUSING PROJE CTS, AS PRESUMED BY THE CIT(APPEALS). 3. THE LD.CIT(APPEALS) FAILED TO ABIDE BY THE SCHEME O F SECTION 80IB BASED ON COMPLETE IDENTITY BETWEEN THE ASSESSE E AS REFERRED TO IN SECTION 80IB(1), ON THE ONE HAND, AN D THE ENTITY FULFILLING THE CONDITIONS LAID DOWN IN SECTIONS 80I B(3), 80IB(9), 80IB(11) AND 80IB(11AA), BESIDES SECTION 80IB(10), ON THE OTHER. 4. THE LD.CIT(APPEALS) FAILED TO APPRECIATE THAT THE L AND BEING INTEGRAL PART OF ANY HOUSING PROJECT, THE ASSESSEE, WITHOUT OWNING THE LAND COMPONENT, COULD NOT PASS ON FULL T ITLE OVER DWELLING UNITS TO THE CUSTOMERS SO AS TO DERIVE PRO FITS FROM DEVELOPING AND BUILDING HOUSING PROJECTS AND THIS I NTEGRATION IS FURTHER FORTIFIED BY THE REQUIREMENT OF APPROVAL BY THE LOCAL AUTHORITY AS WELL AS GRANT OF COMPLETION CERTIFICAT E BY THE LOCAL AUTHORITY UNDER CLAUSE (II) OF THE EXPLANATION BELO W SECTION 80IB(10), BOTH OF WHICH ARE GRANTED TO THE LANDOWNE R, THUS TREATING HIM ALONE AS RUNNING THE UNDERTAKING FROM THE BEGINNING TO THE END. 5. THE LD.CIT(APPEALS) ERRED IN DISPENSING WITH THE OW NERSHIP OF LAND INTRINSICALLY LINKED WITH THE APPROVAL BY THE LOCAL AUTHORITY, ALSO IN DISREGARD OF SECTION 80IB(10)(B) PROVIDING FOR THE CONDITION OF MINIMUM SIZE OF THE PLOT OF LA ND, WHICH CAN BE FULFILLED ONLY BY THE LANDOWNER AND THE PERSON G ETTING APPROVAL FROM THE LOCAL AUTHORITY. 6. THE LD.CIT(APPEALS) ERRED IN MAKING ASSUMPTION REGA RDING PASSING ON OF THE BENEFIT OF SECTION 80IB(10) BY TH E LANDOWNER GETTING APPROVAL FROM THE LOCAL AUTHORITY FOR DEVEL OPING AD BUILDING OF HOUSING PROJECTS TO THE PERSON WITH WHO M HE ENTERS INTO AGREEMENT FOR EXECUTION OF SUCH PROJECTS, WITH OUT THERE BEING ANY PROVISION IN SECTION 80IB FOR SUCH PASSIN G ON, AS CONTAINED IN SECTION 80HHC(1A). ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 3 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT DATED 10.12.2008 WERE THAT THE ASSESSEE- FIRM IS ENGAGED IN BUILDING CONSTRUCTION ACTIVITIES . THE ASSESSEE HAS CLAIMED A DEDUCTION U/S.80IB(10) OF THE ACT OF RS. 29,11,158/-. THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE WAS NOT THE OWNER OF THE LAND. IT HAS ALSO BEEN NOTED BY THE AO THAT THE AS SESSEE HAD NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT FROM THE LOCAL AUTH ORITY. IT WAS FOUND THAT THE LAND OWNERS HAVE SOLD THE PIECES OF LAND T O UNIT HOLDERS DIRECTLY. ACCORDING TO AO, THE ASSESSEE HAD ACTED MERELY AS A CONFIRMING PARTY. ACCORDING TO AO, THE ASSESSEE HAS WORKED AS A CONTR ACTOR. ON THE BASIS OF THOSE FACTS, AFTER A LONG DISCUSSION ON THE LEGA L ASPECT OF THE ISSUE INVOLVED, THE AO HAS ARRIVED AT A CONCLUSION THAT THE ASSESSEE IS NOT ENTITLED FOR THE CLAIM OF DEDUCTION U/S.80IB(10) AN D, ACCORDINGLY, THE INCOME WAS ASSESSED IN HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS CALLED FOR A REMAND REPORT AN D IN COMPLIANCE THE CONTENTIONS OF THE ASSESSEE WAS THAT THE CONSID ERATION WAS PAID TO THE LAND OWNERS. THE CONSIDERATION AS PER ASSESSEE P AID TO THE LAND OWNERS AMOUNTED TO RS.1,45,87,350/-. IT WAS CONTESTED TH AT THE ENTIRE RISKS AND RESPONSIBILITIES OF THE SAID HOUSING PROJECT WAS BO RNE BY THE ASSESSEE- FIRM. LD.CIT(A) HAS REFERRED THE DECISION OF M/S. SHAKTI CORPORATION BEARING ITA NO.1503/AHD/2008 ORDER DATED 07.11.2008 . LD.CIT(A) HAS ALSO MADE AN OBSERVATION THAT ALTHOUGH THE LAND WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE-DEVELOPER, BUT THE TOTAL COST OF THE LAND OF RS.1,45,87.350/- WAS PAID TO THE LAND-OWNERS. THE LD.CIT(A) HAS THEREFORE HELD THAT THE CONTROL OVER THE LAND WAS W ITH THE ASSESSEE AND THE ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 4 - ASSESSEE HAD UNDERTAKEN THE RISKS FOR THE DEVELOPME NT OF THE SAID PROJECT AND THE COST BORNE BY THE ASSESSEE FOR THE SAID PRO JECT. LD.CIT(A) HAS CONCLUDED THAT THE FIRM THROUGH ITS PARTNERS HAVE D EVELOPED THE PROJECT, HENCE ENTITLED FOR THE CLAIM OF DEDUCTION U/S.80IB( 10) OF THE ACT. 4. WITH THIS BRIEF BACKGROUND WE HAVE HEARD BOTH TH E SIDES. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.SAMIR TEKRIWAL APPEARED AND PLACED RELIANCE ON THE OBSERVATIONS OF THE AO. H E HAS MENTIONED THAT EVEN IF THE ORDER OF THE HONBLE GUJARAT HIGH COURT IS TO BE FOLLOWED, AS PRONOUNCED IN THE CASE OF CIT VS. RADHE DEVELOPERS 341 ITR 433(GUJ.), THE ASSESSEE IS UNDER OBLIGATION TO SUBSTANTIATE IT S CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT IN THE LIGHT OF THE OBSERVA TIONS/DIRECTIONS MADE BY THE HONBLE HIGH COURT. WE HAVE BEEN INFORMED THAT IN ASSESSEES OWN CASE FOR IMMEDIATE PRECEDING ASSESSMENT YEAR, I .E. A.Y. 2005-06 BY ITAT AHMEDABAD D BENCH IN THE ITA NO.265/AHD/2009 TITLED AS ITO VS. PARSHWANATH DEVELOPER VIDE ORDER DATED 26 .3.2009 HAS RESTORED THE ISSUE BACK TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS, FOR READY REFERENCE, RELEVANT PORTION IS HEREBY REPRODU CED:- 16. THE FACTS INVOLVED IN THE CASE OF THE ASSESSE E ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) A ND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED T HE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CASE WHERE T HE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJ ECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 5 - AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH T HE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ON LY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SE RVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HA S NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID D OWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY W ITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF TH E DEVELOPMENT AGREEMENT AND CRUX OF THE AGREEMENT IS THAT THE ASS ESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED THE HOUSING PR OJECT AT ITS OWN, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSE E WILL BE ENTITLED FOR THE DEDUCTION U/S.80IB(10). THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF FAQUIR CHAND GULATI (S UPRA) WILL NOT ASSIST THE REVENUE, AS THE AGREEMENT IS NOT SHARING OF THE CONSTRUCTED AREA. IN OTHER CASES THE COPY OF AGREE MENT SINCE HAS NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED, THE TER MS AND CONDITIONS OF THE AGREEMENT WERE NOT SPECIFICALLY A RGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE ORDER O F THE CIT(A) AND RESTORE ALL OTHER APPEALS TO THE FILE OF THE AO WI TH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AND DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDER ATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOP ER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S.80IB(10). IN CAS E THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE S HOULD NOT BE ALLOWED DEDUCTION U/S.80IB(10) TO THE ASSESSEE. ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 6 - 5. ON EXAMINATION OF THE FACTS AND IN THE LIGHT OF THE VIEW ALREADY TAKEN BY US, WE HEREBY RESTORE THIS ISSUE BACK TO T HE FILE OF THE AO TO REDECIDE IN THE LIGHT OF THE FOLLOWING DIRECTIONS:- (A) THE RELEVANT TERMS OF DEVELOPMENT AGREEMENT A RE TO BE EXAMINED SO AS TO ASCERTAIN THE TERMS ON WHICH THE ASSESSEE WAS GRANTED RIGHT OF CONSTRUCTION OF A HOUSING PROJ ECT. (B) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE ASCERTAINED WHETHER IT WAS A WORK CONTRACT OR A DEVELOPMENT CONTRACT. (C) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE EXAMINED THAT WHICH OF THE PARTY HAD TAKEN FULL RESPONSIBILITY FOR EXECUTION OF THE SAID DEVELOPMEN T PROJECT. (D) WHETHER UNDER THE AGREEMENT THE ASSESSEE HAD BE EN GIVEN FULL AUTHORITY TO DEVELOP THE LAND AND TO CONSTRUCT RESIDENTIAL UNITS. THE AO HAS TO EXAMINE THE FACT IN RESPECT O F ENGAGEMENT OF PROFESSIONALS, SUCH AS, ARCHITECT FOR DESIGNING AND ARCHITECTURAL WORK. (E) THE AO HAS TO EXAMINE THE RESPONSIBILITY OF ENR OLMENT OF MEMBERS AND COLLECTION OF CHARGES REQUIRED TO BE MA DE FROM THE BUYERS OF THE RESIDENTIAL UNITS. (F) THE AO HAS TO EXAMINE ABOUT THE PROFIT OR L OSS ARISING FROM THE SAID PROJECT. (G) THOUGH THE OWNERSHIP OF LAND HAS BEEN HELD AS NOT THE ONLY CRITERIA FOR ALLOWING THE CLAIM U/S.80IB(10) BUT TH E DOMAIN OVER THE LAND AND THE CONTROL OVER THE PROJECT HAS TO BE EXAMINED BY THE AO. ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 7 - (H) WHETHER ON TRANSFER OF DOMAIN THE LAND OWNER S HAVE RECEIVED ANY CONSIDERATION AND WHETHER IT WAS A FIXED AMOUNT OR DEPEND UPON THE PROFITS OF THE PROJECT. LIKEWISE, T HE AO HAS TO ASCERTAIN THAT WHETHER THE ASSESSEE WAS GIVEN A FIXED PERCENTAGE AS REMUNERATION FOR THE SAID PROJECT IN LIEU OF GRANTING PERMISSION TO CONSTRUCT THE RESIDENTIAL UN ITS OR TO EARN PROFIT AS A PROJECT DEVELOPER. (I) THE AO HAS TO ASCERTAIN THE POSITION OF THE POS SESSION OVER THE LAND DURING THE CONSTRUCTION PERIOD. (J) FOR THE PURPOSE OF CONSTRUCTION THE AO HAS TO EXAMINE THE FINANCIAL ARRANGEMENTS. (K) THE AO HAS TO EXAMINE THE PROCEDURE FOR RAISING OF FUNDS EITHER BY PRIVATE PLACEMENT OR BY FINANCIAL INSTITU TIONS. (L) THE RISK ELEMENT CONNECTED WITH THE SAID HOUSIN G PROJECT HAS ALSO TO BE EXAMINED. (M) THE ASSESSING OFFICER HAS TO EXAMINE THE SIZE OF THE PLOT ON WHICH PROJECT IS CONSTRUCTED. (N) THE ASSESSING OFFICER HAS TO EXAMINE BUILT-UP A REA OF SANCTIONED UNIT WHETHER WILL IN THE PRESCRIBED LIMI T. 6. IN ADDITION TO THE ABOVE GUIDELINES, ONCE THE M ATTER IS GOING BACK FOR RECONSIDERATION, THEN THE AGREEMENTS CONNECTED TO THE LAND AND THE DETAILS OF THE APPROVAL GRANTED BY THE LOCAL AUTHOR ITY PERMITTING TO DEVELOPMENT OF THE HOUSING PROJECT CAN ALSO BE EX AMINED IF DEEM FIT. SINCE THE HONBLE HIGH COURT HAS GIVEN THE VERDICT IN FAVOUR OF THE ASSESSEE AFTER DUE ASCERTAINMENT OF THESE BASIC FAC TS, THEREFORE IT IS APPROPRIATE FIRST TO PLACE ON RECORD ALL THESE INFO RMATION AND THEN IF FACTS ARE IDENTICAL CONSEQUENTLY THEREUPON, THE CITED DEC ISION HAS TO BE ITA NO. 3265/AHD/2009 ITO VS. M/S.PARSHWANATH DEVELOPERS ASST.YEAR 2006-07 - 8 - FOLLOWED TO DISPOSE OF THE ISSUE. WITH THESE DIREC TIONS, WE HEREBY ALLOW THE GROUND OF THE REVENUE THAT TOO FOR STATISTICAL PURPOSES ONLY. 7. IN THE RESULT, REVENUES APPEAL IS TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 22/ 06 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-II, BARODA 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION..ON 16.6.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.6.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 22.6.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.6.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER