The ITO, Ward-9(1), Ahmedabad V. M/s. Siddhi Construction, Ahmedabad

ITA 340/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6970 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 0 , 0 0 , BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI , ACCOUNTANT MEMBER ./ ITA NO . 340 / AHD/ 201 1 [ [ / ASSESSMENT YEAR : 20 0 7 - 08 THE INCOME TAX OFFICER, WARD - 9 (1) , AHMEDABAD VS M/S. SIDDHI CONSTRUCTION, AAROHI COMPLEX, B/H. BOPAL 444, SARDAR PATEL RING ROAD, BOPAL, AHMEDABAD PAN : ABBFS 6428 C / (APPELLANT) / (RESPONDENT) REVENUE BY : SMT. SONIA KUMAR, SR. DR. ASSESSEE(S) BY : SHR I RUPESH MEHTA, AR / DATE OF HEARING : 0 3 / 12 /2014 / DATE OF PRONOUNCEMENT: 12 /1 2 /2014 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - XV , AHMEDABAD DATED 13 . 12 .201 0 FOR THE ASSESSMENT YEAR 20 07 - 0 8 . 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE READ AS UNDER: - THE L D. COMMISSIONER OF INCOME - TAX (A) - XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE'S CLAIM FOR DEDUCT ION OF RS. 1,29,19,925/ - U/S. 80IB(1 0 ) OF THE ACT. THE L D. COMMISSIONER OF INCOME - TAX (A) - XV, AHMEDABAD HAS ERRED IN HOLDING THAT THE ASSESSEE FULFILLS THE CONDITIONS LAID DOWN FOR CLAIMING DEDUCTION U/S.80IB(10) EVEN WHEN THE LAND WAS IN ITA NO. 340/AHD/2011 M/S. SIDDHI CONSTRUCTION FOR AY 2007 - 08 2 THE NAMES OF ( I ) SHRI SANDEEPKUMAR K. AGARWAL (II) AJAYSHANKAR KRISHNAMURARILAL AGRAWAL, KARTA HUF (III) SIDHI DEVELOPERS (IV) DIPAKBHAI BALDEVBHAI PATEL, MEHUL BALDEVBHAI PATEL, ANUJA DIPAK PATEL. BHUMIKA MEHUL PATEL (V) UMADEVI AJAYSHANKAR KRISHNAMURARILAL AGRAWAL,[SH.D IPAKBHAI BALDEVBHAI PATEL AND SH. MEHUL BALDEVBHAI PATEL ARE PARTNERS AND OWNERS OF THE SIDDHI CONSTRUCTION] WHICH IS A SEP A RATE LEGAL ENTITY IN THE EYE OF LAW AND THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THEM. THE ENTIRE RESPONSIBILITY TO EXECUTE THE HOUSING PROJECT AND ABIDE BY THE TERMS AND CONDITIONS OF ITS APPROVAL RIGHT FRO M THE INCEPTION O F THE PROJECT TILL ITS COMPLETION RESTS WITH THEM. ASSESSEE WAS JUST A CONTRACTOR OF THE LAND CONSTRUCTING 119 RESIDENTIAL COMPLEX AND NOT A DEVELOPER. 3. THE CIT(A) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER : - 5. GROUND NO.1 TO 7 PERTAIN TO DISALLO WANCE MADE U/S.801 B (10) BY THE AO. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE DISALLOWANCE WAS MADE AS PER REASONS SUMMARIZED IN PARA 2.25 OF THE ASSESSMENT ORDER. THE CRUX IS THAT THE APPELLANT DID NOT OWN THE LAND AND HENCE IN VIEW OF THE AO IS NOT ELIGIBLE FOR DEDUCTION BECAUSE HE WORKED AS A CONTRACTOR / AGENT OF THE LAND OWNERS. PERUSAL OF PARA 2.23 OF THE ASSESSMENT ORDER SHOWS THAT ACCORDING TO THE AO THE APPELLANT EXCEEDED 1500 SQ.FT. LIMIT OF BUILT - UP AREA AND WAS THUS NOT ENTITLED TO DEDU CTION U/S.80IB(10). 6. DURING THE COURSE OF APPELLANT PROCEEDING SUBMISSIONS DATED 13.4.2010, 26.10.2010 AND 28.10.2010 WERE FILED BY THE L D. AR WHICH ARE PLACED ON RECORD. VARIOUS POINTS WERE MADE DISPUTING THE DENIAL OF DEDUCTION. 7. THE POINT OF OWNERSHIP OF LAND NOT ENTITLING THE APPELLANT FOR THE DEDUCTION HAS TO BE SEEN IN THE LIGHT OF THE DECISION OF HON'BLE ITAT BENCH A AHMEDABAD DECISION DATED 7.11.2008 IN THE CASE OF M/S. SHAKTI CORPORATION, BARODA IN ITA NO. 1 503/AHD/2008 IN AY 2005 - 06. ACC ORDING TO THIS DECISION DEVELOPMENT AGREEMENT HAS TO BE REFERRED TO AND IF IT IS FOUND THAT THE ASSESSEE HAS PRACTICALLY PURCHASED THE LAND AND ACQUIRED DOMINANT CONTROL AND HAS DEVELOPED THE PROJECT AT ITS OWN RISK IT IS ENTITLED FOR DEDUCTION. VIDE SUBMISSION DATED 13.4.2010 IT WAS STATED THAT THE FIRM CAME INTO EXISTENCE FROM 19.1.2005 AND IS FILING RETURNS FROM AY 2005 - ITA NO. 340/AHD/2011 M/S. SIDDHI CONSTRUCTION FOR AY 2007 - 08 3 06. IT WAS STATED THAT 80 I B DEDUCTION WAS CLAIMED AND ALLOWED BY THE DEPARTMENT IN AY 2005 - 06 AND 2006 - 07. IT WAS FURTHER STATED IN THE SUBMISSION THAT LAND WAS OWNED BY THE PARTNERS, THEIR RELATIVES AND SISTER CONCERNS. 8. AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEEN THROUGH THE DEVELOPMENT AGREEMENT DATED 10.1.2005 THAT THE APPELLANT FIRM SIGNED THIS AGREEMENT WITH THE FOLLOWING PERSONS TERMED AS LAND OWNER IN THE AGREEMENT: 1 SANDIPKUMAR KRISHNAMURARILAL AGARWAL 2 AJAYSHANKAR KRISHNAMURARILAL AGARWAL, KARTA HUF 3 SIDHI DEVELOPERS 4 DIPAKBHAI BALDEVBHAI PATEL, MEHUL BALDEVBHAI PATEL, ANUJA DIPAK PATEL, BHUMIKA MEHUL PATE L 5 UMADEVI AJAYSHANKAR KRISHNAMURARILAL AGARWAL IT WAS SEEN THAT IN AY 2005 - 06 THERE WERE 5 PARTNERS AS UNDER: I) TARABEN B PATEL - 25% II) DEEPAKBHAI B PATEL - 25% III) SARIDIP KRISHNAMURARILAL - 20% IV)UMADEVI AJAY SHANKAR - 20% V) PRABHADEVI KRISHNAMURARILAL - 10% IN AY 2006 - 07 THE ABOV E PARTNERS WERE THERE , HOWEVER IN AY 2007 - 08 FOLLOWING WERE THE PARTNERS: I) TARABEN B PATEL - 25% II) DEEPAKBHAI B PATEL - 25% III) M EHULBHAI B PATEL - 50% THUS THE CONTENTION THAT PARTNERS OF THE APPELLANT FIRM ARE ALSO CO - OWNERS OF THE LAND ON WHICH THE RESIDENTIAL UNITS WERE CONSTRUCTED IS CORRECT THOUGH IT IS TRUE THAT ALL THE LAND OWNERS ARE NOT PARTNERS. ITA NO. 340/AHD/2011 M/S. SIDDHI CONSTRUCTION FOR AY 2007 - 08 4 9. FURTHER THE DEVELOPMENT AGREEMENT DATED 10.1.2005 SHOWS THAT AS PER CLAUSE 17 THE TOTAL VALUE OF THE LAND WAS DECIDED AS RS.1,58,34,350 FOR WHICH THE LAND OWNERS HAD TO BE PAID. CLAUSE 17 IS AS UNDER: 'SINCE THE LAND OWNERS IS HEREBY GIVING THE DEVELOPMENT RIGHT AS MENTIONED IN THIS AGREEMENT, THE TOTAL VALUE OF THE LAND IS DECIDED AS RS. 1,58,34,350 AND THE PAYMENT WILL BE GIVEN TO THEM AS AND WHEN THEY EXECUTE THE AGREEMENT IN FAVOUR OF THE PERSON TO WHOM SEND BY DEVELOPER.' AS PER CLAUSE 18 THE RISK AND REWARD WAS OF THE APPELLANT SO WAS THE PROFIT. CLAUSE 18 IS REPRODUCED BE LOW: 'SINCE THE RISK AND REWARD IS OF THE DEVELOPER AND BUILDER, IT IS SPECIFICALLY AGREED BY BOTH THE PARTIES THAT THE DEVELOPER AND BUILDER WILL NOT ENTITLED FOR ANY REMUNERATION FROM THE LAND OWNERS. THEY HAVE TO MANAGE THEIR PROFIT OUT OF THE TOTAL DEVELOPMENT CO ST RECOVER FROM THE PARTIES THEMSELVES. IT IS HEREBY SPECIFICALLY AGREED THAT LAND OWNER ENTITLED ONLY FOR THE AGGREGATE AMOUNT AS MENTIONED ABOVE AND NOT ENTITLE OR RESPONSIBLE FOR ANY SUBSEQUENT INCREASE OR DECREASE IN PRICES OF LAND.' AND AS PER CLAUSE 14 THE LAND OWNER COULD NOT SELL THE LAND TO ANYONE WITHOUT THE PRIOR CONSENT OF THE APPELLANT, WHO HAS BEEN TERMED AS DEVELOPER IN THE DEVELOPMENT AGREEMENT. IN VIEW OF THE ABOVE CLAUSES - CLAUSE 14, 17 AND 18 OF THE DEVELOPMENT AGREEMENT I AM OF THE VIEW THAT THE COST OF LAND WAS PAID TO THE LAND OWNERS AS PER DEVELOPMENT AGREEMENT, THE APPELLANT ACQUIRED DOMINANT CONTROL OVER THE LAND AND DEVELOPED THE HOUSING PROJECT AT ITS OWN RISK AND THE PROFIT WAS ALSO TO BE THAT OF THE APPELLANT. 4. BOTH THE PART IES BEFORE US AGREED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (2012) 341 ITR 40 3, WHEREIN IT WAS HELD THAT FOR CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT , A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH THE HOUSING PROJECT WAS CONSTRUCTED. ITA NO. 340/AHD/2011 M/S. SIDDHI CONSTRUCTION FOR AY 2007 - 08 5 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF HOUSING PROJECT S . THE UNDISPUTED FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME SHOWING NIL INCOME AFTER CLAIMING DEDUCTION U/S 80IB(10) FOR RS.1,29,19,925/ - . THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE DID NOT CONCEPTUALIZE AND OWNED THE PROJECT IN AS MUCH AS THE ASSESSEE IS NOT THE OWNER OF THE LAND AND THE APPROVAL WAS NOT ISSUED TO IT BY THE LOCAL AUTHORITIES. 6. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM FOR DEDUCTION U/S80IB(10) TO THE ASSESSEE ON THE GROUND THAT THE PARTNERS OF THE ASSESSEE - FIRM WERE ALSO CO - OWNERS OF THE LAND ON WHICH RESIDENTIAL UNITS WERE CONSTRUCTED, AS PER CLAUSE 17 , THE TOTAL VALUE OF THE LAND W AS DECIDED AS RS.1,58,34,350/ - FOR WHICH THE LAND OWNERS HAD TO BE PAID AS AND WHEN THEY EXECUTE THE AGREEMENT IN FAVOUR OF THE PERSON AT THE INSISTENCE OF THE ASSESSEE DEVELOPER AND THAT AS PER CLAUSE 18, THE RISK AND REWARD WAS OF THE ASSESSEE - FIRM AS IT WAS STATED IN THE SAID CLAUSE THAT THEY HAVE TO MANAGE THEIR PROFIT OUT OF THE TOTAL DEVELOPMENT COST RECOVERED FROM THE PARTIES THEMSELVES AND IT WAS SPECIFICALLY AGREED THAT THE LAND OWNER WAS ENTITLED TO THE AGGREGATE AMOUNT AS MENTIONED IN THE D EVELOPMENT A GREEMENT AND WAS NOT ENTITLED OR RESPONSIBLE FOR ANY SUBSEQUENT INCREASE OR DECREASE IN PRICES OF LAND. 7. WE FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPRA) HAS HELD THAT THE PROVISIONS NOWHERE REQUIR ED THAT ONLY THOSE DEVELOPERS WHO THEMSELVES OWN THE LAND WOULD RECEIVE THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. NEITHER THE PROVISIONS OF SECTION 80IB NOR ANY OTHER PROVISIONS CONTAINED IN OTHER ITA NO. 340/AHD/2011 M/S. SIDDHI CONSTRUCTION FOR AY 2007 - 08 6 RELATED STATUTES DEMONSTRATE THAT OWNERSHIP OF THE L AND WOULD BE A CONDITION PRECEDENT FOR DEVELOPING THE HOUSING PROJECT. SUCH REQUIREMENT CANNOT BE READ INTO THE STATUTE BECAUSE T HERE IS NOTHING UNDER SECTION 80IB(10) OF THE ACT REQUIRING THAT OWNERSHIP OF THE LAND MUST VEST IN THE DEVELOPER TO BE ABLE T O QUALIFY FOR SUCH DEDUCTIO N . 8. WE, THEREFORE, FIND THAT THE ORDER OF THE CIT(A) IS SUPPORTED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS HEREBY CONFIRMED AND THE GROUNDS OF APPE AL OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE CO URT ON F R I D A Y , THE 1 2 T H OF DECEMBER , 2014 AT AHMEDABAD. SD/ - SD/ - ( G.C. GUPTA ) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 1 2 /1 2 /2014 BIJU T., PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - XV, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD