The ITO, Ward-9(1), Ahmedabad V. M/s. Shilp Corporation, Ahmedabad

ITA 341/AHD/2011

• Counselvise Citation: 34120514 RSA 2011
• Duration Of Justice: 4 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: S N DIVETIA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHM E DABAD , BEFORE: SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER SHRI KUL BHARAT, JUDICIAL MEMBER I T A NO. 341 /AHD/ 20 1 1 ASSESSMENT YEAR : 200 7 - 0 8 IT O , WARD - 9 (1), AHMEDABAD V/S . M/S. SHILP CORPORATION 40, HARSHAD COLONY PART - II, B/H. INDIA COLONY, BAPUNAGAR, AHMEDABAD PAN NO. A A ZFS4476K (APPELLANT) .. (RESPONDENT) / BY REVENUE SHRI ALBINUS TIRKEY , SR. D.R. / BY ASSESSEE SHRI S. N. DIVETIA , A.R. / DATE OF HEARING 31 . 0 8 .201 5 / DATE OF PRONOUNCEMENT 11 .0 9 .201 5 O R D E R PER : KUL BHARAT, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - XV , AHMEDABAD , DATED 14 TH DECEMBER, 2010 PERTAINING TO ASSESSMENT YEARS 200 7 - 0 8 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: I TA NO. 341 /AHD/ 1 1 A.Y. 0 7 - 0 8 ( IT O VS. M/S. SHILP CORPORATION ) PAGE 2 1). THE ID. 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 DEDUCTION OF RS.1,18,97,366/ - U/S. 80IB(10) OF THE ACT. 2). 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 THE NAME OF SHRI LALJIBHAI HARIBHAI SUDANI, WHO IS A SEPARATE LEGAL ENTITY IN THE EYE OF LAW AND THE ASSESSEE E NTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE LAND OWNER. AN ASSESSEE IS A WORK CONTRACTOR WHO WAS AWARDED THE CONTRACT BY THE LAND OWNER. THE ENTIRE RESPONSIBILITY TO EXECUTE THE HOUSING PR O JECT A N D ABIDE BY THE TERMS AND CONDITIONS OF ITS A PPROVAL RIGHT FROM THE INCEPTION OF THE PROJECT TILL ITS COMPLETION RESTS WITH THE LAND OWNER. ASSESSEE WAS JUST A CONTRACTOR OF THE LAND CONSTRUCTING HOUSING SCHEME. 3). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TA X (A) - XV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ' 4). IT IS THEREFORE, PRAYED THAT THE ORDER OF THE ID. COMMISSIONER OF INCOME - TAX(A) - XV, AHMEDABAD MAY BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 . BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961, HEREINAFTER REFERRED TO AS THE ACT WAS FRAMED VIDE ORDER DATED 24 .12.20 09 . WHILE FRAMING ASSESSMENT ASSES SING OFFICER MADE DISALLOWANCE OF CLAIM OF DEDUCTION MADE U/S.80IB(10) OF THE ACT BY OBSERVING THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS AS PRESCRIBED U/S. 80IB(10). THE OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE IS NOT A DEVELOPER A ND BUILDER AS REQUIRED BY THE PROVISIONS OF SECTION 80IB(10) OF THE ACT. THE ASSESSEE ENTERED INTO THE PROJECT BY A D EVELOPMENT AGREEMENT WITH THE LAND OWNER AND CONSTRUCTION WAS CARRIED OUT A S PER THE SAID AGREEMENT AND HENCE THE ASSESSEE WA S MERELY A CO NTRACTOR FOR THE PURPOSE OF CONSTRUCTION OF THE PROJECT. FURTHER, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT SOLD ANY UNIT TO THE PURCHASER BUT THE LAND OWNER H AS EXECUTED SALE DEED S AS A SELLER. THE ASSESSING OFFICER OBSERVED THAT AS PER THE AMENDMENT TO SECTION 80IB BY THE FINANCE ACT, 2009, A WORK S CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PERSON IS NOT I TA NO. 341 /AHD/ 1 1 A.Y. 0 7 - 0 8 ( IT O VS. M/S. SHILP CORPORATION ) PAGE 3 ELIGIBLE FOR DEDUCTION U/S.80IB. ON THE CONTRARY, LD. CIT(A) ALLOWED THE CLAIM BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH REN DERED IN CASE OF M/S. SHAKTI CORPORATION, BARODA IN ITA NO. 1503/AHD/2008. 3. THE ONLY EFFECTIVE GROUND IS AGAINST DELETION OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IB(10) OF RS.1,18,97,366/ - . LD. SR. D.R. VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HAS GIVEN CATEGORICAL FINDING THAT THE ASSESSEE IS NEITHER A LAND OWNER NOR A DEVELOPER HE IS MERELY A CONTRACTOR WHO HAD EXECUTED THE PROJECT OF CONSTRUCTION UNDER A DEVELOPER AGREEM ENT. HE SUBMITTED THAT AS PER AGREEMENT, THE PERSON WHO CARRIES OUT THE CONSTRUCTION AS A WORK CONTRACTOR IS NOT ELIGIBLE FOR THE DEDUCTION U/S.80IB(10) OF THE ACT. HE SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE, SHRI S. N. DIVETIA ARGUED THAT TH ERE IS NO MISPLACE. HE SUBMITTED THAT CONTRACTOR DOES NOT INVEST HIS OWN MONEY, BUT UNDISPUTEDLY LAND IN QUESTION WAS PURCHASED BY THE MONEY OF ASSESSEE. HENCE THE ASSESSEE INVESTED HIS MONEY. HE SUBMITTED THAT THE ENTIRE COST AND RISK INVOLVED INTO THE PROJECT WAS BORNE BY THE ASSESSEE. THEREFORE, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF CO - ORDINATE BENCH IN M/S. SHAKTI CORPORATION AND THE DECISION OF TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. RADHE DEV ELOPER INDIA LTD. & ANOTHER (2012) 341 ITR 403 (GUJ.). 4 . WE HAVE HEARD THE RIVAL CONTENT IONS AND PERUSED THE MATERIAL ON RECORD . THE ONLY ISSUE IS I.E. TO BE DECIDED IS WITH REGARD TO THE ELIGIBILITY OF DEDUCTION U/S.80IB(10). ASSESSEE HAD CLAIMED DEDUCTION U/S.80IB(10) AMOUNTING TO RS.1,18,97,366/ - . ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: 2. 23 IT IS, THEREFORE, HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB FOR TH E FOLLOWING REASONS. I TA NO. 341 /AHD/ 1 1 A.Y. 0 7 - 0 8 ( IT O VS. M/S. SHILP CORPORATION ) PAGE 4 1. THE ASSESSEE IS NOT BOTH DEVELOPER AND BUILDER AS REQUIRED BY THE PROVISIONS OF SECTION 801B(10). ASSESSEE IS NOT A DEVELOPER BECAUSE THE ASSESSEE DID NOT CONCEPTUALIZE AND OWN THE PROJECT IN AS MUCH AS THE ASSESSEE IS NOT THE OWNE R OF THE LAND AND THE APPROVAL WAS NOT ISSUED TO IT BY THE LOCAL AUTHORITY. 2. THE ASSESSEE ENTERED INTO THE PROJECT BY A DEVELOPMENT AGREEMENT WITH THE LAND OWNER AND CONSTRUCTION WAS DONE AS PER THE AGREEMENT AND HENCE THE ASSESSEE IS MEREL Y A CONTRACTOR FOR THE PURPOSES OF CONSTRUCTION OF THE PROJECT. 3. THE ASSESSEE HAS NOT SOLD ANY UNIT TO THE PURCHASER BUT THE LAND OWNER HAS EXECUTED THE SALE DEEDS AS A SELLER. THIS ALSO PROVES THAT THE ASSESSEE WAS MERELY A CONTRACTOR/ AGENT OF THE LA ND OWNER. 4. AS PER THE AMENDMENT TO SECTION 80IB BY THE FINANCE ACT 2009, A WORKS CONTRACTOR WHO EXECUTES THE WORK AWARDED BY ANY PERSON IS NOT ELIGIBLE FOR THE DEDUCTION U/S 80IB. 2.24 THUS, THE ASSESSEE HAS FAILED TO SATISFY THE CONDITIONS OF SECTION 80IB(10). THEREFORE, NO DEDUCTION UNDER THIS SECTION IS ALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVER, LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER: 4. DURING THE COURSE OF APPELLATE PROCEEDINGS VIDE SUBMISSION DATED 1.12.2010 IT WAS STATED THAT THE APPELLANT HAD PAID ENTIRE LAND CONSIDERATION TO MR.LALJIBHAI HARIBHAI SUDANI WHO PURCHASED THE LAND FROM THE ORIGINAL LAND OWNERS FROM THE FUNDS GIVEN BY T HE APPELLANT. LALJIBHAI SUDANI WAS PAID THROUGH CHEQUES DRAWN ON UNION CO - OPERATIVE BANK ACCOUNT OF THE APPELLANT OF RS.8,35,000 ON 13.4.2004 AND RS.1,45,000 ON 15.4.2004, SUBSEQUENT TO WHICH LALJIBHAI PAID TWO CHEQUES OF RS.4,90,000 TO THE LAND OWNERS (HA NSRAJBHAI DHANJIBHAI AND RAMJIBHAI HARJIBHAI) THROUGH PURCHASE DEED DATED 15.4.2004 WHICH MENTIONS THE AMOUNT PAID TO THE LAND OWNERS. I T WAS THUS ARGUED THAT THE LAND COST HAD BEEN BORNE BY THE APPELLANT. 5. THE OBJECTION OF THE AO THAT THE APPELLANT WAS NOT THE OWNER OF THE LAND HAS TO BE SEEN IN THE LIGHT OF THE TESTS LAID DOWN BY 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. AS PER PARA 16 OF THIS DECISION IF AN. APPELLANT IS FOUND HAVING PRACTICALLY PURCHASED THE LAND AND HAVING ACQUIRED DOMINANT CONTROL OF THE LAND AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK THEN THE DEDUCTION SHOULD BE ALLOWED. FOR THIS HON'BLE ITAT HAS DIRECTED THE DEVELOPMENT AGRE EMENT TO BE REFERRED TO. PERUSAL OF THE DEVELOPMENT AGREEMENT DATED 7.5.2004 SHOWS THAT THE DEVELOPMENT AGREEMENT WAS SIGNED BY THE APPELLANT CONSISTING OF 3 PARTNERS VIZ. 1. PARESHBHAI NANUBHAI SIROYA 2. PRAFULBHAI SHAMBUBHAI PATEL 3. RAJENDRABHAI HARIBH AI JOGANI (THE FIRST PARTY) LAND LALJIBHAI HARIBHIA SUDANI (THE SECOND PARTY). CLAUSE 1 STATES THAT THE POSSESSION OF THE PROPERTY HAD BEEN HANDED OVER TO THE FIRST PARTY. CLAUSE 2 STATES THAT ALL MATERIAL REQUIRED . FOR CARRYING OUT DEVELOPMENT WOULD BE B ROUGHT BY I TA NO. 341 /AHD/ 1 1 A.Y. 0 7 - 0 8 ( IT O VS. M/S. SHILP CORPORATION ) PAGE 5 THE FIRST PARTY. CLAUSE 3 STATES THAT ALL THE EXPENSES WOULD BE BORNE BY THE FIRST PARTY. CLAUSE 10 STATES THAT THE FIRST PARTY CAN SELL THE SAID BUNGLOW TO ANY PERSON. AFTER GOING THROUGH RIVAL SUBMISSIONS I AM OF THE VIEW THAT THE APPELLANT SH OULD BE ALLOWED SOIB(10) DEDUCTION BECAUSE IT FULFILLS THE TESTS LAID DOWN BY HON'BLE ITAT DECISION IN THE CASE OF SHAKTI CORPORATION. IT HAS PRACTICALLY PURCHASED THE LAND AND DEVELOPED IT AT ITS OWN COST AND RISK. THE DEDUCTION IS ALSO ALLOWABLE BECAUSE ANY OF THE SPECIFIC CONDITIONS STIPULATED FROM CLAUSE (A) TO CLAUSE (D) OF SECTION 80IB(10) HAVE NOT BEEN FOUND VIOLATED BY THE AO. THE AO IS THEREFORE DIRECTED TO ALLOW THE DEDUCTION CLAIMED U/S.80IB(10) . THE LD. CIT(A) ALLOWED THE CLAIM BY OBSERVING T HAT ASSESSING OFFICER HAD DISALLOWED MAINLY ON THE GROUND THAT THE ASSESSEE WORKED AS A CONTRACTOR OF THE LAND OWNER WITH WHOM IT ENTERED INTO DEVELOPMENT AGREEMENT FOR CONSTRUCTION. THE LD. CIT(A) HAS GIVEN A FINDING ON FACT THAT THE ENTIRE SALE CONSIDER ATION WAS PAID TO MR. LALJIBHAI HARIBHAI SUDANI WHO HAD PURCHASED THE LAND FROM THE ORIGINAL LAND OWNERS FROM THE FUNDS GIVEN BY THE ASSESSEE. IT IS OBSERVED THAT LALJIBHAI SUDANI WAS PAID THROUGH CHEQUES DRAWN ON UNION CO - OPERATIVE BANK ACCOUNT OF THE AS SESSEE OF RS.8,35,000/ - AND RS.1,45,000/ - , SUBSEQUENT TO WHICH LALJIBHAI SUDANI PAID TWO CHEQUES OF RS.4,90,000/ - TO THE LAND OWNERS THROUGH PURCHASE DEED DATED 15.04.2004 WHICH MENTIONS THE AMOUNT PAID TO THE LAND OWNERS. LD. CIT(A) HAS EXAMINED DEVELOP MENT AGREEMENT AND OBSERVED THAT AS PER CLAUSE 1, THE POSSESSION OF THE PROPERTY HAS BEEN HANDED OVER THE ASSESSEE. AS PER CLAUSE 2, ALL MATERIALS REQUIRED FOR CARRYING OUT DEVELOPMENT WOULD BE BROUGHT BY THE ASSESSEE. AS PER CLAUSE 3, ALL THE EXPENSES W OULD BE BORNE BY THE ASSESSEE. CLAUSE 10 AUTHORIZES THE FIRST AUTHORITY TO SELL BUNGALOW TO ANY PERSON. THE REVENUE HAS NOT DISPUTED THE FACT THAT THE ENTIRE AMOUNT HAS BEEN DEMONSTRATED BY THE ASSESSEE. THE POSSESSION OF THE LAND WAS GIVEN TO THE ASSES SEE. THE ASSESSEE INCURRED ALL COST AND WAS LIABLE FOR ANY RISK OR CONSEQUENCES. THE ASSESSEE WAS ALSO AUTHORIZED TO DISPOSE OF THE SALE OF BUNGALOW AS PER HIS OWN RISK. THE AFOREMENTIONED OBSERVATION OF LD. CIT(A) IS NOT CONTRADICTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. HENCE IT CAN BE INFERRED FROM THE FACTS PLACED BEFORE US THAT ALL RISK AND I TA NO. 341 /AHD/ 1 1 A.Y. 0 7 - 0 8 ( IT O VS. M/S. SHILP CORPORATION ) PAGE 6 CONSEQUENCES WERE BORNE BY THE ASSESSEE. UNDER THESE FACTS THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE ASSESSEE AS MERELY A CO NTRACTOR. LAW IS WELL SETTLED NOW BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPRA), THAT EVEN IF THE DEVELOPER OF A PROJECT IS NOT OWNER OF THE LAND BUT HE BEARS ALL RISK AND CONSEQUENCES HE CANNOT BE DE NIED DEDUCTION U/S.80IB(10) OF THE ACT. THE ASSESSING OFFICER HAS NOT POINTED VIOLATION OF ANY OTHER CONDITION(S) EMBODIED U/S.80IB(10) OF THE ACT UNDER THESE FACTS. THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE ASSESSEE AS MERELY A WORK CONTRACTOR. W E DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). SAME IS HEREBY AFFIRMED. THE GROUND NOS. 1 & 2 OF THE REVENUES APPEAL ARE DISMISSED. OTHER GROUNDS RAISED IN THIS APPEAL ARE GENERAL IN NATURE NEEDS NO SEPARATE ADJUDICATION. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . TH I S ORDER PRONOUNCED IN OPEN COURT ON 11 TH SEPTEMBER , 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER/ , / ,