The ITO, Ward-9(2), Ahmedabad V. M/s. Adhyashakti Developers, Ahmedabad

ITA 366/AHD/2011

• Counselvise Citation: 36620514 RSA 2011
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y C SURTI
• Keywords: Value adopted by valuation officer
• Section: 143(3); 80IB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. MOHAN ALAN KAMONY, AM) ITA NO.366/AHD/2011 A. Y.: 2007-08 THE INCOME TAX OFFICER, WARD 9 (2), 4 TH FLOOR, A-BLOCK, PRATYAKSH KAR BHAWAN, OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD VS M/S. ADHYASHAKTI DEVELOPERS, 54, SARDAR PATEL COLONY, STADIUM ROAD, NARANPURA, AHMEDABAD PA NO. AALFA 8098 D (APPELLANT) (RESPONDENT) C.O. NO.66/AHD/2011 (IN ITA NO.366/AHD/2011: A.Y.: 2007-08) M/S. ADHYASHAKTI DEVELOPERS, 54, SARDAR PATEL COLONY, STADIUM ROAD, NARANPURA, AHMEDABAD VS THE INCOME TAX OFFICER, WARD 9 (2), 4 TH FLOOR, A-BLOCK, PRATYAKSH KAR BHAWAN, OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD PA NO. AALFA 8098 D (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI Y. C. SURTI, DR ASSESSEE BY SHRI TEJ SHAH, AR DATE OF HEARING: 16-09-2011 DATE OF PRONOUNCEMENT: 23-09-2011 O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE LEARNED CIT(A)-XV, AHMEDABAD DATED 14-12-2010, FOR ASSESSMENT YEAR 2007-08. ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 2 2. THE DEPARTMENTAL APPEAL IS FILED ON THE FOLLOWIN G GROUNDS: 1. THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION OF RS.69,43,920/- U/S. 80IB(10) OF THE ACT. 2. THE LD. 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 NAMES OF FORE FATHERS OF THE PARTNERS AND SO WAS IN HUF STATUS OWNED BY LEGAL HEIRS, I.E. SHRI KRISHNAKANT D. PATEL, SHRI BHUPENDRAKUMAR D. PATEL AND SHRI AJAY D. PATEL, WHICH IS A SEPARATE 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 FROM THE INCEPTION OF THE PROJECT TILL ITS COMPLETION RESTS WITH THEM. THE OWNERSHIP OVER THE LAND NEVER PASSED ON TO THE ASSESSEE. THE LAND OWNERS HAVE DIRECTLY SOLD THE UNITS TO THE CUSTOMERS & THEREFORE THE INVESTMENT RISK WAS EITHER OF THE LAND OWNERS OR TH E CUSTOMERS & NEVER OF THE ASSESSEE FIRM. IT IS WRONG ON THE PART OF THE ASSESSEE THAT THE PARTNERS OF TH E FIRM & THEIR HUFS (WHO WERE THE OWNERS OF THE LANDS) WERE ONE. THE INDIVIDUAL, HUFS & THE FIRMS ARE DISTINCT ENTITIES IN THE EYES OF THE LAW. ASSES SEE WAS JUST A CONTRACTOR OF THE LAND CONSTRUCTING 52 RESIDENTIAL UNITS (BUNGALOWS) AND NOT A DEVELOPER. 3. THE CROSS OBJECTION IS FILED ON THE FOLLOWING GR OUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (A)-XV, AHMEDABAD HAS RIGHTLY DIRECTED THE ASSESSING ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 3 OFFICER TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION OF RS.69,43,920/- U/S 80 IB (10) OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A)-XV, AHMEDABAD HAS CONSIDERED THE FACTS OF THE CASE AND HAS RELIED ON THE PRINCIPAL LAID DOWN BY HONBL E ITAT, AHMEDABAD IN CASE OF SHAKTI CORPORATION AND CONCLUDED THAT THE ASSESSEE (THE RESPONDENT) HAS ACQUIRED DOMINANT CONTROL AND DEVELOPED THE HOUSING PROJECT AT ITS OWN RISK AND FULFILLS THE TE ST LAID DOWN BY HONBLE ITAT DECISION IN THE CASE OF SHAKTI CORPORATION. THE OWNERS OF THE LAND ARE THE SAME PERSONS, THOUGH IN THEIR HUF STATUS, WHO ARE PARTNERS OF THE FIRM IN THEIR PERSONAL CAPACITY. TH E TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT ALSO VERY RIGHTLY PASSED ON THE RISK AND REWARDS OF THE PROJECT TO THE FIRM, AND THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX (A)-XV, AHMEDABAD HAS ALSO CONCLUDED IN PARA 8:- FURTHER IT HAS NOT BEEN FOUND VIOLATING ANY OF THE STIPULAT ED CONDITIONS OF SECTION 80IB (10) FROM CLAUSE (A) TO CLAUSE (D), THEREFORE THE AO IS DIRECTED TO ALLOW T HE DEDUCTION. 4. THE LEARNED CIT(A) NOTED THE FACTS OF THE CASE IN THE IMPUGNED ORDER. THE SAME ARE THAT ON PERUSAL OF THE ASSESSMENT SHOWS THAT DEDUCTION U/S 801B OF THE IT ACT WAS DEN IED BY THE AO AS PER REASONS SUMMARIZED IN PARA 4.27 OF THE ASSES SMENT ORDER. ACCORDING TO THE AO THE ASSESSEE WAS NOT A DEVELOPE R BUT A CONTRACTOR WHO CONSTRUCTED THE FLATS ON THE BASIS O F THE DEVELOPMENT AGREEMENT ENTERED INTO WITH THE LAND OW NER. ALSO ACCORDING TO THE AO THE ASSESSEE EXCEEDED 1500 SQ. FT. LIMIT OF BUILT-UP AREA IN THE UNITS CONSTRUCTED. IT WAS STAT ED VIDE WRITTEN SUBMISSION DATED 22-10-2010 THAT DURING THE YEAR TH E ASSESSEE HAD UNDERTAKEN THE BUILDING AND CONSTRUCTION WORK O F RESIDENTIAL ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 4 BUILDING TITLED ISHAN BUNGALOWS AT AHMEDABAD AT SUR VEY NO.587 / 2, 589 / 7, 589/ 8, 589 /10, 622/ 2 AND 624 /1 AT TP SCHEME FP NO. 68, 78, 82, 118, 102/ 2 AT CHANDKHEDA, TALUKA GANDHINAGAR ON LAND MEASURING 8825 SQ. MTRS. ON WHICH 52 RESIDENTI AL UNITS WERE CONSTRUCTED. IT WAS STATED THAT LAND WAS OWNED BY T HE FORE-FATHERS OF THE PARTNERS AND SO WAS IN HUF STATUS OWNED BY L EGAL HEIRS I.E. SHRI KRISHNAKANT D. PATEL, SHRI BHUPENDRAKUMAR D. P ATEL AND SHRI AJAY D. PATEL. VIDE WRITTEN SUBMISSION DATED 28-10- 2010 IT WAS STATED AS UNDER: 'THE INITIAL PAYMENTS FOR THE !AND PURCHASE HAS BEE N MADE TO THE LAND OWNERS WHO ARE NO ONE ELSE BUT THE SAME PERSONS IN THEIR HUF CAPACITY, BY YOUR APPELLA NT FIRM, THE DETAILED ACCOUNT OF THE LAND PAYMENTS, RE CEIVED FROM DIFFERENT CUSTOMERS AS PER THE SALE DEEDS EXEC UTED TO THEM, IS ENCLOSED HEREWITH. THE SAME DETAILS WER E ALSO GIVEN TO THE ID. AO VIDE OUR LETTER DATED 7.10.2009 .' IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE IN ITIAL PAYMENT OF RS.3,00,000/- WAS COLLECTED FROM 3 MEMBERS (RS. 1,00,000/- EACH) BY THE ASSESSEE FIRM AND IT WAS GIVEN TO THE THREE LAND OWNERS THROUGH CHEQUES DRAWN FROM VIJAYA BANK ACCOUNT OF T HE ASSESSEE FIRM. IT WAS EXPLAINED THAT LATER PAYMENTS COLLECTE D FROM THE MEMBERS WHO BOOKED FLATS IN THE SCHEME WERE PAID BY THE ASS ESSEE FIRM TO THE THREE LAND OWNERS SEPARATELY. THE TOTAL PAYMENT WHI CH WAS MADE TO THE LAND OWNERS WAS RS.2,19,88,903/- (1/3 RD OF WHICH WAS REIMBURSED SEPARATELY TO EACH LAND OWNER). IT WAS THAT THE OWN ERS OF THE LAND AND THE PARTNERS ARE NOT DIFFERENT IN CASE OF THE ASSES SEE AND FOR THE SAKE OF ADMINISTRATIVE CONVENIENCE THE ASSESSEE FORMED P ARTNERSHIP FIRM. THAT ALL THE GOVERNMENT APPROVALS LIKE AUDA APPROVA LS ETC. WERE ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 5 GIVEN IN THE NAME OF KRISHNAKANT D. PATEL-PARTNER O F THE FIRM. THE OBJECTION OF THE AO THAT THE ASSESSEE WAS NOT THE O WNER 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.1503/AHD/2008 IN AY 2005- 06. HON'BLE ITAT DIRECTED THE DEVELOPMENT AGREEMENT TO BE REFERRED TO EXAMINE THE ELIGIBILITY OF THE ASSESSEES FOR DEDUCT ION U/S.80LB(10) OF THE IT ACT AND WHERE IT IS FOUND THAT THE ASSESSEE HAD PRACTICALLY PURCHASED THE LAND, HAD ACQUIRED DOMINANT CONTROL O VER LAND AND DEVELOPED THE LAND AT ITS OWN COST AND RISK THEN DE DUCTION SHOULD BE GIVEN. IN THIS CASE THE PARTNERS OF THE FIRM WHO AR E ONLY TWO IN NUMBER ARE ALL ALSO OWNERS OF THE LAND IN THE CAPACITY OF KARTA OF THEIR HUFS. FURTHER THE, DEVELOPMENT AGREEMENT DATED 23-11-2004 WAS SIGNED BY THE ASSESSEE FIRM CONSISTING OF TWO PARTNERS - S HRI KRISHNAKANT D. PATEL AND SHRI BHUPENDRAKUMAR D. PATEL (FIRST PARTY ) AND FOLLOWING PERSONS WERE REFERRED TO AS THE SECOND PARTY / LAND OWNERS: 1) SHRI KRISHNAKANT D. PATEL, HUF 2) SHRI AJAY DAYABHAI PATEL, HUF AND 3) SHRI BHUPENDRAKUMAR D PATEL, HUF. CLAUSE C OF THE DEVELOPMENT AGREEMENT STATES THAT T HE SECOND PARTY IS DESIROUS OF STARTING CONSTRUCTION OVER THE SAID LAND FOR RESIDENTIAL PURPOSE AND HAD HANDED OVER THE VACANT AND ACTUAL P OSSESSION OF THE SAID LAND TO THE FIRST PARTY. ACCORDING TO CLAU SE 6 OF THE DEVELOPMENT AGREEMENT THAT THE PAYMENT FOR THE PLOT OF LAND SHALL GO TO THE SECOND PARTY (LAND OWNERS) EITHER DIRECTLY O R THROUGH THE ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 6 ASSESSEE. CLAUSE 9 OF THE DEVELOPMENT AGREE MENT STATES THAT THE FIRST PARTY SHALL REGISTER MEMBERS AND MAKE ALL OTMENT OF HOUSES. CLAUSE 13 STATES THAT THE POSSESSION OVER THE ENTIR E CONSTRUCTION ON THE SAID LAND AND OF THE HOUSE SHALL BE THAT OF THE FIRST PARTY. THUS AS PER DEVELOPMENT AGREEMENT THE ASSESSEE HAS ACQUIRED DOMINANT CONTROL AND ITS PARTNERS OWNED THE LAND IN HUF CAPACITY AND LAND COST HAS GONE TO THE LAND OWNERS EITHER DI RECTLY OR THROUGH THE ASSESSEE FIRM AS OBVIOUS FROM THE CLAU SES OF THE DEVELOPMENT AGREEMENT QUOTED ABOVE. THE SUBMISSION OF THE ASSESSEE RECEIVED DURING THE COURSE OF APPELLATE PR OCEEDINGS WITH RESPECT TO THE OBJECTION OF THE AO THAT THE FLATS E XCEEDED 1500 SQ. FT. BUILT-UP AREA LIMIT WAS SENT TO THE AO FOR COUNTER COMMENTS WHICH WERE RECEIVED VIDE HIS LETTER DATED 31-5-2010. 5. THE LEARNED CIT(A) CONSIDERING THE MATERIAL ON R ECORD IN THE LIGHT OF THE FINDINGS OF THE AO AND SUBMISSIONS OF THE ASSESSEE FOLLOWED THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF M/S. SHAKTI CORPORATION AND ALLOWED THE CLAIM OF TH E ASSESSEE U/S 80 IB (10) OF THE IT ACT. HIS FINDINGS IN PARA 7 AND 8 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 7. AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEE N THAT THE BUILT-UP AREA OF STAIR CASE OF 39.68 SQ .FT. HA S BEEN DIVIDED BY 2 BY THE AO IN PARA 4.15 OF THE ASSESSME NT ORDER, THOUGH IT SHOULD HAVE BEEN DIVIDED BY 4 BECA USE THERE WERE 4 UNITS IN TYPE A. IF THIS IS DONE THE B UILT-UP COMES 9.92 SQ. RNTR. PER UNIT WHICH HAS TO BE MULTI PLIED BY 10.76 TO CONVERT SQUARE METRES INTO SQUARE FEET AND THE FIGURE OF 106.74 SQ. FT. (9.92 X 10.76) COMES. AND WHEN 106.74 IS ADDED TO THE BUILT-UP AREA CALCULATED BY THE AO ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 7 (1295.56 SQ. FT.) IN THE ASSESSMENT ORDER WITHOUT S TAIR CASE CABIN AREA THE BUILT-UP AREA COMES TO BUILT-UP AREA OF 1402.30 SQ. FT(1295.56 SQ. FT. + 106.74 SQ. FT) THEREFORE THE OBJECTION OF THE AO IS NOT CORRECT. THE APPELLA NT IS NOT FOUND EXCEEDING 1500 SQ. FT. BUILT-UP AREA LIMIT OF EACH RESIDENTIAL UNIT. 8. THUS FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE APPELLANT HAS ACQUIRED DOMINANT CONTROL AND DEVELOP ED THE HOUSING PROJECT AT ITS OWN RISK AND FULFILLS TH E TESTS LAID DOWN BY HON'BLE ITAT DECISION IN THE OF SHAKTI CORPORATION FURTHER IT HAS NOT BEEN FOUND VIOLATING ANY OF THE STIPULATED CONDITIONS OF SECTION 80IB(10) GIVEN FROM CLAUSE (A) TO CLAUSE (D), THEREFORE THE AO IS DIREC TED TO ALLOW THE DEDUCTION. 6. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT COP Y OF THE DEVELOPMENT AGREEMENT AND PLAN ETC. HAVE ALSO BEEN PLACED ON RECORD TO SHOW THAT THE LEARNED CIT(A) CORRECTLY AP PRECIATED THE FACTS OF THE CASE AND RIGHTLY ALLOWED DEDUCTION U/S 80 IB (10) OF THE IT ACT. HE HAS FURTHER SUBMITTED THAT THE AO IN THE CASE OF THE SAME ASSESSEE IN PRECEDING ASSESSMENT YEAR 2006-07 CONSI DERING TH4E IDENTICAL FACTS ALLOWED THE CLAIM OF THE ASSESSEE U /S 80IB (10) OF THE IT ACT. COPY OF THE ASSESSMENT ORDER DATED 19-03-2 008 U/S 143 (3) OF THE IT ACT IS PLACED ON RECORD AND IS SUPPLIED T O THE LEARNED DR ALSO. HE HAS SUBMITTED THAT SINCE THE CLAIM OF THE ASSESSEE ON IDENTICAL FACTS IS ALLOWED BY THE AO, THEREFORE, DE PARTMENTAL APPEAL MAY BE DISMISSED. THE CROSS OBJECTION BY THE ASSESS EE IS FILED IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A). ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 8 7. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES AND FACTS OF THE CASE, WE ARE OF THE VIEW THE ISSUE IS SQUARELY COVERED BY THE ORDER OF ITAT, AHMEDABAD BENCH IN THE CASE OF M/S. SHAKTI CORPORATION. ITAT, AHMEDABAD BENCH IN THE CASE OF A MALTAS ASSOCIATES VS ITO, REPORTED IN 131 ITD 142 CONSIDER ING THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF M/S. RADHE B UILDERS AND M/S. SHAKTI CORPORATION (SUPRA) ALLOWED THE CLAIM O F THE ASSESSEE ON IDENTICAL FACTS. FINDINGS OF THE TRIBUNAL IN THE CA SE OF AMALTAS ASSOCIATES (SUPRA) ARE REPRODUCED AS UNDER: 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. SECTION 80IB(10) READS AS UND ER: 80-IB. DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER TH AN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS.--(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS 3(3) TO (11), (11A) AND (11B) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. XXXX XXXX XXXX XXXX (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 9 2008 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT . OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVAN T TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SUCH CONSTRUCTION, (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004, ON OR BEFORE THE 31ST DAY OF MARCH, 2008 ; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, OR, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY ; (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE O N WHICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY ; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE : ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 10 PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CLAUSE (B) SHALL APPLY TO A HOUSING PROJECT CARR IED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF ; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF D ELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE ; AND (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT. OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS. XXXXXX EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SUB- SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). 7. THE DEFINITION OF BUILT-UP AREA IS PROVIDED IN SECTION 80IB(14) (A) OF THE ACT, WHICH MEANS THE I NNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR L EVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREAS ED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS. BEFORE PROCEEDING FURTHER, IT WOULD BE RELEVANT TO MENTION THE FACTS CONSIDERED IN THE CASE OF RADHE DEVELOPER S AND SHAKTI CORPORATION (SUPRA) DECIDED BY THE ITAT, ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 11 AHMEDABAD BENCHES. IN THE CASE OF RADHE DEVELOPERS (SUPRA), THE ASSESSEE CLAIMED DEDUCTION UNDER SECTI ON 80IB(10). HOWEVER, THE AO DISALLOWED THE CLAIM ON THE GROUND THAT (I) THE ASSESSEE WAS NOT THE OWNER OF T HE LAND, AND (II) EACH APPROVAL WAS ALSO NOT IN THE NA ME OF THE ASSESSEE AND IT HAD ACTED MERELY AS AN AGENT/CONTRACTOR FOR CONSTRUCTION OF RESIDENTIAL HO USE. THE CLAIM WAS DENIED TO THE ASSESSEE. THE TRIBUNA L CONSIDERED THE AVERMENTS AND MATERIAL ON RECORD AND HELD AS UNDER: 27. A BARE READING OF THESE PROVISIONS OF S. 80-IB(10), AS THEY STOOD IN THE YEARS UNDER CONSIDERATION, THE REQUIREMENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THAT (I) THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT; (II) SUCH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY; (III) THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT HAS COMMENCED ON OR AFTER 1ST OCT., 1998; (IV) THE HOUSING PROJECT IS ON A SIZE OF A PLOT OF LAND WHIC H HAS MINIMUM AREA OF ONE ACRE; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HAS A BUILT UP AREA OF 1,000 SQ. FT. IF IT IS SITUATED IN DELHI AN D MUMBAI OR WITHIN 25 KMS OF MUNICIPAL LIMIT OF THESE CITIES AND 1,500 SQ. FT. AT ANY OTHER PLACE. THERE IS NO OTHER CONDITION, WHICH IS TO BE COMPLIED BY AN ASSESSEE FOR CLAIMING THE DEDUCTION ON PROFITS OF T HE HOUSING PROJECT. 28. THE CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION UNDER S. 80-IB(L0), THERE I S A CONDITION PRECEDENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO FORCE. WE DO NOT FIND ANY SUCH CONDITION AS APPEARING IN THE PROVISIONS OF THE SECTION EXTRACTED ABOVE. A PLAIN READING OF SUB-S. (10) OF S. 80-IB REVEALS AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJECT AS APPROVED BY A LOCAL ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 12 AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION T HAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAN D BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT AS NARRATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND-OWNERS. THEREFORE, THE MERE FACT THAT THE LANDOWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A CONTRACTOR. HAVING ENTERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, ASSESSEE WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOVE, IT IS THE UNDERTAKING THAT DEVELOPS OR BUILD S THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHETHER THAT IT IS THE OWN ER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREOF. THE REQUIREMENT FOR CLAIMING DEDUCTION IS THAT SUCH AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT, BE IT ON THEIR OWN LAND OR ON THE LAND OF OTHERS AN D FOR WHICH A TRIPARTITE AGREEMENT HAS BEEN ENTERED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRACTOR FOR DEVELOPING AND BUILDING HOUSING PROJECT OR AN OWNER OF THE LAND. THE WORD DEVELOPMENT MEANS THE REALIZATION OF POTENTIALITIES OF LAND OR TERRITORY BY BUILDING OR ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 13 MINING. ACCORDINGLY, IT CAN BE SAFELY SAID THAT A PERSON WHO UNDERTAKES TO DEVELOP REAL ESTATE BY DEVELOPING AND CONSTRUCTING A HOUSING PROJECT IS AN ELIGIBLE UNDERTAKING; DEVELOPING AND BUILDING OF HOUSING PROJECTS WITHIN THE MEANING OF S. 80-IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND, THE LANDOWNER HAS NOT MADE ANY CONSCIOUS ATTEMPT TO DEVELOP THE PROPERTY EXCEPT ENSURING THEIR RIGHTS A S LANDOWNER SO THAT THE SALE VALUE OF THE LAND COULD BE REALIZED TO THEM AS PER THE TERMS OF AGREEMENT TO SALE AND THE DEVELOPMENT AGREEMENT . THE LANDOWNERS, NO DOUBT, HAVE NOT THROWN THEMSELVES INTO DEVELOPMENT OF PROPERTY. IT IS ONLY THE ASSESS EE WHO IS DEVELOPING THE PROPERTY. THROWING ITSELF INT O THE BUSINESS OF DEVELOPMENT AND BUILDING OF HOUSING PROJECTS BY TAKING ALL RISKS ASSOCIATED WIT H THE BUSINESS BY ENGAGING ARCHITECTS, STRUCTURAL CONSULTANTS, DESIGNING AND PLANNING OF THE HOUSING SCHEMES, PAYMENT OF DEVELOPMENT CHARGES, OBTAINING NECESSARY PERMISSIONS, APPROVING PLANS, HIRING MACHINERY AND EQUIPMENTS, HIRING ENGINEERS, APPOINTING CONTRACTORS, ETC. NO DOUBT, THE PERMISSION HAS BEEN OBTAINED IN THE NAME OF THE REGISTERED LANDOWNERS, BUT THE SAME HAVE BEEN OBTAINED BY THE ASSESSEE FIRM THROUGH ITS PARTNERS WHO ARE HOLDING POWER OF ATTORNEY OF THE RESPECTIVE LANDOWNERS. IT IS A FACT THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS, BUT DEVELOPER IS WORKING FOR HIMSELF IN ORDER TO EXPLOIT THE POTENTI AL OF ITS BUSINESS IN HIS OWN INTEREST AND, THEREFORE, OP TED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVELOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS. AS PER THE PROVISIONS OF S. 2(1)(G) OF REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVICE ACT (27 OF 1996), THE TERM CONTRACTOR MEANS A PERSON WHO UNDERTAKES TO PRODUCE A GIVEN RESULT FOR ANY ESTABLISHMENT, OTHER THAN A MERE SUPPLY OF GOODS OR ARTICLES OF ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 14 MANUFACTURE, BY THE EMPLOYMENT OF BUILDING WORKERS OR WHO SUPPLIES BUILDING WORKERS FOR ANY WORK OF THE ESTABLISHMENT; AND INCLUDES A SUB- CONTRACTOR. IN THOSE CIRCUMSTANCES, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER S. 80-IB(10) AS IT HAD DEVELOPED AND BUILT THE HOUSING PROJECT; IT HAD STARTED CONSTRUCTION AFTER 1 DAY OF APRIL 1998; THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND THE MAXIMUM BUILT- UP AREA OF THE RESIDENTIAL UNITS IS NOT MORE THAN 1,500 SQ. FT. IT MAY ALSO BE BORN IN MIND THAT DEDUCTION IS NOT EXCLUSIVELY TO AN ASSESSEE BUT TO AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, BE IT DEVELOPED BY A CONTRACTOR OR BY AN OWNER. THE ASSESSEE, IN THE INSTANT CASE, CAN ALSO BE SAID TO BE THE OWNER OF THE LAND AS IT HAD MADE PAR T PAYMENT TO THE LANDOWNERS DURING THE FINANCIAL YEARS 2000-01 AND 2001-02 FOR AN AMOUNT OF RS. 56 LACS, AND TAKEN THE POSSESSION OF THE LAND FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT AND SATISFY THAT CONDITION AS WELL OF BEING THE OWNER O F THE LAND IN VIEW OF PROVISIONS OF S. 2(47)(V). WHEN THE ASSESSEE HAS TAKEN ON THE POSSESSION OF IMMOVABLE PROPERTY OR RETAINED IT IN PART PERFORMANCE OF A CONTRACT OF A NATURE REFERRED TO I N S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 IT AMOUNTS TO TRANSFER UNDER S. 2(47)(V). IN THE INSTANT CASE THERE WAS, DEFINITELY, A DOMINION OF THE DEVELOPER OVER THE LAND TO THE EXCLUSION OF OTHERS INASMUCH AS POSSESSION OF THE LAND IS GIVEN TO THE DEVELOPER BY THE LAND OWNERS T O CARRY OUT THE CONSTRUCTION ACTIVITY OF THE HOUSING PROJECT. THE ASSESSEE DEVELOPER HAS COMPLIED WITH ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 15 ALL THE CONDITIONS AS PROVIDED UNDER S. 80-IB(10) O F THE ACT, SO AS TO CLAIM DEDUCTION. THE ASSESSEE HAS ALSO PASSED ON THE PART CONSIDERATION FOR ACQUIRING THE LAND THROUGH AN AGREEMENT TO SALE AND IN VIEW OF THE PROVISIONS OF S. 2(47) R/W S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, THE ASSESSEE HAS COMPLETELY PERFORMED HIS PART OF THE CONTRACT AND DEVELOPED THE HOUSING PROJECT AND TRANSFERRED THE FLATS/TENEMENTS TO THE BUYERS IN VIEW OF AGREEMENT TO SALE AS WELL AS DEVELOPMENT AGREEMENT. IT SHOWS THAT THE ASSESSEE WAS IN FULL POSSESSION OF THE LAND FOR THE DEVELOPMENT OF HOUSING PROJECT AND HAS CARRIED OUT ALL THE ACTIVITIES OF A COMPLETE HOUSING PROJECT BY TAKING ALL RISKS ASSOCIATED WITH THIS BUSINESS. THE ASSESSEE IS ENGAGED IN COMPLETE INFRASTRUCTURE INCLUDING ENGAGING ARCHITECTS, STRUCTURAL CONSULTANTS, DESIGNING AND PLANNING OF T HE HOUSING SCHEMES, PAYMENT OF DEVELOPMENT CHARGES, OBTAINING NECESSARY PERMISSIONS, ON BEHALF OF THE LANDOWNERS, GOT THE PLANS APPROVED, HIRING OF MACHINERY AND EQUIPMENTS, HIRING ENGINEERS, APPOINTING CONTRACTORS, ETC. AS DISCUSSED ABOVE AND IN VIEW OF THE CASE LAW OF THE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD. (SUPRA), WHEREIN IT HAS BEEN CATEGORICALLY OBSERVED AS REGARDS TO OWNERSHIP THAT ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDINGS THOUGH A FORMAL DEED OF TITLE MIGHT NOT HAVE BEEN SALE AND DEVELOPMENT AGREEMENT , THE ASSESSEE HAS ACQUIRED DOMINION OVER THE LAND TO THE EXCLUSION OF OTHERS AND HE HAS COMPLETED THE PROJECT ON TERMS AND CONDITIONS LAID DOWN UNDER S. 80-IB(10) OF THE ACT, TO CLAIM DEDUCTION ON THE PROFIT DERIVED FROM CONSTRUCTION AND DEVELOPMENT OF RESIDENTIAL HOUSING PROJECT. ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 16 THERE IS NO EXPLICIT CONDITION ENUMERATED IN S. 80- IB(10) OF THE ACT AS REGARDS TO REQUIREMENT OF OWNERSHIP FOR THE CLAIM OF DEDUCTION. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LEGAL PROPOSITION LAID DOWN BY THE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD. (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED FOR CLAIM OF DEDUCTION ON THE PROFITS DERIVED FROM CONSTRUCTION AND DEVELOPMENT OF RESIDENTIAL HOUSING PROJECT. 8. IN THE CASE OF SHAKTI CORPORATION (SUPRA), THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 80IB(1 0). THE AO DISALLOWED THE ASSESSEES CLAIM ON THE GROUN D THAT IT WAS NOT THE OWNER OF THE PROPERTY; THAT THE PERMISSION WAS NOT GRANTED IN THE ASSESSEES NAME A ND THE APPROVAL FROM THE MUNICIPAL CORPORATION WAS IN THE NAME OF THE ORIGINAL LAND OWNER AND NOT IN THE NAME OF THE ASSESSEE. THE TRIBUNAL CONSIDERED THE AVERMENT AND THE MATERIAL ON RECORD AND ALLOWED THE CLAIM OF THE ASSESSEE AND IT WAS HELD AS UNDER: IN THE INSTANT CASE, THERE WAS NO AGREEMENT TO SHARE THE CONSTRUCTED AREA. THIS AGREEMENT RELATES ONLY TO PURCHASE PART OF THE LAND FROM THE LANDOWNER BY THE ASSESSEE FOR A PREDETERMINED CONSIDERATION. ALL THE RESPONSIBILITIES FOR CARRYIN G OUT THE CONSTRUCTION, PERMISSION, NA, NOC, LEGAL PROCEEDINGS AND THE RESULTS OF THE DEVELOPMENT LIES WITH THE ASSESSEE. THE FIRST PARTY IS ONLY TO CO- OPERATE THE ASSESSEE IN CARRYING OUT THE DEVELOPMENT AND ALSO TO EXECUTE THE DOCUMENTS WHENEVER IT IS REQUIRED BY THE DEVELOPER. THE ASSESSEE HAS ALSO HANDED OVER THE PHYSICAL POSSESSION TO THE BUILDER FOR CARRYING OUT THE DEVELOPMENT OF THE PROJECT. THE LANDOWNER DOES NOT HAVE ANY RIGHT, INTEREST, TITLE IN THE DEVELOPMENT SO CARRIED OUT EXCEPT TO THE EXTENT HE HAS TO RECEIVE THE CONSIDERATION FROM THE ASSESSEE. THE ASSESSEE IS ENTITLED TO PUBLICIZE THE PROJECT, PRINT BROCHUR ES, ETC., AND CAN SELL THE PROJECT AT ITS OWN RIGHT. AL L THE ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 17 EXPENSES HAVE TO BE INCURRED BY THE ASSESSEE FOR CARRYING OUT THE CONSTRUCTION, ETC. THE LANDOWNER HAS TO DO NOTHING EXCEPT TO THE EXTENT HE HAS TO RECEIVE CONSIDERATION FROM THE ASSESSEE. HIS MOTIVE IS NOT TO DEVELOP, CONSTRUCT OR CARRY ON THE BUSINE SS AS A BUILDER OR DEVELOPER. PRACTICALLY NO RIGHT IN THE LAND REMAINS WITH THE OWNER. FOR WHOLE PRACTICAL PURPOSE THE ASSESSEE ACQUIRED DOMINANT RIGHT OVER THE LAND AND HE CAN DEAL WITH THE LAND IN THE MANNER IN WHICH HE MAY LIKE. THUS, THE TERMS AND CONDITIONS ENTERED INTO, IN OUR OPINION, GIVE ALL DOMINANT CONTROL AND RIGHTS OVER THE LAND TO THE ASSESSEE. THE ASSESSEE, IN OUR OPINION, WILL BE CONSTRUCTING THE BUILDING AT ITS OWN COST AND WILL REMAIN THE OWNER OF THE BUILDING AT ITS OWN WITHOUT ANY INTERFERENCE FROM THE LANDOWNER. THE LANDOWNER DOES NOT HAVE ANY RIGHT TO SHARE THE BUILDINGS. THE AGREEMENT DOES NOT ENVISAGE THAT THE ASSESSEE WILL BE WORKING AS A CONTRACTOR OR AGENT ON BEHALF OF THE LANDOWNER. THE AGREEMENT CANNOT BE REGARDED TO BE THE JOINT VENTURE OR COLLABORATION AGREEMENT. IT IS, IN OUR OPINION, THE AGREEMENT FOR THE SALE OF THE LAND FOR A DETERMINED CONSIDERATION UNDER WHICH THE ASSESSEE IS ENTITLED TO DEVELOP THE PROJECT ON THE SAID LAND AT ITS OWN COST IN THE MANNER IN WHICH HE MAY DECIDE. THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS & ORS. (SUPRA) AND, ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE 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 & ORS. (SUPRA) WILL NOT APPLY IN A CASE WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 18 ENTERED INTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VES T WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS & ORS. (SUPRA) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS & ORS. (SUPRA) CANNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF THE ASSESSEE, SINCE IT HAD FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRUX OF THE AGREEMENT WAS THAT THE ASSESSEE HAD PURCHASED THE LAND AND HAD DEVELOPED THE HOUSING PROJECT AT ITS OWN, THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION UNDER SECTION 80IB(10). 9. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE TERMS OF THE AGREEMENT FOR HOUSING PROJECT (PB 62). ACCORDING TO WHICH, THE RESPONSIBILITY OF THE ASSES SEE HAVE BEEN ANALYZED IN SUCH MANNER THAT THE PLANNING , SANCTION OF PLAN, WORK OF CONSTRUCTION, DEVELOPMENT OF THE PROPERTY, LABOUR ENGAGEMENT SHALL HAVE TO BE DONE B Y THE ASSESSEE IN RESPECT OF THE DEVELOPMENT OF THE PROPE RTY IN QUESTION. IT IS FURTHER PROVIDED THAT THE ASSESSEE SHALL PROVIDE PARTIES/MEMBERS TO WHOM SALE IS TO BE MADE BY ENROLLING THE MEMBERS. THE ASSESSEE SHALL ACCEPT A LL THE PAYMENTS FROM THE MEMBERS/BUYERS. THE LEARNED COUNSEL FOR THE ASSESSEE FILED DETAILS OF THE SALE PROCEEDS RECEIVED FROM THE PARTIES OF 110 UNITS IN THE ASSES SMENT YEAR 2005-2006 AND 2006-2007. IT WOULD SUPPORT THE CASE OF THE ASSESSEE THAT THE ASSESSEE RECEIVED ENT IRE SALE CONSIDERATION FROM THE MEMBERS/BUYERS AFTER COMPLETION OF THE DEVELOPMENT AND BUILDING HOUSING PROJECT. AGREEMENT FURTHER PROVIDES THAT THE ASSES SEE SHALL PROVIDE PAYMENT FOR CONSTRUCTION, ENGAGE ARCH ITECT, ENGINEERS/SITE SUPERVISORS AND SHALL ALSO OBTAIN AL L ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 19 PERMISSION FROM THE AUDA. THE ASSESSEE SHALL MAKE ALL FINANCIAL ARRANGEMENTS FOR THE PURPOSE OF IMPLEMENT ING HOUSING PROJECT AND SHALL EXECUTE ALL DEEDS IN THIS BEHALF. THE AGREEMENT FURTHER PROVIDES THAT THE ASSESSEE SH ALL RECOMMEND THE NAMES OF THE MEMBERS FOR ALLOTMENT AN D LAND SHALL REMAIN OPEN FOR CONSTRUCTION FOR THE ASS ESSEE AND THE ASSESSEE SHALL HAVE ALL RIGHTS FOR USING OF ALL THE TERRACE AND OPEN SPACE IN ANY MANNER. THE AGREEMEN T FURTHER PROVIDES THAT AFTER IMPLEMENTATION AND COMP LETION OF THE PROJECT, WHATEVER PROFIT/SURPLUS OR LOSS/DEF ICIT TO THE ASSESSEE OUT OF THE PROJECT WILL REST WITH THE ASSE SSEE AND THE ASSESSEE SHALL BE RESPONSIBLE AND LIABLE FO R ALL THE LOSSES SUFFERED FOR THE COMPLETION OF THE PROJE CT AND THE ASSESSEE SHALL COMPENSATE IN THIS BEHALF. THE AGREEMENT FURTHER PROVIDES THAT THE ASSESSEE SHALL INCUR ALL EXPENSES FOR COMMON FACILITY LIKE, LIGHTS, WATE R, SEWERAGE, LIFT, BORE-WELL ETC. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COPY OF THE AGREEMENT TO SELL D ATED 12-8-2003 THROUGH WHICH THE ASSESSEE PURCHASED THE PROPERTY IN QUESTION THROUGH AGREEMENT TO SELL FOR CONSIDERATION OF RS.3 LAKHS AND ALSO FILED COPY OF THE LEDGER ACCOUNT AND BANKING STATEMENT OF THE ASSESSE E AS WELL AS OF THE SOCIETY TO SHOW THAT THE AMOUNT OF S ALE CONSIDERATION OF RS.3 LAKHS IS TRANSFERRED IN A SUM OF RS.2.50 LAKHS AND RS.50,000/- FROM THE ASSESSEE AND WAS RECEIVED BY THE SOCIETY IN THEIR ACCOUNT. IT W OULD THEREFORE PROVE THAT THE ASSESSEE MADE THE PAYMENT OF SALE CONSIDERATION OF THE PROPERTY IN QUESTION THRO UGH BANKING CHANNEL. THE DETAILS OF THE AMOUNT RECEIVE D AS A SALE PROCEEDS FROM THE MEMBERS/PROPOSED BUYER IS AL SO FILED TO SUPPORT THE CONTENTION OF THE ASSESSEE THA T THE ASSESSEE RECEIVED ENTIRE SALE PROCEEDS IN ITS BOOKS OF ACCOUNTS WITH ALL RIGHTS TO USE PROFIT AND LOSS. P B-130 IS THE REPLY FILED BEFORE THE LEARNED CIT(A) TO EXPLAI N THE ABOVE POSITION THAT THE ASSESSEE PAID SALE CONSIDER ATION TO THE SOCIETY. THE LEARNED COUNSEL FOR THE ASSESS EE ALSO REFERRED TO THE QUERIES RAISED BY THE CIT(A) IN THI S REGARD WHICH IS PROPERLY EXPLAINED BY THE ASSESSEE. THE A BOVE FACTS WOULD PROVE THAT THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL WITH THE SOCIETY FOR CONSIDERATIO N. ALL ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 20 THE RESPONSIBILITIES FOR CARRYING OUT THE CONSTRUCT ION, PERMISSION AND DEVELOPMENT OF THE PROJECT LIE WITH THE ASSESSEE. THE REAL OWNER OF THE LAND WAS ONLY TO C O- OPERATE WITH THE ASSESSEE IN CARRYING OUT THE DEVELOPMENT AND ALSO TO EXECUTE NECESSARY DOCUMENTS WHENEVER REQUIRED BY THE ASSESSEE AS A DEVELOPER. THE REAL OWNER HAS ALSO HANDED OVER THE PHYSICAL POSSES SION TO THE SOCIETY AS A BUILDER FOR CARRYING OUT THE DEVELOPMENT OF THE PROJECT. THE LAND OWNER DID NO T LEFT WITH ANY RIGHT, INTEREST OR TITLE IN DEVELOPMENT WH ICH WAS CARRIED OUT BY THE ASSESSEE. THE ASSESSEE WAS ENTI TLED TO ENROLL THE MEMBERS FOR SELLING THE UNITS WITHIN ITS OWN RIGHTS. ALL THE EXPENSES HAVE TO BE INCURRED BY TH E ASSESSEE FOR CARRYING OUT THE CONSTRUCTION ETC. T HE MOTIVE OF THE REAL OWNER WAS NOT TO DEVELOP, CONSTR UCT OR CARRYING OUT ANY BUSINESS AS A BUILDER OR DEVELOPER AND PRACTICALLY NO RIGHT IN THE HANDS OF THE REAL OWNER IN THIS BEHALF. WITH ALL INTENTS AND PURPOSES, THE ASSESSE E HAS ACQUIRED DOMINANT RIGHT OVER THE LAND AND THE ASSES SEE COULD DEAL WITH THE LAND IN THE MANNER IN WHICH THE ASSESSEE MIGHT HAVE LIKED. THE TERMS AND CONDITIONS ENTERED INTO BETWEEN THE ASSESSEE AND THE SOCIETY A S PER THE DEVELOPMENT AGREEMENT AND AGREEMENT TO SELL PROVIDED ALL DOMINANT CONTROL AND RIGHTS OVER THE L AND TO THE ASSESSEE AND THE ASSESSEE WOULD BE DEVELOPING A ND CONSTRUCTING THE HOUSING PROJECT AT ITS OWN COST AN D WOULD REMAIN OWNER OF THE BUILDING WITHOUT ANY INTERFEREN CE FROM THE LAND OWNER. THE AGREEMENT IN QUESTION DID NOT PROVIDE THAT THE ASSESSEE WOULD BE WORKING AS A CONTRACTOR OR AGENT ON BEHALF OF THE LAND OWNER. T HE AGREEMENT IN QUESTION WOULD NOT BE REGARDED TO BE T HE JOINT-VENTURE OR COLLABORATION AGREEMENT. IT WAS T HE AGREEMENT FOR SALE OF THE LAND FOR DETERMINED CONSIDERATION UNDER WHICH THE ASSESSEE WAS ENTITLED TO DEVELOP THE HOUSING PROJECT ON THE SAID LAND IN ITS OWN COST AND IN THE MANNER IN WHICH THE ASSESSEE MIGHT HAVE DECIDED. THE AUTHORITIES BELOW REJECTED THE CLAIM OF THE ASSESSEE, BECAUSE, ORIGINALLY, THE ASSESSEE WAS AUTHORIZED TO CONSTRUCT 94 RESIDENTIAL UNITS, BUT A S AGAINST THE AGREEMENT, LATER ON, THE ASSESSEE CONSTRUCTED 1 10 ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 21 UNITS. HOWEVER, WE FIND THAT THERE IS BAR TO CONST RUCT MORE FLATS OR UNITS BY THE ASSESSEE IN THE GIVEN FA CTS OF THE CASE. IT IS A MATTER BETWEEN THE LAND OWNER AN D THE ASSESSEE. ONCE SANCTION PLAN IS APPROVED BY THE MUNICIPAL AUTHORITIES ON THE PAPERS SUBMITTED BY TH E REAL OWNER, IT COULD BE DEEMED APPROVAL OF CONSTRUCTION OF HOUSING FLATS IN FAVOUR OF THE ASSESSEE, MORE SO, W HEN THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL WHOL E OF THE PROPERTY. SO THE OBJECTION OF THE AUTHORITIES BELOW THAT THE ASSESSEE CONSTRUCTED MORE FACTS IS NOT SUSTAINABLE IN LAW. THE ABOVE FACTS, IF CONSIDERED IN LIGHT OF DECISION OF THE ITAT, AHMEDABAD BENCHES, IN THE CASE OF RADHE DEVELOPERS AND THE SHAKTI CORPORATION, WE ARE OF THE VIEW THAT THE ISSUE IS NOW COVERED BY THE AB OVE DECISION OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, BECAUSE, THE ASSESSEE HAS ACQUIRED DOMINION RIGHT O VER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISK INVOLVED THEREIN. THE CRUX OF THE MATTER WOULD BE THAT THE ASSESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED T HE HOUSING PROJECT AT ITS OWN COST, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR DEDUCTI ON UNDER SECTION 80IB(10) OF THE ACT. 10. THE ASSESSEE FILED DETAILS OF BUILT UP AREA OF ALL 110 UNITS OF THE RESIDENTIAL FLATS AT PAGE NO.52 AND 53 OF THE PB TO SHOW THAT THE BUILT UP AREA WAS LESS THAN 150 0 SQ.FEETS. HOWEVER, THE DVO REPORTED IN HIS REPORT (PB- 46) THAT CONSIDERING THE OPEN TERRACE IN FRONT OF P ENT- HOUSE ROOM AT 6TH FLOOR WHICH IS ANALOGOUS TO BALCONY/VERANDAH, THEN BUILT-UP AREA IN THIS MANNER WILL MEASURE MORE THAN 2500 SQ.FEET TO 2600 SQ.FEET APPROXIMATELY. IT IS THEREFORE A CASE SET UP AGAIN ST THE ASSESSEE THAT THE OPEN TERRACE IS ANALOGOUS TO BALCONY/VERANDAH AND IF IT IS INCLUDED IN THE DEFIN ITION OF BUILT-UP AREA, THEN IT WOULD EXCEED THE PRESCRIBED LIMIT. THE DEFINITION OF BUILT-UP AREA MEANS INNER MEASURE MENT OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDIN G THE PROJECTIONS AND BALCONIES AS INCREASED BY THE THICK NESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 22 SHARED WITH OTHER RESIDENTIAL UNITS. THE LEARNED COUNSEL FOR THE ASSESSEE PROVIDED FROM DIFFERENT DICTIONARI ES THE DEFINITION OF BALCONY WHICH READS AS UNDER: 1. (ARCH.) A PLATFORM PROJECTING FROM THE WALL OF A BUILDING, USUALLY RESTING ON BRACKETS OR CONSOLES, AND INCLOSED BY A PARAPET; AS A BALCONY IN FRONT OF A WINDOW. ALSO, A PROJECTING GALLERY IN PLACES OF AMUSEMENTS; AS, THE BALCONY IN A THEATER. [1913 WEBESTER] 2. 1): AN UPPER FLOOR PROJECTING FROM THE REAR OVER THE MAIN FLOOR IN AN AUDITORIUM 2): A PLOTFORM PROJECTING FROM THE WALL OF A BUILDING AND SURROUNDED BY A BALUSTRADE OR RAILING OR PARAPET. SOURCE : WORDNET (R) 2.0 3. 1(ARCH.) A PLATFORM PROJECTING FROM THE WALL OF A BUILDING, USUALLY RESTING ON BRACKETS OR CONSOLES , AND INCLOSED BY A PARAPET; AS A BALCONY IN FRONT OF A WINDOW. ALSO, A PROJECTING GALLERY IN PLACES OF AMUSEMENTS; AS, THE BALCONY IN A THEATER. SOURCES: WEBSTERS REVISED UNABRIDGED DICTIONARY (1913) 11. WHEN THE ABOVE MEANING OF BALCONY IS TAKEN IN TO CONSIDERATION WITH THE DEFINITION OF BUILT-UP AREA AS PROVIDED IN THE ACT, IT IS CLEAR THAT FINDING OF TH E AUTHORITIES BELOW ARE NOT SUSTAINABLE IN LAW. IT IS AN ADMITTE D FACT THAT THE OPEN TERRACE IN FRONT OF PENT-HOUSE WAS CONSIDERED AS BALCONY/VERANDAH. THE OPEN TERRACE I S NOT COVERED AND IS OPEN TO SKY AND WOULD NOT BE PART OF THE INNER MEASUREMENT OF THE RESIDENTIAL FLOOR AT ANY F LOOR LEVEL. THE DEFINITION OF BUILT-UP AREA IS INCLUS IVE OF BALCONY WHICH IS NOT OPEN TERRACE. THE DVO HAS CONSIDERED THE OPEN TERRACE AS ANALOGOUS TO ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 23 BALCONY/VERANDAH WITHOUT ANY BASIS. THEREFORE, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN REJECTING T HE CLAIM OF THE ASSESSEE BY TAKING THE OPEN TERRACE AS BALCONY/VERANDAH. THEREFORE, THE ASSESSEE HAS COMP LIED WITH ALL THE REQUIREMENTS OF SECTION 80IB (10) OF T HE ACT IN THIS REGARD. MOREOVER, THE ITAT, NAGPUR BENCH IN T HE CASE OF AIR DEVELOPERS (SUPRA) HAS HELD AS UNDER: IN VIEW OF THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V. DY. CIT (IT APPEAL NO. 1595 (KOL) OF 2005, DATED 24-3-2006], WHICH WAS SQUARELY APPLICABLE TO THE INSTANT CASE, IT WAS TO BE HELD THAT IF THE ASSESSEE HAD DEVELOPED A HOUSING PROJECT WHEREIN THE MAJORITY OF THE RESIDENTIAL UNITS HAD A BUILT-UP AREA OF LESS THAN 1500 SQ. FT., I.E., THE LIMIT PRESCRIBED BY SECTION 80- IB(10) AND ONLY A FEW RESIDENTIAL TRAITS WERE EXCEEDING THE BUILT-UP AREA OF 1500 SQ. FT., THERE WOULD BE NO JUSTIFICATION TO DISALLOW THE ENTIRE DEDUCTION UNDER SECTION 80-IB(10). IT WOULD BE /AIR AND REASONABLE TO ALLOW THE DEDUCTION ON A PROPORTIONATE BASIS, I.E. ON THE PROFIT DERIVED FRO M THE CONSTRUCTION OF THE RESIDENTIAL UNIT WHICH HAD A BUILT-UP AREA OF LESS THAN 12500 SQ. FT., I.E. THE LIMIT PRESCRIBED UNDER SECTION 80IB(10). IN VIEW OF THE ABOVE, THE AO WAS TO BE DIRECTED THAT IF IT WAS FOUND THAT THE BUILT-UP AREA OF SOME OF THE RESIDENTIAL UNITS WAS EXCEEDING 1500 SQ.FT., HE WOULD ALLOW THE PROPORTIONATE DEDUCTION UNDER SECTION 80-IB(10). ACCORDINGLY, THE APPEAL OF THE REVENUE WAS TO BE DISMISSED AND CROSS-OBJECTION OF THE ASSESSEE WAS DEEMED TO BE PARTLY ALLOWED. THEREFORE, IN THE LIGHT OF THE DECISION OF THE ITAT , NAGPUR BENCH, THE AUTHORITIES BELOW SHOULD NOT HAVE REJECTED THE CLAIM OF THE ASSESSEE AT LEAST ON ALTE RNATE CONTENTION THAT THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 80IB(10) ON PRO-RATA BASIS. NO OTHER POINT WAS CONSIDERED AGAINST THE ASSESSEE FOR ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 24 REFUSING RELIEF UNDER SECTION 80IB(10) BY THE AUTHO RITIES BELOW. SINCE WE HAVE HELD ABOVE THAT THE OPEN TERRA CE IS NOT PART OF BALCONY/VARANDH THEREFORE ACCORDING TO THE SUBMISSIONS OF THE ASSESSEE, THE BUILT UP AREA OF T HE ASSESSEE WAS WITHIN THE PRESCRIBED LIMIT. THEREFOR E, THERE IS NO NEED TO GIVE FURTHER FINDING WITH REGAR D TO ALTERNATE CLAIM OF THE ASSESSEE. CONSIDERING THE FA CTS OF THE CASE, IN THE LIGHT OF THE ABOVE DECISIONS, WE A RE OF THE VIEW THAT THE ASSESSEE FULFILLED THE CONDITIONS AND REQUIREMENT OF THE SECTION 80IB(10) OF THE ACT, THE REFORE, THE CLAIM OF THE ASSESSEE FOR DEDUCTION SHOULD NOT HAVE BEEN DENIED BY THE AUTHORITIES BELOW. WE ACCORDING LY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND D IRECT THE AO TO GRANT DEDUCTION TO THE ASSESSEE UNDER SECTION 80IB(10) OF THE ACT AS CLAIMED BY THE ASSESSEE. 12. IN RESULT, THE ASSESSEES APPEAL IS ALLOWED . 8. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COPY OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT IN THE CASE OF THE SAME ASSESSEE FOR PRECEDING ASSESSMENT YEAR 2006-07 IN WHICH THE CLAIM OF THE ASSESSEE U/S 80IB (10) OF THE IT ACT H AS BEEN ALLOWED BY THE AO. THE LEARNED DR COULD NOT CONTRIBUTE ANYTHIN G ON THIS ISSUE AND MERELY RELIED UPON THE ORDER OF THE AO. ONCE, T HE AO ACCEPTED SIMILAR CLAIM OF THE ASSESSEE, THERE WAS NO REASON FOR THE REVENUE TO DEVIATE FROM ITS EARLIER STAND. ON EXAMINATION OF T HE FACTS AND CIRCUMSTANCES OF THE CASE AND EVIDENCES ON RECORD, THE LEARNED CIT(A) RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE IN WHICH NO INFIRMITY HAS BEEN POINTED BY THE LEARNED DR. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A) IN ALLOWING CLAIM OF THE ASSESSEE. IN VIEW OF THIS FIN DING, THE CROSS OBJECTION OF THE ASSESSEE BECOMES INFRUCTUOUS WHICH WAS FILED IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A). ITA NO.266/AHD/2011 & C. O. NO.66/AHD/2011 M/S. ADHYASHAKTI DEVELOPERS 25 9. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED AND THE CROSS OBJECTION OF THE ASSESSEE IS INFRUCTUOUS AND IS DISPOSED OF ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD