The ITO, Ward-1(3), RAJKOT-GUJARAT V. M/s. Shagun Developers, RAJKOT-GUJARAT

ITA 366/RJT/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67273 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-06-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV RANADE
• Assessee Lawyers: J C RANPURA CA U
• Section: 143(3); 80IB

Judgement Text

U N , IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 366 / RJT/20 12 / ASSESSMENT YEAR S 20 0 9 - 10 ITO, WARD - 1(3), RAJKOT ( D / APPELLANT) VS. M/S. SHAGUN DEVELOPERS, 120/121 - TO RAL COMPLEX, JAWAHAR ROAD, NEAR HOTEL GALAXY, RAJKOT PAN : ABHFS 3536 M RD / RESPONDENT A / REVENUE BY SHRI RAJIV RANADE , DR / ASSESSEE BY SHRI J C RANPUR A, CA U /DATE OF HEARING 10 . 0 6 .2013 U / DATE OF PRONOUNCEMENT 14 . 06 . 2013 / ORDER . . [ , / T. K. SHARMA, J. M . : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 26 .0 3 .2012 OF LD CIT (A) - I , RAJKOT FOR THE ASSESSMENT YEAR 200 9 - 1 0. 2 . THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN BUSINESS OF BUILDING CONSTRUCTION. FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING TOT AL INCOME OF RS.2,406/ - , AFTER CLAIMING DEDUCTION OF RS.1,22,90,395/ - U/S 80IB OF THE INCOME - TAX ACT . THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT ON 23.12.2011, WHEREIN HE DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT ON THE GROUND THAT THE HOUSING PROJECT HAS NOT BEEN IN THE NAME OF THE ASSESSEE AND THE PROJECT HAS BEEN APPROVED BY THE RMC TO SHRI RAJESH B PARSANA AND OTHERS IN THE CAPACITY OF INDIVIDUALS AND NOT IN THE NAME OF THE FIRM. IN THE ASSESSMENT O RDER, THE ASSESSING OFFICER FURTHER OBSERVED THAT ON THIS ISSUE NO DECISION OF JURISDICTIONAL HIGH COURT IS AVAILABLE. ITA NO. 366 /RJT/2012 2 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD CIT(A) ALLOWED THE CLAIM OF DEDUCTION U/S. 80IB(10) FOR THE DETAILED REASON GIVEN IN PARAGR APH 4.2 TO 4.4 OF APPELLATE ORDER WHICH READ AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE ISSUE ON HAND. THE AO MADE THE ADDITION BECAUSE THE APPROVAL RECEIVED BY THE APPELLANT FOR COMMENCEMENT OF HOUSING PROJECT, WHOSE INCOME MEANT TO BE CLAIMED AS DEDUCTION U/S 80IB(10) WAS IN THE NAME OF THE PARTNERS OF THE FIRM AND NOT IN THE APPELLANT FIRM. THEREFORE, THE CLAIM OF DEDUCTION WAS DECLINED. HOWEVER, IT NEEDS TO BE BORNE IN MIND THAT, THOUGH THE LAND WAS PURCHASED BY THE PARTNERS, THE SAME WAS BROUG HT BY THEM AS THEIR CAPITAL CONTRIBUTION AND ACCORDINGLY, THE FIRM HAD BECOME THE REAL OWNER. AS PER SECTION 4 OF THE PARTNERSHIP ACT, PARTNERSHIP IS THE RELATION BETWEEN PARTNERS WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM. THUS, THOUGH THE FIRM HAS SEPARATE LEGAL IDENTITY, HOWEVER, PARTNERS ARE AN INHERENT PART OF THE FIRM. THAT IS WHY, EACH PARTNER IS EQUALLY AND SEVERALLY RESPONSIBLE FOR THE ACTS OF ANY OR ALL THE PARTNERS. THEREFORE, IF ANY APPROVAL IS GRANTED TO THE PARTNERS, THE SAME BECOMES THE DEEMED APPROVAL GRANTED TO THE FIRM. SINCE THE LAND WAS BROUGHT INTO PARTNERSHIP FIRM BY EACH OF THE PARTNERS AS THEIR CAPITAL CONTRIBUTION AND AS THE PLAN WAS APPROVED WITHIN THE SPECIFIED PERIOD AND ALSO, AS ALL THE OTHER CONDITIONS FOR CLAIM OF DEDUCTION U/S 80IB(10) IS FULFILLED, THERE IS NO JUSTIFICATION ON THE PART OF THE AO TO DENY THE CLAIM ON THE GROUND THAT THE APPROVAL WAS GRANTED NOT IN THE FIRM OF THE APPELLANT FIRM. 4.3 IT IS ALSO SEEN THAT, ON SIMILAR I SSUE, THE HONBLE HIGH COURT OF GUJARAT, IN THE CASE OF RAMKRISHNA STHAPATYA V/S ITO IN SPECIAL CIVIL APPLICATION NO.17056/57/59 OF 2011, DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, WHICH IS REPRODUCED AS UNDER: - MERELY BECAUSE THE NAME OF PARTNERS ARE INDI CATED IN DEVELOPMENT PERMISSION GRANTED BY THE LOCAL AUTHORITY, ONE CANNOT JUMP TO THE CONCLUSION THAT PARTNERSHIP FIRM WAS NOT ENGAGED IN BUSINESS OF DEVELOPING HOUSING PROJECT. SUCH A VIEW, IN OUR OPINION, WOULD BE TOO RIGID AND TECHNICAL, PARTICULARLY, WHEN THE DEVELOPMENT PERMISSION IS GRANTED IN THE NAME OF ALL THREE PARTNERS OF FIRM AND THERE ARE NO OTHER PARTNERS OTHER THAN THOSE IN WHOSE FAVOUR SUCH PERMISSION WAS GRANTED. MERELY BECAUSE DEVELOPMENT PERMISSION RECORDED NAME OF PARTNERS AND NOT FIRM , WOULD HARDLY BE AN ISSUE ON WHICH DEDUCTION UNDER SECTION 80IB(10) OF THE ACT COULD BE DENIED PARTICULARLY, IF THE FIRM WAS FOUND TO HAVE DEVELOPED THE HOUSING PROJECT AND FULFILLED ALL OTHER CONDITIONS FOR CLAIMING SUCH DEDUCTION. MERELY BECAUSE PERMIS SION IS ISSUED IN THE NAME OF ALL PARTNERS OF THE FIRM WOULD NOT BE CONCLUSIVE EVIDENCE TO SHOW THAT PARTNERSHIP HAD NOT ENGAGED ITSELF IN THE BUSINESS OF DEVELOPING HOUSING PROJECTS. 4.4 THE ISSUE ON HAND IS IDENTICAL TO THE ISSUE UNDER THE DECISION OF THE HON. GUJARAT HIGH COURT AS MENTIONED SUPRA. IT IS ALSO SEEN THAT IN THE CASE OF M/S KETAN BUILDERS, ON IDENTICAL ISSUE FOR AY 2007 - 08, THE LD. CIT(A) - I RAJKOT VIDE ORDER NO. CIT(A) - I/RJT/315/09 - 10 DATED 25.05.2010 HA D ALSO ALLOWED THE APPEAL OF THE AP PELLANT. THEREFORE, THE ACT I ON OF THE AO IN DENYING THE CLAIM OF DEDUCTION U/S 80IB(10) IS HELD AS DEVOID OF MERIT ON FACTS & ALSO IN LAW, HENCE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. ITA NO. 366 /RJT/2012 3 AGGRIEVED BY THE ORDER OF LD CIT(A), T HE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS: - 1. LD. CIT(A) - I, RAJKOT ALLOWED THE APPEAL FILED BY THE ASSESSEE AND DELETED THE DISALLOWANCES OF DEDUCTION U/S 80IB OF RS.1,22,90,395/ - BY RELYING UPON THE DECISION OF HONBLE H IGH COURT OF GUJARAT IN THE CASE OF M/S RAMKRISHNA STHAPATYA V/S ITO IN SPECIAL CIVIL APPLICATION NO.17056/57/59 OF 2011 FOR WHICH THE DEPARTMENT HAS ACCEPTED THE DECISION AND NO SLP FILED. 2. ON THE FACTS OF THE CASE, LD CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER AS IN THE RELIED UPON CASE, THE LOCAL MUNICIPAL AUTHORITY HAD APPROVED THE PROJECT IN THE NAME OF ONE OF ITS PARTNER I.E. SH. SURESHBHAI M. MAKADIA AND OTHERS AND THE HONBLE HIGH COURT HAD TREATED OTHERS AS REMAINING PARTNE RS OF THE FIRM AND JUDGMENT WAS PRONOUNCED. WHEREAS IN THIS INSTANT CASE, THE RAJKOT MUNICIPAL CORPORATION (RMC) APPROVED THE PROPOSAL OF DEVELOPMENT OF HOUSING PROJECT IN THE NAME OF TWO PERSON (I) RAJESH B PARSANA AND (II) MOHANLAL P SORATHIYA WHEREAS S HRI RAJESH B PARSANA IS NOT AT ALL A PARTNER IN THE FIRM. APART FROM THIS, THE LAND ON WHICH THE PROJECT SHAGUN RESIDENCY WAS DEVELOPED BY THE ASSESSEE FIRM IS IN THE NAME OF RAJESH B PARSANA (HUF) AND SHRI MOHAN P SORATHIYA AND NOT IN THE NAME OF SHRI RA JEHS B PARSANA IN HIS INDIVIDUAL CAPACITY. IF THE APPROVAL BY THE RMC HAD GIVEN IN THE NAME OF SHRI RAJESH B PARSANA (HUF) AND OTHERS, THE RELIANCE WOULD HAVE BEEN ACCEPATABLE. SHRI RAJESH B PARSANA HAD NEITHER PURCHASED THE LAND IN HIS INDIVIDUAL CAPACI TY NOR HE IS A PARTNER IN THE FIRM, THEREFORE THE APPROVAL IN HIS NAME HAS NO NEXUS WITH THE PROJECT DEVELOPED BY M/S. SHAGUN DEVELOPERS. 2. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RE STORED. 4. AT THE OUTSET, SHRI J. C. RANPURA, CA APPEARED ON BEHALF OF THE ASSESSEE AND POINTED OUT THAT IN THE IMPUGNED ORDER THE LD CIT(A) HAS FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF RAMKRISHNA STHAPATYA V. ITO IN SPECIAL CIVI L APPLICATION NO.17056/57/59 OF 2011. THE HONBLE GUJARAT HIGH COURT RECENTLY IN THE CASE OF ITO V. KEVAL CONSTRUCTION, REPORTED IN [2013] 354 ITR 13 (GUJ), HAS ALSO HELD THAT ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION U/S 80IB(10) OF THE INCOME - TAX ACT EVEN IF IT DID NOT OWN THE LAND ON WHICH THE PROJECT WAS DEVELOPED. IN THIS JUDGMENT , THE HONBLE HIGH COURT OF GUJARAT HAS FOLLOWED ITS OWN JUDGMENT IN THE CASE OF CIT V. RADHE DEVELOPERS, REPORTED IN [2012] 341 ITR 403 (GUJ). THE LD COUNSEL FOR THE A SSESSEE ALSO POINTED OUT THAT SINCE THE MATTER IS SQUARELY COVERED BY THE DECISIONS OF JURISDICTIONAL HIGH COURT BY AFORESAID PRONOUNCEMENT S , THE VIEW TAKEN BY THE LD CIT(A) IN THE IMPUGNED ORDER BE UPHELD. ITA NO. 366 /RJT/2012 4 5. SHRI RAJIV RANADE, DR APPEARED FOR THE REVEN UE COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS. 6. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE CASE BEFORE US, LAND WAS PURCHASED BY PARTNERS, SAME WAS BROUGHT BY THEM AS THEIR CAPITAL CONTRIB UTION AND ACCORDINGLY THE FIRM HAS BECOME THE REAL OWNER. IN SUCH SITUATION, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE INCOME - TAX ACT, 1961 AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ITO V. KEVAL CONSTRUCTION (SUPRA). WE AR E, THEREFORE, CONVINCED THAT THE VIEW TAKEN BY THE LD CIT(A) IN THE IMPUGNED ORDER IS IN CONSENSUS WITH THE RATIO OF JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ITO V. KEVAL CONSTRUCTION (SUPRA) & CIT V. RADHE DEVELOPERS (SUPRA) . WE THEREFORE IN CLINE TO UPHELD THE ORDER PASSED BY LD CIT(A). 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( D. K. SRIVASTAVA ) (T. K. SHARMA) / ACCOUNTANT MEMBER A / JUDICIAL MEMBER / ORDER DATE 14 . 06 .2013 . /RAJKOT BT T JO O / COPY OF ORDER FO RWARDED TO: - 1 . D / APPELLANT - ITO, WARD - 1(3),RAJKOT 2 . RD / RESPONDENT - M/S. SHAGUN DEVELOPERS, 120/121 - TORAL COMPLEX, JAWAHAR ROAD, NEAR HOTEL GALAXY, RAJKOT 3 . N E / CONCERNED CIT I , RAJKOT 4 . E - / CIT (A) - I , RAJKOT 5 . N , U N , / DR, ITAT, RAJKOT 6 . / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT