Shri Mukeshbhai V. Patel (HUF), Ahmedabad V. The Income tax Officer, OSD, Gandhinagar

ITA 3680/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8834 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-09-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: SHRIV P PATELAR
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI D.T.GARASIA, JUDICIAL MEMBER AND A.N. PAHUJA, ACCOUNTANT MEMBER) ITA NO.3680/AHD/2007 ASSESSMENT YEAR :2003-04 DATE OF HEARING: 24.12.08 DRAFTED:24.12 .08 MUKESHBHAI V PATEL ,HUF. PLOT NO. 588,SECTOR-22, GANDHINAGAR [PAN :.AABHP8838A] V/S . INCOME-TAX OFFICER[OSD] GANDHINAGAR (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRIV.P.PATEL,AR REVENUE BY:- SH. H.N.SINGH, DR O R D E R A.N. PAHUJA :THIS APPEAL BY THE ASSESSEE DIRECTED AGAINST AN ORDER DATED 13-07- 2007 OF THE LD. CIT(A)-GANDHINAGAR, RAISES GROUN D NOS.1 &2 RELATING TO DEDUCTION U/S 80IB(10) OF THE INCOME-TAX ACT,1961[HEREINAFTER REF ERRED TO AS THE ACT] AND CONSEQUENT ADDITION OF RS.2,10,663/- . 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING NIL INCOME FILED ON 30-9-2003 WAS PROCESSED U/S.143(1) OF THE ACT . TH EREAFTER, THE ASSESSMENT WAS REOPENED U/S 148 OF THE ACT ON 18.8.2005. THE ASSE SSEE IS STATED TO BE IN THE BUSINESS OF CIVIL CONSTRUCTION. AS IN THE PRECEDING TWO ASSESSM ENT YEARS, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO THE ASSESSEE CLAIMED DEDUC TION U/S. 80IB(10) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSIN G OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB( 10) OF THE ACT AS THE ASSESSEE FAILED TO ESTABLISH THAT THE PROJECT WAS APPROVED BY THE LOCA L AUTHORITY. THE ORIGINAL OWNERS SHRI VITHALBHAI MADHAVLAL PATEL & OTHERS HAD SOLD THE LA ND TO GREEN CITY GANDHINAGAR CO-OP. HOUSING SOCIETY. ACCORDING TO THE AO, ACTUAL OWNER OF THE PROJECT WERE THIS SOCIETY AND NOT THE ASSESSEE . AS PER AN AGREEMENT BETWEEN SOCIETY AND THE ASSESSEE, THE LATTER HAD THE RIGHT TO COLLECT MONEY FROM THE MEMBERS AND HAD ALS O LIEN ON THE PROPERTY AND NOWHERE OWNERSHIP RIGHTS HAD BEEN TRANSFERRED TO THE ASSESS EE. APPARENTLY, THE LAND ON WHICH ITA NO.3680/AHD/2007 PAGE 2 HOUSING PROJECT WAS CONSTRUCTED WAS NOT OWNED BY TH E ASSESSEE. ACCORDING TO THE AO, THE ASSESSEE COULD NOT BE REGARDED AS A BUILDER AND DEV ELOPER WITHIN THE MEANING OF PROVISIONS OF SEC. 80(IB)(10) OF THE ACT. THE ASSES SEE HAD MERELY UNDERTAKEN SUPERVISION AND MANAGEMENT ACTIVITY AS ALSO UNDERTAKEN CIVIL CO NSTRUCTION WORK AND WAS ENTITLED TO REMUNERATION @ 18% OF THE COST OF THE PROJECT. ACCORDINGLY, RELYIN G UPON HIS OWN DECISION IN THE PRECEDING ASSESSMENT YEARS, THE AO THE DISAL LOWED CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT . 3. ON APPEAL, THE LD. CIT(A) WHILE RELYING UPON HI S OWN DECISIONS FOR THE AY 2001-02 & 2002-30 UPHELD THE DISALLOWANCE OF DEDUCTION U/S 80 IB(10) OF THE ACT BESIDES ADDITION OF RS.2,10,663/- . 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US. AT THE OUTSET , BOTH THE PARTIES AGREED THAT THE MATTER MAY BE RESTORED TO THE FILE OF TH E AO FOR RE-EXAMINATION IN THE LIGHT OF DECISION OF THE ITAT IN CASE OF M/S SHAKTI CORPORAT ION & OTHERS IN ITA NOS. 1503 /AHD./2008 , A SIMILAR ISSUE HAVING ALREADY BEEN R ESTORED TO THE FILE OF THE AO IN THE PRECEDING YEARS . 5. WE HAVE HEARD BOTH THE PARTIES AND GON E THROUGH THE FACTS OF THE CASE. WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED IN A RECENT DEC ISION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NOS. 1503 /AHD./2008, WHEREIN AFTER ANALYZING THE DECISIONS OF HONBLE APEX COURT IN TH E CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT. LTD. IN CIVIL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. 2482/AHD/2006 IN THE CASE OF M/S RADHE D EVELOPERS & OTHERS , THE BENCH CONCLUDED AS UNDER 16 THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND A CCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMINANT OV ER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THA T, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WI LL NOT APPLY IN A CASE WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT F OR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THA T CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PRO JECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REM UNERATION FOR WHICH HE ITA NO.3680/AHD/2007 PAGE 3 WOULD BE RENDERING THE SERVICES. THE DECISION IN TH E CASE OF RADHE DEVELOPERS (SUPRA) HAS NOT DEALT WITH SUCH SITUATIO N. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTE RED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGRE EMENT AND CRUX OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE, WE ARE O F THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U/S 80I B(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GU LATI (SUPRA) WILL NOT ASSIST THE REVENUE, AS THE AGREEMENT IS NOT FOR SHA RING OF THE CONSTRUCTED AREA. IN OTHER CASES THE COPY OF AGREEMENT SINCE HA S NOT BEEN SUBMITTED BEFORE US, IF SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEMENT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET AS IDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EA CH OF THE ASSESSEES WITH THE LANDOWNER AND DECIDE WHETHER THE ASSESSEE HAS I N FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER A ND 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 DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE AO SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT TH E DEVELOPER HAS ACTED ON BEHALF OF THE LANDOWNER AND HAS GOT THE FIXED CONSI DERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC TS, THE ASSESSEE SHOULD NOT BE ALLOWED DEDUCTION U/S 80IB(10). 6. SINCE THE TERMS AND CONDITIONS OF THE RELEVANT DEVELOPMEN T AGREEMENT WERE NOT SPECIFICALLY ARGUED AND PLACED BEFORE US WHILE BOTH THE PARTIES AGREED THAT THE MATTER NEEDS TO BE RECONSIDERED IN THE LIG HT OF AFORESAID DECISIONS OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NOS. 1503 /AHD./2008 , IN THE INTEREST OF JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A ) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE T HE RELEVANT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE A SSESSEE WITH THE LANDOWNER IN THE LIGHT OF FACTS OBTAINING IN THE BO OKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN VIEW THE AFORESAID DECISION OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFT ER, DECIDE AS TO WHETHER THE UNDERTAKING OF THE ASSESSEE HAS INDEED PURCHASE D THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURCHASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ITA NO.3680/AHD/2007 PAGE 4 ALL THE DOMINANT CONTROL OVER THE PROJECT AND DEVEL OPED THE LAND AT HIS OWN COST AND RISKS, THE AO SHOULD ALLOW THE DEDUCTION U /S 80IB(10)OF THE ACT, IN ACCORDANCE WITH LAW. IN CASE THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON BEHALF OF THE LANDOWNER AND H AS GOT ONLY THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMEN T OF THE HOUSING PROJECT, THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS, GROUND NOS. 1 &2 ARE DISPOSE D OF AS INDICATED HEREINBEFORE. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 24 TH MARCH, 2010 SD/- SD/- (D.T.GARASIA) (A.N.PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, DATED : 24 TH MARCH,2010 COPY OF THE ORDER FORWARDED TO :- 1. INCOME-TAX OFFICER[OSD],GANDHINAGAR 2. THE ASSESSEE. 3. THE CIT(A)-GANDHINAGAR 4. THE CIT,CONCERNED . 5. THE DR, ITAT, B BENCH AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD