The ITO, Ward-3(1), Surat V. M/s. R.P. Corporation, Surat

ITA 3686/AHD/2007

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2229 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 14-09-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: P M MEHTA
• Keywords: Competent authority; Set aside
• Section: 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.3686/AHD/2007 (ASSESSMENT YEAR:-2004-05) & ITA NO.2371/AHD/2008 (ASSESSMENT YEAR:-2005-06) INCOME-TAX OFFICER, WARD- 3(1), SURAT / ACIT, CIRCLE-3, SURAT V/S M/S R P CORPORATION, T P S NO.5, UMRA NORTH, F P NO.29-30, UMARA, SURAT PAN: AAFFR 4379 G [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI R K DHANESTA, DR ASSESSEE BY:- SHRI P M MEHTA, AR O R D E R A N PAHUJA: THESE TWO APPEALS BY THE REVENUE AGAINST TWO SEPARATE ORDERS DATED 24-07-2007 AND 31-03-2008 OF THE CIT(A)-II, SURAT, RAISE GROUNDS RELATING TO CLAIM FOR DEDUCTIO N OF RS.17,08,263/- IN THE ASSESSMENT YEAR 2004-05 AND RS.30,30,145/-(A CTUALLY RS.30,99,640/-) IN THE AY 2005-06 RESPECTIVELY U/S 80IB(10) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT]. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS FOR THE A Y 2004-05 ARE THAT RETURN DECLARING NIL INCOME AFTER CLAIMING D EDUCTION OF RS.17,08,263/- U/S 80IB(10) OF THE ACT FILED ON 25- 10-2004 BY THE ASSESSEE, ENGAGED IN THE BUSINESS CONSTRUCTION OF H OUSING PROJECTS, AFTER BEING PROCESSED ON 12-03-2005 U/S 143(1)(A) O F THE ACT, WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF A NOTICE U/ S 143(2) OF THE ACT ON 01-08-2005 .DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE AS SESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT AS T HE APPROVAL OF THE COMPETENT AUTHORITY FOR DEVELOPMENT OF THE HOUSING PROJECT WAS IN THE NAME OF OWNERS OF THE LAND VIZ. M/S GOVINDJI P ARK CO-OPERATIVE HOUSING SOCIETY, A SOCIETY CONSTITUTED BY SOME OF T HE PARTNERS OF ITA NO.3686/A/07 & 2371/A/08 2 THE FIRM, WHILE APPROVAL FOR THE CONSTRUCTION PLAN WAS ALSO IN THE NAME OF THESE OWNERS AND THE ASSESSEE MERELY EARNED COMMISSION FROM THE SAID SOCIETY .SINCE THE LAND ON WHICH HOUS ING PROJECT WAS CONSTRUCTED WAS NOT OWNED BY THE UNDERTAKING OF TH E ASSESSEE NOR THE ASSESSEE HAD APPROVAL OF ANY HOUSING PROJECT IN THEIR NAME WHILE DEDUCTION U/S 80IB(10) WAS CLAIMED ON COMMISS ION INCOME ALONE AND COMPLETION CERTIFICATE FOR THE SAID HOUSI NG PROJECT WAS OBTAINED BY THE SOCIETY ONLY, THE AO CONCLUDED THAT IT WAS THE LANDOWNER ALONE WHO OWNED THE UNDERTAKING OF DEVELO PING AND BUILDING HOUSING PROJECT AND THE ASSESSEE WAS MEREL Y AN AGENT OR A CONTRACTOR OF THE SAID LANDOWNER AND ENTITLED TO CO MMISSION OF ONLY 15% ON EVERY RS. 100 COLLECTED FOR THE PURPOSE OF O RGANIZING AND CONSTRUCTING ON BEHALF OF THE SOCIETY. ACCORDING TO THE AO, THERE SHOULD BE COMPLETE IDENTITY BETWEEN THE ASSESSEE RE FERRED TO IN SEC. 80IB(1) AND THE UNDERTAKING REFERRED TO IN SEC. 80I B(10) OF THE ACT AS IS APPARENT FROM RULE 18BBB(2) OF THE IT RULES, 1962, STIPULATING A PRESCRIBED REPORT BY THE UNDERTAKING OF THE ASSES SEE AND IN ITS ABSENCE, THE ASSESSEE COULD NOT BE REGARDED AS A BU ILDER AND DEVELOPER WITHIN THE MEANING OF PROVISIONS OF SEC. 80(IB)(10) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE CLAIM FOR DEDUCTION OF RS.17,08,263/- U/S 80IB(10) OF THE ACT IN THE AY 20 04-05. 3. LIKEWISE, IN THE AY 2005-06, THE AO DISALLOWE D THE CLAIM FOR DEDUCTION OF RS.30,99,640/- U/S 80IB(10) OF THE ACT . 4. ON APPEAL, THE ID. CIT(A) ALLOWED THE CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT IN THESE TWO ASSESSMENT YEARS, MERELY FOLLOWING THE DECISION DATED 29.6.2007 OF THE ITAT IN THE CAS E OF RADHE DVELOPERS & OTHERS IN ITA NO. 2482/AHD./2006. 5. THE REVENUE IS NOW IN APPEAL BEFORE US. THE ID. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE MAT TER MAY BE RESTORED TO THE FILE OF THE AO FOR RE-EXAMINATION I N THE LIGHT OF DECISION OF THE ITAT IN CASE OF M/S SHAKTI CORPORAT ION & OTHERS IN ITA NO.3686/A/07 & 2371/A/08 3 ITA NOS. 1503/AHD./2008. THE ID. AR ON BEHALF OF TH E ASSESSEE DID NOT OPPOSE THESE SUBMISSIONS OF THE LD. DR AND ALS O RELIED UPON THE AFORESAID DECISION IN THE CASE OF M/S SHAKTI CO RPORATION & OTHERS, IN SUPPORT OF THEIR CLAIM. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. AS CONTEN DED BY BOTH THE PARTIES ,WE FIND THAT A SIMILAR ISSUE WAS CONSIDERE D IN A DECISION 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 O F HONBLE APEX COURT IN THE 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 DEVELOPERS & 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 DEVELOPER S (SUPRA) AND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HA S ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSIN G PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT, IN OUR OPINION, THE DECIS ION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CAS E 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 ENTERED I NTO 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 RESTRIC TED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA ) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DO WN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVEL OPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRU X OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN, THEREFORE , WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DED UCTION U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVE NUE, AS THE AGREEMENT IS NOT FOR SHARING OF THE CONSTRUCTED ARE A. IN OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFORE US, IF ITA NO.3686/A/07 & 2371/A/08 4 SUBMITTED , THE TERMS AND CONDITIONS OF THE AGREEME NT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US, WE THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AN D DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS, THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS, THE ASSESSEE SHOULD NOT BE AL LOWED DEDUCTION U/S 80IB(10). 6.1. SINCE BOTH THE PARTIES AGREED THAT THE MAT TER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 , IN THE INTER EST OF JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATT ER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE THE RELEVANT DEVE LOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE A SSESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS, KEEPING IN VIEW THE AFORESAID DECISIONS OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER, DECIDE AS TO WHETHER THE UNDERTAKIN G OF THE ASSESSEE HAS INDEED PURCHASED THE LAND FOR A FIXED CONSIDERA TION 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 ALL THE DOMINANT CONTROL OVER THE PROJECT AND D EVELOPED THE LAND AT THEIR OWN COST AND RISKS, THE AO SHOULD ALLOW TH E DEDUCTION U/S 80IB(10)OF THE ACT, IN ACCORDANCE WITH LAW. IN CAS E THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON B EHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATI ON FROM THE ITA NO.3686/A/07 & 2371/A/08 5 LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC T, THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS, GROUND NOS. 1 & 2 IN THESE TWO AP PEALS ARE DISPOSED OF AS INDICATED HEREINBEFORE. 7. GROUND NOS. 3 & 4 IN THESE TWO APPEALS BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, T HEREFORE, DISMISSED. 8. IN THE RESULT, BOTH THESE APPEALS ARE ALLOWED B UT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 1-02-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 1-02-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S R P CORPORATION, T P S NO.5, UMRA NORTH, F P NO.29-30, UMARA, SURAT 2. ITO, WARD-3(1), SURAT / ACIT, CIRCLE-3, SURAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD