Income Tax Officer (Ward) -2, Margao V. M/s. Commonwealth Developers, Margao

ITA 397/PAN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75965 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 397 /PNJ/2013 (ASSESSMENT YEAR - 2010 - 11 ) THE INCOME TAX OFFICER, WARD - (2), MARGAO , GOA. (APPELLANT) VS. M/S. COMMONWEAL TH DEVELOPERS, LAXMI BUILDING, LOURENCO CAETANO MONTEIRO ROAD, MARGAO - GOA. PAN: AAAFC8220E (RESPONDENT) APPELLANT BY : SHRI NISHANT K. LD. DR. RE SPONDENT BY : SHRI PRAMOD Y. VAIDYA DATE OF HEARING : 27/02 /201 4 DATE OF ORDER : 06 / 03 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A), PANAJI DATED 27.09.2013 FOR THE ASSESSMENT YEAR 2010 - 11 BY RAISING THE FOLLOWING GROUNDS. 1. THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACT OF THE CASE . 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 8,34,50,531/ - MADE ON ACCOUNT OF DISALLOWANCE U/S. 80IB BY PLACING RELIANCE ON THE DECISION IN THE CASE OF RADHE DEVELOPERS. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME ON 17.09.2010 DECLARING TOTAL INCOME OF RS. NILL, AFTER CLAIMING DEDUCTION U/S. 80IB(10). THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF DEVELOPING & BUILDING HOU SING PROJECTS AND SALE OF FLATS AND 2 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS VILLAS. IT IS SEEN FROM THE DETAILS FILED THAT THE ASSESSEE HAS EXECUTED PROJECT VIZ. CD SCENIC ACRES AT FATORDA, MARGAO. THE ASSESSEE CLAIMED DEDUCTION U/S.80IB(10) FOR THE PROJECT CD SCENIC ACRES AT RS 8,34,50,531/ - . T HE ASSESSEE FIRM HAS FILED DETAILS OF UNIT PURCHASED/BOOKED IN RESPECT OF THE PROJECT. ON THE BASIS OF DETAILS FURNISHED, IT IS NOTICED THAT THERE ARE CERTAIN ALLOTMENTS WHICH ARE NOT AS PER THE CONDITIONS SPECIFIED 80IB(10)(E) & (F). MOREOVER, ON THE BAS IS OF DETAILS FURNISHED BY THE ASSESSEE FIRM, IT IS SEEN THAT THE APPROVAL OF THE PLAN S FOR THE 80IB PROJECT CD SCENIC ACRES IS IN THE NAME OF SHRI NILESH ANANT NAIK, LAND OWNER OF THE SAID PLOT, WHICH IS EVIDENT FROM THE SOUTH GOA PLANNING & DEVELOPMENT A UTHORITY, AND LICENCE FROM MARGAO MUNICIPAL COUNCIL, MARGAO. IT WAS NOTICED THAT THE APPROVAL FROM THE LOCAL AUTHORITY FOR THE HOUSING PROJECT, UNDERTAKEN BY THE ASSESSEE FIRM, FOR WHICH DEDUCTION CLAIMED U/S. 80IB IS NEITHER IN THE NAME OF THE FIRM NOR IN THE NAME OF THE PARTNERS. THEREFORE, DEDUCTION U/S. 80IB WAS NOT ALLOWED BUT 80IB (10) CLAUSE (E) & (F) WAS ALLOWED. 3 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE DETAILED SUBMISSION OF THE APPELLANT ON THE ISSUE AND FIND THAT RATIO OF THE DECISION IN THE CASE RADHE DEVELOPERS IS SQUARELY APPLICABLE IN THE INSTANT CASE. IN THE CASE OF RADHE DEVELOPERS, IT WAS HELD THAT REQUIREMENT FOR CLAIMING DEDUCTION U/S 801B (10) IS THAT, ASSESSEE AS AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT, IRRESPECTIVE OF THE FACT WHETHER IT IS ACTING AS A CONTRACTOR FOR DEVELOPING AND BUILDING HOUSING PROJECT OR ACTING AN OWNER OF LAND. SINCE THERE IS NO REQUIREMENT OF OWNERSHIP FOR THE CLAIMING DED UCTION U/S 801B (10), ASSESSEES CLAIM OF DEDUCTION ON PROFITS DERIVED FROM CONSTRUCTION AND DEVELOPMENT OF RESIDENTIAL HOUSING PROJECT WAS TO BE ALLOWED. SIMILARLY, IN THE INSTANT CASE THE, THE APPROVAL OF THE PROJECT WAS TAKEN IN THE NAME OF THE OWNER O F THE LAND AND THEN THE HOUSING PROJECT WAS DEVELOPED BY THE APPELLANT. ALL THE SIGNIFICANT RISKS AND REWARDS RELATED TO THE HOUSING PROJECT BELONGED TO THE APPELLANT. IN VIEW OF THE SIMILARITY OF FACTS OF THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APP ELLANT, RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF RADHE DEVELOPERS, THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF APPELLANT MADE U/S. 80IB (10) AND DELETE THE ADDITION. 4. THE L EARNED DR SUBMITTED THAT THE OWNER OF THE PROPER TY IS MR. NILESH ANANT NAIK AND THE PROMOTION FOR CONSTRUCTION IS IN THE NAME OF THE NILESH 3 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS ANANT NAIK. THEREFORE, SECTION 80IB (10) CAN BE ALLOWED ONLY TO THE OWNER OF THE PROPERTY. 5. ON THE OTHER HAND, THE LEARNED AR RELIED UPON THE ORDER OF THE CIT(A). WE HAVE ALS O RELIED UPON THE DECISION OF CIT VS. MAHALAKSHMI HOUSING SOCIETY 41 TAXMAN. 146 (MAD), CIT VS. SANGHVI & DOSHI ENTERPRISE 29 TAXMAN 386(MAD), CIT VS. RADHE DEVELOPERS 17 TAXMAN, 156/341ITR 403(GUJ), CIT VS. PRATHAMA DEVELOPERS 32 TAXMAN 336 (GUJ), RADHE DEVELOPERS 32 TAXMAN 113 ITJ 300 (AHD). 6. THE LEARNED AR SUBMITTED THAT THE AS PER THE REQUIREMENT OF SECTION 80IB (10) IS APPROVAL FOR THE PROJECT AND BENEFIT THE DEDU CTION IS AVAILABLE TO THE UNDERTAKING WHICH DEVELOPING AND BUILDING THIS APPROVED PROJECT. IT IS NOT DEVELOPM ENT OF PROJECT BY THE ASSESSEE BUT THE DEVELOPMENT OF PROJECT BY THE UNDERTAKING OF THE ASSESSEE, THE TERM UNDERTAKING , IT IS SUBMITTED, DIFFEREN T FROM TERM ASSESSEE THAT IS CONTEMPLATED UNDER THE SECTION 80IB(10). THE MADRAS HIGH COURT HAS HELD THAT WHERE THE PROJE CT IS DEVELOPED BY THE ASSESSEE, T HE ASSESSEE IS ENTITLED FOR THE DEDUCTION SECTION 80IB NOWHERE STIPULATES THAT THE APPROVAL OF HOUS ING PROJECT SHOULD BE IN THE NAME OF THE ASSESSEE. THE LAND OWNER HAS SOLD THE LAND BY THE SALE AGREEMENT AND POSSESSION WAS GIVEN TO THE DEVELOPER. THE LOCAL AUTHORITY HAS GIVEN APPROVAL OF THE LAND IN THE NAME OF THE OWNER BUT THE BUILDER HAS CARRIED OUT THE DEVELOPMENT WORK AS PER SECTION 53 A OF THE TRANSFER OF P ROPERTY ACT WHEREIN THERE IS AN AG REEMENT IN WRITING, THE TRANSFEREE IS WILLING TO PERFORM HIS PART OF THE CONTRACT AND THE TRANSFEREE HAS TAKEN POSSESSION OF THE PROPERTY, THEN THE EFFECTIVE OWNERSHIP OF THE PROPERTY IS DEEMED TO BE TRANSFERRED. THEREFORE, AS PER THE DECISION OF AHMEDABAD HIGH COURT IN THE CASE OF RADHE DEVELOPERS VS. INCOME TAX OFFICER, 113 ITJ 300 WHERE IN THE SIMILAR FACT ARE THAT THE HIGH COURT HAS ALLOWED THE CLAIM OF THE 4 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS ASSESSEE. THEREFORE, CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LAND OWNER HAS EXECUTED AGREEMENT TO SALE WITH THE ASSESSEE AND WE HAVE GONE THROUGH THE TERMS OF AGREEMENT AND AS PER THE CONDITION NO .9 OF THE AGREEMENT TO SALE THE PROSPECTIVE VENDEE SHALL GET THE PLANS DRAWN FOR CONSTRUCTION OF VILLAS ROW VILLAS AND APARTMENT IN THE SAID PROP ERTY AS THEY DEEM ED FIT AND PROPER SEEK APPROVAL S FROM STATUTORY AUTHORITY INCLUDING THE MARGAON P LANNING AND DEVELOPMENT A UTHORITY , PWD, MARGAO MUNICIPAL COUNCIL. THE PROSPECTIVE VENDORS SHALL COOPERATE WITH THE PROSPECTIVE VENDEE IN OBTAINING T HE REQ UIRED APPROVAL S, NO OBJECTION CERTIFICATES, PERMISSION S ETC. AND IN GETTING WATER AND ELECTRICITY CONNECTION S FOR PURPOSES OF CONSTRUCT ION AND THEREAFTER FOR PREMISES BUILT IN THE SAID PLOT . THE PROSPECTIVE VENDORS HAVE TO EXECUTE A POWER OF ATTORNEY IN FAVOUR OF PROSPECTIVE VENDE E GRANTING POWERS TO APPEAR A REPRESEN T THEM BEFORE ALL STATUTORY AUTHORI TIES FOR THE PURPOSE OF OBTAINING ALL REQUIRE D LICENCE S . THE PROSPECTIVE VENDEE SHALL BE ENTITLED TO DEVELO P THE SAID PROPERTY AT THEIR OWN COSTS , RISK, EXPENSES AND RESPONSIBILITY BY PUTTING UP THEREIN ROW VILLAS APARTMENTS AND OTHER PREMISES IN ACCORDANC E WITH LAWS REGULATIONS IN FORCE, THE PLANS APPR OVED AND CONSTRUCTION LICENCE ISSUED BY CONCERNED AUTHORITIES . MOREOVER STIPULATION 15 ALSO PROVIDES THE LIABILITY IN FA VOUR OF THE DEVELOPER. THEREFORE, WE FIND THAT AS PER THE DECISION O F RADHE DEVELOPERS W E HAVE SEEN THE TERMS OF AGREEMENT OF SALE ENTERED INTO BETWEEN THE PARTIES THE CONDITION MUST BE REVEALED THAT THE OWNER OF THE LAND HAS RECEIVED PART OF SALE CONSIDERATION AND IN LIEU THEREOF HE HAD GRANTED DEVELOPMENT PERMISSION TO THE ASSESSEE. IN THIS CASE THIS CONDITION IS SATISFI ED THAT THE ASSESSEE DEVELOPER WAS GIVEN POSSESSION AND ASSESSEE HAS UNDERTAKEN THE CONSTRUCTION AS PER P L ANS APPROVED BY LOCAL AUTHORITY. THE ASSESSEE DEVELOPER HAS PAID FEES TO THE 5 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS ARCHITECTS AND ENGINEERS. THE ASSESSEE HAS CARRIED OUT AND ADMITTED THE MEMBERS. THE LAND OWNER HAS AGREED TO GIVE NECESSARY SIGNATURE, AGREEMENTS, AND EVEN POWER OF ATTORNEY TO FACILITATE THE WORK OF THE DEVELOPER. THEREFORE, THE ASSESSEE HAS UNDERTAKEN THE ENTIRE TASK OF DEVELOPMENT, CONSTRUCTIO N AND SALE OF THE HOUSING UNITS TO BE LOCATED ON THE LAND BELONGING THE ORIGINAL LAND OWNERS. WE FIND THAT AS PER THE SALE AGREEMENT THE DEVELOPER WAS GIVEN FULL POWER OF ATTORNEY AND THE LAND OWNER WAS GIVEN RS. 95 LAKHS IN CONSIDERATION OF THE PROPERTY. THE DEVELOPER WAS GIVEN POWER TO SELL, TRANSFER OF ROW VILLAS AND TO RECEIVE THE CONSIDERATION AMOUNT , AND ALL THE RISK WAS TAKEN BY THE BUILDER, THEREFORE, IN OUR OPINION THE DECISION OF GUJRAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS IS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THE CASE OF RADHE DEVELOPERS (SUPRA) HAS DECIDED THE APPEAL BY OBS ERVING AS UNDER: 36. WE HAVE NOTED AT SOME LENGTH, THE RELEVANT TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENTS BETWEEN THE ASSESSEES AND THE LAND OWNERS IN CASE OF RADHE DEVELOPERS, WE ALSO NOTED THE TERMS OF THE AGREEMENT OF SALE ENTERED INTO BETWEEN THE PARTIES. SUCH CONDITIONS WOULD IMMEDIATELY REVEAL THAT THE OWNER OF THE LAND HAD RECEIVED PART OF SALE CONSIDERATION. IN LIEU THEREOF HE HAD GRANTED DEVELOPMENT PERMISSION TO THE ASSESSEE. HE HAD ALSO PARTED WITH THE POSSESSION OF THE LAND. THE DEVELOPMENT OF THE LAND WAS TO BE DONE ENTIRELY BY THE ASSESSEE BY CONSTRUCTING RESIDENTIAL UNITS THEREON AS PER THE PLANS APPROVED BY THE LOCAL AUTHORITY. IT WAS SPECIFIED THAT THE ASSESSEE WOULD BRING IN TECHNICAL KNOWLEDGE AND SKILL REQUIRED FOR EXECUTION OF SUCH PROJECT. THE ASSESSEE HAD TO PAY THE FEES TO THE ARCHITECTS AND ENGINEERS. ADDITIONALLY, ASSESSEE WAS ALSO AUTHORIZED TO APPOINT ANY OTHER ARCHITECT OR ENGINEER, LEGAL ADVISER AND OTHER PROFESSIONALS. HE WOULD APPOINT SUB - CONTRACTOR OR LABOUR CONTRACTOR FOR EXECUTION O F THE WORK. THE ASSESSEE WAS AUTHORIZED TO ADMIT THE PERSONS WILLING TO JOIN THE SCHEME. THE ASSESSEE WAS AUTHORISED TO RECEIVE THE CONTRIBUTIONS AND OTHER DEPOSITS AND ALSO RAISE DEMANDS FROM THE MEMBERS FOR DUES AND EXECUTE SUCH DEMANDS THROUGH LEGAL PRO CEDURE. IN CASE, FOR SOME REASON, THE MEMBER ALREADY ADMITTED IS DELETED, THE ASSESSEE WOULD HAVE THE FULL RIGHT TO INCLUDE NEW MEMBER IN PLACE OF OUTGOING MEMBER. HE HAD TO MAKE NECESSARY FINANCIAL ARRANGEMENTS FOR WHICH PURPOSE HE COULD RAISE FUNDS FROM THE FINANCIAL INSTITUTIONS, BANKS ETC. THE LAND OWNERS AGREED TO GIVE NECESSARY SIGNATURES, AGREEMENTS, AND EVEN POWER OF ATTORNEY TO FACILITATE THE WORK OF THE DEVELOPER. IN SHORT, THE ASSESSEE HAD UNDERTAKEN THE ENTIRE TASK OF DEVELOPMENT, CONSTRUCTION A ND SALE OF THE HOUSING UNITS TO BE LOCATED ON THE LAND BELONGING TO THE ORIGINAL LAND OWNERS. IT WAS ALSO AGREED BETWEEN THE PARTIES THAT THE ASSESSEE WOULD BE ENTITLED TO USE THE FULL FSI AS PER THE EXISTING RULES AND REGULATIONS. HOWEVER, IN FUTURE, RULE S BE AMENDED AND ADDITIONAL FSI BE AVAILABLE, THE ASSESSEE WOULD HAVE THE FULL RIGHT TO USE THE SAME ALSO. THE SALE PROCEEDS OF THE UNITS ALLOTTED BY THE ASSESSEE IN FAVOUR OF THE MEMBERS ENROLLED WOULD BE APPROPRIATED TOWARDS THE LAND PRICE. EVENTUALLY AF TER PAYING OFF 6 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS THE LAND OWNER AND THE ERSTWHILE PROPOSED PURCHASERS, THE SURPLUS AMOUNT WOULD REMAIN WITH THE ASSESSEE. SUCH TERMS AND CONDITIONS UNDER WHICH THE ASSESSEE UNDERTOOK THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FROM THE O RIGINAL OWNER, LEAVES LITTLE DOUBT IN OUR MIND THAT THE ASSESSEE HAD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. THE ASSESSEE COULD PUT THE LAND TO USE AS AGREED BETWEEN THE PARTIES. THE ASSESSEE HAD FULL AUTHORITY AND ALSO RESPONSIBILITY TO DEVE LOP THE HOUSING PROJECT BY NOT ONLY PUTTING UP THE CONSTRUCTION BUT BY CARRYING OUT VARIOUS OTHER ACTIVITIES INCLUDING ENROLLING MEMBERS, ACCEPTING MEMBERS, CARRYING OUT MODIFICATIONS ENGAGING PROFESSIONAL AGENCIES AND SO ON. MOST SIGNIFICANTLY, THE RISK E LEMENT WAS ENTIRELY THAT OF THE ASSESSEE. THE LAND OWNER AGREED TO ACCEPT ONLY A FIXED PRICE FOR THE LAND IN QUESTION. THE ASSESSEE AGREED TO PAY OFF THE LAND OWNER FIRST BEFORE APPROPRIATING ANY PART OF THE SALE CONSIDERATION OF THE HOUSING UNITS FOR HIS BENEFIT. IN SHORT, ASSESSEE TOOK THE FULL RISK OF EXECUTING THE HOUSE PROJECT AND THEREBY MAKING PROFIT OR LOSS AS THE CASE MAY BE. THE ASSESSEE INVESTED ITS OWN FUNDS IN THE COST OF CONSTRUCTION AND ENGAGEMENT OF SEVERAL AGENCIES. LAND OWNER WOULD RECEIVE D A FIX PREDETERMINED AMOUNT TOWARDS THE PRICE OF LAND AND WAS THUS INSULATED AGAINST ANY RISK. 37. BY NO STRETCH OF IMAGINATION CAN IT BE SAID THAT THE ASSESSEE ACTED ONLY AS A WORK CONTRACR........ WE RESPECTFULLY FOLLOWING THE DECISION WE DISMISS THE DEPARTMENTS APPEAL. 7. IN THE RESULT, THE APPEAL FILE D BY THE DEPARTMENT IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 6 . 3. 2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 6 .3 . 2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER PRIVATE SECRETARY, ITAT, PANAJI, GOA 7 . ITA NO. 397/PNJ/2013 (A.Y.2010 - 11) ITO VS. M/S. COMMONWEALTH DEVELOPERS