The ITO, Ward-5(3), Baroda V. M/s. Sun Enterprises, Baroda

ITA 451/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6604 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Retrospective amendment
• Section: 80IB; 194C; 12; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM &SHRI A N PAHUJA, AM I TA NO.451/AHD/2009 (ASSESSMENT YEAR:-2005-06) INCOME-TAX OFFICER, WARD- 5(3), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA V/S M/S SUN ENTERPRISES, R V DESAI ROAD, NEAR KRISHNA TOWER, BARODA PAN: AAXFS 3471 Q [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI S P TALATI, DR ASSESSEE BY:- NONE (WRITTEN SUBMISSIONS) O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 12- 11-2008 OF THE LD. CIT(APPEALS)-V, BARODA, FOR THE ASSESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING / RESTRICTING THE FOLL OWING ADDITIONS: (A) RS.6,15,848/- MADE U/S 80-IB(10) (B) DISALLOWANCE MADE U/S 40(A)(IA) RS.31,26,738/ - [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS OF THE C ASE AND DELETING THE ABOVE ADDITIONS. [3] THE APPELLANT CRAVES LEAVE TO ADD, AMEND, OR AL TER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LD. CIT(A) MAY BE SET-ASIDE AND T HAT OF THE AO BE RESTORED. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY REQUEST FOR ADJOURNMENT WAS RECEIVED. INSTEAD, THE ASSESSEE, VI DE LETTER DATED 7.5.2011,REQUESTED TO DISPOSE OF THE APPEAL IN THE LIGHT OF THEIR WRITTEN SUBMISSIONS. CONSIDERING THE NATURE OF ISSU ES INVOLVED, WE, ITA NO.451/AHD/2009 2 2 THEREFORE, DECIDED TO DISPOSE OF THE APPEAL AFTER H EARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3. ADVERTING FIRST TO GROUND NO.1(A) IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING IN COME OF RS.1,05,370/- FILED ON 30-10-2005 BY THE ASSESSEE, CARRYING ON THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF PROPERT Y, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [H EREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTIN Y WITH THE ISSUE OF A NOTICE U/S 143(2) OF THE ACT ON 19-10-2006.DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE DISCLOSED GROSS TOTAL INCOME OF RS.7,21,218/- AND CLAIMED DEDUCTION OF RS.6,15,848/- U/S 80IB(10) OF THE ACT . THE DEDUCTION WAS CLAIMED TO THE EXTENT OF SALE OF RESI DENTIAL HOUSE ON PRORATA BASIS I.E. SALE OF COMMERCIAL AREA WAS EXCL UDED . TO A QUERY BY THE AO, THE ASSESSEE EXPLAINED THAT THE ASSESSE E DID NOT CLAIM ANY DEDUCTION ON THE PROFITS ARISING ON SALE OF 832 SQ. METERS OF CONSTRUCTION OF COMMERCIAL UNIT, WHICH WAS MORE THA N 5% OF THE TOTAL AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT. THE RESIDENTIAL AREA, OTHER THAN COMMERCIAL WAS MORE THAN ONE ACRE, IT WA S CLARIFIED. WHILE REFERRING TO PROVISIONS OF SEC. 80IB(10) OF T HE ACT , THE AO OBSERVED THAT THE PROJECT INCLUDED CONSTRUCTION OF COMMERCIAL COMPLEX ADMEASURING 836.04 SQ. MTS. WHICH WAS MORE THAN 5% OF THE AGGREGATE BUILT UP AREA, RESULTING IN VIOLATION OF CLAUSE (D) OF SECTION 80IB(10) OF THE ACT, STIPULATING THAT THE B UILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS . MOREOVER, THE LAND ON WHICH PROJECT WAS CONSTRUCTED WAS NOT OWNED BY THE ASSES SEE AND EVEN THE APPROVAL OF THE LOCAL AUTHORITY I.E. VADODRA M AHANAGARPALIKA FOR DEVELOPING AND BUILDING THE PROJECT WAS IN THE NAME OF THE OWN ER OF THE LAND SHRI FARID ABDULALI MOHIBI & OTHERS . SINCE THE ASSESSEE MEREL Y ACTED AS A CONTRACTOR AND THE OWNERS HAD SOLD PIECES OF LAND TO UNIT HOLDERS DIRECTLY WHILE THE SALE DEEDS ITA NO.451/AHD/2009 3 3 HAD NOT BEEN REGISTERED , THE AO CONCLUDED THAT THE ASSESSEE WAS NOT A DEVELOPER AND BUILDER OF THE HOUSING PROJECT WITHIN THE MEANING OF PROVISIONS OF SEC. 80IB(10) OF THE ACT AND HENCE NOT ENTITLED TO DEDUCTION U/S. 80IB(10) OF THE ACT. ACCORDINGLY, THE AO DENIED THE CLAIM FOR DEDUC TION OF RS.6,15,848/- U/S. 80IB(10) OF THE ACT. IN NUTSHELL, WHILE REFERRING TO DECISION IN THE CASE OF V S MALHOTRA VS. CIT 227 ITR 240(SC), THE AO C ONCLUDED AS UNDER:- 7.1 TO CONCLUDE, THE DEDUCTION U/S 80IB(10) READ W ITH SECTION 80IB(1) AND RULE 18BBB IS ADMISSIBLE ONLY TO SUCH ASSESSES AS IS DERIVING PROFITS FROM AN UNDERTAKING OF BUILDING AND HOUSING PROJECT S APPROVED BY THE LOCAL AUTHORITY, AND FOR SUCH APPROVAL, THE ASSESSEE MUST LEGALLY OWN THE LAND WHICH IS AN INALIENABLE CONSTITUENT OF ANY HOUSING PROJECT. THE PERSON DOING ONLY THE WORK OF DEVELOPING AND CONSTRUCTION THE BUILDING STRUCTURE ON THE AUTHORITY OF THE APPROVAL GRANTED TO THE LAN DOWNER CAN NOT BE SAID TO BE IN THE BUSINESS OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS, NOT ONLY ON ACCOUNT OF NOT BEING THE OWNE R OF THE LAND, A NECESSARY CONSTITUENT OF THE HOUSING PROJECT, BUT A LSO ON ACCOUNT OF NOT HAVING BEEN GRANTED THE APPROVAL TO EXECUTE THE PRO JECT IN HIS OWN RIGHT, BECAUSE THAT INVOLVES OBLIGATIONS THAT CAN BE DISCH ARGED ONLY BY THE PERSON TO WHOM THE APPROVAL IS GRANTED. THE CLAIM I S BASED ON AN INTERPRETATION BESET WITH SUBTERFUGE TO AVOID STAMP DUTY AND ALSO EVENTUALLY CAPITAL GAINS, WHICH NO RULE OF INTERPRE TATION CAN PERMIT. 7.2 THE PLAIN READING OF SECTION 801B(10) MAKES IT CLEAR THAT PROFIT IN CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUS ING PROJECT AFTER GETTING1 APPROVAL FROM A LOCAL AUTHORITY SHALL BE A LLOWED DEDUCTION AT 100% OF PROFIT DERIVED FROM SUCH HOUSING PROJECT, I F THE CONDITIONS AS LAID DOWN IN SUB-SECTION 10 OF SECTION 80IB ARE FULFILLE D. HOWEVER, IN THIS CASE AS DISCUSSED ABOVE, THE FIRM HAS NOT FULFILLED THE TWO BASIC CONDITIONS FOR CLAIMING DEDUCTION I.E. COMMERCIAL CONSTRUCTION INC LUDED IN THE PROJECT SHOULD NOT EXCEED 5% OF THE TOTAL AREA OR 2000 SQ F T, WHICH EVER IS LESS AND OWNERSHIP OF LAND ON WHICH HOUSING PROJECT IS C ONSTRUCTED AND THE APPROVAL OF LOCAL AUTHORITY IS NOT IN THE NAME OF T HE ASSESSEE FIRM. HENCE ITS CLAM FOR DEDUCTION U/S 80IB OF THE I.T ACT IS R EJECTED. 4. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE IN THE FOLLOWING TERMS:- 3.1 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CAS E AND PERUSED THE ARGUMENTS OF THE AO. THE ISSUE NOW STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE BY THE ORDER OF THE JU RISDICTIONAL ITAT, IN THE CASE OF RADHE DEVELOPERS VS. ITO WARD 3(2) BARO DA NO. ITA NO.451/AHD/2009 4 4 2482/AHD/2006 A BENCH AHMEDABAD. THE RELEVANT PORTI ON OF THE ORDER OF THE TRIBUNAL MAY BE PRODUCED BELOW. '28 THE CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION U/S 80IB(10), THERE IS A CONDITION PRECE DENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUS ING PROJECT IS CONSTRUCTED HAS NO FORCE. WE DO NOT FIND ANY S UCH CONDITION AS APPEARING IN THE SECTION ABSTRACTED ABOVE. A PLA IN READING OF THE SUBSECTION 10 OF SECTION 80IB REVEALS AND MAKES IT EVIDENT, THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BU ILDING A HOUSING PROJECT AS APPROVED BY A LOCAL AUTHORITY. I T DOES NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMENT AN D BUILDING OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWN ED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAN D BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH T HE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUS AL OF THE AGREEMENT AS NARRATED ABOVE IT IS EVIDENT THAT DEVE LOPMENT 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 LAND OWNER AND THE UNDERTAKING DEVELOPING AND BUILDING THE HOUSING PROJECT ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTI ON WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING HOUSING PR OJECT AND NOT THE MERE OWNER THEREOF.' 3.2 THE DECISION OF THE CASE REFERRED TO ABOVE SQUA RELY APPLIES TO THE FACTS OF THE PRESENT CASE. THE DEDUCTION U/S 80IB(1 0) WHICH HAS BEEN DENIED BY THE AO ONLY ON THE GROUND OF OWNERSHIP OF LAND DEVELOPED, HAS TO BE ALLOWED IN VIEW OF THE ITATS ORDER. THUS, TH E APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. THE AO IS DIRECTED TO AL LOW THE CLAIM U/S 80IB(10) AMOUNTING TO RS.6,15,848/- AS MADE BY THE APPELLANT. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR WHIL E SUPPORTING THE ORDER OF THE AO CONTENDED THAT THE LD. CIT(A) HAVE NOT RECORDED ANY FINDINGS ON THE FACTS FOUND BY THE AO AND MERELY RE LIED ON DECISION IN THE CASE OF RADHE DEVELOPERS(SUPRA). THE LD. CIT (A) DID NOT TAKE ITA NO.451/AHD/2009 5 5 COGNIZANCE OF THE FACT THAT THE ASSESSEE VIOLATED O NE OF THE BASIC CONDITIONS STIPULATED IN CLAUSE(D) OF SEC. 80IB(10) OF THE ACT , STIPULATING THAT THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMEN TS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PER CENT OF THE AGGR EGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHE VER IS LESS. SINCE IN THIS CASE, THE PROJECT INCLUDED CONSTRUCTION OF COMMERCI AL COMPLEX ADMEASURING 836.04 SQ. MTS. WHICH WAS MORE THAN 5% OF THE AGGREGATE BUILT UP AREA, THE ASSESSEE IS NOT ENTIT LED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. IN THESE CIRCUMSTANCES, THE L D. DR ADDED THAT THE ISSUE IS REQUIRED TO BE RESTORED TO THE FILE OF THE AO FOR R E-ADJUDICATION IN THE LIGHT OF THE DECISION DATED 07-11-2008 OF THE ITAT IN THE CASE M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503/AHD/200 8 . 5.1 ON THE OTHER HAND, THE ASSESSEE IN HIS WRITTE N SUBMISSIONS SUPPORTED THE ORDER OF THE LEARNED CIT(A) WHILE REL YING UPON DECISION DATED 07-11-2008 OF THIS TRIBUNAL IN THE C ASE OF M/S SHAKTI CORPORATION IN ITA NO.1503/AHD/2008 AND OTHERS AS A LSO DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. BRAHMA ASSOCIA TES,239 CTR(BOM.)30. 6 WE HAVE HEARD THE LD. DR AND GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AS ALSO THE DECIS IONS REFERRED TO THEREIN. AS IS APPARENT FROM A MERE GLANCE AT THE I MPUGNED ORDER, THE LD. CIT(A) DID NOT RECORD HIS SPECIFIC FINDING S ON VIOLATION OF CONDITION STIPULATED IN CLAUSE (D) OF SEC.80IB(10) OF THE ACT , EVEN WHEN THE AO CONCLUDED THAT THE ASSESSEE VIOLATED ONE OF THE BASIC CONDITI ONS STIPULATED IN CLAUSE(D) OF SEC. 80IB(10) OF THE ACT ,STIPULATING THAT THE BUIL T-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING P ROJECT SHOULD NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUS ING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS. IN THIS CASE, THE P ROJECT INCLUDED CONSTRUCTION OF COMMERCIAL COMPLEX ADMEASURING 836.04 SQ. MTS. W HICH WAS MORE THAN 5% OF THE AGGREGATE BUILT UP AREA OF 4968 .59 SQ. METRES. IN THIS CONNECTION, THE ASSESSEE RELIED UPON DECISI ON OF THE HONBLE BOMBAY ITA NO.451/AHD/2009 6 6 HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES(SUPRA) RELEVANT FOR THE AY 2003-04 . IN THE SAID DECISION, THE FACTS WERE THAT IN THE AY 2003-04, THE ASSESSEE UNDERTOOK THE CONSTRUCTION OF A PROJECT AT PUNE WHICH WAS APPROVED AS A RESIDENTIAL PLUS COMMERCIAL PROJECT. THE COMMERCIAL AREA OF THE PLOT WAS 20.83% OF THE TOTAL AREA. THE ASSESSEE CLAIMED DEDU CTION U/S 80-IB(10) OF THE ACT WHICH WAS DENIED BY THE AO & CIT (A) ON THE GRO UND THAT THE EXPRESSION HOUSING PROJECT IN S. 80IB(10) APPLIED ONLY TO PR OJECTS CONSISTING OF RESIDENTIAL UNITS AND NOT TO PROJECTS HAVING COMMERCIAL UNITS . ON APPEAL, THE SPECIAL BENCH (119 ITD 255) HELD THAT PRIOR TO THE AMENDMENT IN AY 2005-06, IF THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY AS A HOUSING PROJE CT OR IF THE PROJECT WAS APPROVED AS RESIDENTIAL PLUS COMMERCIAL AND THE C OMMERCIAL USER DID NOT EXCEED 10% OF THE BUA, DEDUCTION WAS ALLOWABLE IN E NTIRETY. HOWEVER, IF THE COMMERCIAL USER EXCEEDED 10%, DEDUCTION WAS ALLOWAB LE ONLY ON THE RESIDENTIAL UNITS. ON APPEAL BY THE DEPARTMENT , THE HONBLE BO MBAY HIGH COURT CONCLUDED AS UNDER: A) UPTO 31/3/2005 (SUBJECT TO FULFILLING OTHER C ONDITIONS), DEDUCTION UNDER SECTION 80IB(10) IS ALLOWABLE TO HOUSING PROJECTS A PPROVED BY THE LOCAL AUTHORITY HAVING RESIDENTIAL UNITS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES / REGULATIONS FRAMED B Y THE RESPECTIVE LOCAL AUTHORITY. B) IN SUCH A CASE, WHERE THE COMMERCIAL USER PERMITTED BY THE LOCAL AUTHORITY IS WITHIN THE LIMITS PRESCRIBED UNDER THE DC RULES / REGULATION, THE DEDUCTION UNDER SECTION 80IB(10) UPTO 31/3/2005 WOULD BE ALLOWABLE IRRESPECTIVE OF THE FACT THAT THE PROJECT IS APPROV ED AS 'HOUSING PROJECT' OR 'RESIDENTIAL PLUS COMMERCIAL'. C) IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOM E TAX ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UPTO 31/3/2005 DE DUCTION UNDER SECTION 80IB(10) WOULD BE ALLOWABLE TO THE PROJECTS APPROVE D BY THE LOCAL AUTHORITY HAVING RESIDENTIAL BUILDING WITH COMMERCIAL USER UP TO 10% OF THE TOTAL BUILT- UP AREA OF THE PLOT. D) SINCE DEDUCTIONS UNDER SECTION 80IB(10) IS ON TH E PROFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORIT Y AS A WHOLE, THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING SECTION 8 0IB(10) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER, IN THE PRESENT CASE, SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING S ECTION 80IB(10) ITA NO.451/AHD/2009 7 7 DEDUCTION TO A PART OF THE PROJECT, WE DO NOT DISTU RB THE FINDINGS OF THE TRIBUNAL IN THAT BEHALF. E) CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFF ECT FROM 1/4/2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1/4/2005. 6.1 AS ALREADY STATED IN THE INSTANT CASE, THE LD . CIT(A) DID NOT RECORD HIS SPECIFIC FINDINGS ON THE CONDITION STIPULATED IN CL AUSE (D) OF SEC.80IB(10) OF THE ACT, EVEN WHEN THE AO CONCLUDED THAT THE ASSESSEE V IOLATED THE SAID CONDITION STIPULATED IN CLAUSE(D) OF SEC. 80IB(10) OF THE ACT AND THEREFORE , IS NOT ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT . AS REGARDS THE ISSUE OF OWNERSHIP OF LAND AND APPROVAL OF THE PROJECT ,BOTH THE PARTIES RELIED UPON DECISION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI COR PORATION & OTHERS IN ITA NO. 1503 /AHD./2008, WHEREIN AFTER ANALYZING THE DECISI ONS OF 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 ITA NO.451/AHD/2009 8 8 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 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). 6.2. SINCE BOTH THE PARTIES RELIED UPON THE AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 WHILE THE LD. CIT(A) DID NOT RECORD HIS SPECIFIC FINDINGS ON THE VIOLATION OF CONDITION STIPULATED IN CLAUSE (D) OF SEC.80IB(10) OF THE ACT NOR EXAMINED THE ISSUE IN THE LIGHT OF DECISION IN M/S SHAKTI CORPORATION & OTH ERS(SUPRA) , IN THE INTEREST OF FAIR PLAY & JUSTICE, WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE D IRECTIONS TO ANALYSE THE RELEVANT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE ASSESSEE WITH THE LANDOWNER(S) I N THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINE D FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCU MENTS, KEEPING IN VIEW THE AFORESAID DECISIONS OF THE ITAT AS AL SO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFT ER, DECIDE AS TO WHETHER THE UNDERTAKING OF THE ASSESSEE HAS INDEED PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER A ND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOL VED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN P URCHASED BY THE ITA NO.451/AHD/2009 9 9 UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINAN T CONTROL OVER THE PROJECT AND DEVELOPED THE LAND AT THEIR OWN COS T AND RISKS, THE AO SHOULD ALLOW THE DEDUCTION U/S 80IB(10)OF THE AC T, IN ACCORDANCE WITH LAW. IN CASE THE AO FINDS THAT THE UNDERTAKIN G OF THE ASSESSEE HAS ACTED ON BEHALF OF THE LANDOWNER(S) AND HAS 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. NEEDLESS TO SAY THAT WHILE RE DECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT AS ALSO VARIOUS JUDICIAL PRONOUNCEMENTS ,INCLUDING IN THE CASE OF BRAHMA ASS OCIATES(SUPRA) AND RECORD HIS SPECIFIC FINDINGS ON THE FACTS FOUND BY THE AO THAT THE ASSESSEE VIOLATED ONE OF THE BASIC CONDITIONS IN CLAUSE(D) OF SEC. 80IB(1 0) OF THE ACT ,STIPULATING THAT THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL EST ABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WH ICHEVER IS LESS. WITH THESE DIRECTIONS, GROUND NO. 1(A) IN THE APPEAL IS DISPOS ED OF AS INDICATED HEREINBEFORE. 7. GROUND NO. 1(B) IN THE APPEAL RELATES TO DISALLO WANCE OF RS.31,26,738/- U/S 40(A)(IA) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE MADE PA YMENTS TO VARIOUS CONTRACTORS IN RESPECT OF TRANSPORTATION AN D LABOUR. TO A QUERY BY THE AO, THE ASSESSEE SUBMITTED THE FOLLOWI NG DETAILS OF THE CASES IN WHICH TDS WAS NOT DEDUCTED ON CREDIT OF TH E AMOUNT AND ALSO WORKED OUT THE AMOUNT DISALLOWABLE AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT:- SR. NO. NAME OF THE PERSONS TO WHOM PAYMENT MADE NATURE OF PAYMENT TOTAL AMOUNT PAID / CREDITED AMOUNT DISALLOWABLE REMARKS 1 RITA TRANSPORT TRANSPOR- TATION 286867 286867 NO DEDUCTION ITA NO.451/AHD/2009 10 10 U/S 194C WAS MADE AT THE TIME OF CREDIT / PAYMENT 2 SHREE NEW JAY AMBE TRANSPORT -DO- 50490 50490 -DO- 3 SHIVSHAKTI TRANSPORT -DO- 281705 281705 -DO- 4 NILESH MISTRY LABOUR 63596 63596 -DO- 5 VIRSINH PATEL -DO- 105950 60000 -DO- 6 BUDHARAM -DO- 201755 105000 -DO- 7 D K ENGG. -DO- 2011950 1358000 -DO- 8 J K ENGG. -DO- 177164 177164 NO TDS 9 NATURAM -DO- 10 PATEL & PATEL -DO- 175500 50000 NO DEDUCTION U/S 194C WAS MADE AT THE TIME OF CREDIT / PAYMENT 11 SANJAY SHAH -DO- 107500 64000 -DO- 12 S M TRANSPORT -DO 465415 465516 -DO- 13 R V PATEL PROFESSION 165300 165300 -DO- TOTAL 3127638 THE ASSESSEE PLEADED THAT IN VIEW OF AMENDMENT IN S ECTION 40(A)(IA) OF THE ACT DEDUCTION OF EXPENSES WERE ALL OWED ONLY IF DEDUCTION OF TAX AT SOURCE WAS MADE FROM THE PAYMEN T OF SUCH NATURE AND AFTER MAKING THE DEDUCTION, THE SAID AMO UNT WAS DEPOSITED IN GOVERNMENT ACCOUNT ON OR BEFORE THE DU E DATE OF FILING OF RETURN. THE ASSESSEE DEDUCTED THE TAX BUT PAID ON 30/05/2007, IT WAS SUBMITTED. HOWEVER, THE AO DID NOT ACCEPT THE S UBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DEDUC TED THE TAX ONLY ITA NO.451/AHD/2009 11 11 ON 31/03/2007 ON PAYMENT OF TRANSPORTATION / LABOU R CHARGES OF RS.31,26,738/- & PAID TO GOVT. ACCOUNT ON 30/05/200 5, THEREBY VIOLATING THE PROVISIONS OF SECTION 200(1) AND 40( A)(IA) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE AMOUNT OF RS.31 ,26,738/-. 8. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM IN THE FOLLOWING TERMS:- 4.1 THE AR STRONGLY ARGUED THE MATTER AND HAS POIN TED OUT THAT BY FINANCE ACT 2008; AN AMENDMENT HAS BEEN MADE IN SEC TION 40(A)(IA) OF THE IT ACT, 1961 WITH RETROSPECTIVE EFFECT FROM 01- 04-2005. AS PER THE SAID AMENDMENT, THE DUE DATE FOR PAYMENT OF TAX HAS BEEN EXTENDED UP TO THE DUE DATE OF FILING OF RETURN OF INCOME SPECIFIED IN SUB SECTION (1) OF SEC. 139 OF THE ACT, IN RESPECT OF TDS LIABLE TO BE DEDU CTED DURING THE MONTH OF MARCH. IN LIGHT OF THIS, IT IS CONTENDED THAT THE A PPELLANT FIRM HAS PAID THE AMOUNT OF TDS ON 23-06-2005 I.E. BEFORE THE SPECIFI ED DUE DATE FOR THE FIRM UNDER SECTION 139(1) OF THE IT ACT, 1961, WHIC H IS 31-10-2005 AND HENCE NO DISALLOWANCE IS REQUIRED TO BE MADE UNDER SECTION 40(A)(IA) OF THE IT ACT, 1961 AND REQUESTED FOR DELETING THE SAM E. 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE, AS AL SO THE ARGUMENTS ADVANCED BY THE AR. IN VIEW OF THE LEGAL AND FACTUA L POSITION, THE SUBMISSION OF THE AR IS ACCEPTABLE AND THE AO IS DI RECTED TO ALLOW THE CLAIM OF THE APPELLANT ACCORDINGLY. IN THE CIRCUMST ANCES, THIS GROUND OF APPEAL IS ALLOWED. 9. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).HE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE ASSESSEE IN THEIR WRITTEN SUBMISSIONS RELIED ON THE FINDINGS OF THE LD. CIT(A) IN THE LIGHT OF AMENDMEN T IN SEC. 40A(IA) OF THE ACT BY THE FINANCE ACT,2008 W.E.F 1.4.2005. 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE AFORESAID AMOUNT OF 31 ,27,638/- WAS CREDITED TO THE ACCOUNT OF RESPECTIVE PARTIES ON 31 .3.2005 AND ACCORDINGLY TAX WAS DEDUCTED AT SOURCE. HOWEVER, TH E TAX WAS DEPOSITED IN THE GOVERNMENT ACCOUNT ONLY ON 23.6.2 005, AS CONTENDED BEFORE THE LD. CIT(A). BEFORE PROCEEDING FURTHER, WE MAY ITA NO.451/AHD/2009 12 12 HAVE A LOOK AT THE RELEVANT PROVISIONS OF SEC. 40A( IA) OF THE ACT, WHICH READS AS UNDER: 40. AMOUNTS NOT DEDUCTIBLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', - (A) IN THE CASE OF ANY ASSESSEE- . (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES F OR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABO UR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UND ER CHAPTER XVII- B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDU CTION, HAS NOT BEEN PAID,- (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED- (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID 10.1 IN THE INSTANT CASE, TAX DEDUCTED FROM PAY MENT OF RS. 31,27,638/- ON 31.3.2005 I.E. IN THE LAST MONTH OF THE FINANCIAL YEAR HAS BEEN PAID ON 23.6.2005 I.E. BEFORE THE DUE DATE SPECIFIED IN SEC. ITA NO.451/AHD/2009 13 13 139(1) OF THE ACT . IN THE LIGHT OF THESE FACTS AN D IN VIEW OF AFORESAID PROVISIONS OF SEC. 40A(IA) OF THE ACT AS AMENDED BY THE FINANCE ACT,2008 W.E.F 1.4.2005, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). IN VIEW THEREOF, ESPEC IALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE ANY MATERIAL SO AS T O ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INC LINED TO INTERFERE. THEREFORE, GROUND NO.1(B) IN THE APPEAL IS DISMISSE D. 11. GROUND NO.2 BEING GENERAL IN NATURE NOR ANY SU BMISSIONS HAVING BEEN MADE ON THIS GROUND, DOES NOT REQUIRE A NY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO.3 OF THE APPEAL, BOTH THESE GROUNDS ARE DISMISSED.. 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 13-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 13-05-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S SUN ENTERPRISES, R V DESAI ROAD, NEAR KRISHN A TOWER, BARODA 2. INCOME-TAX OFFICER, WARD-5(3), AAYAKAR BHAVAN, R ACE COURSE CIRCLE, BARODA 3. CIT CONCERNED 4. CIT(A)-V, BARODA 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ITA NO.451/AHD/2009 14 14 ASSISTANT REGISTRAR ITAT, AHMEDABAD