Deputy Commissioner of Income-tax, V. Sanand Properties Pvt. Ltd., Pune

ITA 54/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7247 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NIRUPAMA KOTRU
• Keywords: Business income; Maximum Marginal Rate
• Section: 143(3); 133A; 80IB; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NOS.53 AND 54/PN/2016 [ [ / ASSESSMENT YEARS : 2011-12 AND 2012-13 DY. COMMISSIONER OF I NCOME TAX , CIRCLE 6, PUNE. . / APPELLANT V/S SANAND PROPERTIES PVT. LTD., S.NO.177/2, DESAI HOUSE, DHOLE PATIL ROAD, PUNE 41001. PAN : AAHCS3227K. . / RESPONDENT ASSESSEE BY : SHRI NEELESH KHANDELWAL. REVENUE BY : MRS. NIRUPAMA KOTRU. / ORDER PER ANIL CHATURVEDI, AM : THESE TWO APPEALS FILED BY THE REVENUE ARE EMANATING OUT OF A CONSOLIDATED ORDER OF COMMISSIONER OF INCOME TAX (A) 4, PUNE DT.30.10.2015 FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13. 2. BEFORE US, AT THE OUTSET BOTH THE PARTIES SUBMITTED THAT THOUGH THE APPEALS FILED BY THE REVENUE ARE FOR TWO DIFFERENT ASSESSMENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE / DATE OF HEARING : 26.10.2017 / DATE OF PRONOUNCEMENT: 31.10.2017 2 AMOUNTS INVOLVED AND THE LD.CIT(A) HAS ALSO PASSED A CONSOLIDATED ORDER AND THEREFORE THE SUBMISSIONS MADE BY THEM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHER APPEAL ALSO AND THEREFORE, BOTH THE APPEALS CAN BE HEARD TOGETHER. IN VIEW OF THE AFORESAID SUBMISSIONS OF BOTH THE PARTIES, WE FOR THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER BUT HOWEVER, PROCEED WITH NARRATING THE FACTS FOR ASSESSMENT YEAR 2011-12. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- ASSESSEE IS A COMPANY AND IS STATED TO BE ENGAGED IN THE BUSINESS OF REAL ESTATE. ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011 DECLARING TOTAL INCOME OF RS.7,48,64,338/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.04.10.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.15,94,52,010/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.30.10.2015 (IN APPEAL NO.PN/CIT(A)-4/ACIT CIR-6/642/2014-15) ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS CORRECT IN TREATING THE AMOUNT OF RS.8,45,87,672/- AS SHARE OF INCOME FROM THE AOP AND NOT SHARE OF REVENUE IN LIEU OF SURRENDER OF THE DEVELOPMENT RIGHTS IN THE LAND. 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS A MEMBER OF AN AOP IN THE NAME AND STYLE OF FORTALEZA DEVELOPERS WITH RAVIRAJ KOTHARI & CO., THE LAND WHICH WAS OWNED BY THE ASSESSEE WAS GIVEN BY IT TO FORTALEZA DEVELOPERS (AOP) AS ITS CAPITAL CONTRIBUTION. HE NOTED THAT THE AOP WAS FORMED BY THE AGREEMENT DT.29.04.2003 FOR CONSTRUCTION ON THE PLOT OF 37,976.90 SQ. MTRS ON THE LAND BEARING SURVEY NO.210 SITUATED AT YERWADA VILLAGE, PUNE. AO NOTED THAT AS PER CLAUSE 7 OF THE AGREEMENT, ASSESSEE WAS ENTITLED TO 35% OF GROSS SALE PROCEEDS AS ITS SHARE OF REVENUE AND OUT OF THE BALANCE OF 65% AFTER MEETING THE EXPENDITURE, THE NET BALANCE WAS TO BE SHARED BY THE ASSESSEE AND RAVIRAJ KOTHARI & CO., AO HAS NOTED THAT A SURVEY ACTION U/S 133A OF THE ACT WAS CONDUCTED ON 23.12.2010 AND THE MATERIAL IMPOUNDED INCLUDED THE ORIGINAL COPY OF AOP AGREEMENT, COPY OF AUDITED FINANCIAL STATEMENTS OF FORTALEZA DEVELOPERS FOR A.Y. 2007-08 AND OTHER DOCUMENTS. DURING THE COURSE OF SURVEY PROCEEDINGS, STATEMENT OF SHRI ASHOK SURATWALA, DIRECTOR OF THE ASSESSEE COMPANY WAS RECORDED WHEREIN HE STATED THAT DEVELOPMENT RIGHTS OF LAND BEING PRECIOUS AND TO AVOID BEING EXPOSED TO INHERENT RISKS ASSOCIATED WITH THE REAL ESTATE BUSINESS, ASSESSEE HAD DEVISED A FORMULA BY WHICH IT WAS ENTITLED TO 35% OF GROSS SALE PROCEEDS. AO WAS OF THE VIEW THAT THE AOP WAS JUST A FAADE OR A DEVISE THAT WAS CREATED TO AVOID PAYING TAXES AND WAS NOT CREATED FOR SHARING PROFITS AT ALL. HE FURTHER NOTED THAT THE OTHER MEMBER OF AOP, RAVIRAJ KOTHARI & CO., HAD UNDERTAKEN ALL THE CONSTRUCTION ACTIVITIES WHEREAS THERE WAS NO OBLIGATION ON THE PART OF ASSESSEE AND IT WAS ONLY CONCERNED WITH SHARING OF REVENUE. HE WAS OF THE VIEW THAT AS PER PROVISIONS OF SEC.67A OF THE ACT SINCE THE SHARES OF MEMBERS WERE KNOWN THEN BOTH THE MEMBERS OF THE AOP 4 WERE LIABLE TO PAY TAX ON THEIR INDIVIDUAL SHARES AS PER NORMAL PROVISIONS OF THE ACT. AO WAS OF THE VIEW THAT THE AMOUNT OF RS.8,45,87,671/- RECEIVED BY THE ASSESSEE FROM AOP WAS NOT A SHARE OF PROFIT BUT CONSIDERATION RECEIVED AGAINST THE SURRENDER OF DEVELOPMENT RIGHTS IN THE LAND AND THE AMOUNT WAS NOT EXEMPT. HE ACCORDINGLY HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TO BE SHARE OF REVENUE FROM THE SURRENDER OF DEVELOPMENT RIGHTS IN THE LAND AND NOT BEING SHARE OF PROFIT FROM AOP. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 4. DURING APPELLATE PROCEEDINGS THE LD COUNSEL OF THE APPELLANT SUBMITTED THAT THE SAME ISSUE WAS BEFORE ITAT, PUNE BENCH FOR EARLIER YEARS AY'S 2008-09 & 2009-10, AGAINST THE ORDERS OF THE LEARNED CIT(A)-III, PUNE. THE HONORABLE ITAT, 'A' BENCH PUNE ORDER ITA NO. 186O/PN/2012 & ITA NO. 2446/PN/2012 FOR AY'S 2008-09 & 2009-10 RESPECTIVELY, HAS ALLOWED APPEAL AGAINST THE ORDER OF CIT(A)- III, PUNE AND THEREFORE, THE ADDITION MADE BY THE AO ON ACCOUNT OF SURRENDER OF DEVELOPMENT RIGHTS IN LAND RECEIVED FROM THE AOP M/S FORTALEZA DEVELOPERS STANDS DELETED. 5. THE LD COUNSEL FURTHER SUBMITTED THAT IN THE CASE OF AOP FORTALEZA DEVELOPERS, THE HONORABLE CIT-15, MUMBAI, HAD INVOKED THE PROVISIONS OF SECTION 263 AND HAD CARVED OUT THE APPELLANT'S SHARE IN THE AOP. AGAINST THE SAID ACTION OF THE CIT, FORTALEZA DEVELOPERS HAD FILED AN APPEAL TO THE HONORABLE ITAT, F BENCH, MUMBAI, WHO DECIDED THE ISSUE IN FAVOR OF FORTALEZA DEVELOPERS AND QUASHED THE ORDER PASSED BY CIT-15, MUMBAI. AGAINST THE ORDER OF ITAT, F BENCH, MUMBAI THE DEPARTMENT PREFERRED AN APPEAL TO THE HON'ABLE BOMBAY HIGH COURT, THE HON'ABLE HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF FORTALEZA DEVELOPERS AND UPHELD THE DECISION OF HON'ABLE ITAT F BENCH, MUMBAI. IN VIEW OF THE ABOVE THE LEI COUNSEL PRAYED TO DELETE THE ADDITION MADE BY THE AO OF RS. 7,71,58,784 ON ACCOUNT OF CONSIDERATION RECEIVED AGAINST SURRENDER OF DEVELOPMENT RIGHTS IN LAND. 6. THE ITAT, PUNE BENCH HAS RELIED ON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF AOP (WHERE THE APPELLANT COMPANY WAS A MEMBER) OF M/S FORTALEZA DEVELOPERS VS ITO AND VIDE ITA NO..3687/MUM!2012 FOR AY 2008-09 AND ITA NO.3687/MUM/2012 FOR AY 2009-10 ORDER DATED 13-09-2013 WHERE THE ISSUE IN THE CASE OF THE AOP READS AS UNDER, '2. THE ASSESSEE HAS RAISED ONE COMMON GROUND IN THESE APPEALS. THE GROUND RAISED FOR THE ASSESSMENT YEAR 200S-09 AS UNDER: '1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CTT(A) ERRED IN CONFIRMINQ THE REDUCTION OF BUSINESS INCOME BY RS.I4,64,64,961/- BEINQ THE SHARE OF PROFIT OF ONE THE MEMBERS 5 OF THE APPELLANT AOP ERRONEOUSLY HOLDING THAT THE AGREEMENT ENTERED INTO BETWEEN THE MEMBERS OF THE AOP IS FOR SHARING OF THE REVENUE AND NOT FOR SHARING OF THE NET PROFIT. REDUCTION OF BUSINESS INCOME BEING BAD IN LAW, THE SAME NEEDS TO BE CANCELLED AND RETURNED BUSINESS INCOME AND CONSEQUENTIAL CLAIM U/S 80IB(10) ON THAT AMOUNT NEEDS TO BE ACCEPTED. 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL. IS ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 12.10.2012 IN ITA NO. 2648/2012 IN PARAS 5.5 TO 5.7 AS UNDER: '5.5 WE HAVE CAREFULLY CONSIDERED THE VERSION OF LD. CIT IN THE LIGHT OF AVAILABLE ON OUR RECORD. WE HAVE CAREFULLY GONE THROUGH THE CLAUSE-S OF THE AGREEMENT AND THE DISTRIBUTION OF REVENUE BY THE ASSESSEE IN ITS ACCOUNT. THE DISTRIBUTION OF THE REVENUE IN THE ACCOUNT OF THE A SSESSEE IS IN ACCORDANCE WITH INTENT AND PURPOSE OF CLAUSE-7 OF THE AGREEMENT. ACCORDING TO CLAUSE-7 OF THE AGREEMENT SPPL IS ENTITLED TO 35% SHARE OF THE GROSS SALE PROCEEDS OF THE UNITS INCLUSIVE OF THE VALUE OF THE LAND. ACCORDING TO DISTRIBUTION IN THE ACCOUNT OF THE ASSESSEE SPPL HAS RECEIVED RS.15.11 CRORE WHICH IS 35% OF GROSS SALE PROCEEDS OF THE UNIT AMOUNTING TO RS.43.17 CRORES. A SUM OF RS.11.62 CRORE IS CREDITED TO THE ACCOUNT OF SPPL ON ACCOUNT OF LAND ETC. AND RS.3.49 CRORE IS CONSIDERED AS PROFIT SHARE OF SPPL. OUT OF BALANCE 65%, AFTER INCLUDING THE MSEB AND INCIDENTAL CHARGES AND REDUCING THE DEVELOPMENTAL CHARGES A SUM OF RS. 10.76 CRORE HAS BEEN CONSIDERED AS PROP SHARE OF RRKC. THEREFORE, THE DISTRIBUTION OF PROFIT MADE BY THE ASSESSEE BETWEEN ITS MEMBERS IS IN ACCORDANCE WITH CLAUSE 7 OF THE AGREEMENT. THE INTERPRETATION OF CLAUSE-7 SOUGHT TO BE ADOPTED BY LD. CIT WILL BE AGAINST THE VERY INTENT AND PURPOSE FOR WHICH THE ASSESSEE AOP HAS BEEN FORMED AND I F SUCH INTERPRETATION IS ADOPTED IT WILL TANTAMOUNT TO DENIAL OF EXISTENCE OF AOP WHICH IS NOT EVEN THE CASE OF LD. CIT. I T HAS ALREADY BEEN POINTED OUT THAT AOP IS A SEPARATE AND DISTINCT ASSESSABLE ENTITY AND IS ALSO ENTITLED TO CLAIM THE DEDUCTIONS PERMITTED UNDER THE INCOME TAX ACT PROVIDED IT FULFIL THE CONDITIONS LAID DOWN IN THE SECTION GOVERNING THAT DEDUCTION. THE ASSESSEE AOP IN THE PRESENT CASE HAS BEEN ASSESSED AS AOP AND FOUND TO HAVE FULFILLED THE CONDITION LAID DOWN IN SECTION 80IB(10) AND HAS BEEN HELD TO BE ELIGIBLE FOR SUCH DEDUCTION. THE QUANTUM OF DEDUCTION UNDER SECTION 80IB(10) WILL DEPEND ON THE INCOME EARNED FROM ELIGIBLE PROJECT. THE QUANTUM OF DEDUCTION WILL NOT DEPEND UPON THE MODE OF DISTRIBUTION OF SHARES AMONGST THE MEMBERS OF AOP AS INCOME OF AOP IS TAXABLE AT MAXIMUM MARGINAL RATE. THEREFORE, MANNER IN OVER ELIGIBLE QUANTUM OF DEDUCTION UNDER SECTION 80IB (10) AS THE ELIGIBLE QUANTUM WILL BE GROSS RECEIPTS FROM THE PROJECT REDUCED BY EXPENSES INCURRED ON THE PROJECT. IT IS NOT EVEN THE CASE OF LD. CIT THAT ASSESSEE AOP IS NOT ENTITLED TO GET THE BENEFIT OF DEDUCTION UNDER SECTION 80IB (10). THE ONLY OBJECTION OF LD. CIT IS THAT DISTRIBUTION OF REVENUE IN THE ACCOUNT OF THE ASSESSEE IS INAPPROPRIATE AND BY THIS MANNER ASSESSEE HAS BEEN BENEFITED BY LARGER DEDUCTION IN PLACE OF SMALLER DEDUCTION AVAILABLE TO IT. IN OUR OPINION SUCH OBSERVATIONS OF LD. CIT ARE INCORRECT, FIRSTLY, ON THE GROUND THAT EVEN DISTRIBUTION OF REVENUE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE SAID TO BE CONTRARY TO THE PURPOSE AND INTENT DESCRIBED IN CLOUSE-7 OF THE AGREEMENT. SECONDLY, THE ALLOWABILITY OR OTHERWISE OF DEDUCTION UNDER SECTION80IB(10) IS NOT DEPENDENT UPON THE MANNER IN WHICH THE PROFIT HAS BEEN DISTRIBUTED AMONG THE MEMBERS OF AOP BUT IT DEPEND UPON THE 6 FULFILLMENT OF THE CONDITIONS LAID DOWN IN THAT SECTION AND ALSO THE DEDUCTION IS AVAILABLE TO AN UNDERTAKING AND NOT TO THE INDIVIDUAL CONSTITUENT OF AN UNDERTAKING. 5.6 WE HAVE ALSO NOT FOUND ANY FORCE IN THE SUBMISSION LD. DR THAT 35% SHARE ALLOCABLE TO SPPL WAS IN THE NATURE OF OVERRIDING TITLE. CLAUSE-7 OF THE AGREEMENT WHICH HAS BEEN SOUGHT TO BE INTERPRETED BY LD. CIT DR IN THIS MANNER DOES NOT INDICATE THAT 35% OF THE GROSS REVENUE TO BE SHARED BY SPPL WAS IN THE NATURE OF OVERRIDING TITLE, THEREFORE, THIS ARGUMENT OF LD. CIT DR HAS TO BE REJECTED AND IT IS TO BE HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENUE B UT IT IS ONLY SHARE OF PROFIT OF SPPL. 5.7 IN VIEW OF ABOVE DISCUSSION IT IS HELD THAT THE IMPUGNED ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF ALLOCATION OF PROFIT BETWEEN MEMBERS AS PER ACCOUNTS OF THE ASSESSEE AS ALLOCATION OF PROFIT IN THE ACCOUNTS OF THE ASSESSEE IS IN ACCORDANCE WITH CLAUSE-7 OF THE AGREEMENT AND MANNER OF ALLOCATION OF PROFIT IN THE ACCOUNT CANNOT ALTER THE QUANTUM OF DEDUCTION AVAILABLE TO AOP UNDER SECTION 80IB (10). 4. THE FACTS FOR THE ASSESSMENT YEAR 2007-08 AND FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ARE IDENTICAL AS THIS ISSUE IS REGARDING THE CLAUSE 7 OF AOP AGREEMENT DATED 29.4.2003. ACCORDINGLY FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE SET ASIDE.' 7.2 SINCE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF THE AOP HAS CATEGORICALLY HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENUE BUT IS ONLY SHARE OF PROFIT OF SPPL, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO NOTICE AGAINST THE ORDER OF THE TRIBUNAL THE GROUNDS RAISED BY THE ASSESSEE HAVE TO BE ALLOWED. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 7. IT IS CLEAR FROM THE PERUSAL OF THE ORDER THAT HON'BLE I TAT, PUNE HAS HELD THAT THE DECISION OF THE HON'BLE ITAT MUMBAI BENCH HAS GIVEN A DEFINITE OPINION ON THE MERITS OF THE CASE AND HAS REJECTED THE PLEA OF THE REVENUE THAT THE OBSERVATIONS OF THE CIT-15, MUMBAI WERE NOT ON MERITS IN THE CASE OF THE AOP M/S FORTALEZA DEVELOPERS. THEREAFTER, HON'BLE ITAT, PUNE BENCH HAS PROCEEDED TO DECIDE THE CASE IN FAVOUR OF THE APPELLANT. IN VIEW OF THE DECISION RENDERED BY THE HONBLE HIGH COURT OF MUMBAI AND ITAT, PUNE THE GROUNDS OF APPEAL RAISED BY THE APPELLANT STAND ADJUDICATED IN FAVOUR OF THE APPELLANT. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.DR. SUPPORTED THE ORDER OF AO. LD.AR. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE IS DIRECTLY COVERED BY 7 THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS (I.E., A.Y. 2008-09 AND 2009-10) ORDER DT.21.03.2014. HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF TRIBUNAL, REVENUE HAD CARRIED THE MATTER BEFORE HONBLE HIGH COURT. HONBLE BOMBAY HIGH COURT IN ITA NOS.1041 OF 2013 AND 1865 OF 2014 ORDER DATED 09.04.2015 AND 24.03.2017 DISMISSED THE APPEALS OF THE REVENUE. HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. HE THEREFORE SUBMITTED THAT NO INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR AND THUS, SUPPORTED THE ORDER OF LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE TAXABILITY OF THE AMOUNT RECEIVED BY ASSESSEE FROM THE AOP. WE FIND THAT IDENTICAL ISSUE ALSO AROSE IN THE CASE OF ASSESSEE IN A.Y. 2009- 10 AND THE CO-ORDINATE BENCH OF THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE INSTANT CASE, THE ASSESSEE ALONG WITH M/S. RAVIRAJ KOTHARI AND COMPANY (RKC) FORMED AN AOP NAMELY M/S. FORTALEZA DEVELOPERS FOR THE PURPOSE OF DEVELOPING AND CONSTRUCTING A HOUSING PROJECT, NAMELY, 'FORTALEZA' ON THE LAND SITUATED IN S.NO.210 AT YERAWADA, PUNE, THE DEVELOPMENT RIGHTS OF WHICH WERE ACQUIRED BY THE ASSESSEE COMPANY FROM THE OWNERS OF THE LAND. CLAUSE 7 OF THE AOP AGREEMENT PROVIDES THE REVENUE SHARING RATIO BETWEEN THE TWO ENTITIES AS PER WHICH THE SALES PROCEEDS OF THE UNITS WERE TO BE DEPOSITED IN A JOINT ACCOUNT AND WOULD BE SHARED AT THE RATIO OF 35% AND 65% BY THE ASSESSEE AND RKC RESPECTIVELY. DURING THE YEAR THE ASSESSEE RECEIVED RS.5,89,91,145/- FROM THE SAID AOP AND HAS SHOWN THE SAME AS ITS SHARE OF PROFIT FROM AOP UNDER THE HEAD 'OTHER INCOME' IN THE PROFIT AND LOSS A/C. IN THE STATEMENT OF TOTAL INCOME FILED WITH THE RETURN, THE ASSESSEE 16 EXCLUDED THIS AMOUNT FROM THE TOTAL INCOME ON THE GROUND THAT THE SAID INCOME WAS ALREADY TAXED IN THE HANDS OF AOP AND THE SHARE OF PROFIT RECEIVED FROM AOP IS NOT TAXABLE AS PER SEC. 167B OF THE IT ACT. ON THE OTHER HAND, THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS NOT RECEIVED SHARE OF PROFIT FROM THE AOP BUT HAS RECEIVED CONSIDERATION IN THE FORM OF 35% SHARE IN THE GROSS SALE PROCEEDS AGAINST DEVELOPMENT RIGHTS IN LAND SURRENDERED BY THE ASSESSEE TO THE OTHER MEMBER OF AOP AND FINALLY TO THE BUYERS 8 OF UNITS IN THE PROJECT UNDERTAKEN BY THE AOP. THEREFORE, THE POINT FOR DETERMINATION IN THE PRESENT CASE IS AS TO WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE AOP REPRESENTING 35% OF GROSS SALE PROCEEDS WAS A PROFIT SHARING ARRANGEMENT AS CLAIMED BY THE ASSESSEE OR IT IS A MERE CONSIDERATION IN LIEU OF SURRENDER OF DEVELOPMENT RIGHTS IN THE LAND TO RKC AS OBSERVED BY THE ASSESSING OFFICER. 7.1 WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S FORTALEZA DEVELOPERS VS. ITO AND VIDE ITA NO.3686/MUM/2012 FOR A.Y. 2008-09 AND ITA NO.3687/MUM/2012 FOR A.Y. 2009-10 ORDER DATED 13- 09-2013 HAD AN OCCASION TO DECIDE THE ISSUE IN CASE OF THE AOP WHICH READS AS UNDER : 2. THE ASSESSEE HAS RAISED ONE COMMON GROUND IN THESE APPEALS. THE GROUND RAISED FOR THE ASSESSMENT YEAR 2008-09 AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTION OF BUSINESS INCOME BY RS. 14,64,64,961/- BEING THE SHARE OF PROFIT OF ONE THE MEMBERS OF THE APPELLANT AOP ERRONEOUSLY HOLDING THAT THE AGREEMENT ENTERED INTO BETWEEN THE MEMBERS OF THE AOP IS FOR SHARING OF THE REVENUE AND NOT FOR SHARING OF THE NET PROFIT. REDUCTION OF BUSINESS INCOME BEING BAD IN LAW, THE SAME NEEDS TO BE CANCELLED AND RETURNED BUSINESS INCOME AND CONSEQUENTIAL CLAIM U/S 80IB(10) ON THAT AMOUNT NEEDS TO BE ACCEPTED. 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IS ASSESSEE S OWN CASE 17 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 12.10.2012 IN ITA NO. 2648/2012 IN PARA 5.5 TO 5.7 AS UNDER: 5.5 WE HAVE CAREFULLY CONSIDERED THE VERSION OF LD. CIT IN THE LIGHT OF AVAILABLE ON OUR RECORD. WE HAVE CAREFULLY GONE THROUGH THE CLAUSE-7 OF THE AGREEMENT AND THE DISTRIBUTION OF REVENUE BY THE ASSESSEE IN ITS ACCOUNT. THE DISTRIBUTION OF THE REVENUE IN THE ACCOUNT OF THE ASSESSEE IS IN ACCORDANCE WITH INTENT AND PURPOSE OF CLAUSE-7 OF THE AGREEMENT. ACCORDING TO CLAUSE-7 OF THE AGREEMENT SPPL IS ENTITLED TO 35% SHARE OF THE GROSS SALE PROCEEDS OF THE UNITS INCLUSIVE OF THE VALUE OF THE LAND. ACCORDING TO DISTRIBUTION IN THE ACCOUNT OF THE ASSESSEE SPPL HAS RECEIVED RS. 15.11 CRORE WHICH IS 35% OF GROSS SALE PROCEEDS OF THE UNIT AMOUNTING TO RS.43. 17 CRORES. A SUM OF RS. 11.62 CRORE IS CREDITED TO THE ACCOUNT OF SPPL ON ACCOUNT OF LAND ETC. AND RS.3.49 CRORE IS CONSIDERED AS PROFIT SHARE OF SPPL. OUT OF BALANCE 65%, AFTER INCLUDING THE MSEB AND INCIDENTAL CHARGES AND REDUCING THE DEVELOPMENTAL CHARGES A SUM OF RS. 10.76 CRORE HAS BEEN CONSIDERED AS PROP SHARE OF RRKC. THEREFORE, THE DISTRIBUTION OF PROFIT MADE BY THE ASSESSEE BETWEEN ITS MEMBERS IS IN ACCORDANCE WITH CLAUSE 7 OF THE AGREEMENT. THE INTERPRETATION OF CLAUSE-7 SOUGHT TO BE ADOPTED BY LD. CIT WILL BE AGAINST THE VERY INTENT AND PURPOSE FOR WHICH THE ASSESSEE AOP HAS BEEN FORMED AND IF SUCH INTERPRETATION IS ADOPTED IT WILL TANTAMOUNT TO DENIAL OF EXISTENCE OF AOP WHICH IS NOT 9 EVEN THE CASE OF LD. CIT. IT HAS ALREADY BEEN POINTED OUT THAT AOP IS A SEPARATE AND DISTINCT ASSESSABLE ENTITY AND IS ALSO ENTITLED TO CLAIM THE DEDUCTIONS PERMITTED UNDER THE INCOME TAX ACT PROVIDED IT FULFILL THE CONDITIONS LAID DOWN IN THE SECTION GOVERNING THAT DEDUCTION. THE ASSESSEE AOP IN THE PRESENT CASE HAS BEEN ASSESSED AS AOP AND FOUND TO HAVE FULFILLED THE CONDITION LAID DOWN IN SECTION 80IB(10) AND HAS BEEN HELD TO BE ELIGIBLE FOR SUCH DEDUCTION. THE QUANTUM OF DEDUCTION UNDER SECTION 80IB (10) WILL DEPEND ON THE INCOME EARNED FROM ELIGIBLE PROJECT. THE QUANTUM OF DEDUCTION WILL NOT DEPEND UPON THE MODE OF DISTRIBUTION OF SHARES AMONGST THE MEMBERS OF AOP AS INCOME OF AOP IS TAXABLE AT MAXIMUM MARGINAL RATE. THEREFORE, MANNER IN OVER ELIGIBLE QUANTUM OF DEDUCTION UNDER SECTION U/S. 80IB (10) AS THE ELIGIBLE QUANTUM WILL BE GROSS RECEIPTS FROM THE PROJECT REDUCED BY EXPENSES INCURRED ON THE PROJECT. IT IS NOT EVEN THE CASE OF LD. CIT THAT ASSESSEE AOP IS NOT ENTITLED TO GET THE BENEFIT OF DEDUCTION UNDER SECTION 80IB (10). THE ONLY OBJECTION OF LD. CIT IS THAT DISTRIBUTION OF REVENUE IN THE ACCOUNT OF THE ASSESSEE IS INAPPROPRIATE AND BY THIS MANNER ASSESSEE HAS BEEN BENEFITED BY LARGER DEDUCTION IN PLACE OF SMALLER DEDUCTION AVAILABLE TO IT. IN OUR OPINION SUCH OBSERVATIONS OF LD. CIT ARE INCORRECT, FIRSTLY, ON THE GROUND THAT EVEN DISTRIBUTION OF REVENUE IN THE BOOKS OF ACCOUNT OF THE-ASSESSEE CANNOT BE SAID TO BE CONTRARY TO THE PURPOSE AND INTENT DESCRIBED IN CLAUSE-7 OF THE AGREEMENT. SECONDLY, THE ALLOWABILITY OR OTHERWISE OF DEDUCTION UNDER SECTION 80IB (10) IS NOT DEPENDENT UPON THE MANNER IN WHICH THE PROFIT HAS BEEN DISTRIBUTED AMONG THE MEMBERS OF AOP BUT IT DEPEND UPON THE FULFILLMENT OF THE CONDITIONS LAID DOWN IN THAT SECTION AND ALSO THE DEDUCTION IS AVAILABLE TO AN UNDERTAKING AND NOT TO THE INDIVIDUAL CONSTITUENT OF AN UNDERTAKING. 5.6 WE HAVE ALSO NOT FOUND ANY FORCE IN THE SUBMISSION LD. DR THAT 35% SHARE ALLOCABLE TO SPPL WAS IN THE NATURE OF OVERRIDING TITLE. CLAUSE-7 OF THE AGREEMENT WHICH HAS BEEN SOUGHT TO BE INTERPRETED BY LD. CIT DR IN THIS MANNER DOES NOT INDICATE THAT 35% 18 OF THE GROSS REVENUE TO BE SHARED BY SPPL WAS IN THE NATURE OF OVERRIDING TITLE, THEREFORE, THIS ARGUMENT OF LD. CIT DR HAS TO BE REJECTED AND IT IS TO BE HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENUE BUT IT IS ONLY SHARE OF PROFIT OF SPPL. 5.7 IN VIEW OF ABOVE DISCUSSION IT IS HELD THAT THE IMPUGNED ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF ALLOCATION OF PROFIT BETWEEN MEMBERS AS PER ACCOUNTS OF THE ASSESSEE AS ALLOCATION OF PROFIT IN THE ACCOUNTS OF THE ASSESSEE IS IN ACCORDANCE WITH CLAUSE-7 OF THE AGREEMENT AND MANNER OF ALLOCATION OF PROFIT IN THE ACCOUNT CANNOT ALTER THE QUANTUM OF DEDUCTION AVAILABLE TO AOP UNDER SECTION 80 18(10). 4. THE FACTS FOR THE ASSESSMENT YEAR 2007-08 AND FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ARE IDENTICAL AS THIS ISSUE IS REGARDING THE CLAUSE 7 OF AOP AGREEMENT DATED 29.4.2003. ACCORDINGLY FOLLOWING THE EARLIER ORDER OF THIS 10 TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE SET ASIDE. 7.2 SINCE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF THE AOP HAS CATEGORICALLY HELD THAT 35% SHARE RECEIVED BY SPPL WAS NOT IN THE NATURE OF OVERRIDING TITLE TO THE REVENUE BUT IS ONLY SHARE OF PROFIT OF SPPL, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO NOTICE AGAINST THE ORDER OF THE TRIBUNAL THE GROUNDS RAISED BY THE ASSESSEE HAVE TO BE ALLOWED. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 7. WE FURTHER FIND THAT AGAINST THE ORDER OF TRIBUNAL, THE MATTER WAS CARRIED BY THE REVENUE BEFORE THE HONBLE HIGH COURT. THE QUESTION BEFORE HONBLE HIGH COURT WAS AS UNDER : (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN HOLDING THAT 35% SHARE RECEIVED BY ASSESSEE COMPANY (SPPL) WAS NOT IN NATURE OF OVERRIDING TITLE TO THE REVENUE GENERATED BY THE AOP BUT ONLY SHARE OF PROFIT OF SPPL IN THE AOP ? WE FIND THAT THE APPEAL OF THE REVENUE WAS DISMISSED BY HOLDING AS UNDER : 8. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING RS.14,18,52,156/-, REPRESENTING THE AMOUNT OF SHARE OF PROFIT OF RECEIVED BY THE APPELLANT AS A MEMBER OF THE AOP FORTALEZA DEVELOPERS AS CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS AND HOLDING THAT THE SAME WAS LIABLE TO TAX AS BUSINESS RECEIPTS IN THE HANDS OF THE APPELLANT. 2. THAT THE LEARNED CIT (A) GRIEVOUSLY ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE MERITS OF THE APPELLANT'S CONTENTION THAT THE AMOUNT RECEIVED BY THE APPELLANT FROM FORTALEZA DEVELOPERS IN ACCORDANCE WITH THE TERMS OF THE AOP AGREEMENT HAD BEEN DULY REFLECTED IN THE TOTAL INCOME OF THE AOP, WHICH WAS ENTITLED TO DEDUCTION U/S. 801B(10) AND ACCORDINGLY THE SAME COULD NOT BE 19 TAXED AGAIN IN THE HANDS OF THE APPELLANT IN VIEW OF THE CLEAR PROVISIONS OF SECTION 86 R.W.S. 167B OF THE INCOME-TAX ACT. 3. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE APPELLANT'S SUBMISSION THAT THE IDENTICAL ISSUE AS IN THE CASE OF THE APPELLANT HAVING BEEN DECIDED ON MERITS BY THE HON'BLE ITAT, 'F' BENCH, MUMBAI, VIDE ITS ORDER PRONOUNCED ON 12TH OCTOBER, 2012, IN THE CASE OF THE AOP FORTALEZA DEVELOPERS FOR A.Y. 2007-08, THE APPEAL OF THE 11 APPELLANT FOR A.Y. 2008-09 WAS REQUIRED TO BE ALLOWED. 4. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW AND ON FACTS IN NOT ACCEPTING EVEN THE ALTERNATE CONTENTION OF THE APPELLANT THAT WHEN IT WAS AN UNDISPUTED FACT THAT THE APPELLANT AND RAVIRAJ KOTHARI & CO. HAD FORMED AN AOP FOR DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT, THE INCOME RECEIVED BY THE APPELLANT FROM THE SAID ACTIVITY OF THE AOP OUGHT TO BE HELD AS ENTITLED TO DEDUCTION U/S.80IB(10). 8.1. THE ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIONAL GROUNDS : 1. THE LD.CIT(A) HAS ERRED IN FACTS AND IN LAW IN NOT HOLDING THAT THE ASSESSING OFFICER HAD NO JURISDICTION TO MAKE ADDITION OF RS.14,18,52,156/- BY TREATING SAID AMOUNT AS CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS AS AGAINST SHARE OF PROFIT FROM AOP. 2. THE LD.CIT(A) OUGHT TO HAVE HELD THAT IN RE-ASSESSMENT PROCEEDINGS U/S.147 R.W. 3RD PROVISO, THE JURISDICTION OF ASSESSING OFFICER IS CONFINED TO INCOME, OTHER THAN INCOME INVOLVING MATTERS WHICH ARE SUBJECT MATTER OF ANY APPEAL 8.2 AFTER HEARING BOTH SIDES, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR ADJUDICATION. 8.3 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS AS WELL AS THE FIRST ADDITIONAL GROUND ARE IDENTICAL TO GROUNDS OF APPEAL IN ITA NO.1860/PN/2012. WE HAVE ALREADY DECIDED THE GROUNDS IN FAVOUR OF THE ASSESSEE. FOLLOWING THE SAME RATIO, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8.4. SO FAR AS THE 2ND ADDITIONAL GROUND IS CONCERNED WE FIND THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT BEFORE THE LD.CIT(A) TOWARDS DISALLOWANCE OF RS.2,78,217/- BEING PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT. ONCE THE SAME IS NOT PRESSED, THE 2ND ADDITIONAL GROUND 20 CHALLENGING THE JURISDICTION OF THE ASSESSING OFFICER IN A REASSESSMENT PROCEEDING BECOMES ACADEMIC IN NATURE WHICH IN OUR OPINION NEEDS NO ADJUDICATION. 8. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRESENT CASE AND THAT OF THE EARLIER YEARS NOR HAS PLACED ANY MATERIAL TO SHOW THAT THE AFORESAID ORDER OF THE HONBLE HIGH COURT WAS SET ASIDE BY THE HIGHER JUDICIAL AUTHORITIES. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS THE GROUNDS OF REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.53/PUN/2016 FOR A.Y. 2010-11 IS DISMISSED. 12 10. AS FAR AS THE GROUNDS RAISED IN APPEALS IN ITA NOS.54/PUN/2016 FOR A.Y. 2011-12 IS CONCERNED, IN VIEW OF THE SUBMISSION OF LD.D.R. THAT THE FACTS OF THE CASE IN BOTH THE YEARS BEING IDENTICAL TO THE FACTS AND ISSUE OF THE CASE IN ITA NO.53/PUN/2016 FOR A.Y. 2010-11, WE THEREFORE FOR THE REASONS STATED HEREIN WHILE DISPOSING OF THE APPEAL IN ITA NO.53/PUN/2016 FOR A.Y. 2010-11 AND FOR SIMILAR REASONS, DISMISS THE GROUNDS OF APPEAL OF REVENUE. THUS, THE GROUNDS OF THE REVENUE ARE DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 31 ST DAY OF OCTOBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 31 ST OCTOBER, 2017. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. CIT(A)-4, PUNE. PRL.CIT-3, PUNE. , , / DR, ITAT, B PUNE; [ / GUARD FILE. / BY ORDER , // / TRUE COPY / / //T // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE.