Sahajanand Associates, Baroda V. The Income tax Officer,Ward-2(2), Baroda

ITA 547/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9140 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 01-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 80IB; 201

Judgement Text

ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 547 /AHD/201 3 ASSESSMENT Y EAR : 200 5 - 06 SAHJANAND ASOCIATES ... ..... . APPELLANT OPP. ZENITH TIN LIMITED, NEAR PRABHUTA HALL, CHHANI, BA RODA 390 002. [PAN: A AJFS 2358G ] VS. INCOME TAX OFFICER , WARD 2( 2 ), BARODA . .... ............. RESPONDENT APPEARANCES BY: (NONE) WRITTEN SUBMISSION , FOR THE APPELLANT ADITYA SHUKLA , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 1 6 .02. 201 7 DATE OF PRONOUNCING THE ORDER : 28 . 0 2 .2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 2 8 TH DECEMBER 201 2 , IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 200 5 - 06 . 2. GRIEVANCE S OF THE APPELLANT ARE AS FOLLOWS : - ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUALLY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. 1. THE LD. CIT (A) - V, BARO DA HAS ERRED IN LAW AND IN FACTS IN DENYING TO THE APPELLANT THE CLAIM OF DEDUCTION U/S 80IB(10) ON THE GROUND THAT THERE IS NO SALE OF COMPLETED TENEMENTS IN A HOUSING PROJECT RATHER THERE IS A SALE OF DEVELOPED AND PARTIALLY CONSTRUCTED PLOTS ONLY BY MAK ING THE FOLLOWING OBSERVATIONS: ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 2 OF 6 I. THAT THE APPELLANT WAS NOT A DEVELOPER OF RESIDENTIAL PROJECT IN VIEW OF SALE DEED BEING FOR PLOT AND LAND WITH UNSPECIFIED AMOUNT OF CONSTRUCTION AND A SUBSEQUENT AGREEMENT FOR REMAINING CONSTRUCTION WHICH WAS 20% TO 33 % OF THE TOTAL PRICE OF THE COMPLETED HOUSE, II. BY ENTERING INTO A CONSTRUCTION AGREEMENT WITH THE PURCHASER, THE APPELLANT MADE HIMSELF A CONTRACTOR OF THE PURCHASER. III. A CONTRACTOR CANNOT CLAIM HE IS STILL A DEVELOPER OF THE TOTAL HOUSING PROJECT A ND ENTITLED TO CLAIM DEDUCTION U/S 80IB OF THE ACT. IV. SINCE THE ACTIVITY OF DEVELOPMENT AND SALE OF PLOTS WITH PARTIALLY CONSTRUCTED TENEMENTS FULFILLS ALL THE CONDITIONS OF SECTION 80IB OF THE ACT, THE APPELLANT IS GRANTED DEDUCTION IN RESPECT OF P ROFITS EARNED FROM THIS ACTIVITY. V. IN VIEW OF THE ABOVE, DEDUCTION U/S 80IB HAS BEEN GRANTED ON PRO RATA BASIS IN RESPECT OF SALES CONSIDERATION RECEIVED BY THE APPELLANT AS PER SALE DEED SINCE NO SEPARATE BOOKS OF ACCOUNT HAVE BEEN MADE IN RESPECT OF THE ELIGIBLE ACTIVITY. THE IMPUGNED DENIAL OF DEDUCTION BEING BAD IN LAW IS PRAYED TO BE ALLOWED AS CLAIMED. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE FIRM HAD CLAIMED A DEDUCTION OF RS.9,44 ,423/ - UNDER SECTION 80IB(1 0 ) OF THE ACT IN RESPECT OF PROFIT DERIVED FROM DEVELOPMENT AND BUILDING OF HOUSING PROJECT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HOWEVER, THE ASSESSING OFFICER DECLINED THE S AID CLAIM ON THE GROUND THAT NEITHER THE LAND IS OWNED BY THE ASSESSEE NOR MUNICIPAL APPROVAL IS IN THE NAME OF THE ASSESSEE. HE FURTHER NOTED THAT THE HOUSING UNITS ARE SOLD DIRECTLY TO THE CUSTOMERS AND THE ASSESSEE IS SIMPLY A CONFIRMING PARTY AND CONSTRUCTION CONTRACTOR. THE ASSESSEE S EXPLANAT ION THAT THIS ISSUE IS COVERED, IN ASSESSES OWN CASE , TRIBUNAL S ORDER WAS DECLINED ON THE GROUND THAT THE SAID DECISION IS IN CHALLENGE BEFORE THE HON BLE HIGH COURT . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 3 OF 6 4. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH NONE APPEARED FOR THE ASSESSEE. I HAVE ALSO PERUSED THE MATERIAL ON RECORD AS ALSO FACTUAL MATRIX OF THE CASE. 5. I FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY A DECIS ION OF THE DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI UMEYA CORPORATION VS. ITO (ITA NO.211/AHD/2010; ORDER DATED 07.07.2015) WHEREIN THE DIVISION BENCH HAS INTER ALIA OBSERVED AS FOLLOWS : - 6. WE FIND THAT, IN THE CASE OF CIT VS RADHE DEVELOPERS [(2012) 341 ITR 403 (GUJ)], HON BLE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO CONSIDER THE ISSUE OF OWNERSHIP OF LAND, ON WHICH HOUSING PROJECT IS DEVELOPED, IN THE CONTEXT OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10). HON BLE JURISDICTIONAL HIGH COURT HAS, IN THIS CONTEXT, INTER ALIA OBSERVED AS FOLLOWS: 32. SEC. 80 - IB(10) OF THE ACT THUS PROVIDES FOR DEDUCTIONS TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS UNDER CERTAIN CIRCUMSTANCES NOTED ABOVE. IT DOES NOT PROVIDE THAT THE LAND MUST BE OWNED BY THE ASSESSEE SEEKING SUCH DEDUCTIONS. 33. IT IS WELL SETTLED THAT WHILE INTERPRETING THE STATUTE, PARTICULARLY, THE TAXING STATUTE, NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS NOT BEEN PROVIDED BY THE LEGISLATURE. THE CONDITION WHICH IS NOT MADE PART OF S. 80 - IB(10) OF THE ACT, NAMELY THAT OF OWNING THE LAND, WHICH THE ASSESSEE DEVELOPS, CANNOT BE SUPPLIED BY ANY PURPORTED LEGISLATIVE INTENT. 34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPMENT AGREE MENTS IN BOTH THE SETS OF CASES. IT CAN BE SEEN FROM THE TERMS AND CONDITIONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUTION OF THE DEVELOPMENT PROJECTS. UNDER THE AGREEMENTS, THE ASSESSEE HAD FULL AUTHORITY TO DEVELOP THE LAND AS PER HIS DISCRETION. THE ASSESSEE COULD ENGAGE PROFESSIONAL HELP FOR DESIGNING AND ARCHITECTURAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CHARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT CAN THUS BE SEEN THAT THE ASSESSEE HAD DEVELOPED THE HOUSING PROJECT. THE FACT THAT THE ASSESSEE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUENCE. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 7. IN OUR HUMBLE UNDERSTANDING, THEREFORE, IN ORDER TO ANSWER THE Q UESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 4 OF 6 ENTRE PRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIB LE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREPRENEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVELOPING AND BUILDING HOUSING PROJECTS BY BUYING, ON OUTRIGHT BASIS, AND CO NSTRUCTING RESIDENTIAL UNITS THEREON COULD PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE OF ACTIVITY, BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BECAUSE THE ASSESSEE HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSING PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND REWARDS OF DEVELOPING THE HOUSING PROJECT, IN SUBSTANCE, REMAIN WITH THE ASSESSEE. IT IS DIFFICULT, IF NOT ALTOGETHER IMPOSS IBLE, TO VISUALIZE ALL THE BUSINESS MODELS THAT AN ASSESSEE MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS, IN SUBSTANCE, THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME, BUT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY FOR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOPING AND BUILDING A HOUSING PROJECT . THERE IS NO JUSTIFICATION, CONCEPTUAL OR LEGAL, IN RESTRICTING ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINE SS MODEL THAT AN ENTREPRENEUR ADOPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HOUSING PROJECT. 8. AS REGARDS LEARNED CIT(A) S RELIANCE ON THE DECISION OF A LARGER BENCH OF THIS TRIBUNAL, IN THE CASE OF B T PATIL & SONS (BELGAUM) CONSTRUCTIONS PVT LT D VS ACIT [(2010) 1 ITR (TRIBUNAL) 703 (MUM)], WHAT HAS BEEN REFERRED TO BY HER IS THE VIEW OF THE THREE MEMBER BENCH RESOLVING THE POINT OF DIFFERENCE BETWEEN THE MEMBERS OF THE DIVISION BENCH. HOWEVER, THIS VIEW WAS STILLBORN, AND ITS RELEVANCE IS CONFIN ED TO ACADEMIC SIGNIFICANCE, FOR THE REASON THAT THAT WHILE GIVING EFFECT TO THE MAJORITY VIEW, VIDE ORDER DATED 28TH FEBRUARY, 2013 AND ON SOMEWHAT PECULIAR FACT SITUATION IN THIS CASE, THE FINAL ORDER OF THE TRIBUNAL DID NOT ENDORSE THESE VIEWS. QUITE TO THE CONTRARY, FOLLOWING HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD AND ORS [(2010) 322 ITR 323 (BOM)] AND UPON BY TAKING INTO ACCOUNT HON BLE BOMBAY HIGH COURT S SPECIFIC DIRECTIONS IN THE CASE BEFORE THE TRIBUNAL, T HE TRIBUNAL S FINAL ORDER HAD, INTER ALIA, CONCLUDED AS FOLLOWS: .WHILE GIVING EFFECT TO THE OPINION OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEARS. 9. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT ASSUME THE ENTREPRENEURSHIP RISKS OF THE HOUSING PROJECT. THE FORM AT OF ARRANGEMENTS FOR TRANSFER OF BUILT UP UNIT, AND BUSINESS MODEL OF THE ASSESSEE FOR ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 5 OF 6 THAT PURPOSE, IS NOT DECISIVE FACTOR FOR DETERMINING ELIGIBILITY OF DEDUCTION UNDER SECTION 80 IB (10), BUT THAT IS ALL THAT THE AUTHORITIES BELOW HAVE FOUND FAULT WIT H. THE OBJECTIONS OF THE AUTHORITIES BELOW ARE THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AUTHORITIES BELOW, IN DECLINING DEDUCT ION UNDER SECTION 80IB (10) AND ON THE FACTS OF THIS CASE, IS INCORRECT. WE VACATE THE SAME AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 10. GROUND NO.1 IS THUS ALLOWED. 6. THE VIEWS SO EXPRESSED BY THE DIVISION BENCH BIND ME. I HAVE TA KEN NOTE OF THE LEARNED CIT ( A ) S VIEW THAT NO PROFITS CAN BE HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80B TO THE EXTENT THESE PROFITS PERTAIN TO CONTRACT WORK CARRIED OUT BY THE ASSESSEE, POST SALE OF PARTIALLY COMPLETED UNIT, AS SUCH PROFITS ARISE IN THE CAPACITY OF CONTRACTOR. HOWEVER, I FIND THAT THIS APPROACH IS UNSUSTAINABLE IN LAW SINCE, AS NOTED IN UMEYA CORPORATION S CASE (SUP R A), THIS ARRANGEMENT IS PART OF BUSINESS MODEL ADOPTED BY THE ASSESSEE . IN SUBSTANCE, ACTIVITY OF THE ASSESSEE IS D EVELOPING HOUSING PROJECT, AND THAT WHAT MATTERS IN THE CONTEXT OF SECTION 80IB(10). I, THEREFORE, DIRECT THE ASSESSING O FFICER TO GRANT DEDUCTION OF RS.9,44,423/ - , UNDER SECTION 80IB(10), TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUN CED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF FEBRUARY , 2017 . PBN/* COPIES TO: (1) THE APPE LLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ITA NO. 547 /AHD/201 3 A SSESSMENT Y EAR: 20 0 5 - 06 PAGE 6 OF 6 ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD