MUKON CONSTRUCTIONS P.LTD, MUMBAI V. ASST CIT 6(30, MUMBAI

ITA 5538/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8100 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUMAN RATNAM
• Assessee Lawyers: PRAKASH JYOTWANI
• Section: 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM , , ITA NO. 5538 / MUM/ 20 1 1 ( / ASSESSMENT YEAR: 20 0 7 - 08 ) M/S MUKON CONSTRUCTIONS PVT LTD. 261, SANT TUKARAM MARG, CARNAC BUNDER, MASJIT, MUMBAI - 400009 / VS. A SSTT . COMMISSIONER OF INCOME TAX - RANGE - 6( 3 ) , AYAKAR BHAVAN, MUMBAI - 400020 ( / APPELLANT) ( / RESPONDENT ) ./ PAN : AADCM1616L ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI PRAKASH JYOTWANI /RE VENUE BY : DR.SUMAN RATNAM / DATE OF HEARING : 6 . 2 .2017 / DATE OF PRONOUNCEMENT : 15. 3 .2017 / O R D E R PER RAJESH KUMAR, A. M: APPEAL FILED BY THE ASSESSEE PERTAINS TO THE ASSESSMENT YEAR 2007 - 08 AND IS DIRECTED AGAINST THE ORDER DATED 4.1.2011 PASSED BY THE LD. CIT(A) - 12, MUMBAI IN WHICH THE ASSESSEE HAS RAISED THE ISSUE OF CONFIRMATION OF DISALLOWANCE BY LD.CIT(A) U/S 80IB (10) OF THE INCOME TAX ACT, 1961 TO THE TUNE OF RS.4,71,15,704/ - AS HELD BY THE AO ON THE GROUND THAT THE DEVELOPMENT RIGHT S (TDR) FROM THE SLUMP REHABILITATION AUTHORITY ( HEREAFTER 2 ITA NO. 5538 /MUM/201 1 CALLED AS SRA) W AS A WORK CONTRACT. THE ASSESSEE ALSO CHALLENGED THE APPLICABILITY OF THE PROVISIONS OF SECTION 80IB(10) OF THE ACT TO THE CASE OF THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING TAXABLE INCOME OF RS. NIL AFTER CLAIMING DEDUCTION U/S 80IB (10) OF RS. 4,71,15,704/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 14.10.2008. THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY AND THE STATUTORY NOTICES UNDER SECTION 143(2) AND 142 (1) WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS A DEVELOPER AND ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION . DURING THE YEAR UNDER CONSIDERATION THE ASSE SSEE COMPANY HAS DEVELOPED SECOND PHASE OF PROJECT AT DHARAVI, MUMBAI FOR S LUM R EHABILITATION A UTHORITY . THE APPELLANT ENTERED INTO A MOU DATED 27.05.2002 WITH SHRI MOMI MANECKJI NETARWALLA FOR PURCHASE OF PLOT OF LAND ADMEASURING 15096SQ MTRS F OR A CO NSIDERATION OF RS. 1,75,00,000/ - WHICH WAS LATER ON REDUCED TO RS. 1,65,00,000/ - WHEN THE AREA OF LAND WAS FOUND TO BE 12298 SQ MTRS. THEREAFTER MR BOMI MANECKJI NETARWALLA (VENDOR) , THE MUKON CONSTRUCTION THE ASSESSEE AND SLUM REHABILITATION AUTHORITY (SRA) ENTERED INTO AN TRIPARTITE AGREEMENT WHERE UNDER THE ASSESSEE WAS TO CONSTRUCT REHABILITATION TENEMENTS OF THE SIZE ADMEASURING 225 SQ FTS ON THE SAID LAND WHICH WAS APPROVED BY THE SRA WHICH WOULD BE SURRE NDERED FREE OF COST TO SRA FOR REHABILITA TION OF SLUM DWELLERS WHO ENCROACHED THE LAND. THE ASSESSEE 3 ITA NO. 5538 /MUM/201 1 DEVELOPER WOULD RECEIVE THE TDR AS A CONSIDERATION FROM SRA ON COMPLETION. ACCORDIN G LY THE PROJECT WAS UNDERTAKEN IN TWO PHASES IN TERMS OF THE COMMENCEMENT CERTIFICATE DATED 15.09.2003 ISSUED BY SRA. PHASE1 WAS COMPLETED IN AY 2004 - 05 AND TD R ALLOTTED AS CONSIDERATION WERE SOLD IN THE OPEN MARKET FOR RS. 5,50,95,533/ - AND ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) IN RESPECT OF THE PROFITS WHICH WAS ALLOWED BY THE DEPARTMENT . SIMILARLY T HE PHASE II WAS COMPLETED AND THE ASSESSEE COMPANY HAS RECEIVED AS CONSIDERATION IN THE FORM OF TDR OF 3150 S Q . MTRS FROM SRA PROJECT WHICH WA S SOLD TO M/S TOPSHOP EXPORT PVT LTD IN THE OPEN MARKET FOR A CONSIDERATION OF RS.8,13,75,840/ - . THE AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS, OBSERVED FROM THE PERUSAL OF PROFIT AND LOSS ACCOUNT THAT ONLY SALES IN THE PROFIT AND LOSS ACCOUNT WAS ON ACCOUNT OF SALE OF TDR AMOUNTING TO RS.8,13,75,840/ - AND SCRAP SALE OF RS.9,532/ - THEREBY SHOWING NET PROFIT OF RS. 4,71,15,704/ - WHICH WAS CLAIMED AS DEDUCTION U/S 80IB (10) OF THE ACT. ACCORDINGLY, THE AO ISSUED NOTICE TO THE ASSESSEE TO JUSTIFY IS CLAIM OF DEDUCTION U/S 80IB (10) OF THE ACT . THE ASSESSEE REPLIED TO THE SAID SHOW CAUSE NOTICE VIDE ITS WRITTEN SUBMI SSIONS DATED 8.12.2009 WHICH IS REPRODUCED BELOW: 'THE EXPRESSION 'WORK CONTRACT' MEANS THAT THERE IS AN AGREEMENT FOR CARRYING OUT THE MATTER MENTIONED THEREIN . ONE OF T EST TO FIND OUT WHETHER A GIVEN CASE IS 'SALE OF GOODS' OR 'WORKS CONTRACT' IS TO SE E IF THE WORK DONE BY A PERSON IS A WORK DONE ON HIS OWN CHATTEL, OR ON THE CHATTEL OF SOMEONE ELSE. L F IT IS ON HIS OWN CHATTEL AND THAT THE CHATTEL IS LATER ON SOLD, THEN IT IS 'SALE OF GOODS', BUT IF THE WORK IS DONE ON THE CUSTOMER'S CHATTEL THEM IT IS 'WORKS CONTRACT' AS STATED IN 4 ITA NO. 5538 /MUM/201 1 THE CASE OF S. V.MOTOR CO. LTD. VS. STATE OF MYSORE, (1964) 15 STC 771 (MYS). FURTHER THE CONTEXT IN WHICH THE WORD :CHATTEL' IN THE ABOVE PARAGRAPH USED MEANS 'REAL CHATTEL' AS AGAINST 'PERSONAL CHATTEL', SUCH AS CONCERN R EAL PROPERTY, SUCH AS LEASEHOLD ESTATES,' INTERESTS ISSUING OUT OF, OR ANNEXED TO , REAL ESTATE; SUCH CHATTEL INTEREST AS DEVOLVE AFTER THE MANNER OF REALITY . IN THE CASE OF OUR ABOVE - MENTIONED CLIENT, IT IS CLEARLY HIGHLIGHTED FROM THE DEED OF CONVEYANC E DATED 05.04.2003 THAT THE ASSESSEE HAS A VESTED INTEREST ISSUING OUT OF, OR ANNEXED TO, THE DEVELOPMENT AND BUILDING OF HOUSING PROJECT AND THEN SELLING IT TO THE SLUM REHABILITATION AUTHORITY (SRA) VIZ., THE BENEFIT THAT IT HAS RECEIVED IN THE FORM OF S LUM TRANSFER OF DEVELOPMENT RIGHT (TOR) & FROM ISSUANCE OF DEVELOPMENT RIGHT CERTIFICATES (DRC). THE SAME RELEVANT CLAUSE (VII) & CLAUSE (IX) ARE REPRODUCED AS BELOW: - 'VII) THE DEVELOPERS HAVE OFFERED SRA, A PACKAGE DEAL OF SURRENDERING FREE OF COST I N LIEU OF GRANT OF SLUM TOR THE CONSTRUCTED REHAB UNITS ON THE PORTION OF THE OPEN PLOT WITHIN THE SAID ENTIRE PROPERTY BEARING C.S.NO.316 (PT.) AND DELINEATED ON THE PLAN THERETO ANNEXED AS ANNEXURE '8' THEREON SURROUNDED BY A RED COLOURED. BOUNDARY FINE HEREIN AFTER CALLED 'THE SAID PROPERTY' AND MORE PARTICULARLY DESCRIBED IN THE SECOND SCHEDULE HEREUNDER WRITTEN. IX) THE DEPUTY DIRECTORS OF TOWN PLANNING SRA HAVE ACCEPTED THE PROPOSAL FROM THE DEVELOPERS AND HAS APPROVED THE SCHEME IN PRINCIPLE ON TH E SAID PROPERTY. AS SLUM REHABILITATION SCHEME UNDER CLAUSE 3. (1 OF APPENDIX IV OF DCR NO.33(10) SANCTIONED BY THE GOVT. UNDER UOO RESOLUTION NO.1095/1029/CR273/95/UD - 11 DATED 15.10.97 AGAINST WHICH SRA SNAIL GIVE BENEFIT OF TRANSFER OF DEVELOPMENT RIGHT (SLUMS) (HEREINAFTER CALLED TOR) AND CAUSE TO ISSUE DEVELOPMENT RIGHT. CERTIFICATES (SLUMS) (HEREINAFTER CALLED 'ORC') TO THE DEVELOPERS UNDER APPENDIX VII B OF DCR IN THE MANNER HEREINAFTER PROVIDED.' NEEDLESS TO MENTION THAT THE. RATE AT WHICH THE TOR WOULD BE SOLD IS ALSO ENTIRELY DEPENDENT ON THE PREVAILING MARKET CONDITIONS AT THE TIME 5 ITA NO. 5538 /MUM/201 1 OF SALE. HOWEVER, THE. CONSIDERATION THAT IS TO BE RECEIVED UNDER THE WORKS CONTRACT IS PREDETERMINED A ND FIXED. HENCE, THE NEWLY INSERTED' EXPLANATION TO SECTION 80 - 18(10) STATING THAT THE SUB - SECTION SHALL NOT APPLY TO UNDERTAKINGS WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT , DOES NOT APPLY TO OUR ABOVE - NAMED CLIENT BY ANY STRETCH OF IMAGINATION AND THEREFORE WE REQUEST YOUR GOO D SE L F TO ALLOW THE DEDUCTI ON U/S 80 - IB(10) OF THE ACT AND OBLIGE 3 . THE AO AFTER CONSIDERING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AS INCORPORATED IN PARA 3.3 OF THE ASSESSMENT ORDER CAME TO THE CONCLUSION THAT HOUSING PROJECT UNDERTAKEN ON BEHALF OF SRA WAS A CONTRA CT AWARDED BY THE STATE GOVERNMENT AND THEREFORE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB (10) OF THE ACT BY REJECTING THE CONTENTION S OF THE ASSESSEE THAT THE HOUSING PROJECT UNDER SRA WAS NOT WORK CONTRACT FOR THE REASONS THAT THE CONSIDERATION RECEIVED UNDER THE WORK CONTRACT WAS PREDETERMIN ED AND FIXED IN THE FORM OF TDR WHICH WAS SOLD IN THE OPEN MARKET AT THE PREVAILING RATES. ULTIMATELY THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 21.12.2009 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.471,15,700 BY REJECTING THE DEDUCTION CLAIMED UNDER SECTION 80IB (10) OF THE ACT ON THE GROUND THAT NO DEDUCTION U/S 80IB (10) COULD BE ALLOWED TO THE ASSESSEE IN RESPECT OF PROFIT FROM A WORK CONTRACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE CONTENTIONS AND 6 ITA NO. 5538 /MUM/201 1 SUBMISSIONS OF T HE ASSESSEE AS INCORPORATED IN PARA 4.3 OF THE APPELLATE ORDER OBSERVED AND HELD AS UNDER : 4.4. I HAVE CAREFULLY CONS IDERED THE 'ORDER OF THE ASSESSING OFFICER A ND THE SUBMISSION OF THE APPELLANT. I FIND THAT THE MAIN DISPUTE IN T HE CASE IS REGARDING GRANT OF DEDUCTION UNDER SECTION 80 IB TO T HE APPELLANT, THE ASSESSING OFFICER HAS; DENIED THE SAME STATING THAT AS THE APPELLANT WAS EXECUTING THE WORKS CONTRACT THE CASE OF T HE APPELLANT FELL UNDER THE PROVISION OF .THE EXPLANATION TO SECTION (10 F) OF SECTION 80IB A N D THEREFORE THE DED UCTION WAS NOT ALLOWED TO T HE APPELLANT. THE APPELLANT ON THE OTHER R HAND HAS ARGUED T HAT IT WA S A DEVELOPER HAVING A PRINCIPAL TO PRINCIPAL RELATIONSHIP WITH THE SRA AND WAS NOT EXECUTING A WORKS CONTRACT. 4.5. SECTION 80 IB OF THE INCOME TAX ACT MAKES IT VERY CLEAR TH AT THE DEDUCTION IS AVAILABLE TO A DEVELOPER AND NOT TO A CONTRACTOR . THE EXPLANATION AFTER SUBSECTION (10) OF SECTION 80 IB HAS BEEN INSER TED SO AS TO PROVIDE THAT NOTHING CONTAINED IN THIS SUBSECTION SHALL APPLY TO ANY UNDERTAKING WHICH TAKES THE HOUSING PROJECT AS A WORK CONTRACT AWARDED BY ANY OTHER PERSON (INCLUDING CEN TRAL OR STATE GOVERNMENT) . UNDER THE CIRCUMSTANCES IT IS TO BE SEEN WHETHER THE APPELLANT FELL IN THE CURRENT CATEGORY OF A CONTRACT OR A DEVELOPER AS THIS BENEFIT IS NOT DENIED TO A DEVELOPER BUT ONLY TO A CONTRACTOR. IN THE FIRST INSTANCE IT IS VERY NECE SSARY TO SEE WHETHER THE APPLICANT FULFILS THE CONDITIONS OF THE SAID SECTION THAT IS 1. WHETHER THE APPELLANT IS THE OWNER O F THE LAND. 2. WHO IS THE ACTUAL DEVELOPER I.E. WHO IS THE ACTUAL PERSON UNDERTAKING THE INVESTMENT RISK AS ANY PERSON UNDERTA KING JUST CONTRACT RISK IS NOT ENTITLED TO TAX BENEFITS. INVESTMENT IS IMPORTANT TO TAKE BENEFIT UNDER SECTION 80 IB (10) OF THE INCOME TAX ACT. THIS IS BECAUSE IT IS ONLY THE ACTUAL DEVELOPER WHO WOULD BE UNDERTAKING THE INVESTMENT RISK. THEREFORE WHAT HAS TO BE SEEN IS THAT WHETHER IN REALITY THE APPELLANT WAS THE OWNER OF THE LAND AND HAS UNDERTAKEN THE INVESTMENT RISK OR NOT. 7 ITA NO. 5538 /MUM/201 1 4.6. THE TERM WORKS CONTRACT HAS NOT BEEN DEFINED IN THE INCOME TAX ACT AND THEREFORE_ IT IS TO BE INTERPRETED BY EXAMINING THE AGREEMENTS AND OTHER DOCUMENTS . A READING OF THE D EED OF E:ONVEYANCE DATED 5/4/2003 SHOWS THAT THE OWNERSHIP OF THE LAND VESTED WITH ONE B O MI. MANECKJI NETARWALLA WITH TWO OTHER PARTIES HAVING INTEREST IN IT. THE APPELLANT HAD APPROACHED THE OWNER OF T HE LAND WITH A SCHEME OF DEVELOPING AND SALE OF THE PROPERTY, AND THEN APPROACHED SRA WITH A SCHEME WHICH IS APPROVED IN PRINCIPLE. A LETTER OF INTENT WAS ISSUED SUBJECT TO THE TERMS AND CONDITIONS MENTIONED THEREIN AND IT IS ONLY ON THE EXECUTION OF - THES E TERMS AND CONDITIONS THAT THE SRA AGREED TO GIVE THE BENEFIT OF TOR TO THE APPELLANT. THE APPELLANT IN TURN WAS COMPELLED TO CONSTRUCT TENEMENTS ON THE SAID PROPERTY AS PER THE TERMS AND CONDITIONS OF THE SRA. A READING OF; THE AGREEMENT ALSO SHOWS THAT THE OWNERSHIP OF THE PROPERTY WAS TRANSFERRED IN THE NAME OF THE APPELLANT HOWEVER THIS TRANSFER WAS SUBJECT TO THE DEVELOPMENT TO BE DONE. IT WAS NOT AS IF THAT THE APPELLANT HAD FIRST PURCHASED THE LAND AND HAD BECOME ITS'. OWNER AND THEN INVESTED IN THE DEVELOPMENT PROJECT AS AN ACTUAL DEVELOPER. THE AGREEMENT CLEARLY SAYS THAT THE APPELLANT GOT THE POSSESSION OF THE. SAID PROPERTY FOR AND BEHALF OF THE SRA WITH THE RIGHT. TO CARRY OUT CONSTRUCTION OF THE TENEMENTS - AND DEVELOP THE SAME IN ACCORDANCE WIT H THE TERMS OF THE AGREEMENT DATED THE 5 APRIL 2003. IT HAS FURTHER BEEN STATED IN THE AGREEMENT THAT THE DEVELOPMENT HAS TO BE CARRIED OUT AS PER TERMS OF AGREEMENT. THE FIRST CONFIRMING PARTY HAS A SPECIAL LIEN ON THE SAID POSSESSION WHICH SHALL NOT BE D LSTURBED BY SRA. A READING OF THE AGREEMENT ALSO SHOWS THAT IT IS FOR THE SRA TO CONVEY THIS PROPERTY TO ANOTHER AFTER ALL THE BENEFITS OF THE TOH ARE GIVEN TO THE APPELLANT. THEREFORE IT STANDS THAT THE OWNERSHIP OF THE PROPER - TY WAS ACTUALLY NEVER OF THE APPELLANT THE APPELLANT WAS ORILV ,GIVEN DEVELOPMENT RIGHT IN IT BY THE ORIGINAL OWNER AND AFTER APPROACHIRIQ THE SRA UNDER TERMS AND CONDITIONS VERY CLEARLY DEFINED THE ORIQINA] OWNER CONVEYED THE PROPERTY IN THE NAME OF THE APPELLANT WITH THE PAYMENTS B EING SUBJECT TO THE TDR RECEIVED BY THE APPELLANT FROM THE SRA FOR THE WORK DO NE AS PER TERMS AND CONDITIONS. IT THEREFORE CLEARLY STANDS THAT THE ASSESSING OFFICER IS VERY CORRECT IN CONCLUDING THAT WHAT .THE APPELLANT HAD WAS A WORKS CONTRACT FOR WHICH I T RECEIVED FIXED AMOUNT OF ' TDR . IT IS IMMATERIAL THAT THE TDR WAS SOLD AT A GREATER VALUE IN THE OPEN MARKET BY THE APPELLANT. IT IS ALSO SEEN FROM RECORDS THAT THE APPELLANT SIMPLY HELD THE LAND IN ITS NAME ON BEHALF OF THE SRA. THE APPELLANT NEVER HAD T HE RIGHTS OF THE ACTUAL/VEAL OWNER OF THE PROPERTY . IT DID NOT HAVE THE RIGHT TO CANCEL THE CONTRACT WITH THE SRA AND DEVELOP THE LAND ACCORDING T; ITS OWN PLANS/INITIATIVES. 8 ITA NO. 5538 /MUM/201 1 4.7. I AM THEREFORE TOTALLY IN AGREEMENT WITH THE OBSERVATION O F THE AO THAT T HE CONTRACT THAT THE APPELLANT WAS UNDERTAKING WAS A WORKS CONTRACT WHEREIN THE APPELLANT HAD NO ACTUAL RISKS OF AN INVESTOR. IT IS ALSO TO BE CONSIDERED THAT THE CONTRACT ENTERED INTO BY DEVELOPERS AND BUILDERS ARE TREATED AS WORKS CONTRACT BOTH FOR VAT A S WELL AS SERVICE TAX PURPOSES. UNDER THE CIRCUMSTANCES I AM NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE ASSESSING OFFICER. THE ACTION OF THE ASSESSING OFFICER BY WHICH THE BENEFIT OF SECTION 80 IB (10) HAS BEEN DENIED TO THE APPELLANT FOR THE REASO NS MENTIONED IN THE ASSESSMENT ORDER IS UPHELD AND THE GROUND OF APPEAL RAISED DISMISSED 4 . THE LD. AR VEHEMENTLY SUBMITTED BEFORE THE BENCH THAT THE ASSESSEE HAS RECEIVED TDR AS CONSIDERATION FOR EXECUT ION OF PROJECT FOR SRA, GOVT. OF MAHARASHTRA AWARDED BY THE GOVT. OF MAHARASHTRA. THE LD. AR WHILE ATTRACTING THE ATTENTION OF THE BENCH TO THE ORDER OF LD.CIT(A) DATED 26.5.2006 FOR THE ASSESSMENT YEAR 2004 - 05, A COPY OF WHICH IS PLACED AT PAGES 32 TO 36 OF THE ASSESSEES PAPER BOOK SUBMITTED THA T THE LD.CIT(A) HAS ALLOWED SIMILAR DEDUCTION IN THE ASSESSMENT YEAR 2004 - 05 IN RESPECT OF PHASE - 1 . THE LD. AR ALSO TOOK US THROUGH THE MEMORANDUM OF UNDERSTANDING DATED 27TH DAY OF MAY,2002 ENTERED BETWEEN BOMI MANECKJI NETARWALLA AND M/S GENERAL ESTAT E AND AGENCIES FILED AT PAPER BOOK PAGES 37 TO 45 , DEED OF CONVEYANCE DATED 5.4.2003 PLACED AT PAGES 46 TO 63 OF THE PAPER BOOK , COMMENCEMENT CERTIFICATE NO.SRA/CHE/DDTP/129/GN/PL/AP DATED 15.9.2003 IN FAVOUR OF M/S MUKON CONSTRUCTION PVT LTD. FILED A T PAGES 64 TO 76 OF THE PAPER BOOK , A COPY OF LETTER ISSUED BY MUNICIPAL CORPORATION OF GREATER MUMBAI DATED 20.3.2007 ON THE ISSUE OF DRC FOR TDR GENERATED 9 ITA NO. 5538 /MUM/201 1 IN SRA ON THE LAND BEARING CS NO.316(PT) OF DHARAVI DIVISION NETRAWALA COMPOUND/ESTATE, DHARA VI PLACED AT PAGES 92 TO 96 OF THE PAPER BOOK AND A LETTER DATED 17.12.2009 ISSUED BY DY.CHIEF ENG.(DP)I, REGARDING ISSUE OF DRC FOR TDR GENERATED IN SRA ON THE LAND BEARING CS NO.316(PT) OF DHARAVI DIVISION NETRAWALA COMPOUND/ESTATE, DHARAVI IN FAV OUR OF THE ASSESSEE. THE LD. AR SUBMITTED THAT IN VIEW OF ALL THESE DOCUMENTS AND EVIDENCES AS REFERRED TO ABOVE IT WAS ABUNDANTLY CLEAR THAT THE ASSESSEE HAS RECEIVED TDR FROM SRA IN LIEU OF CONSTRUCTION UNDERTAKEN FREE OF COST WHICH WAS SOLD IN THE O PEN MARKET AND PROFIT GENERATED THEREON TO THE TUNE OF RS.4,71,15,704/ - WERE CLAIMED UNDER SECTION 80IB (10) OF THE ACT. FURTHER, THE LD. AR ALSO CONTROVERTED THE FINDINGS OF THE FAA THAT EXPLANATION TO SECTION 80IB (10 ) W A S NOT ATTRACTED IN THE PRESENT CASES AS THE ASSESSEE HAS NOT WORK ED AS WORK S CONTRACTOR BUT HAS RECEIVED TDR FROM SRA AS A CONSIDERATION FOR CARRYING OUT CONSTRUCTION OF REHABILITATION TENEMENTS FREE OF COST UNDER A CONTRACT AWARDED BY THE GOVT. OF MAHARASHTRA FOR REHABILITATION OF SL UM DWELLERS AND ALL THE CERTIFICATES AND EVIDENCES ALSO SUBSTANTIATED THAT THE ASSESSEE WAS ENTITLED TO TDR AS ISSUED BY SRA IN THE NAME OF THE ASSESSEE AS A CONSIDERATION FOR THE PROJECT EXECUTED FOR SRA . THE LD. AR IN DEFENCE OF HIS ARGUMENTS RELIE D ON THE FOLLOWING CASE LAW: A) RAMESH GUNSHI DEDHIA V/S ITO(2014) 148 ITD 356; B) ACIT V/S SMT C RAJINI 9 TAXMAN.COM 115 (CHENNAI - ITAT); C) CIT V/S RADHE DEVELOPERS (2008 23 SOT 420) (AHD); 10 ITA NO. 5538 /MUM/201 1 D) CIT V/S RADHE DEVELOPERS (GUJ) HIGH COURT E) UNITY INFRA PRO JECTS V/S DCIT(ITAT MUM) DECIDED ON 10.10.2014; F) ITO V/S SAUBHAGYALAXMI DEVELOPER (ITAT PUNE) DECIDED ON29.1.2016 AND G) ITO V/S SONASHA ENTERPRISES (ITAT MUMBAI) 5 . ON THE OTHER HAND, THE LD. DR RELIED HEAVILY ON THE ORDERS OF AUTHORITIES BELOW A ND PRAYED BEFORE THE BENCH THAT THE ORDER PASSED BY THE LD.CIT(A) SHOULD BE UPHELD. 6 . HEARD BOTH THE PARTIES AT LENGTH, PERUSED THE MATERIAL PLACED BEFORE THE BENCH INCLUDING THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE ORDERS RELIED UPON BY THE ASSESSE E. THE FACTS ON RECORDS REVEAL THAT THE ASSESSEE RECEIVED TDR FROM SRA ON RATE CONTRACT AWARDED BY THE GOVT. OF MAHARASHTRA FOR WHICH THE COMMENCEMENT CERTIFICATE DA T ED 15.9.2003 WAS ISSUED IN FAVOUR OF M/S MUKON CONSTRUCTION PVT LTD QUA ERECTION O F TENEMENTS AT PLAT NO. CS NO.316(PT) OF DHARAVI DIVISION NETRAWALA COMPOUND/ESTATE, DHARAVI BY THE DY.CHIEF ENGINEER, SRA. WE ALSO FIND THAT THE CERTIFICATE WAS ISSUED IN FAVOUR OF M/S MUKON CONSTRUCTION PVT LTD BY MUNICIPAL CORPORATION OF GREATER MUMBAI ( DEVELOPMENT RIGHT CERTIFICATE ) DATED 29.10.2007 AS IS PLACED AT PAGES 93 TO 96 OF THE PAPER BOOK WHICH SHOW THAT THE ASSESSEE HAS RECEIVED /EARNED DEVELOPMENT RIGHT OF SRA IN CONSIDERATION OF EXECUTION OF CONTRACT AWARDED BY GOVT.OF MAHARASHTRA . THE SAID TDRS WE RE SOLD IN THE OPEN MARKET FOR A CONSIDERATION OF RS. 11 ITA NO. 5538 /MUM/201 1 8,13,75,840/ - AS WAS CLEAR FROM THE DOCUMENTS ISSUED IN THE NAME OF THE ASSESSEE BY VARIOUS AUTHORITIES . THE ASSESSEE HAS UNDISPUTEDLY RECEIVED DEVELOPMENT RIGHTS FROM SRA WHICH WER E SOLD IN THE OPEN MARKET AND WHATEVER PROFIT WAS EARNED FROM THE SAID SALE AFTER SETTING OF ALL THE EXPENDITURES INCURRED ON THE EXECUTION OF THE SRA PROJECT, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF THE ACT. IN THE CASE OF CIT V/S RADHE DEVELOPER S (SUPRA), THE HONBLE HIGH COURT HAS HELD THAT THE DEDUCTION U/S 80IB(10) IS AVAILABLE EVEN IN CASE OF HOUSING PROJECT WHERE DEVELOPER IS NOT OWNER OF THE LAND WHERE THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY AND THE PROJECT IS DEVELOPED AT THE RIS K AND COST OF THE ASSESSEE. IN THE PRESENT CASE THE ASSESSE WAS A DEVELOPER IN COMMON PARLANCE AS WELL AS LEGAL PARLANCE AND COULD NOT BE REGARDED AS WORKS CONTRACTOR AND ACCORDINGLY THE EXPLANATION TO SECTION 80IB INSERTED W.E.F. 1.4.2001 HAS NO APPLICA TION AS THE PROJECT IS NOT A WORKS CONTRACT. FURTHER THE ASSESSEE WAS, IN PART PERFORMANCE OF THE AGREEMENT TO SELL WAS GIVEN POSSESSION OF THE LAND AND HAD ALSO CARRIED OUT CONSTRUCTION OF HOUSING PROJECT, IT HA S TO BE DEE M ED AS OWNER U/S 2(47)(V) R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT EVEN THOUGH NO FORMAL TITLE DEED WAS EXECUTED. IN THE CASE OF UNITY INFRA PROJECTS V/S DCIT(ITAT MUM) (SAUPRA), ITO V/S SAUBHAGYALAXMI DEVELOPER (ITAT PUNE) (SUPRA) AND ITO V/S SONASHA ENTERPRISES (ITAT MUMBAI(SUPRA) THE COORDINATE BENCHES HAVE HELD THAT THE PROFIT FROM SALE OF TD R FROM SRA IS ELIGIBLE U/S 80IB(10) OF THE ACT. WE ARE , THEREFORE, RESPECTFULLY FOLLOWING THE 12 ITA NO. 5538 /MUM/201 1 RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT AND COORDINATE BENCHES INCLINED TO SE T ASIDE THE ORDER OF T HE LD.CIT(A) AND DIRECT THE AO TO ALLOW DEDUCTION AS CLAIMED BY THE ASSESSEE . 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH MARCH , 2017. S D SD ( /MAHAVIR SINGH ) ( / RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 14 . 3 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI