The ITO, Ward-3(1), Baroda V. M/s. J.R. Construction, Baroda

ITA 592/AHD/2011

• Counselvise Citation: 59220514 RSA 2011
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Section: 80IB

Judgement Text

ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH,A HMEDABAD. (BEFORE SHRI D. K. TYAGI AND SHRI R.C. SHARMA) I.T.A. NO. 592 & 593/AHD/2011 (ASSESSMENT YEAR 2004 -05 & 2005-06) INCOME TAX OFFICER, WARD 3(1), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. (APPELLANT) VS. M/S. J. R. CONSTRUCTION, NARAYAN MULCHANDS FALIA, NEAR PADHARAI MATA, TAL.PADRA, DIST. BARODA. (RESPONDENT) PAN: AACFJ 7443 A APPELLANT BY : SHRI S. K.MEENA, SR. D.R. RESPONDENT BY : WRITTEN SUBMISSION. DATE OF HEARING : 5-8-2011 DATE OF PRONOUNCEMENT : ( (( ( )/ )/)/ )/ ORDER PER BENCH : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINS T TWO SEPARATE ORDERS OF CIT (A)-II, BARODA DATED 3-11-2010 AND 30-11-201 0 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. 2. FOLLOWING TWO COMMON GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN BOTH THE YEARS UNDER CONSIDERATION:- ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICE R TO ALLOW THE DEDUCTION TO THE ASSESSEE ON THE GROUND THAT THE AS SESSEE HAS PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM T HE LANDOWNER AND HAS DEVELOPED THE HOUSE PROJECT AT ITS OWN COST AND RISKS INVOLVED, IN RESPECT OF ISSUE REGARDING DEDUCTION U/S. 80-IB(10) R.W.S. 80IB(1) CLAIMED BY THE ASSESSEE, WITHOUT APPRECIATING THE F ACT THAT THE APPROVAL BY THE LOCAL AUTHORITY AS WELL AS COMPLETI ON CERTIFICATE WAS NOT GRANTED TO THE ASSESSEE BUT TO THE LAND OWNER A ND THE RIGHTS AND OBLIGATION UNDER THE SAID APPROVAL WERE NOT TRANSFE RABLE, AND THAT TRANSFER OF DWELLING UNITS IN FAVOUR OF THE END-USE RS WAS MADE BY THE LANDOWNER AND NOT BY THE ASSESSEE. 2. WITH PREJUDICE, THE LD. CIT (A) ERRED IN ALLOWIN G DEDUCTION U/S. 80IB(10) IN RESPECT OF THE PROCEEDS ATTRIBUTAB LE TO THE SALE OF UNUTILIZED FSI AND NOT TO THE DWELLING UNITS IN THE HOUSING PROJECTS, WHICH COULD NOT BE TERMED AS PROFITS DERIVED FROM DEVELOPING AND BUILDING HOUSING PROJECTS IN TERMS OF THIS PROVISIO N. 3. WE HAVE CONSIDERED THE CONTENTIONS OF LD. D.R. A ND ALSO WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. WE HAD ALSO CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IB (10) WAS DEC LINED BY THE A.O. THE ASSESSEE IN ITS RETURNS OF INCOME HAS CLAIMED DEDUC TION UNDER SECTION 80IB(10) WHICH WAS DISALLOWED BY THE ASSESSING OFFI CER ON THE GROUND THAT ASSESSEE WAS NOT THE OWNER OF THE PROPERTY AND THE PERMISSION WAS NOT GRANTED IN THE ASSESSEES NAME AND THE APPROVAL BY THE VADODARA MUNICIPAL CORPORATION WAS IN THE NAME OF THE ORIGINAL LAND OW NERS AND NOT IN THE NAME OF THE ASSESSEE DEVELOPER AND THE ORIGINAL LAND OWN ER HAS ASKED THE SERVICES OF ASSESSEE FIRM FOR DEVELOPMENT AND CONSTRUCTION O F THE PROJECT. IN VIEW OF ASSESSING OFFICER, THE FUNDAMENTAL CONDITION THAT T HE APPROVAL MUST BE ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 3 ACCORDED IN ASSESSEES NAME WAS NOT SATISFIED AND T HEREFORE THE CLAIM WAS DENIED. 4. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASS ESSEE HAD UTILIZED FSI OF 9389.81 SQ. MT. AND LEFT UNUTILIZED FSI OF 35364 .19 SQ. MT. AND AS THE SAID LAND WAS DISPOSED BY THE ASSESSEE ALONG WITH THE TE NEMENTS TO PROSPECTIVE BUYERS, THE PROFIT BOOKED FROM SALE OF 35364.19 SQ. MT. WAS STATED TO BE OUTSIDE THE AMBIT OF PROVISIONS OF SECTION 80IB (10 ) AS IT IS NOT THE PROFIT DERIVED FROM ACTIVITIES OF DEVELOPMENT AND CONSTRUC TION. IN ESSENCE DEDUCTION U/S. 80IB (10) WAS DENIED AND IN THE ALTE RNATE THE DEDUCTION ON SALE OF UNUTILIZED FSI WAS DISALLOWED. 5. BY IMPUGNED ORDER THE CIT (A) ALLOWED BOTH GROUN DS IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF CO-ORDINATE B ENCH IN THE CASE OF RADHE DEVELOPERS AND OTHERS. AFTER GOING THROUGH T HIS DECISION, WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE HONBLE ITAT, AHMEDABAD, IN ITA NO.2482/AHD/2006 IN THE CASE OF M/S. RADHE DEVELOPE RS AND OTHERS IN WHICH APPELLANT WAS ALSO ONE OF THE PARTY. THE ITAT , AHMEDABAD HELD THAT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IB (10 ) OF THE ACT, IT IS NOT NECESSARY FOR THE ASSESSEE TO OWN THE LAND. SINCE S UCH CONDITION IS NOT MENTIONED IN THE SECTION IT WOULD NOT BE CORRECT TO DENY DEDUCTION ON THIS GROUND. RELEVANT PARAS OF THE ORDER OF ITAT, READS AS UNDER:- 28. THE CONTENTION OF REVENUE AUTHORITY THAT TO CLAIM D EDUCTION U/S. 80IB(10), THERE IS A CONDITION PRECEDENT THAT THE A SSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONST RUCTED HAS NO FORCE WE DO NOT FIND ANY SUCH CONDITION AS APPEARIN G IN THE PROVISION OF THE SECTION EXTRACTED ABOVE. A PLAIN READING OF SUB-SECTION (10) OF SEC. 80IB REVEALS AND MAKES IT EVIDENT THAT THERE M UST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJE CT AS APPROVED ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 4 BY A LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT SHO ULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSONS WHO HAS ENTERED INTO AN AGRE EMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT O N A PERUSAL OF THE AGREEMENT AS NARRATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND OWNE RS. THEREFORE, THE MERE FACT THAT THE LAND-OWNER AND THE UNDERTAKING D EVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIE S WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. 29. IT IS ALSO THE CASE OF THE REVENUE THAT THE ASS ESSEE WAS A MERE CONTRACTOR DEVELOPING AND BUILDING HOUSING PROJECT AND THEREFORE, IT COULD NOT BE A DEVELOPER. WE FAIL TO UNDERSTAND AS TO HOW SUCH A SITUATION COULD EMERGE. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A CONTRACTOR. HAVING ENT ERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUIL DING THE HOUSING PROJECT, WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TE RM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOVE IT IS THE UNDERTAKING THAT DEVELOPS OR BUILDS THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHET HER THAT IT IS THE OWNER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREO F. THE REQUIREMENT FOR CLAIMING DEDUCTION IS THAT SUCH AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT, BE IT ON THEIR OWN LAND OR O N THE LAND OF OTHERS AND FOR WHICH A TRIPARTITE AGREEMENT HAS BEEN ENTER ED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRACTOR FOR DEVELOPING AND BUILDING HOUSING PROJ ECT OR AN OWNER OF THE LAND. 45. THEREFORE, LOOK AT FROM ANY ANGLE, WE ARE OF TH E CONSIDERED OPINION, THAT TO CLAIM DEDUCTION FOR DEVELOPING AND BUILDING HOUSING PROJECT, IT IS NOT NECESSARY THAT ASSESSEE MUST BE AN OWNER OF THE LAND AND IT WOULD BE SUFFICIENT IF HE WAS AN UNDERTAKING DEVELOPS AND BUILD HOUSING PROJECT. THE ASSESSEE IS ALSO THE OWNER OF THE PROJECT, THOUGH THE TITLE DOES NOT VEST IN IT. ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 5 6. FURTHER, IN RESPECT OF UNUTILIZED FSI, THE HON. ITAT AHMEDABAD, HAS OBSERVED AS FOLLOWS:- 63. A QUESTION HAS ALSO BEEN RAISED BY THE REVENUE THAT THE PROFIT EARNED BY THE ASSESSEE ARE NOT FOR DEVELOPING AND B UILDING HOUSING PROJECT ALONE BUT FOR THE SALE OF EXTRA FSI, WHICH HAS NOT BEEN UTILIZED FOR DEVELOPING AND BUILDING HOUSING PROJECT. ON A P ERUSAL OF THE PROVISIONS OF SEC. 80IB (10). WE FIND THAT IT IS NO T MANDATORY REQUIREMENT TO FULLY UTILIZE PERMISSIBLE FSI; THERE IS NO CONDITION AS TO FSI UNDER THE SCHEME OF THE PROVISIONS OF SEC. 80IB (10) OF THE ACT; THERE IS NO QUESTION OF SELLING UNUSED FSI TO THE I NDIVIDUAL BUYER FOR EACH PROJECT AND ALSO THERE IS NO QUESTION OF CALCU LATING THE PROFITABILITY ON FSI AS THE SAME HAS NOT BEEN CONTE MPLATED U/S. 80IB (10) OF THE ACT. ON VERIFICATION OF THE SALE DEED E XECUTED IN FAVOUR OF BUYERS OF THE RESIDENTIAL HOUSES, IT IS CLEAR TH AT THE ASSESSEE HAD MADE THIS SALE DEED FOR SALE OF PLOT OF LAND. FURTH ER, ON VERIFICATION OF DEVELOPMENT AGREEMENT WITH THE LAND OWNER, WE FIND THAT HERE ALSO THE REFERENCE IS WITH RESPECT TO LAND AREA ONLY. IN BOTH THE DOCUMENTS ASSESSEE HAD NOT ACQUIRED RIGHTS AND HAS NOT RELINQ UISHED RIGHTS WITH REFERENCE TO FSI. FURTHER, ON VERIFICATION OF APPRO VED MAP FOR EACH UNIT IS WITH REFERENCE TO BUILT UP AREA ONLY. UNDER THE CIRCUMSTANCES, THE ASSESSEE HAS NEVER DEALT WITH FSI, BOTH IN TERM S OF ACQUIRING RIGHTS IN THE LAND AND FOR RELINQUISHMENT OF SUCH R IGHTS IN THE LAND. THE CALCULATION GIVEN IN APPROVED PLAN IS OF MAXIMU M PERMISSIBLE FSI AND BY GIVING SUCH CALCULATION IT IS NOT MADE M ANDATORY BY ANY PROVISIONS OF ANY ACT TO MAKE CONSTRUCTION TO THE F ULLEST EXTENT OF MAXIMUM PERMISSIBLE FSI. THE UTILIZATION OF FSI BY THE BUILDER DEVELOPER DEPENDS ON MANY FACTORS LIKE SITUATION OF PLOT, THE TYPE OF LOCALITY, AND THE TYPE OF BUYERS AFFORDABILITY. IT IS THE MARKET FORCE, WHICH DETERMINES THE AVERAGE SIZE OF THE RESIDENTIA L UNIT A COMMERCIAL DECISION, WHICH PREVAILS FOR THE PURPOSE OF CARRYING OUT THE BUSINESS AND FOR MAKING RESIDENTIAL UNITS AND N OT THE PERMISSIBLE MAXIMUM FSI. IT WOULD ALSO BE IMPOSSIBLE TO CONSTR UCT ANY HOUSING UNIT AS PER THE PROVISIONS OF SEC. 80IB(10) BY UTIL IZING THE MAXIMUM FSI. 7. HONBLE ITAT IN THE CASE OF ITO AND OTHERS VS. S HAKTI CORPORATION BARODA IN ITA NO.1503/AHD/2008 DATED 7-11-2008 WHER EIN FOLLOWING THE DECISION OF THE SUPREME COURT IN THE CASE OF FAQUIR CHAND GULATI VS. UPPAL ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 6 AGENCIES PVT. LTD. AND ANOTHER (CIVIL APPEAL NMO.33 02 OF 2005) DATED 10- 7-2008 HELD THAT - 16. THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPERS (SUPRA) AND A CCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMI NANT OVER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY M ENTION HERE THAT, IN OUR OPINION, THE DECISION IN THE CASE OF RADHE DEVE LOPERS (SUPRA) WILL NOT APPLY IN A CASE 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 LANDOW NER. THE AGREEMENT ENTERED INTO IN THAT CASE WILL NOT ENTITL E THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INT EREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REM UNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) HAS NOT DEALT WITH SUCH SITUATIO N. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CA NNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING INTO THE DEVELOPMENT AG REEMENT ENTERED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF TH E DEVELOPMENT AGREEMENT AND CRUX OF THE AGREEMENT IS THAT THE ASS ESSEE HAS PURCHASED THE LAND AND HAS DEVELOPED THE HOUSING PR OJECT AT ITS OWN, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE WIL L BE ENTITLED FOR THE DEDUCTION U/S. 80IB(10). THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASS IST THE REVENUE, AS THE AGREEMENT IS NOT 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 AGREEMEN T 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 TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFIC ER SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEE WITH THE LANDOWNER AND DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHAS ED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVE LOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE ASSESSING OFFICER FINDS THAT PRACTICALLY T HE LAND HAS BEEN ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 7 BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMIN ANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN C OST AND RISKS, THE ASSESSING OFFICER SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S. 80IB(10). IN CASE THE ASSESSING OFFICER FIND THAT T HE DEVELOPER HAS ACTED ON BEHALF OF THE LANDOWNER AND HAS GOT THE FI XED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSI NG PROJECT, THE ASSESSEE SHOULD NOT BE ALLOWED DEDUCTION U/S. 80IB (10). THE CASE OF M/S. RADHE DEVELOPERS & OTHER (INCLUDES THE CASE OF THE APPELLANT) VIDE ORDER IN ITA NO.2482/AHD/2006 DATED 29-06-2007 . THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE ARE IDENTICAL TO THE CASES DECIDED BY HONBLE ITAT, AHMEDABAD. ALSO ALL THE PLEAS RAIS ED BY THE ASSESSING OFFICER HAVE BEEN EFFECTIVELY DEALT WITH AND DISCUSSED IN THE SAID ORDER AND THEREAFTER HONBLE ITAT HAS ALLOWED THE DEDUCTION UNDER SECTION 80IB (10). RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT, THE DEDUCTION UNDER SECTION 80 IB(10) WAS RIGHTLY ALLOWED BY CIT (A). 8. AS THE FACTS AND CIRCUMSTANCES DURING BOTH THE Y EARS UNDER CONSIDERATION ARE PARI-MATERIA, WE RESPECTFULLY FOL LOW THE DECISION OF THE COORDINATE BENCH AND CONFIRM THE ORDER OF CIT (A). 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 08 - 2011. SD/- SD/- (D K. TYAGI) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATED: 26 - 08 - 2011. S.A.PATKI. ITA.592-593/AHD/20 11 ASSTT.YEARS: 2004- 05 & 05-06 8 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-II, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 10 - 8 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10 / 8 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 25 - 8 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 26 - 08 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 26 - 8 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 6 - 8 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..