M/s Eagleton Property Holdings, Bangalore V. ACIT, Bangalore

ITA 790/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95237 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

ITA.790/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NO.790/BANG/2014 (ASSESSMENT YEAR : 2009-10) M/S. EAGLETON PROPERTY HOLDINGS, NO.4, MODEL HOUSE STREET, BASAVANAGUDI, BANGALORE 560004 .. APPELLANT PAN : AABFE9865C V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -4(1), BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. V. SRIDHAR, CA REVENUE BY : SHRI. ANURAG SAHAY, CIT-DR HEARD ON : 24.08.2015 PRONOUNCED ON : 04.09.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT ASSAILS AN ORD ER DT.25.03.2014 OF CIT, BANGALORE- II, PASSED U/S.263 OF THE INCOME-TAX ACT , 1961 (THE ACT IN SHORT). 02. FACTS APROPOS ARE THAT ASSESSEE HAD FILED RETUR N OF INCOME DECLARING INCOME OF RS.65,77,573/-. ASSESSEE HAD CLAIMED DED UCTION OF RS.5,09,35,824/-, U/S.80IB(10) OF THE ACT, FOR ONE OF ITS HOUSING PRO JECTS CALLED COUNTY- 1, IN SUCH RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO HAD VIDE ITA.790/BANG/2014 PAGE - 2 LETTER DT.16.06.2011, REQUIRED THE ASSESSEE TO FILE THE GPA EXECUTED IN ITS FAVOUR BY M/S. CHAMUNDESWARI BUILD TECH P. LTD, PURSUANT TO WHICH ASSESSEE HAD CONSTRUCTED RESIDENTIAL UNITS. AO ALSO MENTIONED I N SUCH LETTER THAT ASSESSEE FIRM WAS NOT HAVING ANY RIGHT, TITLE AND INTEREST O VER THE PROPERTY ON WHICH CONSTRUCTION WAS BEING DONE AND ASSESSEE WAS ACTING ONLY AS A CONTRACTOR. REPLY IF ANY GIVEN BY THE ASSESSEE, ON THIS QUERY O F THE AO IS NOT FORTHCOMING FROM THE RECORDS BEFORE US. HOWEVER IT SEEMS ASSES SEE HAD FILED A LETTER DT.18.08.2011 INTER ALIA JUSTIFYING HIGHER COST INC URRED BY IT ON NON-80IB PROJECTS. THEREAFTER ASSESSMENT WAS COMPLETED ON 2 3.09.2011 U/S.143(3) OF THE ACT AND IN SUCH ASSESSMENT AN ADDITION OF RS.9,96,5 00/- WAS MADE FOR EXCESS EXPENDITURE ON NON-80IB PROJECTS. 03. ON 25.09.2013, CIT ISSUED A NOTICE U/S.263 OF T HE ACT, TO THE ASSESSEE. AS PER THIS NOTICE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR SUCCEEDING ASSESSMENT YEAR 2010-11, AO CONCERNED HAD REFERRED THE ASSESSEES CLAIM WITH REGARD TO DEDUCTION U/S.80IB(10) OF THE ACT TO THE DISTRICT VALUATION OFFICER (DVO IN SHORT) FOR THE COUNTY-I PROJECT. AS PER THE CIT IN THE REPORT OF DVO THERE WERE ADVERSE INFERENCES REGARDING THE AREA OF RESIDENTIAL UNITS AND OWNERSHIP OVER THE LAND ON WHICH CONSTRUCTION WAS B EING DONE. CIT NOTED THAT FOR A. Y. 2010-11 BASED ON THE REPORT OF DVO, AO HA D DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80IB (10) OF THE ACT. ASSESSEE WAS CONSIDERED AS A BUILDING CONTRACTOR AND NOT AS A DEVELOPER. SINCE F OR A. Y. 2010-11 THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT WAS DENIED, AS PE R THE CIT FOR THE IMPUGNED ITA.790/BANG/2014 PAGE - 3 ASSESSMENT YEAR ALSO SUCH CLAIM COULD NOT BE ALLOWE D, PROJECT BEING THE VERY SAME. ASSESSEE IN REPLY TO THE ABOVE MENTIONED NOT ICE STATED THAT IT HAD TWO RESIDENTIAL PROJECTS NAMELY COUNTY-1 AND COUNTY-II. ACCORDING TO IT CLAIM FOR WHICH DEDUCTION U/S.80IB(10) OF THE ACT WAS RESTRIC TED TO COUNTY-I. AS PER THE ASSESSEE IN RESPECT OF FIVE UNITS WHICH WERE FOUND BY THE DVO AS HAVING BUILT- UP AREA IN EXCESS OF 1,500 SQ.FT, HE WAS NOT CLEAR AS TO WHETHER IT WERE A PART OF COUNTY I OR COUNTY II. FURTHER AS PER THE ASSESS EE, IT HAD NEVER ACTED AS A BUILDING CONTRACTOR AND NO MONEY WAS RECEIVED FROM THE LAND OWNER FOR CONSTRUCTION. ASSESSEE POINTED OUT THAT IT WAS IN POSSESSION OF GPA FOR THE LAND, HAVING ALL POWERS TO DEVELOP THE LAND. AS PE R THE ASSESSEE, THE CONSIDERATION OF RS.1.60 CRORES STOOD PAID TO THE O RIGINAL LAND OWNER. CONTENTION OF THE ASSESSEE WAS THAT THE SALE AGREEM ENT WITH THE BUYERS CLEARLY BROUGHT OUT THAT ASSESSEE WAS A DEVELOPER AND THE O WNER WAS A CONFIRMING PARTY. AS PER THE ASSESSEE IT HAD SHOWN THE COST OF PURCHA SE OF LAND AND FULL SALE PROCEEDS WHEN THE DEVELOPED UNITS WERE SOLD, IN ITS BOOKS OF ACCOUNT. LAND OWNERSHIP, AS PER THE ASSESSEE WAS NOT A PRE-REQUIS ITE FOR PREFERRING A CLAIM U/S.80IB(10) OF THE ACT. ASSESSEE ALSO CONTENDED T HAT EVEN IF SOME UNITS WERE HAVING AREA IN EXCESS OF 1500SFT, CLAIM OF DEDUCTIO N U/S.80IB(1) OF THE ACT COULD NOT BE DENIED. FOR THIS, IT PLACED RELIANCE O N THE CASE OF DCIT V. BRIGADE ENTERPRISES (P) LTD.[(2008) 14 DTR 037]. THUS, AS PER THE ASSESSEE, ASSESSMENT DONE FOR THE IMPUGNED ASSESSMENT YEAR WAS NEITHER E RRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE. ITA.790/BANG/2014 PAGE - 4 04. HOWEVER, THE CIT WAS NOT IMPRESSED. ACCORDING TO HIM, THE DVO WHO CARRIED OUT THE INSPECTION IN THE PRESENCE OF THE A CCOUNTANT OF THE ASSESSEE HAD GIVEN A CLEAR FINDING THAT A NUMBER OF RESIDENTIAL UNITS WERE HAVING BUILT-UP AREA IN EXCESS OF 1500 SFT. THEREFORE ACCORDING TO HIM, ASSESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION U/S.80IB(10) OF THE ACT. CIT (A) ALS O NOTED THAT HONBLE APEX COURT HAD ON A SIMILAR ISSUE ADMITTED THE APPEAL OF THE REVENUE, WHEREIN IT ASSAILED THE DIRECTIONS OF THE TRIBUNAL TO GIVE PRO -RATA DEDUCTION U/S.80IB(10) OF THE ACT. VIS-A-VIS THE OWNERSHIP OF THE PROPERTY O N WHICH DEVELOPMENT WAS BEING DONE, CIT WAS OF THE OPINION THAT THE LAND BE LONGED TO CHAMUNDESWARI BUILTDTEK P. LTD., AND THEY HAD SOLD THE SITES DIRE CTLY TO DIFFERENT PURCHASERS. IT WAS SUCH PURCHASERS OF LAND WHO HAD ENTERED INTO AG REEMENT FOR CONSTRUCTION WITH THE ASSESSEE. ASSESSEE WAS CONSTRUCTING HOUSES FOR SUCH PURCHASERS BASED ON INDIVIDUAL PLAN SANCTIONS OBTAINED BY THESE PUR CHASERS. THIS BEING THE CASE AS PER THE CIT ASSESSEE WAS ONLY A CONTRACTOR AND F OR THIS REASON ALSO NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S.80IB(10) OF THE ACT. 05. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF CIT SUBMITTED THAT EVEN PRESUMING SOME OF THE UNITS HAD BUILT-UP AREA IN EXCESS OF 1,500 SFT, DEDUCTION CLAIMED U/S.80IB(10) COULD NOT BE DENIED. RELIANCE WAS PLACED ON A COORDINATE BENCH DECISION IN THE CASE OF DCIT V. BR IGADE ENTERPRISES (P) LTD [(2008) 14 DTR 037]. VIS-A-VIS REQUIREMENT OF LEGA L OWNERSHIP OVER THE LAND, LD. AR RELYING ON THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT IN THE CASES OF CIT V. RADHE DEVELOPERS [341 ITR 403] AND CIT V. SH REE RAM CONSTRUCTION ITA.790/BANG/2014 PAGE - 5 [TA.430 OF 2013, DT.10.12.2012], SUBMITTED THAT SUC H OWNERSHIP OVER THE LAND WAS NOT AN ESSENTIAL CRITERIA. AS PER THE LD. AR, OWNER OF THE PROPERTY HAD PARTED POSSESSION OF THE LAND AND ASSESSEE WAS THE PERSON WHO WAS DEVELOPING IT. OWNER HAD GIVEN A GPA WHICH INCLUDED POWER TO SELL THE LAND. IT WAS THE ASSESSEE WHO WAS DOING THE CONSTRUCTION. ASSESSEE WAS A DEVELOPER OF THE RESIDENTIAL UNITS AND THEREFORE BY VIRTUE OF THE AB OVE MENTIONED JUDGMENTS, ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S.80 IB(10) OF THE ACT. CIT HAD REFUSED TO FOLLOW THE COORDINATE BENCH DECISION IN THE CASE OF BRIGADE ENTERPRISES (P) LTD (SUPRA) THOUGH AN SLP FILED ON THE VERY SAME ISSUE BY THE REVENUE BEFORE THE APEX COURT STOOD DISMISSED. FUR THER ACCORDING TO HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO HAD ENQUIRED ABOUT THE ASPECT OF OWNERSHIP AND WAS SATISFIED WITH THE REPLIES GIV EN BY THE ASSESSEE. THUS ACCORDING TO HIM, ORDER OF THE AO WAS NEITHER ERRON EOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 06. PER CONTRA, LD. DR STRONGLY SUPPORTING THE ORDE R OF CIT AND SUBMITTED THAT THAT ASSESSEE WAS ONLY A CONTRACTOR AND NOT EN TITLED FOR CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT. BUYERS HAD PURCHASED THE PROPERTY FROM M/S. CHAMUNDESWARI BUILDEK P. LTD. IT WAS SUCH BUYER WH O APPOINTED THE ASSESSEE TO CONSTRUCT THEIR RESIDENCE. AS FOR THE RELIANCE PLACED BY THE ASSESSEE ON RADHE BUILDERS (SUPRA), LD. DR SUBMITTED THAT THERE THE DEVELOPER WAS A PARTY TO A TRIPARTITE AGREEMENT IN WHICH LAND OWNER AND ULTIMA TE CUSTOMER HAD AGREED TO THE ARRANGEMENT. HERE ON THE OTHER HAND, AS PER TH E LD. DR, BOTH THE PARTIES ITA.790/BANG/2014 PAGE - 6 WERE INTERESTED PERSONS AND THERE WAS NO INTER-SE A RRANGEMENT. PLACING RELIANCE ON GPA PLACED AT PAPER BOOK PAGE 53, LD. DR SUBMITT ED THAT MANAGING DIRECTOR OF CHAMUNDESWARI BUILDTEK P. LTD, WHO WAS THE OWNER OF THE PROPERTY, WAS M. ASHOK KUMAR. BENEFICIARY OF THE GPA WAS THE ASSESSEE, WHO WAS A PARTNERSHIP FIRM AND THE MANAGING PARTNER OF THE SA ID FIRM WAS ALSO THE VERY SAME ASHOK KUMAR. ACCORDING TO HIM, THE GPA EXECUT ED BY THE VERY SAME PERSON IN HIS OWN FAVOUR COULD NOT BE GIVEN MUCH SA NCTITY. IT WAS ONLY A METHOD OF SIPHONING THE PROFITS. AO HAD NOT APPLIE D HIS MIND TO THESE ASPECTS. AS PER THE LD. DR SOME OF THE UNITS DEFINITELY HAD BUILT-UP AREA IN EXCESS OF 1500 SFT AND THIS CAME TO THE NOTICE OF THE AO ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMEN T YEAR AND THIS WAS ALSO AN UNDISPUTED POSITION. AS PER THE LD. DR THESE WERE SUFFICIENT TO SHOW THAT THE AO HAD COMPLETED THE ASSESSMENT FOR THE IMPUGNED AS SESSMENT YEAR WITHOUT CONSIDERING THE RELEVANT ASPECTS OF THE CASE AND HA D NEVER APPLIED HIS MIND. 07. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. QUERY PLACED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS WITH REGARD TO THE CLAIM U/S.80IB(10) OF THE ACT IS REPRODUCED HERE UNDER : YOUR AUTHORISED REPRESENTATIVE HAS FILED A COPY OF GPA FROM M/S. CHAMUNDESHWARI BUILDERS PVT. LTD. ON WHICH YOUR FIR M HAS BEEN GIVEN ONLY POWER TO CONSTRUCT AND SELL ON BEHALF OF THEM, WHICH MEANS THAT YOUR FIRM IS ACTING AS AN AGENT FOR THE COMPAN Y, AND ALL THE RIGHTS OF THE PROPERTY LIES WITH THE COMPANY ONLY. YOUR F IRM DOES NOT HAVE ANY RIGHT, TITLE AND INTEREST OVER THE PROPERTY. I T MEANS THAT YOUR FIRM IS ONLY ACTING AS A CONTRACTOR TO THEM. AS PER EXP LANATION TO SECTION ITA.790/BANG/2014 PAGE - 7 80IB(10), THE CONTRACTORS ARE NOT ELIGIBLE FOR CLAI MING THE DEDUCTION U/S.80IB(10). THEREFORE YOU ARE REQUESTED TO SHOW CAUSE WHY THE DEDUCTION U/S.80IB(10) OF RS.5,09,35,824/- CLAIMED BY YOU SHOULD NOT BE DISALLOWED AND BROUGHT TO TAX AS YOUR FIRMS INC OME. 08. ASSESSEES REPLY TO THIS, IF ANY, IS NOT AVAIL ABLE ON THE RECORDS. HOWEVER, IN THE ORIGINAL ASSESSMENT ORDER DT.23.09.2011 THER E IS A MENTION REGARDING THE CLAIM MADE BY THE ASSESSEE U/S.80IB(10) OF THE ACT, AND THIS READ AS UNDER : 09. ABOVE NARRATION IN THE ASSESSMENT ORDER DOES SH OW THAT ASSESSEE HAD FILED A LETTER DT.18.08.2011. BUT ASSESSEE HAD AT NO POINT OF TIME EVER STATED THAT ANY OF THE UNITS BEING BUILT IN COUNTY-I HAD BUILT-UP AREA IN EXCESS OF 1,500 SFT. AO HAD NO INFORMATION ON THIS ASPECT. THIS CAME TO HIS NO TICE ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A. Y. 2010-11 WHEN THERE WAS A REFERENCE TO THE ITA.790/BANG/2014 PAGE - 8 DVO. IT IS NOT DISPUTED THAT DVO IN HIS REPORT HAD STATED THAT UNIT NOS.B-8, B- 19, B-21, B-22 & B-31, HAD BUILT-UP AREA IN EXCESS OF 1,500 SFT. MAY BE THE ARGUMENT OF THE ASSESSEE THAT EVEN IF SOME OF THE U NITS HAD BUILT-UP AREA IN EXCESS OF 1,500 SFT, PRO-RATA DEDUCTION U/S.80IB(10) OF TH E ACT, SHOULD BE GIVEN TO IT, MIGHT BE ACCEPTABLE IN VIEW OF THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS (SUPRA). BUT NEVERTHE LESS AS NOTED BY THE CIT IT IS CLEAR FROM THE SALE DEED ENTERED BY CHAMUNDESWARI B UILDTEK P. LTD, WITH VARIOUS BUYERS, ONE COPY OF WHICH IS AVAILABLE AT PAPER BOO K PAGE 73 TO 80, THAT THE VENDOR WAS CHAMUNDESWARI BUILDTEK P. LTD AND THE BU YERS WERE ACTUALLY BUYING THE PLOTS FROM THEM. AGREEMENTS ENTERED BY SUCH BU YERS WITH THE ASSESSEE FOR CONSTRUCTION OF RESIDENTIAL UNITS WERE SEPARATE. T HESE ASPECTS HAVE NOT BEEN LOOKED INTO BY THE AO. THESE WERE VERY RELEVANT IN DECIDING WHETHER THE ASSESSEE WAS A DEVELOPER OR ONLY A CONTRACTOR. WHE N THE AO DOES NOT MAKE THE ENQUIRIES THAT IS LAWFULLY EXPECTED OF HIM AND WHIC H ANY PRUDENT MAN WOULD HAVE DONE, IF PLACED IN SIMILAR CIRCUMSTANCES, IT WOULD DEFINITELY RENDER THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. NOT ONLY WAS THERE UNITS WHICH HAD BUILT-UP AREA IN EXCESS OF 1500 SFT, BUT ALSO THE AGREEMENTS AND THE POWER OF ATTORNEY DID HAVE A BEARING ON THE QUESTIO N AS TO WHETHER ASSESSEE WAS INDEED ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT. AO HAD NEVER CONSIDERED THESE ASPECTS NOR MADE ENQUIRIES WHICH W ERE REQUIRED OF HIM. NO DOUBT INADEQUATE ENQUIRY BY ITSELF WILL NOT RENDER AN ORDER ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. BUT AN EN QUIRY WHICH BY ITSELF IS ONLY A FARCE AND DOES NOT DO JUSTICE TO THE DUTY CAST ON A STATUTORY AUTHORITY WOULD BE ITA.790/BANG/2014 PAGE - 9 EQUIVALENT TO NON-ENQUIRY. IN SUCH CIRCUMSTANCES, WE CANNOT FIND ANY ERROR IN THE ORDER OF CIT IN CONSIDERING THE ORDER OF AO ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF REVENUE. CIT HAD WHILE SETTING ASIDE THE ASSESSMENT ONLY DIRECTED A FRESH ASSESSMENT AFTER GIVING OPPORTUNITY TO THE AS SESSEE. THUS ASSESSEE WOULD HAVE AN OPPORTUNITY TO PLACE THE JUDICIAL PRECEDENC E THAT HE WANTS TO RELY ON WHEN THE MATTER IS TAKEN UP BY THE AO AFRESH. AT THIS J UNCTURE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4TH DAY OF SEPTEM BER, 2015. SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR