The ACIT, Central Circle-2, Baroda V. M/s. Shikhar Developers, Bharuch

ITA 854/AHD/2010

• Counselvise Citation: 85420514 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUKUND BAKSHI A R

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.854/AHD/2010 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2007-08) THE ASST.CIT CENTRAL CIRCLE-2 BARODA & & & & / VS. M/S.SHIKHAR DEVELOPERS 81, KRISHNA NAGAR SOCIETY STATION ROAD, BHARUCH ( '# ./)* ./ PAN/GIR NO. : ABFFS 6693 D ( (+ / // / APPELLANT ) .. ( ,-(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI SHYAM PRASAD, SR.D.R. ,-(+ / . ' / RESPONDENT BY : SHRI MUKUND BAKSHI, A.R. &0 / #/ // / DATE OF HEARING : 22/5/2012 12' / # / DATE OF PRONOUNCEMENT : 31/5/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FR OM THE ORDER OF THE LEARNED CIT(APPEALS)-IV, AHMEDABAD DATED 04/01/2010 . REVENUE HAS RAISED FOLLOWING GROUND:- (I) THE CIT(A) HAS ERRED IN LAW AND FACTS AND CIRCUMSTA NCES OF THE CASE IN DELETING THE ADDITION OF RS.25,85,970/- ON ACCOUNT OF DELETION OF DEDUCTION MADE ON ACCOUNT OF 80IB(10) OF THE I.T. ACT. ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 24/1 2/2008 WERE THAT THE ASSESSEE-FIRM IS STATED TO BE IN THE BUSINESS OF DE VELOPMENT OF REAL ESTATE AND CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE PROFIT EARNED BY THE ASS ESSEE AT RS.25,85,920/- AND AFTER CLAIMING THE DEDUCTION U/S.80-IB OF THE I .T.ACT THE NIL RETURN WAS DECLARED. THE ASSESSING OFFICER HAS NOTED THAT THE LAND REMAINED WITH THE LAND OWNERS AND THE PERMISSION FOR CONSTRU CTION WAS ALSO GRANTED IN THE NAME OF THE LAND OWNERS AS PER THE F OLLOWING DETAILS. I. 17-05-2005 - THE LAND OWNER SMT.PURNIMABEN J PANCHAL HAS EXECUTED POWER OF ATTORNEY IN THE NAME OF SHRI MAHESH PRAJAPATI II. 29-04-2006 SHRI J.D.PANCHAL APPLIES FOR PERMISSIO N OF CONSTRUCTION. III. 16-05-2006 THE FIRM CAME INTO EXISTENCE BY A PART NERSHIP DEED. IV. 31-05-2006 SHRI JAYANTIBHAI D PANCHAL AND SMT.PURNIMABEN J. PANCHAL HAVE BEEN GRANTED PERMISS ION FOR CONSTRUCTION VIDE LOCAL AUTHORITYS APPROVAL DA TED 31- 05-2006. V. 02-02-2008 LOCAL AUTHORITY GRNATS COMPLETION CERT IFICATE TO SHIKHAR DEVELOPERS IN THE NAME OF PURNIMABEN J.PANCHAL. 3. ON THE ABOVE FACTS, THE ASSESSING OFFICER HAS ST ATED THAT THE ASSESSEE WAS NOT THE OWNER OF THE HOUSING PROJECT, THEREFORE NOT ENTITLED TO DEDUCTION U/S.80-IB(10) OF THE I.T.ACT. ON THE OTHER HAND, FROM THE SIDE OF THE ASSESSEE RELIANCE WAS PLACED ON RADHE D EVELOPERS & OTHERS ITA NO.2483/AHD/2006. HOWEVER, ASSESSING OFFICER H AS HELD THAT THE APPROVAL BY THE LOCAL AUTHORITY HAS NOT BEEN GRANTE D IN THE NAME OF THE ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 3 - ASSESSEE AND THAT OTHER CONDITIONS OF 80IB(10) OF T HE I.T.ACT HAVE NOT BEEN COMPLETED, THEREFORE REJECTED THE CLAIM OF THE DEDUCTION. 4. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY WHO HAS PLACED RELIANCE ON RADHE DEVELOPERS & OTHERS CITED- SUPRA. (113 TTJ 300 (AHD.) AND SHAKTI CORPORATION (ITA NO.1503/AHD/200 8. HE HAS ARRIVED AT THE CONCLUSION AS FOLLOWS:- 3.4. I HAVE CAREFULLY GONE THROUGH THE RELEVANT CL AUSES OF THE DEVELOPMENT AGREEMENT. ON CONSIDERATION OF THE REL EVANT DOCUMENTS, I CAME TO THE CONCLUSION THAT THE APPELL ANT HAD ACQUIRED THE DOMINANCE OVER THE LAND AND THE LAND I S UNDER THE POSSESSION OF THE APPELLANT FIRM. THE APPELLANT FI RM WAS THE DE- FACTO LAND OWNER FOR ALL PRACTICAL PURPOSES AND HAD DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND T AKING ALL THE RISKS INVOLVED THEREIN. THE APPELLANT FIRM WAS NOT MERELY A CONTRACTOR OF THE LAND OWNER FOR FIXED REMUNERATION . THE LAND OWNERS WERE ELIGIBLE TO GET ONLY PRICE OF LAND FIXE D BY THE DEVELOPMENT AGREEMENTS AND NOT TO GET ANY SHARE IN THE DEVELOPMENT PROFITS OF THE PROJECT THE APPELLANT H AD THUS FULFILLED ALL THE CONDITIONS LAID DOWN IN SEC.80IB(10) OF THE ACT. 3.5. IN VIEW OF THE ABOVE DISCUSSION IN PARA-3.2 TO PARA-3.4 AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE AHMEDABAD TRIBUNAL IN THE CASE OF M/S. RADHE DEVELOPERS & ORS . VS. I.T.O. & ORS.(SUPRA) AND ALSO THE SUBSEQUENT DECISION IN THE CASE OF SHAKTI CORPORATION(SUPRA), I AM OF THE OPINION THAT THE AP PELLANT FIRM HAD FULFILLED ALL THE CONDITIONS LAID DOWN IN SE.80 IB(10) OF THE ACT AND WAS ENTITLED TO THE DECUTION U/S.80IB(10) OF TH E ACT. THE ASSESSING OFFICER WAS THUS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S.80IB(10) OF THE ACT TO THE APPELLANT FIRM. HER FINDING SO RECORDED IS THUS CANCELLED AND DEDUCTION U/S.80IB(1 0) OF THE ACT IS ALLOWED TO THE APPELLANT FIRM. THE ADDITION MADE F OR RS.25,85,920/- IS HEREBY DELETED. THE SECOND AND T HIRD GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 4 - 5. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.SHYAM PRASAD HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFIC ER AND ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDENT-ASSESSEE, LD. AR HAS PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(APPEALS). 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE OF ADMISSIBILITY OF DEDUCTION PRESCRIBED U/S.80-IB(10) IS NOW TO BE DECIDED AS PER THE OBSER VATIONS MADE BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF RADHE DEV ELOPERS INDIA LTD. IN TAX APPEAL NO.171 OF 1999 VIDE ORDER DATED 01/04 /2009 [REPORTED AT (2010) 329 ITR 01 (GUJ.)]. THE HON'BLE COURT HAS G IVEN FINDING IN THAT CASE AFTER EXAMINATION OF CERTAIN FACTS TO SATISFY THE CONDITIONS PRESCRIBED U/S.80-IB(10). ONLY AFTER GIVING A FINDING ON FACT S, THE HON'BLE COURT HAS ALLOWED THE DEDUCTION U/S.80-IB(10). THOSE REQUIRE MENTS HAVE TO BE FULFILLED BY A DEVELOPER TO STAKE A CLAIM OF DEDUCT ION. THE REQUISITE INFORMATION IS NOT AVAILABLE ON RECORD. WE HAVE NO TICED THAT THE SAID REQUISITE INFORMATION WAS NOT EVEN EXAMINED BY THE REVENUE AUTHORITIES IN THE LIGHT OF THE HIGH COURT DECISION. THE GUIDE LINES GIVEN BY THE HON'BLE HIGH COURT CAN BE SUMMARIZED AS FOLLOWS:- (A) THE RELEVANT TERMS OF DEVELOPMENT AGREEMENT A RE TO BE EXAMINED SO AS TO ASCERTAIN THE TERMS ON WHICH THE ASSESSEE WAS GRANTED RIGHT OF CONSTRUCTION OF A HOUSING PROJ ECT. (B) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE ASCERTAINED WHETHER IT WAS A WORK CONTRACT OR A DEVELOPMENT CONTRACT. ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 5 - (C) ON THE BASIS OF THE TERMS AND CONDITIONS, IT HA S TO BE EXAMINED THAT WHICH OF THE PARTY HAD TAKEN FULL RESPONSIBILITY FOR EXECUTION OF THE SAID DEVELOPMEN T PROJECT. (D) WHETHER UNDER THE AGREEMENT THE ASSESSEE HAD BE EN GIVEN FULL AUTHORITY TO DEVELOP THE LAND AND TO CONSTRUCT RESIDENTIAL UNITS. THE AO HAS TO EXAMINE THE FACT IN RESPECT O F ENGAGEMENT OF PROFESSIONALS, SUCH AS, ARCHITECT FOR DESIGNING AND ARCHITECTURAL WORK. (E) THE AO HAS TO EXAMINE THE RESPONSIBILITY OF ENR OLMENT OF MEMBERS AND COLLECTION OF CHARGES REQUIRED TO BE MA DE FROM THE BUYERS OF THE RESIDENTIAL UNITS. (F) THE AO HAS TO EXAMINE ABOUT THE PROFIT OR L OSS ARISING FROM THE SAID PROJECT. (G) THOUGH THE OWNERSHIP OF LAND HAS BEEN HELD AS NOT THE ONLY CRITERIA FOR ALLOWING THE CLAIM U/S.80IB(10) BUT TH E DOMAIN OVER THE LAND AND THE CONTROL OVER THE PROJECT HAS TO BE EXAMINED BY THE AO. (H) WHETHER ON TRANSFER OF DOMAIN THE LAND OWNER S HAVE RECEIVED ANY CONSIDERATION AND WHETHER IT WAS A FIXED AMOUNT OR DEPEND UPON THE PROFITS OF THE PROJECT. LIKEWISE, T HE AO HAS TO ASCERTAIN THAT WHETHER THE ASSESSEE WAS GIVEN A FIXED PERCENTAGE AS REMUNERATION FOR THE SAID PROJECT IN LIEU OF GRANTING PERMISSION TO CONSTRUCT THE RESIDENTIAL UN ITS OR TO EARN PROFIT AS A PROJECT DEVELOPER. (I) THE AO HAS TO ASCERTAIN THE POSITION OF THE POS SESSION OVER THE LAND DURING THE CONSTRUCTION PERIOD. (J) FOR THE PURPOSE OF CONSTRUCTION THE AO HAS TO EXAMINE THE FINANCIAL ARRANGEMENTS. ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 6 - (K) THE AO HAS TO EXAMINE THE PROCEDURE FOR RAISING OF FUNDS EITHER BY PRIVATE PLACEMENT OR BY FINANCIAL INSTITU TIONS. (L) THE RISK ELEMENT CONNECTED WITH THE SAID HOUSIN G PROJECT HAS ALSO TO BE EXAMINED. (M) THE ASSESSING OFFICER HAS TO EXAMINE THE SIZE OF THE PLOT ON WHICH PROJECT IS CONSTRUCTED. (N) THE ASSESSING OFFICER HAS TO EXAMINE BUILT-UP A REA OF SANCTIONED UNIT WHETHER WILL IN THE PRESCRIBED LIMI T. 7. IN ADDITION TO THE ABOVE GUIDELINES, ONCE THE M ATTER IS GOING BACK FOR RECONCILIATION, THEN THE AGREEMENTS CONNECTED T O THE LAND AND THE DETAILS OF THE APPROVAL GRANTED BY THE LOCAL AUTHOR ITY PERMITTING TO DEVELOP THE HOUSING PROJECT CAN ALSO BE EXAMINED I F DEEM FIT. SINCE THE HONBLE HIGH COURT HAS GIVEN THE VERDICT IN FAVOUR OF THE ASSESSEE AFTER DUE ASCERTAINMENT OF THESE BASIC FACTS, THEREFORE I T IS APPROPRIATE FIRST TO PLACE ON RECORD ALL THESE INFORMATION AND THEN IF F ACTS ARE IDENTICAL CONSEQUENTLY THEREUPON, THE CITED DECISION HAS TO B E FOLLOWED TO DISPOSE OF THE ISSUE. WITH THESE DIRECTIONS, WE HEREBY ALL OW THE GROUND OF THE REVENUE THAT TOO FOR STATISTICAL PURPOSES ONLY. 8. IN THE RESULT, REVENUES APPEAL IS TREATED AS AL LOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 31 / 5 /2012 ..&, .&../ T.C. NAIR, SR. PS ITA NO .854/AHD/2010 ASST.CIT VS.M/S.SHIKHAR DEVELOPERS ASST.YEAR - 2007-08 - 7 - '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-IV, AHMEDABAD 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION22.5.12 (DICTATION-PAD PGS 1 TO 6 ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.5.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER