The ITO, Ward-2(3), Baroda V. Moon Star Developers, Baroda

ITA 854/AHD/2012

• Counselvise Citation: 85420514 RSA 2012
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 854/AHD/2012 ASSESSMENT YEARS :2005-06 THE INCOME TAX OFFICER, WARD-2(3) 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. V/S . M/S. MOON STAR DEVELOPERS. A/1, ALHAMEED PARK, DARULOOLUM, OPP. BUS STAND, TANDALJA, BARODA. PAN NO. A AGFM1254J (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI Y.P. VERMA, SR. DR /BY RESPONDENT SHRI MUKUND BAKSHI, A.R. /DATE OF HEARING 29.11.2012 /DATE OF PRONOUNCEMENT 14.12.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVNUE WHICH HAS EMANATED FROM THE ORDER OF CIT(A)-II, BARODA, ORDER DATED 01.02.2 012 FOR A.Y. 2005-06 AGAINST ALLOWING DEDUCTION U/S. 80IB(10) OF THE IT ACT AND PROFIT DERIVED FROM THE SALE OF UNUTILIZED FSI. BOTH THE GROUNDS OF AP PEAL ARE INTERLINKED. 2. REVENUE ALSO REVISED THE GROUNDS, WHICH ARE REPR ODUCED AS UNDER: 1(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE ID CIT (APPEALS) ERRED IN ALLOWING THE CLAIM OF DED UCTION U/S.80IB(10) OF THE ACT NOT APPRECIATING THE FACT THAT THE RELATION SHIP BETWEEN THE ASSESSEE AND THE END USER OF THE UNITS WAS THAT OF 'WORKS CONTRACT'. 1(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 2 ID CIT (APPEALS) ERRED IN DELETING THE DISALLOWANC E OF DEDUCTION U/S.80IB(10) OF THE ACT WITHOUT APPRECIATING THE FA CT THAT THE DEDUCTION IS NOT PERMISSIBLE IN LAW SINCE THIS AMOUNT IS NOT AN INCOME DERIVED FROM A HOUSING PROJECT, BUT A DISALLOWANCE MADE U/S.40(A)( IA) OF THE INCOME- TAX ACT, AND THAT THIS AMOUNT IS ALLOWABLE IN THE Y EAR OF PAYMENT OF TAX THEREON WHICH WOULD LEAD TO DOUBLE DEDUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID CIT(APPEALS) ERRED IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW THE DEDUCTION U/S.80IB(10) R.W.S.80IB(1) OF THE INCOME- TAX ACT ON PROFIT DERIVED FROM SALE OF UNUTILIZED FSI, WITHOUT APPREC IATING THAT THIS PROFIT WAS NOT PROFIT DERIVED FROM THE BUSINESS ACTIVITY O F DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT RELATING TO THE SALE OF TENEMENTS. THE REVISED GROUNDS ALSO ADMITTED IN KEEPING VIEW O F THE HONBLE SUPREME COURT DECISION IN CASE OF NTPC VS. CIT, 229 ITR 383. 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSES SEE FIRM HAD CONSTRUCTED HOUSING PROJECT AND SHOWN TOTAL NET PROFIT OF RS.2, 45,977/- AS HAVING BEEN DERIVED FROM THE DEVELOPMENT AND BUILDING OF THE HO USING PROJECT. THE PROFIT OF BUSINESS HAS BEEN CLAIMED AS DEDUCTION AT 100% F ROM THE TOTAL INCOME OF THE ASSESSEE FIRM U/S. 80IB(10) OF THE IT ACT. THE LD. A.O. OBSERVED AS UNDER: 4.1 TO SUBSTANTIATE THE ITS CLAIM, THE ASSESSEE HA S FILED COPY OF LAYOUT PLAN, THE AUDIT REPORT IN FORM 10CCB ETC. F OR THE HOUSING PROJECT. HOWEVER, ON PERUSAL OF SUPPORTING DOCUMENTS FILED I N FAVOUR OF THE CLAIM OF DEDUCTION U/S.80IB(10), IT HAS BEEN OBSERV ED THAT PERMISSION FOR DEVELOPMENT/ RAJA CHITTHI ISSUED BY THE LOCAL A UTHORITY I.E. VADODARA ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 3 MUNICIPAL CORPORATION, SHOWS NAME OF THE APPLICANTS IN WHOSE NAME THE PROJECT IS APPROVED AS MUSTAKBHAI ALIBHAI PATEL & OTHERS. THIS DOCUMENT CATEGORICALLY STATES THAT PERMISSION FOR C ONSTRUCTION IS GRANTED AS PER THE APPROVED PLAN ENCLOSED WITH IT A ND THE PERMISSION IS SUBJECT TO VARIOUS RULES AND BYE LAWS LAID DOWN BY THE GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT RULES, VADODARA URBA N DEVELOPMENT AUTHORITY, GENERAL DEVELOPMENT CONTROL REGULATION E TC. THE PERMISSION CLEARLY MENTIONED THAT THE PERMISSION IS GRANTED TO MUSTAKBHAI ALIBHAI PATEL & OTHERS FOR CONSTRUCTION OF HOUSING PROJECTS ON THE AREA OF LAND OWNED BY THEM. 4.2 AS PERUSED FROM THE DOCUMENTS FURNISHED, IT IS NOTICED THAT THE PERMISSION FOR DEVELOPMENT/RAJA CHITTHI ISSUED BY T HE LOCAL AUTHORITY IS NOT IN THE NAME OF THE ASSESSEE. MOREOVER, THE LAN D ON WHICH THE HOUSING PROJECT CONSTRUCTED IS ALSO NOT OWNED BY TH E ASSESSEE. AS PER SECTION 80IB(10) OF THE ACT, THE BASIC REQUIREMENT FOR CLAIMING DEDUCTION IS APPROVAL OF HOUSING PROJECT BY LOCAL A UTHORITY IN THE NAME OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSE PRO JECTS. IT IS ALSO REQUIRED THAT THE AREA OF LAND ON WHICH THE HOUSING PROJECT IS CONSTRUCTED SHALL BE OWNED BY THE ASSESSEE. THE LD. A.O. HAD ISSUED SHOW CAUSE NOTICE DATED 28. 09.2007 FOR DISALLOWING THE CLAIM MADE BY THE ASSESSEE U/S. 80IB(10). THE APPELLANT SUBMITTED REPLY ON 17.10.2007. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, HE NOTICED THE FOLLOWING FACTS: ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 4 (I) THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WA S BUILT UP. (II) THE ASSESSEE HAS NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT FROM THE LOCAL AUTHORITY. THE SAME WAS TAKEN BY TH E OTHER PERSONS WHO ARE ENTIRELY SEPARATE ENTITY SEPARATE ENTITY IN THE EYES OF LAW. (III) THE LAND OWNERS HAVE SOLD THE PIECES OF LAND TO UNIT HOLDERS DIRECTLY AND THE ASSESSEE HAD ACTED MERELY AS A CON FIRMING PARTY. (IV) ASSESSEE FIRM HAS ACTED MERELY AS A CONTRACTO R AS IT HAS ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDERS. (V) THE ASSESSEE FIRM HAS NEVER SOLD THE HOUSE TO T HE UNIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF . FURTHER, HE ALSO ANALYZED THE LEGAL POSITION AS WEL L AS FACTUAL POSITION FOR CLAIMING OF 80IB(10) DEDUCTION FROM PAGE NOS.5 TO 1 9 AND DISALLOWED THE DEDUCTION U/S. 80IB(10) OF THE IT ACT. FURTHER, TH E A.O. ALSO OBSERVED THAT BALANCE FSI WAS AVAILABLE ON THESE PLOTS OF LAND FO R DEVELOPMENT AND CONSTRUCTION WHICH HAD NOT BEEN UTILIZED FOR THE PU RPOSE OF DEVELOPMENT AND CONSTRUCTION OF THE PROJECTS. THE FIRM HAD SOLD TH E CONSTRUCTION OF APPROVED UNIT WHICH HAS BEEN SHOWN BY THE APPELLANT. HOWEVE R, UNUTILIZED FSI SOLD BY THE APPELLANT WITHOUT INVOLVING ANY PROCESS OF DEVE LOPMENT AND CONSTRUCTION I.E. A PRIMARY CRITERION TO SATISFY THE CLAIM OF SE CTION 80IB(10) OF THE IT ACT. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE TO FURNISH THE INCOME EARNED ON FSI SOLD. THE LD. A.O. PROPORTIONATELY CALCULATED THE PROFIT OF FSI SOLD AT RS.54,235/- WHICH HAS ALSO BEEN REDUCED FROM THE PR OFIT OF CONSTRUCTION ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 5 BUSINESS OF RS.2,45,977/-. THE LD. A.O. ALSO DISAL LOWED RS.10 LACS U/S. 40(A)(IA) ON PAYMENT OF LABOUR CHARGES ON WHICH NO TDS HAD BEEN DEDUCTED. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE CIT(A)-II, BARODA, WHO HAD DELETED TH E ADDITION ON BOTH GROUNDS, BY OBSERVING AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL AND FACTS OF THE CASE AND THE RECENT DECISION OF HONBLE ITAT AH MADABAD, IN THE CASE OF M/S. RADHE DEVELOPERS & OTHERS ITA NO. 2482 /AHD/2006 DATED 29.06.2007. THE FACTS AND CIRCUMSTANCES OF THE APP ELLANT ARE IDENTICAL TO THE CASES DECIDED BY HONBLE ITAT, AHMADABAD. R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT, THE DEDUCTI ON UNDER SECTION 80IB(10) IS DIRECTED TO BE ALLOWED. REGARDING UNUT ILIZED FSI, THE AFORESAID DECISION OF THE ITAT, AHMADABAD, HAS DISC USSED THE MATTER AT LENGTH, AND DECIDED IN FAVOUR OF THE APPELLANT. HENCE THE RESTRICTION COMPUTED BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. BUT, ADDITION MADE U/S. 40(A)(IA) HAD BEEN CONFIRME D BY THE CIT(A) AT RS. 10 LACS BECAUSE TDS PROVISIONS ARE APPLICABLE ON IT. 4. THE APPELLANT FILED THE SECOND APPEAL BEFORE THE ITAT AGAINST THE ADDITION MADE U/S. 40(A)(IA) OF THE IT ACT AT RS. 1 0 LACS. THE CO-ORDINATE D BENCH, IN ITA NO.1048/AHD/2009, FOR A.Y. 2005-06, O RDER DATED 12.06.2009, HAD RESTORED BACK THIS ISSUE TO THE CIT(A) FOR RE-A DJUDICATION OF THIS ISSUE, WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.8 0IB(10) OF THE IT ACT ON THE AMOUNT OF DISALLOWANCE MADE BY THE A.O. U/S. 40(A)( IA) OF THE IT ACT. LD. CIT(A) HAS ALSO PASSED ORDER ON 01.02.2012 AND HELD THAT IF ANY ADDITION IS ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 6 MADE U/S.40(A)(IA) WILL RESULT IN INCREASE IN THE P ROFIT FROM THE PROJECT, WHICH HAD BEEN HELD AS ELIGIBLE IN THE DEDUCTION U/S.80IB (10), THE ADDITION SO MADE MUST ALSO BE CONSIDERED FOR ALLOWANCE OF DEDUCTION U/S.80IB(10). THE DISALLOWANCE U/S.40(A)(IA) RELATED TO LABOUR CONTRA CT EXPENSES FOR ONLY PROJECT UNDERTAKEN BY THE ASSESSEE DURING THE YEAR. THIS W ILL INCREASE THE PROFIT OF THE PROJECT. HENCE, THE ASSESSEE IS ENTITLED TO DE DUCTION U/S.80IB(10) ON THIS ADDITION/DISALLOWANCE AS WELL. THE ASSESSING OFFIC ER ALSO DIRECTED TO ALLOW THE DEDUCTION U/S.80IB(10), ON THE DISALLOWANCE MAD E U/S.40(A)(IA). THE GROUND OF APPEAL IS ALLOWED. 5. NOW THE REVENUE FILED THE APPEAL AGAINST THE CIT (A) ORDER DATED 01.02.2012 ON THREE REVISED GROUNDS AS MENTIONED AB OVE BUT AGAINST THE FIRST APPEAL DECIDED FOR THE ASSESSMENT YEAR 05-06 WAS DE CIDED BY THE CIT(A) ON 31.12.2008. THERE IS NO EVIDENCE ON RECORD AS TO S HOW THE REVENUE HAS CHALLENGED THE CIT(A)-II, BARODA ORDER DATED 31.12. 2008 ON THE GROUND WHETHER THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80IB(10) AND ESTIMATED RECEIPTS ON SALE OF FSI WAS DERIVED FROM THE DEVELO PMENT AND BUILDING OF THE HOUSING PROJECT. THE LD. D.R. ARGUED THIS ASPECT B UT THE REVISED GROUNDS ARE NOT EMANATING FROM THE CIT(A) ORDER DATED 01.02.201 2. THE LD. D.R. HAS NOT BROUGHT IN THE NOTICE ANY LEGAL POSITION OF THE BEN CH THAT IN SECOND ROUND OF APPEAL, BEFORE US, NEW GROUNDS CAN BE REVISED ON TH E BASIS OF REVISED ORDER PASSED BY CIT(A) IN SECOND ROUND TO GIVE THE APPEAL EFFECT OF THE ITAT ORDER. THUS, REVISED GROUND NO. 1(A) AND 2 ARE NOT MAINTAI NABLE. 6. THE REMAINING REVISED GROUND NO. 1(B) IS AGAINST ALLOWING DEDUCTION U/S.80IB(10) ON DISALLOWANCE MADE U/S.40(A)(IA) OF THE IT ACT. THE LD. D.R. ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 7 ARGUED THAT IF SECTION 80IB(10) DEDUCTION IS ALLOWE D DURING THE YEAR, THE ASSESSEE MAY ALSO CLAIM DEDUCTION ON THE BASIS OF P AYMENT ON TAX AND THIS AMOUNT WILL BE ALLOWED AGAIN AS DEDUCTION DOUBLY. THUS, HE PRAYED NOT TO ALLOW DEDUCTION U/S. 80IB (10) ON IT. FROM THE SID E OF THE APPELLANT, LD. COUNSEL SUBMITTED THAT THE APPELLANT WAS HAVING INC OME FROM DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT ONLY. THE INCO ME IS 100% IS DEDUCTABLE U/S.80IB(10). THUS, WHATEVER ADDITION WOULD BE MAD E BY THE A.O. IN THE INCOME, WOULD AUTOMATICALLY GET DEDUCTION U/S.80IB( 10) OF THE IT ACT. HE FURTHER ARGUED THAT HONBLE GUJARAT HIGH COURT IN C ASE OF CIT VS. RADHE DEVELOPERS, 341 ITR 403 HAS HELD THAT THE OWNERSHIP OF LAND IS NOT ESSENTI AL PART OF GETTING DOMEN AND POSSESSION OF THE LAND. THE APPELLANT HAD PAID THE LAND CONSIDERATION TO THE LAND OWNER AND MADE AGREE MENT WITH THEM TO CONSTRUCT THE BUILDING AS PER PLAN APPROVED BY THE MUNICIPAL CORPORATION, BARODA. ALL REQUISITE CONDITIONS HAD BEEN VERIFIED BY THE LD. CIT(A) WHEN ALLOWING THE DEDUCTION U/S.80IB(10). FURTHER, THE PROFIT ON SALE OF FSI HAS ALSO BEEN HELD IN CASE OF RADHE DEVELOPERS (SUPRA) IN FA VOUR OF THE ASSESSEE. THUS, HE ARGUED THAT CIT(A) WAS RIGHT IN ALLOWING T HE DEDUCTION U/S.80IB(10) OF THE IT ACT. HE PRAYED BEFORE US TO CONFIRM THE ORDERS OF CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE CASE LAW CITED BY THE APPELLAN T. EVEN, REVENUES APPEAL IS MAINTAINABLE ON THE BASIS OF REVISED GROU ND, THE ASSESSEES CASE IS COVERED BY RADHEY DEVEOPERS (SUPRA), THE DISALLOWAN CE MADE U/S. 40(A)(IA) HAD INCREASED THE ASSESSEES INCOME BY RS. 10 LACS. ACCORDINGLY, HE IS ENTITLED TO CLAIM THE DEDUCTION U/S.80IB(10) ON IT AS ASSESSEES ONLY INCOME ITA NO. 854/AHD/12 A.Y. 05-06 PAGE 8 FROM DEVELOPMENT AND BUILDING OF THE HOUSING PROJEC T DURING THE YEAR UNDER CONSIDERATION. THE DISALLOWANCE WAS MADE ON ACCOUN T OF TDS NOT DEDUCTED BY APPELLANT ON PAYMENT OF LABOUR CONTRACT EXPENSES FOR THE ONLY PROJECT UNDERTAKEN BY THE ASSESSEE DURING THE YEAR. HOWEVE R, IT IS CLARIFIED THAT THE ASSESSEE IS NOT ENTITLED ANY DEDUCTION IN SUBSEQUEN T YEAR ON THE BASIS OF PAYMENT ON TDS AS IT WILL BE TANTAMOUNT TO DOUBLE D EDUCTION OF THE SAME EXPENSES. THEREFORE, WE ALLOW THE REVENUES APPEAL PARTLY. 8. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 14.12.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 13.12.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 13.12.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 14.12.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 14.12.2012