The DCIT, Circle-2, RAJKOT-GUJARAT V. Friends Land Developers Co., RAJKOT-GUJARAT

ITA 86/RJT/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7154 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Assessee Lawyers: J C RANPURA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI M.V.NAYAR (AM) AND SHRI D.T. GARASIA (J M) ITA NO.86/R/09 A.Y 2005-06 THE ACIT CIR-2 RAJKOT APPELLANT V/S. M/S. FRIENDS LAND DEVELOPMENT CO., PRASHAM, 3 RD FLOOR, NR DHARAM CINEMA RAJKOT RESPONDENT PAN : AAAFF4174E ITA NO.91/R/09 A.Y 2005-06 M/S. FRIENDS LAND DEVELOPMENT CO., PRASHAM, 3 RD FLOOR, NR DHARAM CINEMA RAJKOT APPELLANT V/S. THE ACIT CIR-2 RAJKOT RESPONDENT ASSESSEE BY : SHRI J C RANPURA, CA REVENUE BY : SHRI S L MEENA, CIT(DR) O R D E R PER M.V. NAYAR, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF CIT(A)-III, RAJKOT IN THE APPEAL NO. 0145/ 07-08 VIDE ORDER DTD. 28/11/2008. 2. THE GROUND OF APPEAL OF REVENUE READS AS UNDER:- THE LD. CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON F ACTS IN PARTLY ALLOWING THE APPEAL OF THE ASSESSEE AND DIRECTED TO ALLOW DE DUCTION U/S. 80IB(10) IN RESPECT OF PROFIT ON SALE OF 17 RESIDENTIAL UNIT S AND THEREBY DELETED HE DISALLOWANCE TO THE TUNE OF RS 33,16,822/-. ITA NOS. 86 & 91/ RJT/2009 A.Y. 2005-06 2 THE GROUND OF APPEAL OF ASSESSEE READS AS UNDER:- THE LD. CIT(A) HAS ERRED ON FACTS ALSO IN LAW IN RE STRICTING THE CLAIM OF DEDUCTION U/S. 80IB(10) IN RESPECT OF PROFIT ON SAL E OF 17 RESIDENTIAL UNITS HAVING BUILT UP AREA OF LESS THAN 1500 SQ FEET. 2. THE FACTS OF THE CASE IS THAT, THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CONSTRUCTION OF DEVELOPMENT OF REAL ESTATE. THE ASS ESSEE HAD CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT WHICH WAS DECLINED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD DEVELOPED BUNGALOWS HAVING BUILT UP AREA OF MOR E THAN 1500 SQ FT AND THAT IT HAD CONSTRUCTED 17% OF THE AREA AS SHOPS WHICH IS I N VIOLATION OF SECTION 80IB(10) OF THE ACT. IT IS SEEN THAT, OUT OF THE TOTAL UNITS CO NSTRUCTED BY THE ASSESSEE, NOT ALL UNITS EXCEEDED THE STIPULATED 1500 SQ FT CONSTRUCTION. T HE REASON WAS THAT, WHEN THE AGREEMENT TO SALE WAS ENTERED INTO, SOME PROSPECTIV E BUYERS HAD INSISTED THE ASSESSEE TO OFFER THEM MORE SPACE AND BUILT UP AREA , WHICH WAS FACILITATED BY THE ASSESSEE AT THEIR BEHEST BY PROVIDING THEM WITH EXP ERTISE, CONSTRUCTION MATERIALS AND OTHER LEGAL FORMALITIES. THE AO HAD DECLINED TH E CLAIM OF DEDUCTION U/S. 80IB(10) IN TOTO SINCE THE ASSESSEE HAD FAILED TO MEET ONE O F THE STATUTORY PARAMETER. THE LD. CIT(A) HAD DIRECTED THE AO TO ALLOW DEDUCTION ON TH OSE UNITS WHICH WERE HAVING CONSTRUCTION OF BELOW 1500 SQ FT. THUS, THE GRIEVA NCE OF THE REVENUE IS THAT, NO PRO- RATA DEDUCTION IS ALLOWABLE TO THE ASSESSEE. 3. BEFORE US, THE LD AR OF THE ASSESSEE SUBMITTED T HAT, THE ASSESSEE GOT APPROVED ORIGINAL PLAN ON 31.03.2001 HAVING TOTAL L AND AREA ADMEASURING 6520.71 SQ. METERS WHICH INCLUDE LAND APPURTENANT ADMEASURI NG 595.42 SQ. METERS ON WHICH COMMERCIAL PORTION IS BUILT. THE PROSPECTIVE BUYERS WHO BOOKED THE RESIDENTIAL UNITS HAD ENTERED INTO AGREEMENTS FOR SELL ( SATA KHAT ). THE BUYERS THEREAFTER STARTED DEMANDING FREQUENTLY FOR THE ADDITIONAL SPACE AND O NLY WITH A VIEW TO FACILITATE THEM, THE APPELLANT AGREED TO SUPPLY MATERIAL REQUIRED FO R CONSTRUCTION OF SUCH ADDITIONAL SPACE AND GET THE ADDITIONAL LABOUR WORK DONE THROU GH THE CONTRACTOR WHO CARRIED OUT CONSTRUCTION WORK FOR THE APPELLANT. HOWEVER SE PARATE AGREEMENTS WITH RESPECTIVE PERSONS WERE ENTERED INTO. THUS ONLY AT THE BEHEST/INSISTENCE OF THE BUYERS THE ASSESSEE HAD NO WAY OUT BUT TO GO FOR SO ME REVISIONS OF PLANS FOR NECESSARY CHANGES IN VIEW OF THE FACT THAT THE CONV EYANCE DEEDS WERE PENDING FOR EXECUTION IN FAVOUR OF SUCH BUYERS THEREFORE, AS PE R THE RELEVANT RULES, REVISED PLAN HAD TO BE SUBMITTED BY THE APPELLANT ONLY AND WERE REVISED ON 10.1.2003 WHEN ITA NOS. 86 & 91/ RJT/2009 A.Y. 2005-06 3 PERMISSION FOR CONSTRUCTION WAS GRANTED BY THE MUNI CIPAL CORPORATION. AS PER THE PLAN APPROVED ORIGINALLY, NOT A SINGLE UNIT EXCEEDE D BUILT UP AREA OF 1500 SQ. FT., IT WAS ONLY AT THE BEHEST OF BUYERS THAT THE APPELLANT WAS COMPELLED TO GET DONE THE WORK FOR ADDITIONAL SPACE I.E. ONLY OUT OF COMMERCI AL EXPEDIENCY THE ACT OF REVISING THE PLAN AND CORRESPONDING WORK WAS GOT DONE. HOWEV ER, AS PER THE REVISED PLAN, OUT OF THE TOTAL 32 RESIDENTIAL UNITS HAVING TOTAL BUILT UP AREA OF 4367.77 SQ. METERS I.E. 47014.240 SQ. FT., TOTAL BUILT UP AREA OF 17 U NITS WAS RANGING FROM 126.67 SQ. METERS I.E. 1363.463 SQ. FT. AND 132.50 SQ. METERS I.E. 1426.216 SQ. FT. AND THE TOTAL AREA ALLOCABLE TO SUCH UNITS COMES TO 2165.14 SQ. M ETERS I.E. 23305.350 SQ. FT. THE AREA OF RESIDENTIAL UNITS SOLD TO THE RESPECTIVE BU YERS AS PER THE AGREEMENTS FOR SALE ENTERED INTO BETWEEN THE APPELLANT AND SUCH BUYERS WAS AS PER THE PLANS APPROVED ORIGINALLY I.E. EACH UNITS WERE HAVING AREA OF LESS THAN 1500 SQ. FT. FURTHER OUT THE UNITS ON WHICH EXTRA WORK WAS DONE, SALE DEEDS IN T HE CASES OF FIVE BUYERS WERE FOR THE AREA LESS THAN 1500 SQ. FT. AND THE ADDITIONAL CONSTRUCTION WAS GOT DONE BY THEM FOR WHICH SEPARATE AGREEMENTS WERE EXECUTED AND THE APPELLANT SUPPLIED REQUIRED MATERIALS ONLY BY RAISING SEPARATE BILLS AND HELPED IN ARRANGING THE CONTRACTORS SERVICES WHO WAS CONVERSANT WITH THE WORK, FOR WHIC H HE DIRECTLY BILLED TO RESPECTIVE BUYERS. IN CASES OF REMAINING BUYERS WHO HAD BOOKED THE UNITS, SINCE THEY SOLD THEIR BOOKED UNITS TO THIRD PARTIES BY THE APPELLANT RECE IVED THE CONSIDERATION FOR THE AREA ADMEASURING LESS THAN 1500 SQ. FT. ONLY WHEREAS THE PAYMENT FOR EXTRA WORK WAS RECEIVED BY THEM DIRECTLY FROM THE PARTIES WHO FINA LLY PURCHASED BY REGISTERING SALE DEEDS. THUS, IT IS THE CONTENTION OF THE LD. AR OF THE ASSESSEE THAT, SINCE THE ORIGINAL PLAN HAD BUILT UP AREAS OF RESIDENTIAL UNITS LESS T HAN 1500 SQ FEET AND AS THE PLANS WERE REVISED ONLY AT THE BEHEST OF SOME CUSTOMERS, AND AS THE AGREEMENT TO SALE WAS EXECUTED ON THE OLD PLANS, THE ASSESSEE IS ELIG IBLE FOR DEDUCTION U/S. 80IB(10) ON THE ENTIRE RESIDENTIAL UNITS. 4. WE HAVE PERUSED THE ASSESSMENT ORDER, THE ORDER OF THE LD. CIT(A) AS ALSO GONE THROUGH THE SUBMISSION PUT FORTH BY THE LD. AR OF THE ASSESSEE. WE FIND THAT THE LD. CIT(A) WHILE DIRECTING THAT THE ASSESSEE SH OULD BE GIVEN PROPORTIONATE DEDUCTION FOR UNITS HAVING BUILT UP AREA OF LESS TH AN 1500 SQ FEET, HAD RELIED UPON THE DECISION OF THE HONBLE ITAT C BENCH KOLKOTA IN ORD ER DATED 24.3.2006 IN ITA NO. 1595/KOL/2003 IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD VS DCIT AND ITAT MUMBAI E BENCH IN THE CASE OF HARSHAD P DOSH I VS ACIT 109 TTJ 335 AND HONBLE ITAT CHENNAI BENCH IN THE CASE OF ARUN EXCE LLO FOUNDATIONS P LTD. VS ACIT 108 TTJ 71 AND HELD THAT, THERE IS NO JUSTIFIC ATION IN DISALLOWING THE NETIRE CLAIM ITA NOS. 86 & 91/ RJT/2009 A.Y. 2005-06 4 OF THE ASSESSEE U/S. 80IB. HE THEREFORE DIRECTED T HE AO TO ALLOW DEDUCTION U/S. 80IB(10) IN RESPECT OF PROFIT ON SALE OF 17 UNITS W HERE BUILT UP AREA IS LESS THAN 1500 SQ FEET. 4.1 WE ALSO FIND THAT THE DECISION OF THE HONBLE I TAT CALCUTTA IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD (RELIED UPON BY THE LD. CIT(A)] HAS BEEN CONFIRMED BY THE HONBLE CALCUTTA HIGH COURT VIDE I TS ORDER DATED 5.1.2007. THUS, THE HONBLE ITAT CALCUTTAS DECISION MERGES WITH TH E DECISION OF THE HONBLE HIGH COURT AND THE MATTER THUS NOW STANDS CONFIRMED. THE REFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT, WE DECLINE TO INTERFERE THE FINDING OF THE LD. CIT(A) AND HENCE, THE REVENUES APPEAL ON T HIS GROUND IS DISMISSED. 5. THE ASSESSEES GROUND OF APPEAL THAT IT IS ELIGIBLE FOR THE DEDUCTION OF THE ENTIRE PROFIT IS ALSO DISMISSED, IN VIEW OF THE DET AILED FINDING MADE SUPRA. HENCE, THE ASSESSEES APPEAL IS ALSO DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE APPEAL OF THE ASSESSEE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON __19/03/20 10_ SD/- SD/- (D.T. GARASIA) (M.V. NAYAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 19/03/2010 RAJKOT COPY FORWARDED TO, 1. FRIENDS LAND DEVELOPMENT CO., PRASHAM, 3 RD FLOOR, NEAR DHARAM CINEMA, RAJKOT 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -2, RAJKOT. 3. THE CIT-III, RAJKOT 4. THE CIT(A)-IV, RAJKOT 5. THE D.R., I.T.A.T., RAJKOT 6. THE GUARD FILE TRUE COPY BY ORDER SENIOR PRI VATE SECRETARY