ACIT, CHENNAI V. M/s. South India Shelters, CHENNAI

ITA 946/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61383 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Retrospective amendment; Deemed dividend; Competent authority
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NOS. 945 & 946/MDS/2012 (ASSESSMENT YEARS : 2005-06 & 2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE V, CHENNAI - 600 034 . (APPELLANT) V. M/S SOUTH INDIA SHELTERS, 14, GULMOHAR AVENUE, VELACHERY MAIN ROAD, CHENNAI - 600 041. PAN : AAHFS6061L (RESPONDENT) C.O. NOS. 96 & 97/MDS/2012 (IN I.T.A. NOS. 945 & 946/MDS/2012) ASSESSMENT YEARS : 2005-06 & 2008-09 M/S SOUTH INDIA SHELTERS, 14, GULMOHAR AVENUE, VELACHERY MAIN ROAD, CHENNAI - 600 041. (CROSS-OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE V, CHENNAI - 600 034 . (RESPONDENT) REVENUE BY : SHRI S. DASGUPTA, JCIT ASSESSEE BY : SHRI N. QUADIR HOSEYN, ADVOCATE DATE OF HEARING : 26.07.2012 DATE OF PRONOUNCEMENT : 26.07.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS AND CROSS-OBJECTIONS FILED BY TH E REVENUE AND ASSESSEE RESPECTIVELY, FOR THE IMPUGNED ASSESSM ENT YEARS, I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 2 DIRECTED AGAINST ORDERS DATED 20.1.2012 OF COMMISSI ONER OF INCOME TAX (APPEALS)-VIII, CHENNAI. GRIEVANCE OF THE REVE NUE IS THAT CIT (APPEALS) HELD ASSESSEE TO BE ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80-IB(10) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE AC T'). AS PER THE REVENUE, ASSESSEE WAS ONLY A CONTRACTOR APPOINTED B Y THE PROSPECTIVE FLAT BUYERS FOR CONSTRUCTING FLATS AND WAS NOT AN UNDERTAKING, WHICH WAS DEVELOPING A PROJECT, ON ITS OWN. FOR ASSESSMENT YEAR 2008-09, ONE MORE GRIEVANCE HAS BEE N RAISED BY THE REVENUE THAT THE CIT(APPEALS) DELETED AN ADDITI ON OF ` 1,83,38,125/- MADE BY THE ASSESSING OFFICER, UNDER SECTION 2(22)(E) OF THE ACT. 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN THE BUSINESS OF CONSTRUCTION ENGINEERS, CIVIL CONTRACTORS AND BUILD ING DEVELOPERS, HAD FILED ITS RETURNS FOR THE IMPUGNED ASSESSMENT YEARS , INTER ALIA, CLAIMING DEDUCTION UNDER SECTION 80-IB(10) OF THE A CT. SUCH CLAIM FOR ASSESSMENT YEAR 2005-06 CAME TO ` 3,80,71,082/- AND FOR ASSESSMENT YEAR 2008-09, IT CAME TO ` 41,86,904/-. THE CLAIM RELATED TO A PROJECT BY NAME SIS MERIDIAN SITUATED AT GANGAIYAL NAGAR, VELACHERY, CHENNAI-42. ASSESSEE WAS FOLLOWI NG COMPLETED CONTRACT METHOD FOR ACCOUNTING THE REVENUE. ASSESS EE HAD ENTERED I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 3 INTO AN AGREEMENT WITH LAND OWNERS AND A POWER OF A TTORNEY OBTAINED BY ONE OF ITS PARTNERS FROM THE LAND OWNERS. BUT F OR THE POWER OF ATTORNEY, NO CONVEYANCE DEED WAS EXECUTED IN ASSESS EES NAME. AS PER THE A.O., THE POWER OF ATTORNEY WAS EXECUTED IN THE NAME OF ONE OF THE PARTNERS OF THE ASSESSEE-FIRM AND SUCH PARTN ER WAS NOT HOLDING THE POWER FOR AND ON BEHALF OF ASSESSEE-FIRM. PERM ISSION FROM LOCAL BODY WAS ALSO TAKEN BY THIS PARTNER AND NOT BY ASSE SSEE-FIRM. COMPLETION CERTIFICATE WAS ALSO ISSUED TO THE SAID PARTNER AND NOT TO THE FIRM. AS PER THE ASSESSING OFFICER, EXPLANATIO N TO SECTION 80- IB(10) INSERTED BY FINANCE (NO.2) ACT, 2009 WITH RE TROSPECTIVE EFFECT FROM 1.4.2001 CLEARLY APPLIED, SINCE ASSESSEE HAD C ONSTRUCTED FLATS BASED UPON INDIVIDUAL AGREEMENTS ENTERED WITH PROSP ECTIVE FLAT BUYERS. THROUGH SUCH CONSTRUCTION AGREEMENT, THE P ROSPECTIVE FLAT BUYER HAD APPOINTED ASSESSEE, ONLY AS A CONTRACTOR FOR CONSTRUCTING THE APARTMENT. IN THIS VIEW OF THE MATTER, HE WAS OF THE OPINION THAT THE EXPLANATION INSERTED BY FINANCE (NO.2) ACT, 200 9 APPLIED AND THE ASSESSEE COULD ONLY BE CONSIDERED AS WORKS CONTRACT OR. HE, THEREFORE, DENIED THE CLAIM OF SECTION 80-IB(10) FO R BOTH THE YEARS. 3. IN ITS APPEALS BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE LAND WAS PURCHASED BY THE ASSESSEE OUT OF ITS OWN FUNDS AND IT HAD ALSO EFFECTED PAYMENTS TO THE LAND OWNERS BEFORE I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 4 EMBARKING ON THE PROJECT. THE COST OF LAND WAS ACC OUNTED IN THE BOOKS OF THE ASSESSEE-FIRM AND SHOWN IT AS STOCK. THE AGREEMENT WITH LAND OWNERS WAS ENTERED BY SHRI A. MOHAMMED AL I, ITS MANAGING PARTNER, AND SUCH AGREEMENT WAS ONLY ON BE HALF OF THE FIRM THOUGH NOT SPECIFICALLY STATED SO IN SUCH AGRE EMENT. ASSESSEE WAS A PROJECT DEVELOPER AND JUST BECAUSE THE LAND P ERMISSIONS FOR DEVELOPMENT OF PROJECT WAS OBTAINED IN THE NAME OF ITS MANAGING PARTNER, THE CLAIM COULD NOT HAVE BEEN DISALLOWED. AS PER THE ASSESSEE, IT WAS NOT A WORKS CONTRACTOR FALLING IN EXPLANATION TO SECTION 80-IB(10) ADDED BY FINANCE (NO.2) ACT, 2009 , BUT WAS A PROJECT DEVELOPER. 4. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTENTIO NS. ACCORDING TO HIM, ASSESSEE WAS NOT A CONTRACTOR SIMPLICITER, NOR A BUILDER SIMPLICITER, NOR A DEVELOPER SIMPLICITER, BUT, ASSE SSEE WAS A DEVELOPER, BUILDER AND ALSO A CONTRACTOR. ASSESSEE HAD INVESTED MONEY FOR PURCHASING OF THE LAND AND THE LAND AGREE MENT DATED 31 ST DECEMBER, 2004 AND SALE AGREEMENT BETWEEN THE LAND OWNERS AND MANAGING PARTNER OF THE ASSESSEE-FIRM CLEARLY PROVE D THIS. ASSESSEE WAS A FIRM CONSTITUTED IN 1996 AND WAS IN THE BUSIN ESS OF DEVELOPERS AND BUILDERS SINCE THAT DATE AND THE PROJECT AS A W HOLE WAS UNDER THE CONTROL OF THE ASSESSEE. ASSESSEE WAS ENJOYING POS SESSION OF I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 5 PROPERTY, CONSTRUCTING FLAT AND HANDING OVER THE FL ATS TO ULTIMATE CUSTOMERS WHO WERE THE PROSPECTIVE FLAT BUYERS. PL AN SANCTION OBTAINED FROM COMPETENT AUTHORITY CLEARLY SHOWED TH AT THE ASSESSEE WAS A DEVELOPER. AS PER CIT(APPEALS), THE QUESTION TO BE ANSWERED WAS WHO ACTUALLY DEVELOPED THE LAND. THE CIRCUMSTA NCES OF THE CASE CLEARLY SHOWED THAT ASSESSEE WAS INDEED THE DEVELOP ER OF THE PROJECT. ASSESSEE HAD EXCLUSIVE RIGHT FOR DETERMIN ING PRICE OF THE FLAT AND SELLING THE FLAT. ORIGINAL OWNER OF LAND WAS E NTITLED ONLY TO COST OF THE LAND. IN THIS VIEW OF THE MATTER, HE HELD THAT ASSESSEE WAS VERY MUCH ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT. RELIANCE WAS PLACED ON THE DECISIONS OF CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. SMT. C. RAJINI [9 ITR (TRIB.) 487] AS ALSO THAT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT V. RADHE DEVELOPERS (2012) 204 TAXMAN 543. 5. NOW BEFORE US, LEARNED D.R., ASSAILING THE ORDER S OF CIT(APPEALS), SUBMITTED THAT ASSESSEE WAS ONLY A BU ILDING CONTRACTOR AND CAME WITHIN THE AMBIT OF EXPLANATION ADDED TO S ECTION 80-IB(10) VIDE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EF FECT FROM 1.4.2001. 6. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTED THE ORDERS OF THE CIT(APPEALS). I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 6 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN OUR OPINION, THERE CAN BE NO DOUBT THAT ASSESSEE WAS DEVELOPING THE PROJECT. ASSESSEE, THROUGH ITS MANAGING PARTNE R, HAD POWER OF ATTORNEY FROM THE LAND OWNERS. MAY BE THE POWER OF ATTORNEY WAS ONLY IN THE NAME OF MANAGING PARTNER. NEVERTHELESS , COST OF THE LAND WAS ACCOUNTED BY THE ASSESSEE-FIRM AND PAYMENTS WER E ALSO EFFECTED BY IT. ALL THE DEVELOPMENT COSTS OF THE P ROJECT WERE ALSO CHARGED IN THE ASSESSEE-FIRM. JUST BECAUSE ASSESSE E-FIRM ENTERED INTO SEPARATE AGREEMENTS WITH PROSPECTIVE FLAT BUYE RS FOR CONSTRUCTION OF FLATS, WE CANNOT SAY THAT THE PROJECT WAS NOT BE ING DEVELOPED BY THE ASSESSEE. ASSESSEE WAS IN POSSESSION OF THE PR OPERTY AFTER OBTAINING THE POWER OF ATTORNEY. DEVELOPMENT WORK WAS CARRIED ON BY THE ASSESSEE AND IT HAD EXCLUSIVE RIGHTS TO DETE RMINE THE SALE PRICE OF THE FLAT AND SELL THE FLAT. WHAT WENT TO ORIGINAL OWNER OF THE LAND WAS ONLY THE COST OF THE LAND AND NOTHING MORE . WE ARE OF THE OPINION THAT IN THIS SITUATION, ASSESSEES CLAIM UN DER SECTION 80- IB(10) WAS NOT HIT BY THE EXPLANATION ADDED THERETO VIDE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4 .2001. ASSESSEE WAS NOT EXECUTING THE HOUSING PROJECT AS WORKS CONT RACTOR. IN SIMILAR FACT SITUATION, HONBLE GUJARAT HIGH COURT IN THE C ASE OF RADHE DEVELOPERS (SUPRA) AS ALSO THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 7 THE CASE OF SMT. C. RAJINI (SUPRA) HAVE HELD THAT A SSESSEES WHO WERE DOING PROJECT DEVELOPMENT IN A BUNDLED MANNER WERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDERS OF CIT(APPEALS) ON THIS ISSUE. 8. THIS LEAVES WITH THE ISSUE OF DELETION OF ADDITI ON MADE BY THE A.O. UNDER SECTION 2(22)(E) OF THE ACT, FOR ASSESSM ENT YEAR 2008-09. 9. ASSESSEE HAD RECEIVED A LOAN OF ` 1,83,38,125/- FROM M/S SOUTH INDIA SHELTERS (P) LTD., WHEREIN PARTNERS OF THE ASSESSEE-FIRM ALSO DIRECTORS. ASSESSING OFFICER CONSIDERED IT AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, SINCE ASSESSEE W AS UNABLE TO SUBSTANTIATE WITH RELEVANT DOCUMENT THAT THE LOAN W AS A PART OF ITS NORMAL BUSINESS WITH THE SAID COMPANY. 10. IN ITS APPEAL BEFORE CIT(APPEALS), ASSESSEE ARG UED THAT THE LOAN RECEIVED AS WELL AS RE-PAID WERE PART OF ITS B USINESS TRANSACTION. AS PER THE ASSESSEE, IT HAD NOT RECEIVED ANY LOAN O R ADVANCE FROM THE COMPANY AND ACCOUNTS OF THE SAID COMPANY IN ASS ESSEES BOOKS WERE IN DEBIT. IT WAS ONLY ON ACCOUNT OF JOURNAL E NTRY PASSED WITH REGARD TO SALE OF SEVEN FLATS TO THE SAID COMPANY, WHICH LED TO THE I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 8 REVERSAL OF THE DEBIT. CIT(APPEALS) WAS APPRECIATI VE OF THIS CONTENTION AND DELETED THE ADDITION MADE. 11. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT NOTH ING WAS PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFIC ER TO PROVE THAT THE TRANSACTIONS WITH THE SAID COMPANY WERE IN THE COURSE OF ITS BUSINESS. CIT(APPEALS) HAD ACCEPTED THE CLAIM WITH OUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER, WHILE CONSIDE RING THE FRESH SUBMISSIONS OF THE ASSESSEE AND THERE WAS VIOLATION OF RULE 46A OF INCOME-TAX RULES, 1962. 12. PER CONTRA, LEARNED A.R. FAIRLY ADMITTED THAT T HE MATTER REQUIRED A FRESH LOOK BY THE ASSESSING OFFICER. 13. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. BEFORE THE ASSESSING OFFICER, ASSESSEE DID NOT PROD UCE ANY EXPLANATION WHEN A PROPOSAL WAS MADE THAT THE SUM O F ` 1,83,38,125/- WOULD BE CONSIDERED AS DEEMED DIVIDEN D COMING WITHIN SECTION 2(22)(E) OF THE ACT. BEFORE THE CIT (APPEALS), ASSESSEE DID PRODUCE NUMBER OF EVIDENCE, WHICH INTE R ALIA INCLUDED JOURNAL ENTRY PASSED REVERSING EARLIER SALES MADE T O THE SAID COMPANY, WHICH RESULTED IN THE DEBIT BALANCE TURNIN G INTO A CREDIT I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 9 BALANCE. SUCH PARTICULARS WERE NEVER PRODUCED BY T HE ASSESSEE BEFORE ASSESSING OFFICER. THEREFORE, WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE, THE MATTER HAS TO BE RE-VISITE D BY THE A.O. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W WITH REGARD TO THE ADDITION UNDER SECTION 2(22)(E) OF THE ACT AND REMI T IT BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. ASSESSEE SHALL BE GIVEN AN OPPORTUNITY TO FILE ITS EXPLANATION. 14. APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005- 06 IS DISMISSED, WHEREAS, THAT FOR ASSESSMENT YEAR 2008-0 9 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 15. WHEN CROSS-OBJECTIONS OF THE ASSESSEE FOR IMPUG NED ASSESSMENT YEARS WERE TAKEN UP, LEARNED A.R. SUBMIT TED THAT CROSS- OBJECTION FOR ASSESSMENT YEAR 2005-06 WAS NOT BEING PRESSED BY HIM. AS FOR CROSS-OBJECTION FOR ASSESSMENT YEAR 20 08-09, LEARNED A.R. SUBMITTED THAT GRIEVANCE WAS WITH REGARD TO LE VY OF INTEREST UNDER SECTION 234B OF THE ACT. 16. SINCE WE HAVE ALREADY UPHELD THE DECISION OF CI T(APPEALS) RULING ASSESSEE TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT, THE GROUND AGAINST LEVY OF INTEREST UND ER SECTION 234B RAISED BY THE ASSESSEE, IN ITS CROSS-OBJECTION HAS BECOME ACADEMIC. I.T.A. NOS.945 & 946/MDS/12 C.O. NOS.96 & 97/MDS/12 10 17. THUS, BOTH THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 18. TO SUMMARIZE THE RESULT, APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005-06 IS DISMISSED, WHEREAS, THAT FOR ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. BOTH THE CROSS-OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISS ED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 26 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH JULY, 2012. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A)-VIII, CHENNAI (4) CIT-VI, CHENNAI-34 (5) D.R. (6) GUARD FILE