Gujarat High Court
Commissioner Of Income Tax Ahmedabad Iv vs Vishal Construction on 16 January, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
COMMISSIONER OF INCOME TAX AHMEDABAD IV....Appellant(s)V/SVISHAL CONSTRUCTION CO.....Opponent(s) O/TAXAP/556/2012 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 556 of 2012 ================================================================ COMMISSIONER OF INCOME TAX AHMEDABAD IV....Appellant(s) Versus VISHAL CONSTRUCTION CO.....Opponent(s) ================================================================ Appearance: MR.VARUN K.PATEL, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 16/01/2013 ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal challenging the judgement of the Income Tax Appellate Tribunal ( the Tribunal for short) dated 23.03.2012 raising following substantial questions of law for our consideration:
(i) Whether in the facts and circumstances of the case, the learned ITAT has erred in law in confirming the order of the CIT(a) deleting the disallowance of deduction of Rs. 74,49,731/- u/s. 80IB(10) of the Income Tax Act, 1961?
(ii) Whether in the facts and circumstances of the case, the assessee is entitled to get deductio of Rs. 74,49,731/- u/s. 80IB(10) of the Income Tax Act, 1961 though the assesee did not own the land and the name of the assessee does not appear in the permission for development granted by local authority?
Issue arising out of deduction claimed by the assessee under Section 80 IB of the Income Tax Act, 1961. Revenue disputed such claim on the ground that the assessee was not the owner of the land used by the assessee for the development of the housing project. The Tribunal ultimately ruled in favour of the assessee and confirmed the view of the CIT(Appeals) relying on its own decision in case of CIT Vs. Radhe Developers.
Counsel for the revenue candidly pointed out that such decision came up for consideration before this Court reported in (2012) 341 ITR 403 (Guj.). This court made following observations:
36.
We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk.
We are informed that such decision of this Court was challenged before the Supreme Court. However, SLP was also came to be dismissed on 27.07.2012. Present appeal is also dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Jyoti Page 4 of 4