Income Tax Appellate Tribunal - Ahmedabad
Super Construction, Baroda vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B" AHMEDABAD
Before Shri N.S.SAINI, ACCOUNTANT MEMBER and
Shri MAHAVIR SINGH, JUDICIAL MEMBER
ITA No.1668/ Ahd/2010
Assessment Year:2006-07
Date of hearing:29.10.10 Drafted:1.11.10
Income Tax Officer, V/s. M/s. Super Construction,
nd
W ard-2(3), 2 Floor, Basera Duplex, Opp.
Aayakar Bhavana, Race Angan Bunglows, Vasna
Course Circle, Baroda Road, Baroda
(Appellant) .. (Respondent)
Appellant by :- Shri K. Madhusudan, SR-DR
Respondent by:- None
ORDER
PER Mahavir Singh Judicial Member:-
This appeal by the Revenue is arising out of the order of Commissioner of Income-tax (Appeals)-II, Baroda in appeal No. CAB/II-219/08-09 dated 23- 02-2010. The assessment was framed by ITO Ward-2(3), Baroda u/s143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 05-12-2008 for assessment year 2006-07.
2. At the outset, it is seen that the CIT(A) has decided the issue by relying on this Tribunal in the case of M/s. Radhya Developers & Otrs. in ITA No.2482/Ahd/2006 and others dated 29-06-2007.
3. On the other hand, the Ld. Departmental Representative submitted the ratio laid down in the case of Radhe Developers and others is not applicable to the facts of the impugned case. The salient features of the fact as existed in the case of Radhe Developers's decisions are as under:-
ITA No.1668/Ahd/2010 A.Y. 2006-07ITO Wd-2(3) Baroda v. M/s. Super Construction Page 2
1. There was an agreement to sale in favour of assessee developer and possession was given by the land owner. Sale consideration was also paid.
2. All approvals / permissions were obtained by Power of Attorney of land owner i.e. assessee.
3. Right to take / peruse all govt. / Quasi govt. proceedings rested with the assessee developer by an agreement.
4. For all these bundles of rights the assessee developer had paid consideration to land owner and obtained all rights including ownership rights Further the Ld. DR drawn our attention to the findings of the ITAT order in para-18, which is the foundation of the decision and which reads as under:-
"... .... From the clauses of the Development and Construction Agreements as well a Agreement for sale, both dated 18.05.2000, extracted above we observe that these two Agreements effectively transfer to the assessee-firm all the rights of development and construction and to deal with the land for consideration payable within a stipulated time; that the assessee had been put in possession of the land of the terms and conditions as mentioned in these two Agreements; that the assessee-firm ha also paid consideration of Rs.56 lacs during the two F.Yrs. i.e. 2000-01 and 201-02; that the assessee- firm has to obtain necessary approvals from the local authorities; i.e., BMC on behalf of the land owners and all the expenses for such purposes are to be incurred by the assessee; that the assessee-firm has engaged the firm of Architect and also incurred expenses towards the charges payable to Corporation, etc., for obtaining the approvals; that even from the books of account, it is noticed that for obtaining the approval, the assessee-firm has paid the development charges to various regulating agencies i.e. AUDA, BMC and GEB(Gujarat Electricity Board), etc. and that these expenses are incurred by the assessee-firm and the Assessing officer has brought out the complete details year-wise in his assessment orders at page No.5 reading as under:- ......................."
The Ld. DR further stated that the Bench was kind-enough to appreciate that the decision imparted in the case of Radhe Developers is based on facts discussed in that case. Needless to say that the Apex Court time and again had held that a ratio becomes a binding precedent in the context of given facts, not in isolation of acts. The facts of the impugned appeal are not similar with the facts of the said case discussed as above. On the contrary, it leads adverse inference against the assessee and deserves rejection of assessee's claim u/s.80IB on the facts of the case of Radhe Developers etc. The Ld. DR also referred to the principals laid down in the recent case of Hon'ble Apex court in the case of Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. & Anr. (Civil Appeal No.3302 of 2005) dated 10-07-2008 and stated that the following issues were raised:-
i) A development agreement is one where the land-holder provides the land. The Builder puts up a building. Thereafter, the land owner and builder ITA No.1668/Ahd/2010 A.Y. 2006-07 ITO Wd-2(3) Baroda v. M/s. Super Construction Page 3 share the constructed area. The builder delivers the 'owner's share' to the land-holder and retains the 'builder's share'. The land-holder sells / transfers undivided share/s in the land corresponding to the Builder's share of the building to the builder or his nominees. The land-holder will have no say or control in the construction of have any say as to whom and at what cost the builder's share of apartments are to be dealt with or disposed of. Such an agreement is not a "joint venture" in the legal sense. It is a contract for "services".
ii) On the other hand, an agreement between the owner of a land and a builder, for construction of apartments and sale of those of apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction / development and be accountable to each other for their respective acts with reference to the project.
iii) The title of the documents is not determinative of the nature and character of the document, though the name may usually give some indication of the nature of the document. The use of the words "joint venture" or "collaboration" in the agreement will not make the transaction a joint venture, if there are no provisions for shared control and losses.
In view of these arguments, the Ld. DR stated that neither the Assessing officer nor the CIT(A) has gone into the agreements and Builders Development Agreement, from where it can be inferred that the assessee is a developer or a contractor. Accordingly, he requested the Bench to set aside the issue for verification of different agreements and documents in the light of the judgment of Hon'ble' Apex Court in the case of Faqir Chand Gulati (supra).
4. We have heard the Ld. DR and gone through the facts and circumstances of the case. We have also perused the case laws and also gone through the assessment order as well as the order of CITIA). It is noticed from the orders of the lower authorities that they have not gone into the builder agreement or joint venture agreements. They have not ascertained whether the assessee is a developer or a contractor. In the absence of these findings, we are of the view that the issue needs re-verification in the light of Hon'ble Apex Court judgment in the case of Faqir Chand Gulati (supra). Similarly, the Ahmedabad Tribunal in other cases has also laid down certain principles in the light of Hon'ble Apex Court judgment in the case of Faqir Chand Gulati (supra) and A.O is also request to consider the case law of this Tribunal in the case of ITO & Otrs. v.Shakti Corporation Baroda and Otrs. in ITA ITA No.1668/Ahd/2010 A.Y. 2006-07 ITO Wd-2(3) Baroda v. M/s. Super Construction Page 4 No.1503/Ahd/2008 dated 07-11-2008. The Tribunal in these cases has held as under:-
"16. The facts involved in the case of the assessee are similar to the facts in the case of Radhe Developers (supra) and accordingly we are of the view that the assessee has acquired the dominant over the land and has developed the housing project by incurring all the expenses and taking all the risks involved therein. We may mention here that, in our opinion, the decision in the case of Radhe Developers (supra) will not apply in a case where the assessee has entered into the agreement for a fixed remuneration merely as a contractor to construct or develop the housing project on behalf of the landowner. The agreement entered into in that case will not entitle the Developer to have the dominant control over the project and all the risks involved therein will vest with the landowner only. The interest of the Developer will be restricted only for the fixed remuneration for which he would be rendering the services. The decision in the case of Radhe Developers (supra) has not dealt with such situation. The proposition of law laid down in the case of Radhe Developers cannot be applied universally without looking into the development agreement entered into by the Developer along with the landowne r. In the case of Shakti Corporation since the assessee has filed copy of the development agreement and crux of the agreement is that the assessee has purchased the land and has developed the housing project at its own, therefore, we are of the view that the assessee will be entitled for the deduction u/s 80IB(10). The decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati (supra) will not assist the Revenue, as the agreement is not sharing of the constructed area. In other cases the copy of agreement since has not been submitted before us, if submitted , the terms and conditions of the agreement were not specifically argued before and placed before us, we therefore, in the interest of justice and fair play to both the parties set aside the order of the CIT(A) and restore all other appeals to the file of the AO with the direction that the AO shall look into the agreement entered into by each of the assessees with the landowner and decide whether the assessee has in fact purchased the land for a fixed consideration from the landowner and has developed the housing project at its own cost and risks involved in the project. In case the AO finds that practically the land has been bought by the Developer and Developer has all dominant control over the project and has developed the land at his own cost and risks, the AO should allow the deduction to the assessee u/s 80IB(10). In case the AO finds that the Developer has acted on behalf of the landowner and has got the fixed consideration from the landowner for the development of the housing projects, the assessee should not be allowed deduction u/s 80IB(10) to the assessee. "ITA No.1668/Ahd/2010 A.Y. 2006-07
ITO Wd-2(3) Baroda v. M/s. Super Construction Page 5
5. In view of the above facts and circumstances, we set aside this appeal to the file of the Assessing officer with a direction that he will consider the principles laid down by the Hon'ble Apex Court in the case of Faqir Chand Gulati (Supra) as well as the case law of this Tribunal in the case of Shakti Corporation Barod (supra) and decide this issue in the lights of facts and circumstances of the case.
6. The next issue in this appeal of Revenue is as regards to in the order of CIT(A) allowing the deduction u/s.s80-IB in respect to proceeds of sale of unutilized FSI and not to the dwelling units in the Housing Project.
7. At the outset, it is stated the main issue is set aside to the file of Assessing Officer, this being a consequential issue needs re-verification at the end of the Assessing Officer in view of the decision in main issue.
8. In the result, Revenue's appeal is allowed for statistical purposes.
Order pronounced in Open Court on 19/11/2010
Sd/- Sd/-
(N.S.Saini) (Mahavir Singh)
Accountant Member Judicial Member
Ahmedabad,
Dated : 19/11/2010
*Dkp
Copy of the Order forwarded to :
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-II, Baroda
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad