Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer, Ward-9(2),, ... vs Jay Corporation,, Ahmedabad on 28 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
ITA Nos. 1742 & 1743/Ahd/2013
(Assessment Years: 2008-09 & 2009-10)
I.T.O., Ward.9(2), Ahmedabad Appellant
Vs.
M/s. Jay Corporation,
31, Shyam Bunglows, IOC Rd,
Chandkheda, Ahmedabad Respondent
PAN: AANFM0681Q
राज व क ओर से/By Revenue : Shri Om Prakash Meena, Sr. D.R.
आवेदक क ओर से/By Assessee : None
सन
ु वाई क तार ख/Date of Hearing : 26.04.2017
घोषणा क तार ख/Date of
Pronouncement : 28.04.2017
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
These two Revenue's appeals for assessment year 2008-09 & 2009-10 arise against the CIT(A)-XV, Ahmedabad's separate orders; both dated 04.03.2013 in case nos. CIT(A)-XV/ITO/9(2)/368/10-11 & CIT(A)- XV/ITO/9(2)/413/11-12, reversing Assessing Officer's action in disallowing Section 80IB(10) deductions of Rs.45,47,315/- and Rs.14,78,516/-; ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -2- respectively, in proceedings u/s. 143(3) of the Income Tax Act, 1961, in short 'the Act'.
Case called twice. None appears at assessee's behest despite service of RPAD notice(s) dated 06.03.2017. It is accordingly proceeded ex parte.
2. The Revenue pleads the following substantive grounds in the above former appeal:
"1a). The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in in law and on facts in directing the Assessing Officer to allow the Assessee's claim for deduction of Rs.45,47,315/- u/s. 80IB(10) of the IT.
Act.
1b). The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in in law and on factsto ignore the fact that the plots of land were transferred by one Shri Natvarbhai Ishwarbhai Patel to various individuals with Assessee carryingout only construction activity as per individual construction work deed between Assessee & individuals.
1c). The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in in law and on facts to ignore the fact that expenses for basic & common infrastructure like land development, land escaping, gardening, plastering of Roads, compound wall, entry gate, security cabin, water supply, electric connection, marking of plots etc., were borne by the land owner which clearly establishes the fact that Assessee firm was only a work contractor and not 'developer' to be eligible for deduction u/s. 80IB(10) of the IT. Act."
We come to above latter appeal and notice that the Revenue's grievance in the same is identically pleaded and the only difference is that of the disallowance sum of Rs.14,78,516/-. Learned Departmental Representative is fair enough in pointing out the fact that the sole issue involved in these two Revenue's appeals is identical. We thus treat former appeal ITA No.1742/Ahd/2013 as the lead case.
3. This assessee is a partnership firm engaged in real estate development and construction. It claimed the impugned Section 80IB(10) deduction qua development of the residential project in the name and style of Shyamsarthi Bungalows, Chandkheda-Kalol highway, Ahmedabad. The Assessing ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -3- Officer took up scrutiny. He noticed that one Shri Natvarbhai Ishwarbhai Patel on the relevant parcel of land. The project approval was in his name. The assessee had entered into development agreement dated 13.11.2006. The Assessing Officer accordingly framed the regular assessment on 28.12.2010 disallowing the impugned deduction on four counts inter alia after holding that the assessee was not both developer and builder u/s.80IB(10), it was merely a contractor as per development agreement, it had not sold any unit to the purchaser and amendment inserted in Section 80IB by the Finance Act, 2009 with retrospective effect squarely applied in facts of the instant case. He therefore declined the impugned deduction.
4. The CIT(A) reverses Assessing Officer's above narrated findings as under:
"5. I have perused the facts of the case as enumerated by A.O. and as submitted by appellant. I have perused the case laws relied on by A.O. as well as appellant. After careful consideration of facts, submission and contention of both A.O. as well as of appellant, ground wise adjudication is as follows:
5.1 Before adjudication following important observation required considerations.
(a) The A.O. after discussing in detail, summarized the facts and given reasons for disallowances u/s. 80IB (10) of the Act mainly on account of non ownership of land so developed. The A.O. supported the contention that both permission to develop project and Building use permission was not in the name of developer.
(b) The appellant is treated as work contractor by A.O. on the basis of development agreement and appellant's reliance on Hon'ble ITAT, Ahmedabad.
Orders in the case of Radhe Developers and Shakti Corporation were summarily rejected with the contention that department has not accepted these order and matter is before the Hon'ble Gujarat High Court. The A.O. further emphasized that inclusion of explanation in respect of "works contract" is justify his stand.
As against these arguments the appellant's main thrust were on following arguments.
(i) The appellant fulfill all the eligible condition as required u/s. 80IB(10) of the Act. The appellant developed a housing project on a land admeasuring more than 1 Acre with due permission from local authority as per approved plan and none of the dwelling unit is having area admeasuring more than 1500 sq. ft. The building use permission is also available. The appellant ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -4- has taken all the risk of development of project right from the purchase of land, conceptualization and plan of the project, getting technical, statutorical and other permission from various authorities, arranging the man, material and finance for execution of development, enrolling the members/purchaser for the project, negotiating with them, collection of price and other such work for sale of dwelling unit of project etc. The claim of appellant is duly supported by a certificate in 10CCB from a Chartered Accountant for the claim and eligibility u/s. 80IB (10) of the Act. The appellant as per the approved method of accounting i.e. 'proportionate completion method1 claimed such deduction in three years on the basis of yearly completion of project and profit derived out of such completion.
(ii) The appellant relied on various decisions of Hon'ble IT AT, Ahmedabad and Hon'ble Gujarat High Court including the latest of m/s. Radhe Developers where in the facts and circumstances as that of appellant's case, Hon'ble High Court held that claim is justified. The appellant also submitted in the form of question and answer (P.B. Page 210 to 213) about how the guide line as enumerated by Hon'ble IT AT, Ahmedabad in such case is fulfilled and satisfied thereby how the ratio of Hon'ble Gujarat High Court decision in the case of Radhe Developer is applicable in his case. (Copy is attached herewith this order for ready reference) 5.2 Appellant's main grounds are against the disallowance of claim u/s. 80IB (10) of the Act. It is in this regard, on the basis of above discussed observations and facts, my observation and findings are as follows:
(i) I am inclined to accept various contentions of the appellant as raised in various sub-grounds. This includes that A.O. failed to consider and appreciate the detailed explanation given by appellant during the course of asst. proceedings highlighting the facts that he fulfilled all the requisite conditions for eligibility of claim u/s.80IB (10) of the Act. The involvement of appellant fund thereby risk undertaken by appellant for development of housing project is not controverted by A.O. The A.O. simply raised two issues for disallowances i.e. the ownership of land and appellant is a work contractor. On the other hand, the A.O. discarded the appellant's submission based on facts as well as legal proposition that dominion control over land with all the risk of development was that of appellant and it is only for some technical purpose the land owner was in picture for obtaining permission for development and other signatory functions.
(ii) I am also inclined to accept the contention of the appellant that ratio of case laws relied on by appellant are squarely applicable in the facts of the appellant. The appellant also provided details and explanation in a tabular form in respect of various guidelines given by Hon'ble Gujarat High Court in the case of Radhe Developers & Ors. And as summarized by Hon'ble ITAT Ahmedabad in various decisions including ACIT Cir.2, Baroda v. M/s.Shikhar Developers. All these details and explanations are verifiable from the details and submission, made by appellant before A.O. and also before me. This analysis also reflects that* appellant fulfilled all the eligible conditions for claim of deduction u/s.80IB (10) of the Act.
ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -5-
(iii) I am inclined to accept the contention of appellant that in section 80IB(10) of the Act there is no condition regarding the ownership of land being developed and there is no requirement in the sub-section that approval of housing project by a local authority and B.U. permission should be the name of developers. It is only the profit derived from building and developing a housing project on minimum one acre of land with each unit below 1500 sq. ft. with other time limitation is entitled for deduction u/s.80IB (10) of the Act. It is therefore a holistic view about the provision with its objective has to be taken rather considering the provisions in a piece meal manner.
(iv) I have examined the facts of the present case in the light of the decision in the case of M/s. Radhe developers (supra) and find that the assessee has satisfied all the requirements of section 80 IB (10) of the IT Act in the matter. The learned Counsel for the assessee referred to the terms of the development agreements extensively during the course of the appeal proceedings for development and construction of residential housing project and it provides that the assessee has acquired all substantive development rights. The development agreements entered into by the assessee was over and above the agreement to sell to acquire the rights and domain over the land in question. According to the development agreements it was the responsibility of the assessee for planning, sanction of the building plan, work of construction, development of the housing projects along with all expenditure to be incurred by the assessee for development of the property in question. The assessee is also entitled to receive the sale consideration and shall accept all the payments from the buyers. The details of the same are filed on record. The learned Counsel for the assessee also submitted that ADDA has granted permission to construct 80 residential units in 14128 sq. m. of land and in the permission for development the name of Shri Ashokbhai Sunderbhai Patel Chairman/Secretary and others being earlier land owner who initially applied for development appears but those land owner sold the land to Shri Ishwarbhai with whom appellant has development agreement but due to terms and condition no new permission for development is required since this permission is granted to land owner as per land record at the time of permission. The Building Use certificate is issued in the name of land owner Shri Natwarbhai I. Patel as per the terms of the permission for development for the same area and for the same number of residential units. When the permission for development and Building Use certificates are considered in the light of the development agreements, it would clarify that the property numbers are same as has been mentioned by ADDA and that there is no objection from the side of the landowner. Therefore, it is clear that the building plans have been sanctioned in respect of the land developed by the assessee through the agreement to sell and the development agreements in question. The details on record supports the case of the assessee that the assessee has undertaken the entire development of the housing project for which the plans were approved and permission to use was obtained in respect of the same property in question, the assessee incurred all the expenditure for development of the housing project and received the entire sale consideration from the buyers. It would, therefore, prove that the assessee undertaken to develop the building housing project in question. These facts would show and prove that the assessee made the payments of sale consideration of the property in question and the details of the sale proceeds received from the buyers have also been mentioned in the total sale proceeds in the books of accounts of the assessee. The facts of the case and ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -6- evidences on record would prove that the assessee entered into development agreements and agreement to sell with the purchaser for consideration. All the responsibilities for carrying out construction, permission and development of the project lie with the assessee. The real owner of the land i.e. landowner was only to co-operate with the assessee in carrying out the development and to execute necessary documents whenever required by the assessee as a developer. The landowner had handed over physical possession of the land to the assessee as a developer for carrying out development of housing project. The landowner was not left with any right, interest or title in the development which was carried out by the assessee. The motives of the landowner was not to develop, construct or carrying out any business as a builder or developer and practically nothing was left with him. For all intent and purposes, the assessee has acquired dominant rights over the land and the assessee can deal in the land in the manner in which the assessee might have liked. The terms and conditions entered into between the assessee and the landowner as per the development agreements provided all the dominant control and rights over the land to the assessee and the assessee developed and constructed the housing project at its own cost and would remain owner of the building without any interference from the landowner. The development agreements in question did not provide that the assessee would be working as a contractor or agent on behalf of the landowner. The agreements in question would not be regarded to be the joint venture or collaboration agreement. It was the agreements under which the assessee was entitled to develop the housing project on the land on its own cost and in the manner in which the assessee might have decided.
It is not in dispute that the assessee being a developer constructed the housing project as per the development agreements by incurring total expenditure and received the sale consideration. Therefore, the assessee is able to satisfy the requirement of section 80 IB (10) of the IT Act. It is highlighted that once plan is approved by AUDA on papers submitted by the assessee and others, it would be deemed approval of construction of housing units in favor of the assessee, more so, when the assessee entered into agreements for developing the whole of the property. Therefore, objection of the authorities below, the name of the assessee is not mentioned in the permission or development agreement as works contract are not sustainable in law. The facts of the case, if considered in the light of the decisions of ITAT Ahmedabad Bench in the cases of Radhe Developers, Shakti Corporation as upheld by Hon'ble Gujarat high court in the case of Radhe Developers 341 ITR 403 and also in the case of C.I.T. Vs. Tarnetar Corporation (order dt. 12/12/2012 in tax appeal No. 1241 of 2011), I am of the view the issue is now fully covered in favor of the assessee for grant of deduction u/s 80 IB(10) of the IT Act because the assessee has acquired dominant right over the land and has developed the housing project by incurring all the expenses and taking all risks involved thereof. The crux of the matter would be that assessee has acquired the land in question and has developed the housing project at its own cost as per the requirement of section 80 IB (10) of the IT Act. Hon'ble supreme court in the case of C.I.T. -1 Ahmedabad Gujarat Vs. B. Nanji Enterprise Ltd. rejected department's petition for special leave in appeal (civil)...../2012 CC 21333/2012 arised from the order dt. 13/12/11 in ITA No. 1498/2008 of Hon'ble Gujarat high court vide order dt. 07/12/12. Further in the case of ACIT (OSD) wd 5(2) Baroda Vs. M/s Someshwar Developers also SLP of the department arising from the judgment and ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -7- order dt. 11/01/2012 in ITA No. 1300/2008 of Hon'ble Gujarat high court, The Hon'ble Supreme Court after condoning delay, declined to interfere and dismissed the SLP of the department.
Therefore,I am of the view the assessee would be entitled for deduction u/s 80 IB (10) of the IT Act. I am of the view that assessee fulfilled the conditions and requirements of section 80IB(10) of the IT Act, therefore, the claim of the assessee for deduction should not have been denied and direct the AO to grant deduction to the assessee u/s80IB(10) of the IT Act as claimed by the assessee. The appellant gets relief accordingly."
5. Heard learned Departmental Representative. Case file perused. He strongly reiterates Assessing Officer's conclusion hereinabove that the assessee is not entitle for the above impugned deduction u/s.80IB(10) of the Act. There can hardly be any dispute that ownership of the land in question is not a valid criteria to disallow the impugned deduction claim as held in hon'ble jurisdictional high court's decision in CIT vs. Radhe Developers' case (2012) 341 ITR 403 (Gujarat). Learned Assessing Officer is fair enough in admitting in para 3.18 that the assessee had been given right of possession over the project land and it had exercised all rights of admission of prospective buyers, collection of consideration as well as finance arrangements. It has come on record that the assessee had placed the above development agreement before the Assessing Officer as well as the CIT(A). The CIT(A) finds in lower appellate order that it is the assessee developer who has incurred total expenditure and received the sale consideration. We afforded ample opportunity to the Revenue to rebut this clinching finding by reading the corresponding terms in above development agreement. We notice that the same does not even form part of the case records. This clinching factor makes us to conclude that the learned CIT(A) has rightly held the assessee to have undertaken all risk and reward in developing the abovestated residential project so as to be eligible for Section 80IB(10) deduction in question. The Revenue's sole substantive ground as well as its appeal ITA No.1742/Ahd/2013 is declined.
ITA No. 1742 & 1743/Ahd/2013 ( ITO vs. M/s. Jay Corporation) A.Ys. 2008-09 & 2009-10 -8-
6. Same order to follow in Revenue's latter appeal ITA No.1743/Ahd/2013 since we have already made it clear in preceding paragraphs that the issue involved herein is the same and identical as adjudicated in former appeal.
7. These two Revenue's appeals are dismissed.
[Pronounced in the open Court on this the 28th day of April, 2017.] Sd/- Sd/-
(PRADIP KUMAR KEDIA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 28/04/2017
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आय!
ु त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।