Income Tax Appellate Tribunal - Chennai
Vasavi Builders, Chennai vs Department Of Income Tax on 28 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
I.T.A. No. 1579/Mds/2011
(Assessment Year : 2008-09)
The Income Tax Officer, M/s Vasavi Builders,
Business Ward - II(2), No.8-A, Old No.9, Kandasamy Street,
Chennai - 600 034. v. R.A. Puram, Chennai - 600 028.
PAN : AADFV2091B
(Appellant) (Respondent)
Appellant by : Shri S. Moharana, CIT-DR
Respondent by : Shri K. Balasubramanian
Date of Hearing : 28.03.2012
Date of Pronouncement : 28.03.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the Revenue, its grievance is that CIT(Appeals) allowed the assessee's claim for deduction under Section 80-IB(10) of Income-tax Act, 1961 (in short 'the Act') which was denied to it by the A.O. 2 I.T.A. No. 1579/Mds/11
2. Short facts apropos are that assessee for the construction projects undertaken by it had claimed deduction under Section 80- IB(10) of the Act of ` 2,26,67,317/-. Assessing Officer denied such claim since according to him, Explanation to Section 80-IB(10) of the Act clearly stated that the said sub-section would not apply to any undertaking which was executing a housing project as a works contractor. According to A.O., assessee was only a works contractor and therefore, not eligible for deduction under Section 80-IB(10) of the Act.
3. Assessee moved in appeal before ld. CIT(Appeals). Argument of the assessee was that a contract to be works contract, it should be awarded by a person. According to assessee, it was only a developer of residential projects and it had not obtained any works contract to construct the houses. The project was executed by it in whole and there was no works contract awarded by any person. Reliance was placed on the decision of co-ordinate Bench of this Tribunal in the case of Sanghvi And Doshi Enterprises v. ITO (131 ITD 151). Ld. CIT(Appeals) was appreciative of these contentions. According to him, assessee's case was fully covered by the decision of this Tribunal mentioned supra. Assessing Officer had disallowed 3 I.T.A. No. 1579/Mds/11 claim of the assessee by invoking Explanation to Section 80-IB(10) of the Act and as per ld. CIT(Appeals), the said Explanation did not apply to a project developer. He, therefore, allowed the claim of the assessee under Section 80-IB(10) of the Act.
4. Now before us, learned D.R., assailing the order of ld. CIT(Appeals), again relied on Explanation to Section 80-IB(10) of the Act. According to him, it was clear that a person doing a construction work as a mere works contractor was not eligible for a claim of deduction under Section 80-IB(10) of the Act.
5. Learned A.R., on the other hand, supported the order of ld. CIT(Appeals) by relying on the decision of Hon'ble Gujarat High Court in the case of CIT v. Radhe Developers in TCA No.546 of 2008 dated 13.12.2011.
6. We have perused the orders and heard the rival submissions. The reason why the A.O. had denied deduction under Section 80- IB(10) of the Act to the assessee was that assessee was executing a works contract and was not a project developer. However, ld. CIT(Appeals) has given a clear finding that assessee had undertaken the housing project not as a works contractor but as a promoter. Ld. 4 I.T.A. No. 1579/Mds/11 CIT(Appeals) has also given a finding that assessee had purchased 18.5 grounds from nine parties for a consideration of ` 3.3 Crores and thereafter executed the housing project by itself. The sellers had executed on power of attorney in favour of assessee on 13.7.2005. Plan for the project was got sanctioned and all other necessary permits obtained by the assessee directly and not through somebody else. None of the above findings of ld. CIT(Appeals) has been rebutted by the Revenue. In such a situation, we do agree that assessee could not be considered as a works contractor but only as a developer. In the case of CIT v. Radhe Developers (supra), Hon'ble Gujarat High Court held at paras 41 and 42 as under:-
"41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of Income-tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the 5 I.T.A. No. 1579/Mds/11 case of Mysore Minerals Ltd. vs. Commissioner of Income Tax (supra), and in the case of Commissioner of Income Tax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also, even if it was necessary.
42. In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore, in this group of cases also will have no effect."
The same view, as above, was taken by Third Member decision of this Tribunal in the case of Sanghvi And Doshi Enterprise (supra). We are, therefore, of the opinion that ld. CIT(Appeals) was justified in directing the Assessing Officer to give deduction claimed by the assessee under Section 80-IB(10) of the Act. We do not find any reason to interfere with the order of ld. CIT(Appeals). 6 I.T.A. No. 1579/Mds/11
7. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court after conclusion of hearing on 28th March, 2012.
sd/- sd/-
(Vikas Awasthy) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 28th March, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-VI, Chennai
(4) CIT-IV, Chennai
(5) D.R.
(6) Guard file