Income Tax Appellate Tribunal - Indore
Rajdhani Land & Housing Corporation, ... vs Assessee on 11 May, 2010
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IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
And
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No.558/Ind/2010
A.Y.2007-08
M/s Rajdhani Land & Housing Corporation
Bhopal
PAN - AAHFR 4618J :: Appellant
Vs
Income Tax Officer
1(1), Bhopal :: Respondent
Appellant by Shri H.P. Verma and
Girish Agrawal
Respondent by Shri Keshav Saxena
Date of hearing 20.04.2012
Date of pronouncement 25.04.2012
O R D E R
PER R.C. SHARMA, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the order of the learned CIT(A) dated 11.5.2010 for the assessment year 2007-08 on the following grounds :- 2
"1. That on the facts and in the circumstances of the case the findings of the learned CIT(A) in confirming the order of learned AO is rejecting deduction claimed by the assessee u/s 80IB(10) at Rs. 1,11,55,537 are materially incorrect and unsustainable in law and facts. Hence his decision be quashed and deduction of aforesaid amount be allowed.
2. That on the facts and in the circumstances of the case and in the absence of any statutory provision merely because the licence and the approval of the housing project by local authority was in the name of Shri Puneet Godha who was a partner but when the entire of development and building impugned housing project has been done by the assessee firm from its own money the deduction of Rs. 1,11,55,537 claimed u/s 80IB(10) could not be denied to the assessee.
3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in law and facts in not appreciating the fact s that it was the assessee firm who acquired lands which was more than one acre, incurred expenditure on approval of plans and permission from the local authorities and other Govt. authorities in engaging architects, engineers structural consultants designing and planning of housing projects, civil works, plumbing and sanitary work, inside and outside of the buildings, arrangement for water, supply, drainage works including sewage water disposal arrangements, electrical works inside the building and outside roads, hiring machines and obtaining connection from electricity department for the project, construction of pump house underground and overhead tanks for water supply and installation of electricity operated pumps wide advertisements repeatedly in newspapers and on hoardings and all other items of work and amenities as required by the project therefore the assessee was a developer and not a contractor.
4. That on the facts and in the circumstances of the case the assessee entered into a agreement with house purchasers stipulating therein one of the condition that if the purchaser needs any financial assistance to 3 purchase the house, the plot chosen by him may be registered in his name by a sale deed but it was mutually agreed that the same was for purpose of obtaining loan by the purchaser but its possession will not be parted away to purchaser but remained continuously before and after registration with the assessee till the complete construction of the house and the amounts due by the purchaser are paid by him to the assessee and only thereafter on receiving a satisfaction letter from the purchaser, the possession of the booked house the built up area of which did not exceed 1500 sq.ft. will be given to him.
5. That on the facts and in the circumstances of the case on the foregoing grounds the entire activities of the assessee should have been viewed as composite in nature and the assessee being a developer could not be denied the deduction of Rs. 1,11,55,537/- u/s 80IB(10) of the Act.
6. That on the facts and in the circumstances of the case the assessee vide its letter dated 29.11.07 had requested Municipal Corporation, Bhopal for issue of completion certificate hence the learned CIT(A) is not justified in assuming that the project has not been completed within the prescribed time limit.
7. That on the facts and in the circumstances of the case when the agreement between assessee and purchasers was made, the house did not come into existence and hence it was considered that provisions of section 17(IA) of Registration Act were not applicable to such agreement. At any event the agreement has been acted upon by both the parties and not repudiated and hence the deduction u/s 80IB(10) could not be denied.
8. That on the facts and in the circumstances of the case the learned CIT(A) erred in law and facts in not considering the written submissions filed before him judiciously and objectively."4
2. Rival contentions have been heard and record perused. The facts, in brief, are that the assessee is a partnership firm engaged in the business of civil construction, development and building housing projects. During the year, under consideration, the return was filed at an income of Rs. 1,58,470/- after claiming deduction u/s 80IB(10) of the Act for Rs.1,11,55,537/-. In the course of assessment u/s 143(3) of the Act, the AO declined the claim of deduction u/s 80IB(10) of the Act which was further confirmed by the learned CIT(A) and the assessee is in further appeal before us.
3. From record we find that during the year, under consideration, the assessee has undertaken a housing project under the name of Vardhman Green Park at Khasra Nos. 36, 38 and 41, Kitoniya Kachiyan, Gram Sherma Kala, Bhopal. The approval for the project was obtained from the Municipal Corporation on 13.12.2004 5 and 10.5.2005. The assessee applied for issuance of completion certificate to the Municipal Corporation on 29.11.2007. However, the completion certificate was issued on 6.6.2009.
4. The AO stated that the assessee is merely a contractor and has not developed any housing project. He observed that no registry was made for the construction work done by the assessee firm, there was registry of land only and after completing the construction work as per the agreement, the houses were handed over to the customers. Thus, as per the AO, no project, as a whole, was completed by the assessee firm. The AO also observed that the completion certificate was to be obtained by 31.3.2009 which was not obtained though a certificate dated 6.6.2009 was produced later during the assessment proceedings.
5. We also find that the lands on which the assessee has developed the housing project were business assets 6 of the firm. It has entered into a partnership agreement dated 6.2.2003 with four parties mentioned therein. Out of these four parties, Shri Punita Godha and Sangita Godha were partners of the assessee firm. The land so contributed was credited to the capital account of the partners. Later on, the agreement dated 2nd April, 2004 was executed which was supplement to the previous partnership agreement made on 6.2.2003. The said land so contributed was to be treated as absolute property of the partnership firm. On this land, the assessee has constructed the houses for which approval was taken from Municipal Corporation on 13.12.2004 and 10.5.2005. Thereafter, the assessee firm entered into agreement for sale of plots of land to the respective buyers on which as per the agreement construction was to be done by the assessee firm. This agreement was entered into by the assessee just to enable the buyers to have loan from the financial institutions. However, the possession and first lien over the plots of land so sold 7 remained with the assessee till such time the complete sale value was received by it. Thereafter, the assessee constructed houses thereon and possession was handed over to the respective buyers after receiving the sale consideration. Thus, the modus operandi adopted by the assessee for sale of house nowhere stands in the way for claim of deduction u/s 80IB(10) of the Act. The contention of the learned CIT DR was that the assessee has merely sold plots to the buyers and the buyers have paid stamp duty on purchase of such plots of land which falls u/s 17(1A) of the Registration Act, 1908, therefore, transfer of land has taken place on the date of registration and the assessee has received consideration for the same. As per the learned CIT DR in such a situation, the assessee was no more the owner of the land. The work of construction was done by the assessee according to the requirements of each land buyer and as such it was merely in the capacity of works contractor. Thereafter, relying on the decision in the case of B.D. 8 Patil & Sons; 35 SOT 171 he contended that the assessee was not eligible for claim of deduction u/s 80IB(10) of the Act in terms of Explanation so inserted. We have carefully gone through the decision in the case of B.D. Patil & Sons (supra), the facts of which are entirely different wherein the claim was made for deduction u/s 80-IA in respect of development, maintenance and operation of infra-structure facilities. However, in the instant case before us, the claim of the assessee u/s 80IB(10) is with respect to the housing project and not for any infra-structure facility. Accordingly, the proposition laid down therein cannot be applied to the assessee's case. There is no dispute to the well settled proposition to the effect that the claim of deduction under section 80IB(10) of the Act is only available to the developers and not to the contractors, meaning thereby that in addition to the construction of the houses, the assessee is also required to undertake development of infra-structure facilities like severages, electricity, roads, 9 etc. Thus, mere construction of the houses does not come under the purview of the definition of 'developer'. In the instant case, it is not clear as to what infra- structure facilities have been developed by the assessee firm in respect of the housing project for which approval has been obtained from the Municipal Corporation on 13.12.2004 and 10.5.2005. In the letter dated 12.11.2009 the Municipal Authority, Bhopal, had intimated the AO vide its letter no. 275 that in respect of permission no. 279 dated 10.5.2005, Khasra Nos. 36, 41 and 44, the assessee had constructed the houses. There is no mention as to completion of project as a whole. In the interest of justice, we restore this issue to the file of the AO for deciding it afresh after making full inquiry with regard to the infra-structure facilities developed by the assessee in terms of approval for the housing project so granted by Municipal Authority, Bhopal, in addition to the construction of the houses and more precisely in terms of our above observation. We direct accordingly. 10
6. So far as the permission of the project given in the names of partners of the firm is concerned, as per our considered view, that does not stand in the way of allowing the claim of deduction u/s 80IOB(10) of the Act. Even where the approval is given in the names of partners who have contributed land to the firm for execution of the housing project, the claim of deduction u/s 80IB(10) of the Act cannot be declined provided other conditions of section 80IB(10) of the Act are fulfilled by the assessee. Thus, we do not find any merit in the observation of the AO for declining the claim of deduction on the plea of the project approval being issued in the names of partners of the firm in place of the firm itself.
7. With regard to the completion certificate, we find that the assessee has applied to the office of the Municipal Corporation, Bhopal, vide letter dated 29.11.2007 which was duly acknowledged vide their 11 rubber stamp dated 26.12.2007. Vide this letter, the assessee has informed the Corporation regarding completion of work and further requested for issue of completion certificate. The Municipal Corporation, Bhopal, issued the completion certificate dated 6.6.2009 with respect to its permission no. 1343 dated 13.12.2004 which was also furnished before the AO. In respect of the completion certificate for permission no. 0279 a letter dated 12.11.2009 was issued directly addressing to the AO wherein completion of the houses was confirmed though the completion certificate for the housing project was not issued. The assessee has also placed this letter along with synopsis which has been obtained under RTI Act from the office of the Municipal Corporation, Bhopal. The issue with regard to the date on which completion certificate is required to be issued has been dealt with by the coordinate Bench of the Tribunal vide its order dated 6.12.2010 in the case of D.K. Construction, ITA No. 12 243/Ind/2010 30.11.2011, wherein following was the precise observation of the Bench :-
"7. We have considered the rival contentions, carefully gone through the orders of the authorities below and relevant material placed on record towards which our attention was invited during the course of hearing by the ld. Authorized Representative and the ld. Senior D.R. Provisions of Section 80IB allows claim for deduction in respect of housing project, which has been approved prior to 1.4.2004 and also completed before 31.3.2008. During the course of assessment with regard to assessee's claim of deduction u/s 80IB in respect of its D.K.Honey Homes Project, the AO has asked the assessee to furnish the certificate of completion of this project M/s. D.K. Honey Homes. The AO also directly called information from local authorities by issuing summons u/s 133(6) and a letter was issued by the competent authority dated 11th November, 2008, confirming that no completion certificate has been issued by this office. Accordingly, the assessee's claim for deduction u/s 80-IB was declined. Section 80IB clearly defines the date of completion as "Date of completion of construction of the Housing Project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the Local Authorities", it means Local Authorities is competent to certify the date of completion of Housing Project. The date of issue of such letter by the Local Authorities is not so crucial but it should have clearly mentioned the date of completion of project. When the Project is completed on 31.3.2008 and the assessee has informed regarding such completion, the Local Authorities may take its own time for issue of certificate, which may be even after 6-7 13 months, but the letter so issued by the Local Authorities should clearly mention the date of completion of such project. Merely because such certificate is issued after gap of 8-9 months or even one year, will not adversely affect the assessee if it has mentioned clearly the date of completion of project prior to 31.3.2008. Once the letter for completion of project is given by the assessee to the Local Authority, it is the duty of the Local Authority to verify physically the Projects stated to be completed from its own parameters. This process may take time and, therefore, the date of issue of letter is not so crucial to determine the assessee's eligibility for claim of deduction as per Explanation (ii) of Section 80IB(10)(a) of the Income-tax Act, 1961. What is crucial is date mentioned in the letter so issued certifying completion of the Project. Thus, the date of issue of letter is not important, but the date mentioned in the letter certifying completion of project is important. We, therefore, do not find any merit in the observation of the lower authorities to the effect that the date of completion shall be taken the date on which certificate is physically issued by the Local Authorities.
8. In view of the above discussion, we restore the matter back to the file of AO and assessee is at liberty to procure the required letter/certificate from the Local Authority clearly mentioning therein the date of completion of the project. The AO is to decide the issue afresh as per law after considering the letter of completion if any furnished by the assessee. We direct accordingly.
9. In the result, the appeal of the assessee is allowed for statistical purposes. "
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8. In view of the above, we restore the matter to the file of the AO for deciding the same afresh in terms of our above decision after giving due opportunity of being heard to the assessee.
9. In the result, the appeal of the assessee is partly allowed for statistical purposes only.
This order was pronounced in the open Court on 25th April, 2012.
Sd sd
(JOGINDER SINGH) (R.C. SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25th April, 2012
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-15