Income Tax Appellate Tribunal - Ahmedabad
Siddharth Enterprises,, Baroda vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH AHMEDABAD
Before Shri D.K.Tyagi, Judicial Member and
Shri A. Mohan Alankamony, Accountant Member
ITA No. 1529/Ahd/ 2010
Assessm ent Year :2007-08
Asst. Commissioner of V/s. M/s Siddharth Enterprise,
Incom e Tax, Circle-5, 5 t h S.No.341, 342, Siddharth
Floor, Aayakar Bhavan, Park Nr. Saideep Nagar,
Race Course Circle, New VIP Road, B/h. Air
Baroda-390 007 Port, Baroda.
PAN No. ABCFS 0789 H
(Appellant) .. (Respondent)
अपीलाथȸ कȧ ओर से Shri K. Mudhousnalan, Sr. D.R.
By Appellant
ू×यथȸ कȧ ओर से/By Respondent None
सुनवाई कȧ तारȣख/Date of Hearing
14.05.2012
घोषणा कȧ तारȣख/Date of Pronouncement 18.05.2012
ORDER
PER : D.K.Tyagi, Judicial Member
This is a Revenue's appeal directed against the order of ld. CIT (A)-V, Baroda dated 09.03.2010 for assessment year 2007-08.
2. None appeared on behalf of the assessee despite notice being served upon him. So we proceeded to decide the appeal after hearing learned A.R.
3. The revenue in this appeal is aggrieved by the order of ld. CIT (A) I T A No . 1 52 9 /A h d/ 2 01 0 A . Y. 20 0 7- 0 8 Page 2 allowing the deduction under Section 80IB(10) of the Act of Rs. 57,18,600/- as claimed by the assessee.
4. The brief facts of the case are that during the assessment proceeding the Assessment Officer observed that the assessee firm has claimed deduction under Section 80IB(10) of the Act of Rs. 57,18,600/-. In this regard, the show cause notice was issued by him as to why this deduction should not be disallowed, considering that the developer is not the owner of the land. After going through the return of income of the assessee as well as the submission of the assessee in reply to the show cause notice issued by him the Assessing Officer was of the view that the assessee firm was not eligible for deduction under Section 80IB(10) of the Act. The reason for this disallowance by A.O. of assessee's claim can be summarized as under:
"(i) The land is not in the name of the firm. Ownership of land is an essential element which carries with it the right to develop the land and build housing projects thereon. AO says that the developer first should purchase the land and then take necessary permission to construct.
(ii) Appellant in the instant case has acted merely as an agent for collection of the land consideration on behalf of the land owner and a contractor for the construction of the house on behalf of the unit holders.
(iii) The approval for the project is granted by the competent authority in the name of the Land owner only.
(iv) The appellant is not a builder or developer but a contractor and the appellant is not eligible for deduction U/S 80IB."
I T A No . 1 52 9 /A h d/ 2 01 0 A . Y. 20 0 7- 0 8 Page 3
5. Aggrieved by this disallowance the assessee went in appeal before the ld. CIT (A). The assessee's contention before him was that he is engaged in developing housing project on the land in possession of the firm in the name of Shri Bholabhai Ramjibhai Patel, HUF who is the partner of the firm and that the land was introduced as capital contribution. It was further mentioned that the approval of the project was also obtained in the name of the aforesaid person and that all the other conditions regarding area etc. as laid down under Section 80IB(10) were also satisfied. Reliance was placed on the decision of the Hon'ble ITAt in the case of Radhey Developers vs ITO ward 3(2) Baroda No 2482/Ahd/2006 A Bench Ahmedabad. It was further submitted that the entire risk was of the assessee who was developing the project and there was no agreement for fixed remuneration as a Contractor and the land owner did not have any right or interest in the developing of the project.
6. Learned CIT (A) allowed the appeal of the assessee by observing as under:
"4.3 I have carefully examined the facts of the case, submissions of the appellant and perused the arguments of the Assessing Officer. On the main issue of deduction u/s. 80IB(10), it is seen that although, the issue was decided in favour of the appellant and against revenue by the order of the jurisdictional ITAT, in the case of Radhe Developers vs ITO ward 3(2) Baroda No 2482/Ahd/2006 A bench Ahmedabad, however the decision was partly modified by the subsequent decision in the case of ITO vs M/S. Shakti Corporation ITA No. 1503/AHD/2008 dated 07/11/2008 wherein, the Hon'ble ITAT has indicated that the benefit under 80IB(10) would be available if the developer has dominant control over the project and has developed the land at its own cost and I T A No . 1 52 9 /A h d/ 2 01 0 A . Y. 20 0 7- 0 8 Page 4 risk and the benefit would be denied if the assessee had entered into an agreement for a fixed remuneration as a contractor to construct or devlop the project on behalf of the land owner. Further, Hon'ble Apex Court in the case of Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd. & Anr. (Civil Appeal No. 3302 of 2005) dated 10/07/2008 has held as under :
i) Adevelopment agreement is one where the land holder provides the land. The Builder puts up a building. Thereafter, the land owner and builder 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 apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both pareties 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.
I T A No . 1 52 9 /A h d/ 2 01 0 A . Y. 20 0 7- 0 8 Page 5 4.3.1 In the instant case, the appellant has purchased the land for fixed consideration and has developed the housing project on its own cost and risk and there is no joint venture with the land owner and thus in terms of decision in the case of M/s. Shakti Corporation and Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd. & Anr. The appellant is entitled to deduction u/s. 80IB(10). The ground is allowed."
7. Since the ld. CIT(A) has given relief to the assessee by placing reliance on the decision of the Tribunal in the case of M/s. Shakti Corporation and the decision of Hon'ble Apex Court in the case of Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd. & Anr, the order passed by him is hereby upheld.
8. In the result, the revenue's appeal is dismissed. Order pronounced in Open Court on the date mentioned hereinabove at caption page.
Sd/- Sd/-
(A. Mohan Alankamony) (D.K. Tyagi)
Accountant Member Judicial Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
I T A No . 1 52 9 /A h d/ 2 01 0 A . Y. 20 0 7- 0 8 Page 6