Income Tax Appellate Tribunal - Ahmedabad
Pranami Builders, Ahmedabad vs Department Of Income Tax on 2 June, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' A " BENCH - AHMEDABAD
Before Shri R.P. Tolani, JM, & Shri Manish Borad, AM.
ITA No.1376/Ahd/2012
Asst. Year: 2008-09
ITO, Ward-9(1), Ahmedabad Vs. M/s Pranami Builders,
120/4 Radhe Chembers,
Pranami nagar, Vastral
Road, Vastral,
Ahmedabad.
Appellant Respondent
PAN AAJFP 3275F
Appellant by Shri A. R. Rewar, Sr.DR
Respondent by Shri A. C. Brahmakshatriya, AR
Date of hearing: 31.5.2016
Date of pronouncement: 2/6/2016
ORDER
PER Manish Borad, Accountant Member.
This appeal of the Revenue is directed against the order of ld. CIT(A)-XV, Ahmedabad, dated 23rd April, 2012 in appeal no.CIT(A)- XV/9(1)/231/10-11 passed against order u/s 143(3) of the IT Act, 1961 (in short the Act) for asst. year 2008-09 on 23.11.2010 by ITO, Wd-9(1), Ahmedabad. The Revenue has raised the following grounds of appeal :-
1) The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the Assessee's claim for deduction of Rs.1,77,38,316/- u/s. 80IB(10) of the IT. Act.ITA No.1376/Ahd/2012 2
Asst. Year 2008-09
2) The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in holding that the Assessee fulfills the conditions laid down for claiming deduction u/s.80IB(10) even when the land was in the name of Madhusudan Co.-Op. Housing Society Ltd., which is a separate legal entity in the eyes of law and the Assessee entered into the project by a development agreement with the Society. The entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the Society. The local Authority had granted permission for development and construction of the project to the Society. Assessee was just a contractor of the land owner constructing residential units and not a developer.
3) On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer.
4) It is therefore, prayed that the order of the Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
2. Briefly stated facts as culled out from the assessment records are that the assessee is a partnership firm engaged in the business of development and construction of housing projects. E-return of income was filed on 22.09.2008 declaring income at Rs.NIL after claiming deduction of Rs.1,77,38,316/- u/s 80IB(10) of the Act. The case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued on 23.9.2009. During the course of assessment proceedings ld. Assessing Officer observed that the impugned project, the income of which assessee has claimed as deduction u/s 80IB(10) of the Act, the land on which the project was constructed was not owned by the assessee nor any approval from the local authorities for development and construction of the said project was accorded in the name of assessee and accordingly denied the deduction u/s 80IB(10) of the Act on the basis of following reasons :-
ITA No.1376/Ahd/2012 3Asst. Year 2008-09 1 The Assessee is not both developer and builder as required by the provisions of section 80IB(10). Assessee is not a developer because the assessee did not conceptualise and own the project in as much as the assessee is not the owner of the land and the approval was not issued to it by the Local authority.
2 The Assessee entered into the project by a Development Agreement with the land owner and construction was done as per the agreement and hence the assessee is merely a contractor for the purposes of construction of the project.
3 The assessee has not sold any unit to the purchaser but the Society has executed the sale deeds as a seller and the assessee joined only as a confirming party to the transaction. This also proves that the assessee was merely a contractor/ agent of the society.
4. Assessee has also failed to produce BU Permission.
5. As per the Amendment to section 80IB by the Finance Act 2009, a works contractor who executes the work awarded by any person is not eligible for the deduction u/s 80IB. Any person includes the Madhusudan Co-
Op..Hsg. Society Ltd.,, which is a legal entity.
3. Aggrieved, assessee went in appeal before ld. CIT(A) before whom assessee made various submissions and also relied on the decision of Hon. Jurisdictional High Court in the case of CIT vs. Radhe Developers 341 ITR 403 (2012). Ld. CIT(A) accepted the contentions of assessee and deleted the disallowance made by ld. Assessing Officer by allowing deduction u/s 80IB(10) of the Act by relying on the judgment of Hon. Jurisdictional High Curt in the case of CIT vs. Radhe Developers (supra) by observing as under :-
14.3. The facts of the appellant are identical with the cases dealt by Hon'ble Gujarat High Court. Even the contention raised by the AO along with reliance of various judicial authorities are identical. Therefore following the ratio of Hon'ble Gujarat High Court in this case, the disallowance and thereby additions made by the AO in the case of the appellant are not justified and directed to be deleted.
Appellant gets relief of Rs.1,77,38,320.
ITA No.1376/Ahd/2012 4Asst. Year 2008-09
4. Aggrieved, Revenue is now in appeal before the Tribunal.
5. Ld. AR reiterated the submissions made before the ld. CIT(A) which are reproduced below :-
We have undertaken the housing project as a developer and builder and claimed the deduction u/s 80-18(10). We have claimed deduction properly and correctly and as per the provisions of the Act. The legitimacy and genuineness of the claim is based on the following grounds:
1 Ours is an undertaking developing and building housing projects approved by the local authorities.
2. We have complied with all conditions prescribed in section 80-18(10) of the Income Tax Act, 1961 for claim of deduction u/s 80-18(10) namely approval, commencement period, completion period, minimum area of plot, maximum area of unit etc.
3. Our undertaking falls under the category of developer and builder and does not fall under the category of works contractor as per explanation to Section 80-18(10) due to following reasons and contentions:
a. The developer is that who is involved in overall activities of the project and also make investment in the project while the works contractor is assigned particular task and he is neither concerned with other activities and overall development nor he makes investment in the project. Our undertaking is fully involved in overall activities since inception to completion of the project and also made investment in purchase of land and construction of building units hence the category of ours is a developer/builder and not as a works contractor.
b. We have made investment in purchase of land, purchase of materials, in stock of materials and work in progress, outstanding to debtor society etc..
c. The land was purchased by the partners and their relatives from the original owners of the land and total investment was made by them and later on the same was transferred to the society for convenience sake. The investment was of partners and relatives of them till date as the same was receivable from the society and received partly in 3-4 years. This is very dear from the purchase deed and account copy of the society from the books of partners and their relatives showing sale of land, investment held, outstanding amount against land till date. Hence it is very clear that the project including the land was funded by the partners of the firm and there is no question of treating them as works contractor rather than developer/builder, d. The approval of the plan was also got approved by the partner of the firm as power of attorney holder of owners of the land.ITA No.1376/Ahd/2012 5
Asst. Year 2008-09 e. The undertaking and its partners were involved in floating the project, getting necessary approvals for development and construction, procuring the building materials, bringing materials to site, construction activity involving labour and machinery, getting the building use permission, selling units to the prospective buyers. The tasks stated hereinabove are not of the works contractor but of the developer and builder hence the undertaking is developer/builder as required by the explanation to section 80-18(10} of the Act.
f. The society entered into an agreement with the undertaking of development of the project assigning overall activities. The agreement was not of the nature of a works contract. This is very clear from the copy of development agreement enclosed.
g. As per clauses of Development Agreement, it is dear that the assignment was of developer/ builder not as works contractor. The clauses are as under: 1. Clause No.3 - Society has handed over the land to the firm for construction as per approved plan after land leveling and development of common aminities and to register the members for allotment of units under the agreed terms and conditions. The abstract of terms and conditions of the development agreement is as under:
a. To plan for development of whole plot of land including common facilities b. To register members of the society and to make financial transactions with them and issue receipts thereof.
c. To collect the outstanding amount from members, to hand over the possession of the unit to the members and to construct as per approved plan, d. To purchase materials in the name of firm and to make payment thereof e. To make financial arrangement with bankers, shroffs, financial institutions or other persons if need of finance arises and to do all legal proceedings for this purpose and the firm shall be liable for repayment of the loans taken f. To revise the plan if need arises and get approval thereof
4. Thus we were assigned the overall activities of development and building the units of the project and we have fulfilled all such assignments. What else activities are left which are required to be done to fall in the category of developer of the housing project. Hence the requirement of the explanation added vide amendment made in Finance 3111,2009 to Sect/on 80-13(10) is fully satisfied. As per aforesaid explanation it is not required that there should be land in own name but there should be the nature of developer and also investment in project fully justifies the nature of developer. Hence we have acted as builder and developer and not as works contractor.
5. The above clauses clearly proves that the undertaking was developer and not as works contractor because the undertaking executed overall activities of the project and also made investment in land and in construction. The development agreement clarifies the scope stating the development with investment.
6. We furnish herewith following documents in support of our claim for your perusal:
1. Copy of Land Purchase Deed
2. Copy of Development Agreement
3. Copy of account copies of society in the books of partners and their relatives who has ITA No.1376/Ahd/2012 6 Asst. Year 2008-09 invested in land of the project
7. Under the circumstances we request your honour to allow us the claim of deduction u/s 80-18(10) of the Income Tax Act, 1961 as our claim is genuine and as per the provisions of the Act"
6. Ld. AR further submitted that on one hand ld. Assessing Officer denied the deduction u/s 80IB(10) of the Act for Asst. Year 2008-09 and on the other hand, the claim of assessee u/s 80IB(10) of the Act on the same project has been allowed for Asst. Year 2009-10 and Asst. Year 2010-11. However, ld. AR mentioned that for asst. year 2009-10 the case of assessee was not selected for scrutiny assessment but for asst. year 2010-11 assessment was completed u/s 143(3) of the Act and deduction u/s 80IB(10) of the Act was allowed at Rs.64551443/-.
7. The ld. AR further submitted that the facts of the present case are identical to the facts adjudicated by the Hon. Tribunal in ITA No.3152/Ahd/2011 for AY 2008-09 in the case of ITO-Wd-9(2) Ahmedabad vs. M/s Hariom Corporation vide order dated 10/5/2016. Further to strengthen his contentions, he placed on record a comparative chart showing the facts of M/s Harion Corporation and the facts of the case of assessee which are reproduced below :-
A comparative chart showing the facts of M/s. Hariom Corporation and the facts of the respondent partnership firm:
The respondent partnership firm M/s. Hariom Corporation. Remarks M/s. Pranami Builders [Observation of the A.O. [Observation of the A.O. in iruthe Assessment order-
the Assessment order- Para Para 7.10 on Page No.18 ] 2.24 on Page No.15] The assessee is not both the The assessee is not both the NIL developer and builder as developer and builder as ITA No.1376/Ahd/2012 7 Asst. Year 2008-09 required by the provisions of required by the provisions of section 80 IB(10). Assessee is section 80 IB(10). Assessee is not a developer because the not a developer because the assessee did not conceptualise assessee did not conceptualise and own the project is as much and own the project is as much as the assessee is not the as the assessee is not the owner of the land and the owner of the land and the approval was not issued to it by approval was not issued to it by the local authority. the local authority. The assessee entered into the The assessee has not taken any NIL project by a development investment risk in the Project. agreement with the landowner The risk taken is principally by and the construction was done the Society. The assessee as per the agreement and entered into the project by a hence the assessee is merely development agreement with contractor for the purposes of the landowner and the construction of the project construction was done as per the agreement and hence the assessee is merely contractor for the purposes of construction of the project. The assessee has not sold any The assessee has not sold any Nil unit to the purchaser but the unit to the purchaser but the society has executed the sale- society has executed the sale- deed as a seller and the deed as a seller and the assessee joined only as a assessee joined only as a confirming party to the confirming party to the transaction. These also proves transaction. These also proves that the assessee was merely a that the assessee was merely a contractor/agent of the society. contractor/agent of the society Assessee -as also failed NA Dealt with to produce BU permission. at Para-12 on Page No.9 of the Appellate order of CIT(A) As per the amendment to As per the amendment to NA section 80 IB by the Finance act section 80 IB by the Finance act 2009, it works contractor who 2009, it works contractor who executes the work awarded by executes the work awarded by any person is not eligible for any person is not eligible for the the, deduction under section 80 deduction under section 80 IB. IB. Any person includes the Any person includes the society society which is a legal entity. which is a legal entity. ITA No.1376/Ahd/2012 8 Asst. Year 2008-09
7A. The ld. DR supported the order of ld. Assessing Officer and did not object to this extent that the facts of the case of respondent and that of M/s Hariom Corporation are identical.
8. We have heard the rival contentions and perused the material on record. The solitary grievance of the Revenue through this ground of appeal is against the action of ld. CIT(A) directing the Assessing Officer to allow assessee's claim for deduction of Rs.1,77,38,316/- u/s 80IB(10) of the Act by completely ignoring the fact that the assessee has not fulfilled the conditions laid down for claiming u/s 80IB(10) of the Act, even when the land on which the project has been constructed was in the name of Madhusudan Co-op. Housing Society Ltd. which is a separate legal entity.
9. We oserve that the facts of the case of assessee are similar to the facts of the case of Hariom Corporation (supra) and the assessee has been able to prove that except the fact that the assessee was not the owner of the land and permission was not accorded for development of the project by local authorities in its name but all other activities relating to development of the project including appointment of various agencies for construction of the project, booking of the units along with recovery of purchase consideration and taking alone all other risks relating to the development and completion of the project.
ITA No.1376/Ahd/2012 9Asst. Year 2008-09
10. We further observe that co-ordinate bench in the case of ITO- Wd-9(2) Ahmedabad vs. M/s Hariom Corporation (supra) in ITA No.3152/Ahd/2011 for AY 2008-09 vide its order dated 10.5.2016 has dismissed the appeal of Revenue by observing as under :-
"7. We have heard the rival contentions and perused the material on record. Revenue has raised various grounds of appeal but the solitary grievance revolves round the single issue that ld. CIT(A) erred in directing the Assessing Officer to allow assessee's claim for deduction u/s 80IB(10) of the Act at Rs.95,56,579/-, even when the land on which the project namely Parth Bunglows Co-op. Housing Society Ltd. was not owned by assessee and the entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the society and assessee is merely a contractor and not a developer. From going through the record, we observe that the land bearing Plot No.7/TP scheme no.99 - Nana Chiloda having an area of 8,317 sq. mtrs. was purchased by Parth Bunglows (Nana Chiloda) Co-op. Housing Society Ltd. and on this land previous owner was accorded permission by local authority for development and construction of the project during Financial Year 2005-06 on 2nd June, 2005 and thereafter the assessee entered into a development agreement with Parth Bunglows Co-op. Housing Society Ltd. We observe that following explanation below section 80IB(10) of the Act was inserted with retrospective effect from 1.4.2001 :-
Explanation - For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).
Now in order to examine as to whether the assessee is a developer, we observe that assessee has carried out various activities right from the inception of the project till the sale of last residential unit and the same are enumerated below :-
ITA No.1376/Ahd/2012 10
Asst. Year 2008-09
Sr.No. Title As a Developer
1. Initiation The partners of the assessee firm have taken
Conception initiative and had designed & conceived the housing
project and floated it.
2 Formation Co-op. Hsg. So, formed for smooth administration
subsequently on completion of the housing project. 3 Relationship The officer-bearers of the society are near relatives of the partners of the firm.
4 Investment The investment of land (by the partners of the firm)
-N.A. Charges + plan passing expenses + all other incidental expenses of the housing project borne borne by the assessee-firm.
5. Ownership Deemed owner by virtue of right of possession over the land & structure developed on it as per development agreement -para -5.
6 Brochure Name/addresses/tele no. of the assessee firm is very well appeared in the brochure for booking or information of the housing project is floated.
7 Preparation of The assessee firm has prepared the plan/got it
plans approved from local authority, engaged
architect/structural engineers and made follow ups to complete the housing project in a fair way.
8 Approval of the Solely responsible to get the construction lay out
plans plans approved as designed by it.
9 Execution of Solely responsible as per development agreement
Civil work
10 Advertisement The assessee-firm has advertised the project and
got booking of the residential units.
11 Acceptance of As per agreement the assessee firm has issued
booking/selling receipts, allotment letters, possession letters & all price other legal documents.
12 Responsibility The assessee firm is responsible of every work of the housing project.
13 Authority As per agreement, the assessee has issued receipts, allotment letters, possession letters & all other legal documents/to cancel the booking/repay the advance money received from the proposed buyer/ booker/to enroll as subsequent member of the housing project.
14 Agreement Development agreement proved that it has entered into to develop the housing project, as a whole including all necessary amenities/roads/streetlights /maintenance of the development site up to possession of the housing project as a whole to all the residential unit buyers/customers.ITA No.1376/Ahd/2012 11
Asst. Year 2008-09 15 Control Domain control on the whole of the land of the project.
16 Price fixation The assessee firm has fixed the consideration/price with proposed buyers/ customers/actual users and not with the land owner society. Even the society has no authority to interfere in price fixation with the buyer/member. 17 Fluctuation in The variation in selling price of the residential units market affect the profit/loss of the assessee firm. 18 Risk Involved in whole of the development of the project/if project fails, the chances of loss was very high. But fortunately, the project succeeds.
19 Work The assessee firm's developmental work includes civil construction work.
20 Meaning Developer is wider terms. Means developer can be said to be a contractor but cannot vice a versa 21 Connection The assessee firm was directly connected to the actual users/customers/members/ brokers. They do not know the land owner society. 22 Keeping books The assessee firm has kept the books of of account etc. account/getting it audited/filed return of income regularly.
23 Possession On completion of the housing project, the possession of each residential unit is given to the members/buyers by the assessee firm.
24 Maintenance The assessee firm has maintained the housing project upto completion of the housing project, i.e. upto last sale of residential unit.
8. Further we observe from the development agreement that assessee firm was having control on the project in the capacity of developer which is justifiable on the basis of below mentioned clauses of the development agreement by virtue of which assessee was appointed as a builder firm :-
3. It is agreed by both the parties that the construction and development work shall be in accordance with the approved plan. However, a separate agreement between the proposed/prospective buyers/purchaser/customer and the builder-firm shall be executed. The party of the first part shall not be held responsible for any delay in work and / or quality of the work. Each buyer wilt free to inspect the quality of the work and on satisfaction only, the builder-firm shall be entitled for the consideration of the work executed. Alt the risk and control over the housing project would be that of M/s. HARIOM ITA No.1376/Ahd/2012 12 Asst. Year 2008-09
5. Except as provided in this agreement, M/S. HARIOM CORPORATION is and at all times will be independent builder cum developer. M/S. HARIOM CORPORATION, the party of the other part has to raise fund for the development and construction work on their own. The necessary developmental expenses shall also be borne by the partnership firm. Any Profit/Loss arise on the developmental work of the Housing Project shall belong to M/S. HARIOM CORPORATION.
6. The party of the first part does not retain the right to terminate this agreement prior to the satisfaction of the terms hereof. Upon the occurrence of any breach or default by M/S. HARIOM CORPORATION of any type of the terms, obligations and covenant contained in this agreement, if it occurs, it should be resolved by mutual discussion only. The party of the other part will free in selecting the architect for assistance and technical information to assist M/S. HARIOM CORPORATION for completing the construction work.
9. M/S. HARIOM CORPORATION agrees to carry out the construction cum developer work on the land as per the approved plan and free to use any advertisement or other materials or other information for the purpose of advertising, promoting or otherwise for publishing the house accommodation. .
9. We further observe that ld. CIT(A) while allowing the assessee's appeal observed as under :-
"6. The AO has not disputed any of the conditions stipulated from clause (a) to clause (d) of section 80IB(10) with respect to time limit of permissions, time limit of completion, area of land, built-up area limit prescribed for the residential units, and percentage of commercial construction which can be undertaken.
His objection is that the appellant is not a developer because it is not the owner of the land on which the residential units were constructed. According to him the appellant is a works contractor executing construction authorized by the cooperative housing society and is thus not eligible for deduction because it is hit by the Explanation inserted in the Act by Finance Act 2009 according to which a works contractor who executes the work awarded by any person is not eligible for deduction u/s.80IB. The appellant according to the AO worked as contractor for constructing the residential units as authorized by the cooperative housing society through the Development Agreement.
This objection of the AO has to be seen in the light of the tests laid down by Hon'ble ITAT Bench A Ahmedabad decision dated ITA No.1376/Ahd/2012 13 Asst. Year 2008-09 7.11.2008 in the case of M/s. Shakti Corporation, Baroda in ITA No.i503/Ahd/2008 in AY 2005-06 wherein Hon'ble ITAT has held that where the appellant is found having practically purchased the land and has borne the risk of development deduction should be allowed.
7. The submission of the appellant dated 2.5.2011 in which it rated that the funds to the Cooperative Housing Society were made available by the appellant was sent to the AO for remand report. Remand report of the AO was received vide letter dated 7.9.2011. Counter comments of the appellant on remand report were received vide letter dated 17.10.2011.
8. The AO in his report dated 7.9.2011 stated as under:
*As directed by your honour the AR of the assessee submitted the copy of Mger account of the society appearing in the books of partners. On perusal of the same, it is noticed that partners have paid cash of Rs.52,000 on 1Z4.2005 and Rs.3,50,000 (Rs.1,50,000 + Rs.1,50,000) on 11.5.2005 i.e. the date of purchase of land on which project is developed."
After going through rival submissions it is seen that in the remand report the AO has not disputed the land funding argument of the appellant therefore the appellant is found meeting the test of having practically purchased the land, set forth in Hon'ble ITAT decision in the case of Shakti Corporation.
9. Further in the remand report the AO has reiterated the arguments made in the assessment order that the appellant is not the owner of the land because the land owner has applied for housing plan approval and got the permission to develop in their names. To examine these arguments the Development Agreement has to be referred to as stated by Hon'ble ITAT 'A1 bench Ahmedabad in the case of Shakti Corporation wherein in para 16 of the order it has been directed that the Development Agreement should be referred to for concluding whether the appellant is in the dominant control of the land or not and whether the project is developed at its cost and risk. Hon'ble ITAT has held that where ITA No.1376/Ahd/2012 14 Asst. Year 2008-09 the appellant is found having practically purchased the land and has borne the risk of development deduction should be allowed.
In this case following clauses of the Development Agreement dated 2.6.2005 show dominant control of the appellant.
(2) Parth Bunglows (Nana Chiloda) Co.Op. Hsg. Society Ltd. the party of the first part hereby appoints the partnership firm M/s HARIOM CORPORATION and the firm M/s. HARIOM CORPORATION agree to act as builder cum developer to develop the and build the housing project thereon on its own risk and cost.
(3) It is agreed by both the parties that the construction and development work s^aii be in accordance with the approved plan. However, a separate agreement between the proposed/prospective buyers/purchaser/customer and the builder-firm shall be executed. The party of the first part shall not be held responsible for any delay in work and/or quality of the work. Each buyer will free to inspect the quality of tfie work and on satisfaction only, the builder-firm shall be entitled for the consideration of the work executed. All the risk and control over the housing project would be that of M/s HARIOM CORPORATION.
(5) Except, as provided in this agreement, M/s HARIOM CORPORATION is and at all times will be independent builder cum developer. M/s HARIOM CORPORATION, the party of the other part has to raise fund for the development and construction work on their own. The necessary development expenses shall also be borne by the partnership firm. Any Profit/Loss arise on the development work of the Housing Project shall belong to M/s HARIOM CORPORATION.
(7) The party of the first would not have any authority in interfering in fixing up the remuneration/charges by M/S HARIOM CORPORATION in accordance with the prevailing rates reasonably as per the progress of eh construction work carried out for the prospective buyers. A separate agreement shall be executed between the appointee builder-firm and the proposed/prospective buyers containing the charges/rate of construction to be paid to the builder-firm. "
10. Violation by the appellant of any of the conditions of section 80IB(10) stipulated from clause (a) to clause (d) is not under dispute and the appellant has been found fulfilling the tests laid down by Hon'ble ITAT Bench A Ahmedabad decision dated 7.11.2008 in the case of M/s.Shakti Corporation. Baroda in ITA No.1503/Ahd/2008 in AY 2005-06 having practically purchased the land and possessing dominant control over the project, therefore in my view there is no justification in denying the deduction to the ITA No.1376/Ahd/2012 15 Asst. Year 2008-09 appellant. The case laws cited by the AO are not applicable in this case because the appellant actual conceived and developed the housing project at its own cost and risk and is not merely a contractor executing the specifications given. The AO is directed to delete the addition made u/s.80IB(10)."
10. From going through the above discussion, we are of the view that assessee has carried on activities as a developer and not a merely works contractor. However, as regards the question 'that the assessee was not the owner of the land then how he will be eligible to claim deduction u/s 80IB(10) of the Act'. The reply to this question specifically lies in the decision of the co-ordinate bench in the case of Shakti Corporation, Baroda (supra). It was further taken up before the Jurisdictional High Court by the Revenue and was dealt in the combined order in the case of CIT vs. Radhe Developers in Tax Appeal No.546 of 2008 pronounced on 13.12.2011 wherein their lordships have elaborately dealt with this issue and held that eve if an assessee is not the owner of the land but has carried out activities as developer-cum-building contractor then also he is eligible for deduction u/s 80IB(10) of the Act. In deciding so Hon. High Court has observed as under :-
39. We may now move on to the question of ownership of the land.
40. Relevant portion of Section 2(47) reads as under:- "2(47): "transfer", in relation to a capital asset, includes,- (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882); or Section 53A of the Transfer of Property Act reads as under:- 53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the ITA No.1376/Ahd/2012 16 Asst. Year 2008-09 contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."
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 HC-NIC Page 37 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 38/42 JUDGMENT 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 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 HC-NIC Page 38 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 39/42 JUDGMENT 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.
43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before the Apex Court, the land owner had entered into an agreement with the builder requiring him to construct apartment building on the land in HC-NIC Page 39 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 ITA No.1376/Ahd/2012 17 Asst. Year 2008-09 40/42 JUDGMENT question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under Section 80IB(10) of the Act.
44. In the case K. Raheja Development Corporation vs. State of Karnataka (supra), the Apex Court considered whether the builder, who was engaged in the development of property and for such purpose had entered into an agreement with the land owner, can be stated to have executed works contract. Such interpretation was rendered in the background of the term "works contract" defined in Section 2(1)(v-i) of the Karnataka Sales Tax Act, which reads as under:- "12. Section 2(1)(v-i) is relevant. It defines a "works contract" as follows: "2.(1)(v-i) 'works contract' includes any agreement for carrying out for cash, deferred payment or other valuable consideration, HC-NIC Page 40 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 41/42 JUDGMENT the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;" It is thus to be seen that under the Karnataka Sales Tax Act the definition of the words "works contract" is very wide. It is not restricted to a "works contract" as commonly understood i.e. a contract to do some work on behalf of somebody else. It also includes "any agreement for carrying out either for cash or for deferred payment or for any other valuable consideration, the building and construction of any movable and immovable property". (emphasis supplied) The definition would therefore take within its ambit any type of agreement wherein construction of a building takes place either for cash or deferred payment, or valuable consideration. To be also noted that the definition does not lay down that the construction must be on behalf of an owner of the property or that the construction cannot be by the owner of the property. Thus even if an owner of property enters into an agreement to construct for cash, deferred payment or valuable consideration a building or flats on behalf of anybody else, it would be a works contract within the meaning of the term as used under the said Act." It was in background of this definition provided by the statute that the Apex Court concluded that the agreement was one of works contract. The Apex Court observed that the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration. Thus the interpretation rendered by the Apex Court in the said decision was based on not the normal meaning of term "works contract" but on the special meaning assigned to it under the Act itself, which provided for a definition of the inclusive nature. HC-NIC Page 41 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 42/42 JUDGMENT ITA No.1376/Ahd/2012 18 Asst. Year 2008-09
45. Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners. 46. We find that it is not even the case of the Revenue that other conditions of Section 80IB of the Act were not fulfilled. We, therefore, answer the question in favour of the assessee and against the Revenue and dispose of all appeals accordingly.
11. Respectfully following the decision of Hon. Jurisdictional High Court in the case of CIT vs. Radhe Developers (supra) and applying the ratio of the decision to the facts of the case before us, we are of the considered opinion that assessee is a developer of the project and not merely a works contractor and is eligible for deduction u/s 80IB(10) of the Act at Rs.95,56,579/-. Therefore, we do not find any reason to interfere with the order of ld. CIT(A) and uphold the same. The ground nos. 1 & 2 raised by the Revenue are dismissed."
11. As the facts of the present case and those of the case of Hariom Corporation (supra) are identical, respectfully following the decision of the co-ordinate bench and also looking to the fact that assessee has been allowed deduction u/s 80IB(10) of the Act on the profit from the same project for Asst. Year 2009-10 and 2010-11 and more so for Asst. Year 2010-11 as per the order of ld. Assessing Officer u/s 143(3) of the Act, we are of the view that ld. CIT(A) has rightly allowed the claim of assessee for deduction u/s 80IB(10) of the Act at Rs.1,77,38,316/-. We do not find any reason to interfere with the order of ld. CIT(A). We uphold the same. Accordingly this ground of the Revenue is dismissed.
12. Other grounds are of general nature, hence need no adjudication.
ITA No.1376/Ahd/2012 19Asst. Year 2008-09
13. In the result, Appeal of the Revenue is dismissed.
Order pronounced in the open Court on 2nd June, 2016 Sd/- sd/-
(R.P. Tolani) (Manish Borad)
Judicial Member Accountant Member
Dated 2/6/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
1. Date of dictation: 1/06/2016
2. Date on which the typed draft is placed before the Dictating Member: 1/06/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 2/6/2016
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: