Income Tax Appellate Tribunal - Bangalore
Income Tax Officer Tds Ward-3(3), ... vs M/S Uas Employees House Building ... on 7 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'A'
BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER
AND SHRI LALIET KUMAR, JUDICIAL MEMBER
ITA Nos.1485 to 1487/Bang/2017
(Asst. Year - 2012- 13 to 2014-15)
The Income-tax Officer,
TDS Ward-3(3),
Bengaluru. . Appellant
Vs.
M/s UAS Employees House Building
Co-operative Society Ltd.,
No.1, Post Office Building,
UAS Campus, Hebbal,
Bengaluru. . Respondent
Appellant by : Shri B.R Ramesh, Addl. CIT
Respondent by : Shri S.V Ravishankar, Advocate
Date of Hearing : 5-2-2018
Date of Pronouncement : -2-2018
ORDER
PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :
These are three appeals by the Revenue, directed against the order Commissioner of Income-tax (Appeals) - 13, Bangalore dated 29/12/2016 for the assessment years 2012-13 to 2014-15. Since common issues are involved, these appeals were heard together and are being disposed off together by way of this order.
2. Briefly stated, the facts of the case are as under:-
ITA Nos.1485 - 1487/B/17 2 2.1 The assessee is a co-operative society engaged in the activity of identifying suitable lands and forming a residential layout for allotment of residential sites to its members. The Assessing Officer ('AO') called for information u/s 133(6) of the Income-tax Act, 1961 (in short 'the Act') pertaining to the details of payments made to developers/contractors and tax deducted thereon. From the details filed, the AO noticed that the assessee had entered into certain agreements and MOU's, with the developer/contractor Shri Lakshman for carrying out the above activities and had failed to deduct tax at source on payments made to these parties with whom it had entered into agreements for the acquisition of land and formation of residential layout for the benefit of its members (requiring the carrying out of civil work such as laying of roads, drainage, electrification, etc.); which in his view were in the nature of composite work contracts. The AO, inter alia, noticed that the aforesaid layout is to be developed as per the assessee's specifications and the words procurement of land meant that the developer does not own any land as on the date of agreement. In that view of the matter, the AO held that the aforesaid work, carried out by the developer/contractor on behalf of the assessee, is the nature of works contract and therefore the provisions of Sec. 194C of the Act was attracted. Since the assessee has failed to deduct tax at source on payments its made to developers/contractors as required u/s 194C of the Act; AO held the assessee to be an assessee in default u/s 201(1) of the Act and also to be charged the consequential interest u/s ITA Nos.1485 - 1487/B/17 3 201(1A) of the Act. The explanations put forth by the assessee did not find favour with the AO and he passed orders u/s 201(1) and 201(1A) of the Act for asst. years 2007-08 to 2012-13 dated 31/3/2016, 1/4/2016 and 5/4/2016 holding the assessee to be an assessee in default for failure to deduct tax at source on payments made by it to developer/contractor as required u/s 194C of the Act as it was in the nature of works contract.
2.2 Aggrieved by the orders u/s 201(1) and 201(1A) of the Act dated 11/3/2014 for asst. years 2012-13 to 2014-15, the assessee preferred appeals before the CIT(A)-13, Bangalore. The ld CIT(A) allowed the aforesaid appeals filed by the assessee for asst. years vide a common order dated 29/12/2016 holding that the assessee was not liable to deduct tax at source on the payments it made to developers/contractors as the provisions of sec. 194C of the Act were not attracted in the case on hand..
3.1 Revenue, being aggrieved by the orders of the CIT(A)-13, Bangalore dated 23/11/2016 for asst. years 2008-09 to 2014-15, has filed these appeals before the Tribunal raising the following common grounds for the aforesaid asst. years.
"1. The order of CIT(A) is opposed to the facts and nature of the case on hand.
2. The Id. CIT (A) erred in holding that the assessee was not required to deduct tax at source u/s. 194C from the payments made to developer.
ITA Nos.1485 - 1487/B/17 4
3. The Ld. CIT(A) erred in deleting the demand u/s. 201(1) and 201(1A).
4. The Id. CIT (A) ought to have considered the fact that as per the assessee's agreement with the developer the works to be carried out like for procuring of land, developing, conversion, plan for approval, drainage, laying roads etc. clearly attracted provisions of Section 194C.
5. The Id. CIT (A) ought to have considered the fact that the agreement entered into by the assessee with the developer are in the nature of composite contracts for works for which provisions of Section 194C is clearly applicable.
6. The Ld. CIT(A) erred in relying on the decision of the jurisdictional High Court in the case of M/s. Karnataka State Judicial Department Employees House Building Co-Operative Societies in ITA No. 1275 of 2006 and the TAT's order in the case of M/s. Kautilya House Building Co-Operative Society Limited in ITA No. 1324 to 1337/Bang/2015 dated 7.4.2016 while allowing the assessee's appeal which have been accepted by the Department only for low tax effect and not in principle.
7. The appeals have been filed for alt the assessment years including the assessment years where the tax effect is below the prescribed minimum since a composite order ITA Nos.1485 - 1487/B/17 5 has been passed by the CT(A) and therefore para 5 of the CBDT's Circular No. 21 of 2015 dated 10. 12.70,15 is applicable in this case.
For these and other grounds that may be raised during the course of appeal and actual hearing it is prayed that the order passed by the AO u/s. 201(1) and 201(1A) be upheld and the order of the learned Commissioner of Income Tax (Appeals) may be set aside and cancelled."
3.2 The grounds raised (Supra) relates to the single issue pertaining to the deletion of the demands raised u/s 201(1) and 201(1A) of the Act by the ld CIT(A) by following the decision of the co-ordinate bench of this Tribunal in the case of Kautilya House Building Co- operative Society in ITA No.1324 to 1337/Bang/2015 dated 7/4/2016, which had in turn followed the decision of the Hon'ble High Court of Karnataka in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., in ITA No.1275 of 2006.
3.3 The ld DR for Revenue was heard in support of the grounds raised (Supra). It is the contention of Revenue that the activity mentioned in the agreements entered into by the assessee with developers/contractors clearly indicate that they are composite contracts for acquiring land, forming residential layouts thereon with attendant civil works and therefore, since it amounts to a composite ITA Nos.1485 - 1487/B/17 6 works contract, the provisions of section 194C of the Act are applicable. According to the ld DR, the judgment of the Hon'ble Karnataka High Court relied on by the ld CIT(A) (Supra) in distinguishable as in that case, the contract for purchase of sites was not a composite contract. It is further submitted that the two decisions of the Tribunal relied upon by the ld CIT(A) have not been accepted by the Department and the same are being contested in further appeal by Revenue.
3.4 Per contra, the ld AR of the assessee supported the impugned orders of the ld CIT(A), and submitted that there is no error therein as the issue in dispute is covered by the orders of the co-ordinate benches of this tribunal which were relied on by the assessee i.e (i) Kautilya House Building Co-operative Society Ltd. (Supra); (ii) Karnataka Legislature Secretariat Employees Housing Co-op Society Ltd., in ITA Nos.1324 to 1337/Bang/2015 and (iii) Lokseva Housing Co-operative Society Ltd., in ITA Nos:219 to 225/Bang/2017. It was prayed that in the light of the above judicial precedents and facts of the case, the impugned order of the ld CIT(A) be upheld. 3.5.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. On an appraisal of the material before us, we find that there is nothing therein that shows that the assessee is liable to deduct tax at source on payments made to the developers in the years under appeal.
ITA Nos.1485 - 1487/B/17 7 3.5.2 Now coming to the merits of the issue in dispute, it is seen that the assessee society has entered into agreement/MOU's with developer/contractor Shri Lakshman, No.548, IV Main, 2nd Stage, West of Chord Road, Mahalakshmipuram Bangalore-560 086 dated 5/2/2011, 28/6/2012 and 30/11/2012. From the aforesaid agreement/MOU's it is seen that the assessee society has entrusted the procurement of 15 acres 39 guntas of land at Sy. Nos.15/1, 15/2, 16/2, 17/2 and 18 of Hosahudya Village, Kasaba Hobli, Doddaballapur Taluk, Bangalore Rural District and development of residential layout thereon with the conditions to execute civil works such as roads, common amenities, drainage, electrification, plan approval, conversion of lands from agriculture to non-agriculture status, etc., to the developer. However, the fact remains that the agreements essentially and basically relate to the purchase of land development and purchase of residential sites from the developer/contractors. The relevant portion of the agreement of the assessee society with M/s Lion Estates and Properties i.e; developmental contractor is as under:-
I. WHEREAS, the Society is a Co-Operative House Building Society, registered under the provisions of the Karnataka Co-operative Societies Act, 1959, constituted for the purpose of formation of residential layouts and distribution of sites of its members. The developer is a renowned developer and builder and has completed several projects in Bangalore City.
ITA Nos.1485 - 1487/B/17 8 II. WHEREAS, in order to cater to the needs of its members the Society has decided to take up a project to form a residential layout, in furtherance of which the Society addressed a letter dated 04.08.2010 to the Developer, inviting proposal. The Developer vide in his letter dated 11.08.2010 expressed his willingness to develop and form a layout and offered lands in several locations for development of residential layout. The Society in its letter dated 30.08.2010, decided to go ahead with the project approximately measuring 15 Acres 39 Guntas in Sy. Nos. 15/1, 15/2, 16/2, 17/2 & 18 of Hosahudya Village, Kasaba Hobli, Doddaballapur Taluk, Bangalore Rural District, which the Developer has already entered into the Sale Agreement with the land owners and the Society communicated to the Developer to submit a detailed proposal. The proposal of the Developer was placed before its Board by the Society at its meeting held on 29.11.2010, and the Board of the Society accepted and approved the proposal of the Developer, the contents of which are reproduced below:
a) The Society agreed to purchase about 650 Sites of various dimensions in the proposed layout to be formed by the Developer, in land approximately measuring 40 Acres in Sy. Nos. 15/1, 15/2, 16/2, ITA Nos.1485 - 1487/B/17 9 17/2 & 18 and in portion of Sy. Nos. 26 of Hosahydya Village, Kasaba Hobli, Doddaballapur Taluk, Bangalore Rural District.
b) All the terms and conditions set out in the letter dated 11.08.2010 of the Developer are hereby approved and accepted to purchase site at the rate of Rs.650/- (Rupees Six Hundred Fifty Only) per square feet for intermediate sites.
c) The Developer shall develop the layout in accordance with zonal regulations and the plan to be approved by BIAAOA (Bangalore International Airport Area Planning Authority).
III. NOW THIS AGREEMENT WITNESSSETH AS FOLLOWS:
1. The Developer agrees to acquire lands, develop a residential layout thereon as per BIAAPA (Bangalore International Airport Area Planning Authority) zonal regulations and deliver to the Society approximately 650 sites of various dimensions (excluding 70% of the corner sites of various dimensions as Developer share) and 30% sites of various dimensions of corner sites spread over in an extent of about 40 acres of lands situated in Sy. Nos. 15/1, 15/2, 16/2, 17/2, 18 and in portion of Sy. No.26 of Hosahudya Village, Kasaba Hobli, ITA Nos.1485 - 1487/B/17 10 Doddaballapur Taluk, Bangalore Rural District, which are morefully described in the Schedule hereunder and hereinafter referred to as the schedule property in the terms and conditions set out herein which has been agreed upon between the parties.
2. The developer shall acquire the schedule property after securing conversion of the same from agricultural to non-agriculture residential use, apply for and obtain sanction from BIAAPA (Bangalore International Airport Area Planning Authority)/competent authority and develop layout, all at his own cost in accordance with the sanctioned plan confirming to the zonal regulations of the BMRDA.
3. The Layout plan approve by the authority shall not be deviated by the developer in developing the layout. The layout plan shall be permanently displayed at the entrance of the layout. Hiring of security, temporary construction of gowdown/ office/ sheds and Insurance coverages in respect to various risks are at the sole discretion of the Developer. All the temporary erections if not needed by the Society shall be cleared by the Developer without seeking any compensation.
ITA Nos.1485 - 1487/B/17 11 IV. FACILITIES & AMENITIES TO BE PROVIDED IN THE LAYOUT:
The Developer shall develop the layout in accordance with the sanctioned plan containing the following facilities and amenities:
(a) Wide Asphalted Roads ranging from 30' to 60's per sanctioned plan;
(b) Water & Sanitary connections to each site with feeder & sub ma connections;
(c) Electrification with overhead lines and Transformers, adequate street lights as per KPTCL norms;
(d) Dedicated Telephone Exchange, Milk Booths, KPTCL Extension Counter, Play ground, Police out post, Bus Terminus, shopping arcade including super market etc., in the area reserved for Civic Amenities in the layout Plan.
(e) Overhead Tank/Sump Tank connected to Borewells in order t provide adequate water supply;
(f) Club House with Swimming pool, Multi Gym, Tennis Court Children play area, Place for religious workship etc;
(g) Landscaped Gardens, road side tree plantation with tree guards;
ITA Nos.1485 - 1487/B/17 12
(h) Welcome Arch with Security Gate, Enclosing the entire layout by a cement solid block compound where it is required as decided by the society;
3.5.4 On appeal, the ld CIT(A) on perusal of the aforesaid clauses of the agreement has arrived at the conclusion that the payments for the purchase of the sites was calculated on sq. ft. area of the property and the amount was paid for the purchases of completed property and not for development work carried out. The ld CIT(A) found that the agreements were only for purchase of sites and does not involve any 'works contract'. In our view, the aforesaid conclusion/finding of the ld CIT(A) cannot be faulted and the same is a correct reading of the scope of the agreements; which has to be treated as a whole and not in piece meal manner. The mere fact that the contractor/developer were required to layout roads and undertake other activities before the delivery of the completed sites cannot be either determinative of the facts or need to mean that the agreements entered into by the assessee society is a composite contract and amounts to a works contract. Thus, in our considered opinion, the case of the assessee is squarely covered by the decisions of the Hon'ble Karnataka High Court in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., (Supra); the relevant portion of which judgment is extracted hereunder:-
ITA Nos.1485 - 1487/B/17 13 "the short that fell for the consideration for the Assessing Officer, the Commissioner of Income-tax and the Tribunal was whether if the assessee has agreed to purchase the sites from a vendor if any sale consideration is paid on instalment basis, the assessee is required to deduct the tax at source or not. When the assessee is only a purchaser, if any advance sale consideration is paid, the assessee has no business to deduct the tax at source as it is for the seller of the sites to pay the capital gains depending upon the tax payable by him."
3.5.5 In the aforesaid case decided by the Hon'ble Karnataka High Court (Supra), the co-ordinate bench of this Tribunal had rendered the following finding:-
"....the agreement between Sh. Lakshman, and Karnataka State .Judicial Department Employees House Building Co-operative Society begins to operate only after the layout is formed and so can never be construed as an agreement in the nature of works contract. A contractor is one who I undertakes to do a particular work-for a price. No such contract is envisaged in this agreement. This agreement envisages purchase of ITA Nos.1485 - 1487/B/17 14 specified intermediate sites at a price after Sri Lakshman completes the job of formation of a layout either infti1 or in part. We accordingly hold that the assessee was not required to deduct tax in this regard."
3.5.6 We find that Revenue's contention that the aforesaid judgment of the Hon'ble Karnataka High Court in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., (Supra) is distinguishable from the case on hand has also been considered on similar fact situation, by co-ordinate benches of this Tribunal in the cases of Karnataka State Co-operative Subhadranna Housing Federation Ltd. (ITA Nos.1301, 1307 to 1313/Bang/2015), Railway House Building Co-operative Society (ITA Nos.1139, 1140 & 1344/Bang/2015 & 1343/Bang/2014), and in the case of Kautilya House Building Co-operative Society Ltd., (ITA Nos. 1324 to 1337/Bang/2015 dated 7/4/2016. The ld CIT(A) has observed that in these cases (Supra) also, the contents of the agreements were similar to those of the assesee in the case on hand and the various co-ordinate benches of this Tribunal after examining the same has applied the ratio of the judgment of the Hon'ble Karnataka High Court in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., (Supra) and have held that there was no requirement for deduction of tax at source u/s 194C of the Act. Respectfully following the ratio of the decision of the Hon'ble Karnataka High Court in the case of Karnataka State Judicial ITA Nos.1485 - 1487/B/17 15 Departmental Employees House Building Society Ltd., (Supra) and of the co-ordinate benches of this Tribunal in the cases of Karnataka State co-operative Subhadranna Housing Federation Ltd., (Supra), Railway House Building Co-operative Society Ltd, (Supra), Kautilya House Building Co-operative Society Ltd., (Supra), Karnataka Legislature Secretariat Employees Co-operative Employees Co- operative Society Ltd., (Supra) and in the case of Telecom Employees Co-operative Society Ltd., (Supra). We find no reason to interfere with or deviate from the view taken in these decisions which have been rendered on similar facts and issues as in the case on hand. We, therefore, uphold the impugned orders of the ld CIT(A) deleting the demands raised by the AO u/s 201(1) and 201(1A) of the Act. Consequently, the grounds raised by the Revenue (Supra), being devoid of merits, are dismissed.
4. In the result, Revenue's appeals for asst. years 2012-13 to 2014-15 are dismissed.
Order pronounced in the open court on 7th February, 2018.
Sd/- Sd/-
(LALIET KUMAR) (JASON P BOAZ)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Bangalore
Dated : 7/2/2018
Vms
ITA Nos.1485 - 1487/B/17
16
Copy to :1. The Assessee
2. The Revenue
3.The CIT concerned.
4.The CIT(A) concerned.
5.DR
6.GF By order
Sr. Private Secretary, ITAT, Bangalore.