Income Tax Appellate Tribunal - Ahmedabad
Shiv Corporation, Baroda vs Department Of Income Tax on 22 May, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, AHMEDABAD
(BEFORE SHRI RAJPAL YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No.2947/AHD/2011
(Assessment Year: 2007-08)
The Income Tax Officer, V/S M/s. Shiv Corporation B/s.
Ward-2(3), Baroda Nandishwar Plot, Nr. Bright
School, Vasna Bhaali,
Baroda-15
(Appellant) (Respondent)
PAN: ABAFS9291G
Appellant by : Shri Nimesh Yadav, Sr. D.R.
Respondent by : None
(आदे श)/ORDER
Date of hearing : 18-05-2015
Date of Pronouncement : 22 -05-2015
PER ANIL CHATURVEDI, ACCOUNTANT MEMBER.
1. This appeal filed by the Revenue is against the order of CIT(A)-II, Baroda dated 29.09.2011 for A.Y. 2007-08.
2. In this case, notice was served to Assessee on 20.03.2015 informing about the fixing of hearing on 18.05.2015. We find that the notice has been received undelivered with the remark of the postal authorities "not known". The changed postal address, if any, is also not on record. On the date of hearing, none appeared on behalf of the Assessee nor any adjournment application was moved on its behalf. In these circumstances, we proceed to 2 ITA No 2947/AHD/2011 . A.Y. 2007-08 dispose of the appeal ex parte qua the Assessee on the basis of material available on record.
3. Assessee is a partnership firm stated to be engaged in the business of construction. Assessee electronically filed its return of income for A.Y. 2007-08 on 23.10.2007 declaring total income at Rs. Nil after claiming deduction of Rs. 17,54,590/- u/s. 80IB(10) of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 31.12.2009 and the total income was determined at Rs. 17,54,590/- whereby the claim of deduction u/s. 80IB was denied. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 29.09.2011 allowed the appeal of the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us and has raised the following grounds;-
1. On the facts and in the circumstances of the case and in law, the Id CIT (Appeals) erred in directing the Assessing Officer to allow the deduction u/s.80IB(10) r.w.s.80IB(l) of the Income-tax Act to the assessee in view of the decision of the Hon'ble ITAT in the case of M/s.Shakti Corporation in ITA No.l503/Ahd/2008 dated 07.11.2008, without appreciating that the approval by the local authority as well as completion certificate was not granted to the assessee but to the landowner and the rights and the obligations under the said approval were not transferable, and that transfer of dwelling units in favour of the end-users was made by the landowner and not by the assessee.
2. On the facts and in the circumstances of the case and in law, the Id CIT (Appeals) erred in directing the Assessing Officer to allow the deduction u/s.80IB(10) r.w.s.80IB(l) of the Income-tax Act to the on profit derived from sale of unutilized FSI in view of the decision of the Hon'ble ITAT in the case of M/s.Radhe Developers in ITA No.2482/Ahd/2006 dated 29.06.2007, without appreciating that this profit not an 3 ITA No 2947/AHD/2011 . A.Y. 2007-08 element of profits derived from the business activity of development and construction of the housing project relating to the sale of tenements.
4. Before us, ld. D.R. submitted that the only dispute is with respect to deduction u/s. 80IB(10).
5. During the course of Assessment proceedings, A.O noticed that Assessee has claimed u/s. 80IB of Rs. 17,54,590/-. A.O on the basis of submissions made by the Assessee was of the view that Assessee was not eligible for deduction u/s. 80IB(10) as it was not the owner of the land on which construction activities was carried out, Assessee had not taken the approval of the housing project and the same was taken by other person, the land owners had sold the pieces of land to the unit holders directly, the Assessee had acted merely as a contractor as it had entered into construction agreement with the unit holders, the Assessee had not sold the house to the unit holders. Apart from the aforesaid, A.O also noticed that Assessee had total plot area of 6183 sq. mts. for development (after reduction on account of common plot road etc) and on the basis of 1.6 FSI, it was eligible to construct 7206.20 sq. mts. but had utilized only 4197.95 sq. mts. of FSI. He was therefore of the view that the profit also includes profit attributable to sale of unutilized FSI on which Assessee has claimed deduction under 80IB(10). He was therefore of the view that profit on sale of unutilized FSI as worked out by him amounting to Rs. 7,32,459/- was not eligible for deduction. He accordingly denied the entire claim of deduction u/s. 80IB(10) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who allowed the appeal of the Assessee by holding as under:-
4 ITA No 2947/AHD/2011 . A.Y. 2007-08 3.3 I have considered the submission of the Authorized Representative and the order of the Assessing Officer. The decision of the Hon'ble ITAT in the case of M/s. Shakti Corporation and Others and the guidelines laid down has also been considered. The issue of ownership of land not being a mandatory condition has been decided in favour of the appellant in the case of M/s. Radhe Builders and Others (Supra).
In respect of assessment year 2005-06, the Assessing Officer has verified that the dominant control over the land, the risk and costs of the project are that of the appellant, hence the appellant was granted deduction u/s. 80IB(10) by the CIT(A)-II, Baroda, as per the conditions laid down in the decision of the Hon'ble ITAT in the case of M/s. Shakti Corporation and Others.
For the year under consideration, following the above mentioned judgments of Hon'ble Ahmedabad ITAT, the claim of the appellant for deduction u/s 80IB(10) is allowed, subject to the Officer finding that the situation has not changed and the assessee passes the test laid down in the case of M/s. Shakti Corporation and Others, this year too. The Assessing Officer shall look into the agreement entered into by the assessee with the landowner(s) and decide whether the assessee has in fact purchased the land for a fixed consideration from the landowner(s) and has developed the housing project at its own cost and risks involved in the project. In case the Assessing Officer finds that practically the land has been bought by the Developer and Developer has all dominant control over the project and has developed the land at his own cost and risks, the Assessing Officer shall allow the deduction to the assessee u/s. 80IB(10). In case the Assessing Officer finds that the Developer has acted on behalf of the landowner and has got a fixed consideration from the landowner for the development of the housing projects, the assessee shall not be allowed deduction u/s. 80IB(10).
It is also seen that on page 41 para 29 of the assessment order, the Assessing Officer has mentioned that deduction of 80IB(10) is not allowable to the assessee on the grounds, inter alia, that the project is not completed within the due date. On page 7 para 6.8, the Assessing Officer has quoted assessee's letter dated 23.12.2009 stating that "the project was approved on 08.02.2005 and the completion certificate from the local authority has been obtained on 29.04.2009, as such the project was complete in time." No other discussion regarding this point is found in the assessment order, as to how the Assessing Officer has reached this conclusion. Matter was therefore referred to the Income-tax Officer, Ward-2(3), Baroda, who submitted letter dated 29.09.2001 to clarify that "On verification of the case record, in Para 6.1 of the Assessment Order, it is mentioned that the completion certificate obtained from the local authority on dated 29.04.2009 which is wrongly mentioned in the assessment order instead of 12.02.2008 as per the letter issued by the VUDA letter dated 28.02,2008, Copy of the letter dated 23.12.2009 is enclosed herewith for your ready reference". Since the project was complete before 31.03.2008, that is no delay and the deduction u/s. 80IB(10) cannot be denied on this count.
6. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us.
5 ITA No 2947/AHD/2011
. A.Y. 2007-08
7. Before us the ld. D.R. submitted that in the present case, the A.O. apart from denying the deduction for the reason that Assessee was not the owner of land had also denied the deduction to Assessee as the Assessee had not fully utilized the FSI. He further submitted that in a recent decision of jurisdictional High Court in the case of Moon Developers reported in (2014) 367 ITR 621 (Guj), Hon'ble High Court has held that what is available for deduction u/s 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project. Mere sale of open land or unused FSI as part of housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from housing project. He further submitted that CIT(A), while deciding the issue has given no finding with respect to sale of FSI. He therefore submitted in view of the decision in the case of Moon Star Developers (supra), the issue needs to re-examined at the end of CIT(A) and therefore submitted that the matter may be remanded back to CIT(A).
8. We have heard the ld. D.R. and perused the material on record. We find that the A.O while denying the deduction to the Assessee u/s 80IB(10) had apart from the fact that Assessee is not the owner of land but had acted as a contractor had also noted that Assessee had not fully utilized the FSI available to it for the construction of project and had utilized only 4197.95 sq. mt. out of the total area of 7206.20 sq. mt. of land. We further find that CIT(A) while adjudicating the issue has not dealt with the aspect of FSI. We also find that in a recent decision in the case of Moon Star Developers (supra) the Hon'ble Gujarat High Court has noted as under:-
31. It is true that section 80IB(10) of the Act does not provide that for deduction, the undertaking must utilize 100% of the FSI available. The question however is, can an undertaking utilize only a small 6 ITA No 2947/AHD/2011 . A.Y. 2007-08 portion of the available area for construction, sell the property leaving ample scope for the purchaser to carry on further construction on his own and claim full deduction under section 80IB(10) of the Act on the profit earned on sale of the property? If this concept is accepted, in a given case, an assessee may put up construction of only 100 sq. ft. on the entire area of one acre of plot and sell the same to a single purchaser and claim full deduction on the profit arising out of such sale under section 80IB(10) of the Act. Surely, this cannot be stated to be development of a housing project qualifying for deduction under section 80IB(10) of the Act. This is not to suggest that for claiming deduction under section 80IB (10) of the Act, invariably in all cases, the assessee must utilize the full FSI and any shortage in such utilization would invite wrath of the claim under section 80IB(10), being rejected. The question is where does one draw the line. In our opinion, the issue has to be seen from case to case basis.
Marginal under-utilization of FSI certainly cannot be a ground for rejecting the claim under section 80IB(10) of the Act. Even if there has been considerable under-utilization, if the assessee can point out any special grounds why the FSI could not be fully utilized, such as, height restriction because of special zone, passing of high tension electric wires overhead, or any such similar grounds to justify under utilization, the case may stand on a different footing. However, in cases where the utilization of FSI is way short of the permissible area of construction, looking to the scheme of section 80IB(10) of the Act and the purpose of granting deduction on the income from development of housing projects envisaged thereunder, bifurcation of such profits arising out of such activity and that arising out of the net sell of FSI must be resorted to. In the present case, none of the assessees have made any special ground for non-utilization of the FSI.
32. The contention of the counsel for the assessee that as long as there has been 100% utilization of the maximum permissible area on the ground floor, deduction under section 80IB(10) of the Act cannot be declined, cannot be accepted. As noted earlier, in case of M/s. Moon Star Developers and many other assesses, such full utilization of the ground floor area available for construction resulted into barely 20% to 25% of the FSI being used, remaining more than 75% being left unused.
33. What is available for deduction under section 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project. Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project.
9. In the present case, as noted from the order of CIT(A), there is no factual finding by CIT(A) with respect to the Assessee's eligibility of deduction u/s 80IB(10) with respect to utilization of FSI. We further find that ld. CIT(A) while allowing the deduction u/s. 80IB, by applying the ratio of decision of Shakti Corporation and Ors. (supra), has directed the A.O to look into the 7 ITA No 2947/AHD/2011 . A.Y. 2007-08 agreement entered by the Assessee with the land owner, whether the Assessee had purchased the land and if the Assessee had all dominant control over the project and has developed the land, then to allow the deduction. Ld. CIT(A) thus without giving any clear finding has remitted the issue to A.O. In view of the aforesaid facts, we are of the view that the entire factual issue needs re-examination in the light of the aforesaid decision of Hon'ble Gujarat High Court in the case of Moon Star Developers (supra) and the decision of Tribunal in the case of Shakti Corporation and Radhe Developers (supra). We therefore remit the matter back to the file of CIT(A) to decide the issue afresh in the light of the aforesaid decisions and as per law. Needless to state that CIT(A) shall grant adequate opportunity of hearing to both the parties. We also direct the Assessee to furnish promptly all the required details for deciding the issue.
10. In the result the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in Open Court on 22 - 05 - 2015.
Sd/- Sd/-
(RAJPAL YADAV) (ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad. TRUE COPY
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad