Income Tax Appellate Tribunal - Ahmedabad
Shree Laxmi Developers, Baroda vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D"
Before SHRI D K TYAGI,JM & SHRI A N P AHUJ A, AM
ITA No.2482/Ahd/2010
(Assessment Year:-2006-07)
Income-tax Officer, W ard- V/s M/s Shree Lakshmi
2(5), 1 s t Floor, Aayakar Developers, Shreedhar Park
Bhavan, Race Course Society, Opp. New Era
Circle, Baroda School, Makarpura, Baroda
PAN: AAFOS 4898 J
[Appellant] [Respondent]
Revenue by :- Shri U S Raina, DR
Assessee by:- Shri P M Mehta, AR
O R D E R
A N Pahuja: This appeal by the Revenue against an order dated 22- 06-2010 of the ld. CIT(Appeals)-V, Baroda, for the Assessment Year 2006-07, raises 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 to the assessee on the ground that the assessee has purchased the land for a fixed consideration from the landowner and has developed the house project at its own cost and risks involved, in respect of issue regarding deduction u/s.80IB(10) r.w.s.80lB(1) claimed by the assessee, without appreciating the fact that the approval by the local authority as well as completion certificate was not granted to the assessee but to the land owner and the rights and obligation under the said approval were not transferable, and that transfer of dwelling units in favor of the end-
users was made by the landowner and not by the assessee.
2. Without prejudice, the Id. CIT(Appeals) erred in allowing deduction u/s.80IB(10) in respect of the proceeds attributable to sale of unutilized FSI and not to the dwelling units in the housing projects, which could not be termed as profit 'derived' from developing and building housing projects in terms of this provision.
3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary.
Relief claimed in appeal ITA No.2500/Ahd/2010 The order of the Id. CIT (Appeals) may be set aside and that of the Assessing Officer may be restored."
2. At the outset, considering the nature of the issue involved and the findings of the ld. CIT(A) thereon in the light of decisions of the ITAT, the Bench rejected the request for adjournment filed on behalf of the assessee and proceeded to hear the appeal.
3. Facts, in brief, as per relevant orders are that return declaring nil income filed on 15-11-2006 by the assessee, engaged in construction and development of residential houses, after being processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the "Act"], was selected for scrutiny with the service of a notice u/s 143(2) of the Act on 22-10-2007. During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee claimed deduction of Rs.18,07,419/- u/s 80IB(10) of the Act. Since the assessee was not the actual owner of the land on which the project was built nor the approval of the project was granted by Vadodara Municipal Corporation to the assessee firm but was in the name of land owners i.e. Shri Girdharlal Joitaram Prajapati and others, the AO disallowed the claim for deduction u/s 80IB(10) of the Act. Inter alia, the AO observed that the landowners had sold the pieces of land to unit holders directly and assessee had acted merely as a confirming party and the assessee firm was merely a contractor, and never sold the house to the unit holders. Besides, the AO also denied deduction of Rs. 5,94,130/- on account of unutilized sale of FSI.
4. On appeal, the learned CIT(A) allowed the claim of the assessee in the following terms:-
"5.2. In appeal, it is contended that the assessee is engaged in developing housing project on the land in possession of the firm. It is also mentioned 2 ITA No.2500/Ahd/2010 that all the other conditions regarding area etc., as laid down u/s. 80IB (10) are satisfied. Reliance is placed on the decision of the Hon'ble ITAT in the case of M/s. Radhe Developers. It is also stated that the issue of unutilized FSI was also decided in favour of appellant in the aforesaid order of the ITAT. It is also pointed out that the appellant had incurred all expenses in respect of development and construction of housing project and all the payments for obtaining necessary clearances were borne by the appellant and that the land owners received only the consideration for purchase of land and all risks and rewards are vested in the developer. Referring to the decision in the case of M/s. Shakti Corporation, it is submitted by the appellant that the appellant had paid for purchase of land to the land owner and that all the expenses in relation to housing projects are incurred by the appellant and the developer is fully authorized to transfer the land along with construction in favour of any person and that the land owner has no control or right over the developer. It is also pointed out that for A.Y. 2004-05 and A.Y. 2005-06 on identical facts the appeal was allowed by CIT(A)-II, Baroda. Further, for A.Y. 2003-04 the Hon'ble ITAT had set aside the order to the file of AO to examine the development agreement in the light of decision in the case of M/s. Shakti Corporation and that the AO in the set aside proceeding vide order dated 08/1/2009 had considered the aspect and had decided that all the risks and cost are borne by the assessee and therefore he allowed deduction u/s. 80IB(10).
5.3. 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 favor 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. The said decision has also decided the matter of proportionate profit from unutilized FSI also in favour of the appellant. Thus the alternate plea of the AO is not acceptable. 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 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 develop the project on behalf of the land owner. It is also observed that for A.Y. 2003-04 the AO has examined the decision in the case of M/s Shakti Corporation and has mentioned that risks and costs are borne by the appellant. In view thereof, the appellant is entitled to deduction u/s 80IB(10). Ground No.1 & 2 are allowed."
5. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the findings of the AO while the learned AR on behalf of the assessee 3 ITA No.2500/Ahd/2010 supported the findings of the learned CIT(A) and submitted that the issue is covered by the decision dated 07-11-2008 of the ITAT Ahmedabad Bench in the case of ITO vs. M/s Shakti Corporation in ITA No.1503/Ahd/2008 and the AO accepte dtheir claim in the AY 2003-04.
6. W e have heard both the parties and gone through the facts of the case. W e find that the ITAT while adjudicating a similar claim in their decision dated 7.11.2008 in the case of M/s Shakti Corporation (supra) after considering the decision of the ITAT in the case of M/s Radhe Developers in ITA no.2482/Ahd./2006 as also decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati v Uppal Agencies Pvt. Ltd. & Anr. [Civil Appeal No.3302 of 2005] , concluded as under:-
"7 We have carefully considered the rival submissions and, perused the material on record along with the order of the tax authorities below. We have gone through the decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati v Uppal Agencies Pvt. Ltd. & Anr. [Civil Appeal No.3302 of 2005]. We find that in that case the questions framed before the Hon'ble Supreme Court were as under:
(i) Whether on the facts and circumstances, a complaint under the Consumer Protection Act, 1986 is maintainable, in regard to the Agreement dated 17-5-1991 between the parties
(ii) Whether a complaint is maintainable under the Act for a prayer seeking delivery of completion certificate and C&D Forms in regard to a building and whether the prayer for completion certificate / C&D Forms involves a prayer for rectification of the deficiencies in the building so as to secure the completion certificate and C&D Forms.
The facts involved in the case of Faqir Chand Gulati (supra) are that the assessee is the owner of the premises at L-3, Kailash Colony, New Delhi. He entered into a collaboration agreement dated 17-5-1991 with Uppal Agencies Pvt. Ltd. ["the Builder" hereinafter]. The terms of the agreement, in brief were as under:
[i] The owner shall place at the disposal of the builder, vacant possession of the remises and authorize the builder to secure necessary sanctions, permissions and approvals for demolition of the existing building and construction and completion of a new building.4 ITA No.2500/Ahd/2010
[iii] The builder shall demolish the existing structure and construct a residential building consisting of ground, first and second floors, at its cost and expense.
[iv] The builder will have the right to appoint Architects, contractors, sub-
contractors etc. [v] The new building to be constructed by the builder shall be of good quality as per the detailed specifications contained in Annexure-A to the agreement.
[vi] On completion of construction, the land-owner will be entitled to the entire ground floor (consisting of three bedrooms with attached bathrooms, one drawing-cum-dining, one store room, one kitchen) with one servant room under the overhead water tank on rear terrace and one parking space, as his share in consideration of his having made available the land. The builder shall also pay a sum of Rs.8 lakhs as non-refundable consideration to the owner.
[vii] The remaining part of the building (the entire first and second floors and two servant rooms and two car parking spaces) shall belong to the builder as its share of the building in consideration of having spent the cost of construction of the entire building and all other services rendered by him under the agreement.
[viii] The owner and the builder shall be entitled to undivided and indivisible share in the land, proportionate to their right in the building, that is, an undivided one-third share in the land shall belong to the owner and two- third share shall belong to the developer.
[ix] The builder shall be entitled to either retain or sell its share of the building.
The owner shall execute necessary documents for transferring the share corresponding to the builder's portion of the building. The owner shall give an irrevocable power of attorney enabling the builder to execute the deed of conveyance in regard to the builder's share in the land. The builder will however, have the option to require the owner to personally execute the sale deed in regard to the builder's share in the land instead of using such power of attorney.
[x] On completion of the building, the builder shall apply for completion certificate to the concerned authority and shall be liable to pay any penalty that may be imposed or levied in regard to the deviations, if any, made in the construction of the building.
[xi] The owner shall not interfere or obstruct the construction and completion of the work in any manner, but will have access to the construction to point out any defect in construction or workmanship or use of inferior material, so as to require the builder to rectify such defects.5 ITA No.2500/Ahd/2010
[xii] Title deeds handed over by the owner to the builder for completing the formalities relating to the agreement shall thereafter be returned to the owner, who shall however, make available the same for reference by the owners of the other floors. (xiii) The agreement and the power of attorney executed by the owner in favour of the builder are irrevocable. In the event of neglect, failure, default on the part of the owner or the builder, the affected party shall have the right to specific performance of the said agreement at the cost and risk of the defaulting party who shall also be liable to pay damages.
[xiv] The agreement is not a partnership and shall not be deemed to be a partnership between the owner and the builder."
8 The land owner alleges that the Builder made several unauthorized deviations during the construction from the sanctioned plan of Municipal Corporation of Delhi due to which the land owner received a number of notices from Municipal Corporation of Delhi and vide order dated 16-1- 1991, Municipal Corporation of Delhi directed to seal the premises and the premises were de-sealed subsequently to enable the Builder to rectify the deviations. The Builder delivered the Ground Floor to the landowner's son during the landowner's absence from India. The landowner on return noted a number of shortcomings in the construction and the violation of sanctioned plan and accordingly vide letter dated 29-10-1992 asked the Builder to rectify the deviations and defects. The Builder did not comply with the same. The landowner therefore filed a complaint before the District Consumer Disputes Redressal Forum. The District Consumer Disputes Redressal Forum dismissed the complaint as not maintainable under the Consumer Protection Act, 1986 holding that the landowner was not a consumer. The appeal filed before the State Commission, Delhi was dismissed as not maintainable. Revision petition was filed before the National Commission. The landowner contended that non-completion of the building as per sanctioned plan and making deviations on a large scale resulting in non-issue of completion certificate and C&D Forms amounted to deficiency in services and accordingly the complaint would have been allowed. The National Commission dismissed the Revision petition by observing that the agreement was in the nature of joint-venture and the transaction did not have any element of hiring the services of the builder within the meaning of section 2(1)(d)(ii) of the Act. The said order was challenged before the Hon'ble Supreme Court by Special Leave. The Hon'ble Supreme Court took the view that the landowner's complaint is maintainable and directed the District Consumer Disputes Redressal Forum to consider the matter on merit by observing as under [as relied on by the learned AR under paras 16 and 19 to 24 of the judgment]:
"16 There is no dispute or doubt that a complaint under the Act will be maintainable in the following circumstances:
(a) Where the owner/holder of a land who has entrusted the construction of a house to a contractor, has a complaint of deficiency of service with reference to the construction.6 ITA No.2500/Ahd/2010
(b) Where the purchaser or intending purchaser of an apartment/flat/house has a complaint against the builder/developer with reference to construction or delivery or amenities.
But we are concerned with a third hybrid category which is popularly called as 'Joint-Venture Agreements' or 'Development Agreements' or 'Collaboration Agreements' between a land-holder and a Builder. In such transactions, 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. As a result each Apartment owner becomes the owner of the Apartment with corresponding undivided share in the land and an undivided share in the common areas of the building. In such a contract, the owner's share may be a single apartment or several apartments. The land-holder who gets some apartments may retain the same or may dispose of his share of apartments with corresponding undivided shares to others. The usual feature of these agreements is that the land-holder will have no say or control in the construction. Nor will he have any say as to whom and at what cost the builder's share of apartments are to be dealt with or disposed of. His only right is to demand delivery of his share of constructed area in accordance with the specifications. The builders contend that such agreements are neither contracts for construction, nor contracts for sale of apartments, but are contracts entered for mutual benefit and profit and in such a contract, they are not 'service-providers' to the land-owners, but a co- adventurer with the land-holder in a 'joint venture', in developing the land by putting up multiple-housing (Apartments) and sharing the benefits of the projects. The question is whether such agreements are truly joint-ventures in the legal sense."
"19. What then is the nature of the agreement between the appellant and the first respondent? Appellant is 7 ITA No.2500/Ahd/2010 the owner of the land. He wants a new house, but is not able to construct a new house for himself either on account of paucity of funds or lack of expertise or resources. He, therefore, enters into an agreement with the builder. He asks the builder to construct a house and give it to him. He says that as he does not have the money to pay for the construction and will therefore permit the builder to construct and own additional floor/s as consideration. He also agrees to transfer an undivided share in the land corresponding to the additional floor/s which falls to the share of the builder. As a result, instead of being the full owner of the land with an old building, he becomes a co-owner of the land with a one-third share in the land and absolute owner of the ground floor of the newly constructed building and agrees that the builder will become the owner of the upper floors with corresponding two-third share in the land. As the cost of the undivided two- third share in the land, which the land owner agrees to transfer to the builder, is more than the cost of construction of the ground floor by the builder for the landowner, it is also mutually agree that the builder will pay the landowner an additional cash consideration of Rs.8 lakhs. The basic underlying purpose of the agreement is the construction of a house or an apartment (ground floor) in accordance with the specifications, by the builder for the owner, the consideration for such construction being the transfer of undivided share in land to the builder and grant of permission to the builder to construct two floors. Such agreement whether called as a 'collaboration agreement' or a 'joint-venture agreement', is not however a 'joint-venture'. There is a contract for construction of an apartment or house for the appellant, in accordance with the specifications and in terms of the contract. There is a consideration for such construction, flowing from the landowner to the builder (in the form of sale of an undivided share in the land and permission to construct and own the upper floors). To adjust the value of the extent of land to be transferred, there is also payment of cash consideration by the builder. But the important aspect is the availment of services of the builder by the land-owner of a house construction (construction of owner's share of the building) for a consideration. To that extent, the land-owner is a consumer, the builder is a service-provider and if there is deficiency in service in regard to construction, the dispute raised by the land owner will be a consumer dispute. We may mention that it makes no difference for this purpose whether the collaboration agreement is for construction and delivery of one apartment or one floor to the owner or whether it is for 8 ITA No.2500/Ahd/2010 construction and delivery of multiple apartments or more than one floor to the owner. The principle would be the same and the contract will be considered as one for house construction for consideration. The deciding factor is not the number of apartments deliverable to the land owner, but whether the agreement is in the nature of a joint- venture or whether the agreement is basically for construction of certain area for the landowner.
20. It is however true that where the contract is a true joint venture the scope of which has been pointed out in para 17 above, the position will be different. In a true joint venture agreement between the land-owner and another (whether a recognized builder or fund provider), the land-owner is a true partner or co-adventurer in the venture where the land owner has a say or control in the construction and participates in the business and management of the joint venture, and has a share in the profit/loss of the venture. In such a case, the land owner is not a consumer nor is the other co- adventurer in the joint venture, a service provider. The land owner himself is responsible for the construction as a co-adventurer in the venture. But such true joint ventures are comparatively rare. What is more prevalent are agreements of the nature found in this case, which are a hybrid agreement for construction for consideration and sale and are pseudo joint-ventures. Normally a professional builder who develops properties of others is not interested in sharing the control and management of the business or the control over the construction with the land owners. Except assuring the land owner a certain constructed area and/or certain cash consideration, the builder ensures absolute control in himself, only assuring the quality of construction and compliance with the requirements of local and municipal laws, and undertaking to deliver the owners' constructed area of the building with all certificates, clearances and approvals to the land owner.
21. Learned counsel for the respondent contended that the agreement was titled as "collaboration agreement" which shows an intention to collaborate and therefore it is a joint venture. It is now well settled that the title or caption or the nomenclature of the instrument/document is not determinative of the nature and character of the instrument/document, though the name may usually give some indication of the nature of the document. The nature and true purpose of a document has to be determined with 9 ITA No.2500/Ahd/2010 reference to the terms of the document, which express the intention of the parties. Therefore, the use of the words 'joint venture' or 'collaboration' in the title of an agreement or even in the body of the agreement will not make the transaction a joint venture, if there are no provisions for shared control of interest or enterprise and shared liability for losses.
22. The State Commission and National Commission have proceeded on an assumption, which appears to be clearly baseless, that wherever there is an agreement for development of a property between the property owner and builder under which the constructed area is to be divided, it would automatically amount to a joint venture and there is no question of the landholder availing the service of the builder for consideration. Reliance was placed on two decisions, the first being that of the National Commission in C Narasimha Rao v. K R Neelakandan - I (1994) CPJ 160 and the second being that of the Delhi State Commission in Har Sarup Gupta v. Mis. Kailash Nath & Associates - II (1995) CPJ 275. In C Narasimha Rao, there was an agreement between the landowners and a builder for construction of a building and sharing of the constructed area. The old building was demolished, but the builder failed to complete the construction of a new building and hand over the owner's share of flats. The landowners preferred a complaint claiming Rs.94,000/- as the value of the malba (retrievable valuables from the debris of the old building) that had been removed by the builder. The National Commission held that as the claim was for recovery of the money being value of the malba removed by the builder, it does not amount to a claim based on deficiency of service and therefore such a claim would fall outside the scope of the Consumer Protection Act. The said decision is wholly inapplicable, as it dealt with a different question. In Har Swamp Gupta, the State Commission was concerned with a claim of the landowners for compensation alleging that the builder had not built the flats in terms of the contract under which the landowners were entitled to 36% and the builder was entitled to 64% of the built up area. The State Commission held that the complaint was not maintainable on the ground that on similar facts the National Commission in Narasimha Rao's case (supra) had held that the fora under the Consumer Protection Act did not have jurisdiction. But Narasimha Rao (supra), as noticed above, was not similar on facts, nor did it lay down any such proposition. Har Swamp Gupta is clearly wrongly decided.10 ITA No.2500/Ahd/2010
23. We may notice here that if there is a breach by the landowner of his obligations, the builder will have to approach a civil court as the landowner is not providing any service to the builder but merely undertakes certain obligations towards the builder, breach of which would furnish a cause of action for specific performance and/or damages.
On the other hand, where the builder commits breach of his obligations, the owner has two options. He has the right to enforce specific performance and/or claim damages by approaching the civil court. Or he can approach the Forum under Consumer Protection Act, for relief as consumer, against the builder as a service- provider. Section 3 of the Act makes it clear that the remedy available under the Act is in addition to the normal remedy or other remedy that may be available to the complainant.
24. The District Forum, the State Commission and the National Commission committed a serious error in wrongly assuming that agreements of this nature being in the nature of joint venture are outside the scope of consumer disputes."
From the aforesaid decision it is apparent that the following proposition of law has been laid down by the Hon'ble Supreme Court for deciding the nature of the agreement (document):
(1) Title or nomenclature given to the agreement / document / instrument does not decide the nature of the agreement.
(2) The name given to the agreement usually gives some indication of the nature of the agreement / document / instrument.
(3) The nature of the agreement has to be decided with reference to the terms and conditions agreed to between the parties who have entered into the agreement or executed the document or instrument as these terms and conditions express the intention of the parties.
(4) Even the nomenclature given in the body of the agreement / document / instrument is also not determinative of the nature and character of the agreement / document / instrument.
On the facts of this case, the Hon'ble Supreme Court observed that the land owner has to do nothing except to the extent he has to receive the constructed area by way of consideration from the Builder / Developer. The Hon'ble 11 ITA No.2500/Ahd/2010 Supreme Court came to the conclusion that the basic purpose of the agreement to construct a house or apartment by the Builder for the owner and, therefore, the agreement is not joint venture even though the nomenclature of the agreement given may be a collaboration agreement. The land owner will not have any say or control in the construction. His motive is not to develop, construct or carry on the business. His only right is to demand delivery of his share of constructed area in accordance with the specifications. Therefore, the Hon'ble Supreme Court after having lengthy and pain taking discussion came to the conclusion that the contract entered into even though is titled as collaboration agreement is in fact a contract for house construction for the consideration and accordingly took the view that the land owner is a consumer and the Builder is a service provider. The remedy is available to the land owner against the Builder for the deficiency in the service. The Hon'ble Supreme Court also made it clear that the agreement of the nature under dispute is not joint venture which can be regarded to be outside the scope of consumer disputes.
9 We agree with the contentions of the learned AR that the decision is a precedent on its own facts. A decision cannot be applied universally without looking to the facts and the issue involved in the decision. If the questions involved in both the decisions are different, one decision cannot be followed while deciding the other case. If the facts involved in both the cases are different, the decision involved in one case cannot be applied in the other case. How a judgment has to be read, the Hon'ble Supreme Court in the case of CIT v Sun Engineering Works P. Ltd. (1992) 198 ITR 297 (SC), has held [at page 299] as under:
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision."
We have also gone through the decision of the Hon'ble Supreme Court in the case of Government of Karnataka & Others v Smt. Gowramma and Others [Appeal (civil) No.2874 of 2001, dated 14-12-2007] on which the learned Senior Advocate has heavily relied. We find that in this case the Hon'ble Supreme Court on the applicability of the judgment has held as under:
"A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a Judge while giving a judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is 12 ITA No.2500/Ahd/2010 decided and for this reason it is important to analyze a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates
- (i) findings of material facts, direct and inferential. An inferential finding of fact is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a Court has been decided is alone binding as a precedent. (State of Orissa v Sudhansu Sekhar Misra and Ors. (AIR 1968 SC 647) and Union of India and Ors. V Dhanwanti Devi and Ors. (1996 (6) SCC 44)). A case is a precedent and binding for what it explicitly decides and no more. The words used by the Judges in their judgments are not to be read as if they are words in Act of Parliament. In Quinn v Leathem (1901) AC 495 (H.L.), Earl of Halsbury LC observed that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides.
Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statues. In London Graving Dock Co. Ltd. v Horton (1951 AC 737), Lord Mac Dermot observed:
"The matter cannot, of course, be settled merely by treating the ipsissima verta of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great 13 ITA No.2500/Ahd/2010 weight to be given to the language actually used by that most distinguished Judge."
In Home Office v Dorset Yacht Co. (1970 (2) All. E.R. 294) Lord Reid said, "Lord Atkins's speech - - - is not to be treated as if it was a statute definition. It will require qualification in new circumstances." Megarry, J. in (1971) 1 WLR 1062 observed:
"One must not, of course, construe even a reserved judgment of Russell L.J. as if it were an Act of Parliament." And, in Herrington v British Railways Board (1972 (2) WLR 537) Lord Morris said:
"There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case."
Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
The following words of Lord Denning in the matter of applying precedents have become locus classicus:
"Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive."
*** *** *** "Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it."
10 Now the question before us is whether the decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati (supra) will be applicable in the case of the assessee or not or can it be regarded to be the precedent for deciding the issue involved in the cases before us for which the 14 ITA No.2500/Ahd/2010 Ld. Senior Advocate took all the pains for traveling from Ahemadabad to Baroda and made us read and understand the whole judgement delivered by the Hon'ble Apex Court in the case of Fakir chand Gulati and that of this tribunal in the case of Radhe developers vis a vis the facts of both the cases. The case of Faqir chand gulati(supra) has been decided by the Hon'ble Supreme Court when a Special Leave Petition has been filed against the order of National Commission dismissing the complaint of the assessee being not maintainable under the Consumer Protection Act, 1986. The issue involved relates to whether the complaint under the Consumer Protection Act, 1986 is maintainable or not. While deciding this issue, the Hon'ble Supreme Court has gone through the agreement entered into by the landowner with the Builder for the development of the property. The agreement was entered into for the development of the property by constructing a building and sharing of the constructed area between the owner and the Builder. The Hon'ble Supreme Court while interpreting the agreement has laid down that how an agreement has to be interpreted. It took the view that it is wrong to assume that wherever there is an agreement for development of a property between the landowner and the Builder under which the constructed area is to be divided, it would amount to a joint-venture and there is no question of the landowner availing the services of the Builder for consideration.
11 Now coming to the facts of the case of the assessee, the assessee has entered into the agreement with the landowner, the copy of which is available before us and English Translation of which is available at pages 42 to 49 of the paper book. This agreement has been entered into on 26-2-2004 with the nomenclature "Agreement for Development". The preamble of the agreement states that out of the said land F. Plot No. 375 Paiki, the powers to develop the land 6985 sq. meters = 75158 sq. ft. are given by the landowner Party of the First Part to the Party of the Second Part Developer (the assessee) and for that purpose, cost of the land is fixed upon calculating at the rate of Rs.121/- per sq. ft. being Rs.90,94,190/-. Out of the said amount, Rs.1,00,000/- has been paid by the Developer to the landowner. The remaining amount of Rs.89,94,190/- is to be paid by the Party of the Second Part to the Party of the First Part within the period of 33 months in equal instalments of three months. It is also mentioned in the said agreement that for constructing buildings for residential as well as commercial purpose over the land mentioned in this agreement, the Vadodara Municipal Corporation has granted Rajachiththi No. L/96/2003 datd 28-07-2003. The assessee has to perform the following acts over the said land including construction:
(1) "That the Party of the Second Part (Assessee) shall upon obtaining all necessary permissions over the said land such as N A, N O C, Development Permission, Rajachiththi, permission for passing plans, Title Clearance, etc. for making the construction and erect an apartment in the same, can organize shops, offices, flats and tenement society and can engage architect if required, can prepare plans and obtain the Occupation Certificate, Completion Certificate, can get the 15 ITA No.2500/Ahd/2010 revised maps prepared and for which, the complete powers are given to the Party of the Second Part.
(2) The entire responsibility for carrying all legal proceedings in respect of aforesaid land shall be that of the Party :f the Second Part and for that purpose, the Party of the First Part are bound to subscribe signatures, consents, affidavits, if and when found necessary. However, the entire expenses that may be required to be incurred by the Second Party on the same cannot be recovered from the Party of the First Part. With this clear-cut condition, this land is entrusted to you for making the development.
(3) On the basis of this Agreement, the Party of the Second Part herein is entitled to make advertisement by displaying the board r in any other manner for the scheme over the land mentioned in the schedule.
(4) The Party of the Second Part Developers can register the members for the new construction that may be made over the said land/property, can issue receipt to the members, can issue allotment letter to the members, can execute the Agreement to Sale, can hand over the possession, can execute Tripartie Agreement, but the entire responsibility for the same shall be that of the Party of the Second Part.
(5) That the Party of the Second Part Developer has to make the construction as per the Rajachithhl issued by the Municipal Corporation, Vadodara, i.e. construction permission over the property as described above and the entire expenses for the same is to be incurred by the Party of the Second Part of its own and there will not be any responsibility of the Party of the First Part in respect of the said amount of expenses.
(6) That the Developer can engage labour contractor, building contractor or any other agency for making construction 01: the scheme organized over the aforesaid property and the Party of the Second Part is completely authorized to make separate agreements with them for all such activities. That on the basis of present Agreement, if the Party of the Second Part Developers will organize any scheme or project over the aforesaid property, in which may accept the complete amounts as stated in this agreement for shops, offices, flats, etc. will be constructed for which we shall execute the Sale Deed in favour of members as and when you may intimate and cause registration and witnessing, etc. on the sale deeds in the Office of the Sub Registrar by presenting the same. However, the stamp, registration charges and other expenses for the same shall be borne by you, the Party of the Second Part or the purchasers of the said offices, shops, flats, houses, etc. (7) That for the houses, shops, flats, etc. that are to be constructed over the said land for which the Party of the second Part is to register them 16 ITA No.2500/Ahd/2010 as members and can upon executing Agreements to Sale, etc. accept the money and issue receipts to the members. Same way, you can remove all obstructions that may come during the period of making the develop it.
(8) If required, the Party of the Second, will raise necessary capital for making development and construction over the said land and can obtain the loan from the bank or any other institutions to complete the scheme and for that purpose can file a claim against such institutions for carrying out necessary proceedings and arty of the Second Part of its own whatever financial responsibility that may arise in au such works, shall be on the head of the Party of the Second Part Developers.
(9) That all activities relating to the construction Is to be carried out by the Developer and if required, the Party of the First Part has to extend necessary cooperation and assistance as a land owner. The expenses for the said works is to be borne by the Party of the Second Part Developer.
(10) From the date of this Agreement, you, the Party of the Second Part is bound to pay tax, land revenue, special cess, etc. in the offices of the Vadodara Municipal Corporation, Government, Semi Government and whatever tax, land revenue, education cess, special cess, etc. are outstanding prior to the date of this Agreement, the same are and shall be paid by us, the Party of the First Part as a land owner.
(11) That for the buildings that may be constructed over the said land, the Party of the Second Part Developer can give a suitable name to the project as deemed fit and for which the Party of the First Part shall not raise any objection or dispute.
(12) That for performing development activity over the said land as well as for the publicity of the said scheme/project, the Party of the Second Part can print brochures, etc. and can publish advertisement, etc. of the same in the daily newspaper and prior to making construction over the said land, can construct a site office and for storing the building material, can construct the godown, etc. at its own cost.
(13) That the required facilities of water, drainage. etc. connections for the houses constructed over the said land as well as for electric connection from Gujarat Electricity Board shall be obtained and provided by the Party of the Second Part at its cost and for that purpose, the Party of the First Part herein is to extend necessary cooperation and assistance to the Party of the Second Part.
(14) That except the writer herein, no one else has any right, title, interest, concern, share or encumbrance over the said land and except myself, no one has any ownership right nor any right of maintenance or share or 17 ITA No.2500/Ahd/2010 authority is being maintained over the said land. Similarly, there is no easement right of any one over the said property nor it is under acquisition and we have not previously executed any Agreement to sale or any other writing to sell the said property in favour of any one else and not transferred, assigned the same in any manner. In spite of the same, if any third person comes forward raising right, claim or charge than we the Party of the First Part shall be bound to remove the same at my cost. Thus, by giving assurance, binding and trust that the property as described hereinabove is having complete clear and marketable title, the Development agreement for the aforesaid property is executed in favour of the Developer herein.
(15) That the physical possession of the said land for performing development activity over the land is handed over by the Party of the First Part herein to the Party of the Second Part herein."
12 If the facts and the terms and conditions of this agreement are compared with the decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati (supra), we noted that in this case there is no agreement to share the constructed area. This agreement relates only to purchase part of the land from the landowner by the assessee for a pre- determined consideration. All the responsibilities for carrying out the construction, permission, N A, N O C, legal proceedings and the results of the development lies with the assessee. The first party is only to co-operate the assessee in carrying out the development and also to execute the documents whenever it is required by the Developer. The assessee has also handed over the physical possession to the Builder for carrying out the development of the project. The landowner does not have any right, interest, title in the development so carried out except to the extent he has to receive the consideration from the assessee. The assessee is entitled to publicize the project, print brochures, etc. and can sell the project at its own right. All the expenses have to be incurred by the assessee for carrying out the construction, etc. The land owner has to do nothing except to the extent he has to receive consideration from the assessee. His motive is not to develop, construct or carry on the business as a Builder or Developer. Practically no right in the land remains with the owner. For whole practical purpose the assessee acquired dominant right over the land and he can deal with the land in the manner in which he may like. Thus, the terms and conditions entered into, in our opinion, give all dominant control and rights over the land to the assessee. The assessee, in our opinion, will be constructing the building at its own cost and will remain the owner of the building at its own without any interference from the landowner. The landowner does not have any right to share the buildings. The agreement 18 ITA No.2500/Ahd/2010 does not envisage that the assessee will be working as a contractor or agent on behalf of the landowner. The agreement cannot be regarded to be the joint-venture or collaboration agreement. It is, in our opinion, the agreement for the sale of the land for a determined consideration under which the assessee is entitled to develop the project on the said land at its own cost in the manner in which he may decide.
13 We have also gone through the decision in the case of Radhe Developers (supra) on which the learned Senior Counsel has heavily relied. We find that the Tribunal in that decision although dealt with 45 appeals of different assessees but has dealt with the facts relating to Radhe Developers in ITA No.2482/Ahd/2006. The facts in that case as are appearing are as under:
"3 The briefly stated facts are that the assessee had developed and built a housing project on a land at Revenue Survey No.648 belonging to one Shri Ghanshyambhai A Patel & Others, through Power of Attorney holder Mahendrabhai A Patel, who are the owners of the land. The assessee-firm had entered into a development and construction agreement with (1) Shri Vinodbhai Nathabhai Patel (HUF), (2) Shri Bhailalbhai Nathabhai Patel HUF, (3) Harishbhai Nathabhai Patel HUF and (4) Shri Hasmukhbhai Nathabhai Patel through their partner Shri Chetankumar Rameshbhai Jogi. The development and construction agreement and Banakhat Agreement are both dated 18-05-2000. There was a Tri-party development agreement revealing that the land owners agreed to get the land developed through the assessee-firm and also agreed that the assessee-firm would make the members i.e. prospective buyers and collect the land consideration at the rate mentioned in the agreement. The project was approved by the local authority, Baroda Municipal Corporation (hereinafter referred to as 'BMC' on 17-07-2000.
The approval was in the name of the said owners of the land. As the assessee-firm is not the owner of the land and even the approval for permission to develop and construct the project was also not in the name of the assessee but in the name of the original land owners, the AO held that the assessee has merely acted as an agent/contractor for construction of residential houses, and therefore, did not satisfy the conditions for granting the claim of deduction u/s 80IB(10) of the Act and accordingly not entitled to the deduction.
4 The CIT(A) dismissed the assessee's appeal vide discussion in paragraph Nos.15 & 16 of his order in the following manner:
"15 Therefore, the deduction u/s 80IB(10) read with section 80IB(1) and rule 18-BBB is admissible only to such assessees as are deriving profits from an undertaking of building and housing projects approved by the local authority, and for such approval, the assessee must legally own the land which is an inalienable 19 ITA No.2500/Ahd/2010 constituent of any housing project. The person doing only the work of developing and constructing the building structure on the authority of the approval granted to the landowner cannot be said to be in the business of an undertaking developing and building housing project, not only on account of not being the owner of the land, a necessary constituent of the housing project, but also on account of not having been granted the approval to execute the project in his own right, because that involves obligation that can be discharged only by the person to whom the approval is granted. The case laws relied upon are all distinguishable on facts and hence are not applicable to the present case."
16 In view of the discussions given above, I do not intend to interfere with the action of the AO in disallowing the claim of deduction u/s 80IB(10) hence the same is confirmed."
14 The findings of the Tribunal are given at page 13 onwards are as under:
8. We have heard the rival contentions and gone through the facts and circumstances of the case. We have also gone through the orders of lower authorities as well as the paper-book filed by the ld.counsel for the assessee.
9 In the most common mode of development of real estate by the developers, the owners of land do not desire to develop the land and they sell the land to a Developer. It is the obligation of the Developer to develop the land, and if necessary to get agricultural land converted into non-agricultural land by the change of user, appoint the architects to prepare the building plans, get them approved with the local authority, and to construct the houses in the form of tenements and flats. The Developer would carry out the construction on his own, namely, carry out all necessary statutory formalities for construction, buy material for construction, employ labour or an agency which would supply labourers and thereupon complete the construction. The Developer would then sell the houses to the prospective buyers. The Developer would buy land and get it transferred in his name even before the plans are placed.
10 However, the other mode in many cases is that land is not purchased at that stage by executing deed of conveyance, i.e. sale-deed.
This is because of variety of reasons, namely, because such conveyance would entail payment of stamp duty, because of litigation, prohibition against execution of conveyance-deed immediately, etc. In some cases, the land may be conveyed directly in favour of Co-operative Housing Societies or Non Trading Corporations or Developers. Therefore, if the land is conveyed to a developer, what the developer does is that he enters 20 ITA No.2500/Ahd/2010 into an agreement titled as Development Agreement with the land-owner. The Development Agreement effectively is an agreement of sale under which the land-owner hands over the possession to the Developer, which entitle Developer to develop the property entirely at his choice, convenience and discretion. By such Development Agreement, the price on which the land would be sold, is fixed. The Agreement would also specify that the land-owner would be entitled to receive his consideration either immediately or over a fixed period, irrespective of whether or not the land is actually developed by the Developer. The land-owner gives all his rights over the land and gives full authority to the developer to enjoy the land in the manner of his choice. The Agreement would also specifically authorize the developer to develop the land, construct tenements thereon, book members and hand over possession to one or more allottees. For all purposes, therefore, the land-owner extinguishes his interest in this land in favour of Developer on execution of this Development Agreement.
11 In the cases of the present assessee land situated at Vadodara, i.e. area comprising of the City of Baroda and around it, is declared as Urban Development Area within the meaning of Section 2(xxix) of the GTP & UDA and the constructions carried out in and around Vadodara are governed by the provisions of the GTP & UDA. The provisions of section 26 of the GTP & UDA restricts everyone from carrying on development/construction over any land without the permission of the appropriate authority, i.e., Vadodara Urban Development Authority (VUDA), Section 27 prescribes that an application for development is to be made, importantly, such application can be made by "any person ...... intending to carry out any development .... in or over any land ...." It does not refer only to an owner of the land. That apart, the definition of the term "Owner" as given in Section 2 (xviii) of the GTP & UDA clearly says that anyone, who develops the land on his own account or for the benefit of any other person or as a joint trustee, guardian, manager, etc., is to be treated as an Owner. Section 29 of GTP & UDA authorizes VUDA to grant or refuse permission for development. In terms of the powers prescribed under Section 118 of GTP & UDA, the State Government has notified rules, viz., Gujarat Town Planning and Urban Development Rules, 1979 (herein after referred to as "GTP & UDR"). Rule 9 thereof prescribes application for development permission under Section 27 to be in Form-C and that permission to be granted under Section 29 to be in Form-D. On looking at Form-C, it is clear that such an application can be made by anyone, not necessarily "Owner." Similarly, permission for development could be granted to whoever has applied for the permission; not necessarily only the Owner.
21 ITA No.2500/Ahd/201012 We may also refer to at this stage, the "General Development Control Regulations (GDCR) as notified by VUDA in pursuance of provisions of Section 12(2) (m) and Section 13(2) (c) of the TP Act which govern the activity of construction in and around the city of Vadodara. Clause 2 of GDCR gives definitions. The term "owner" in Clause 2.32 includes "Developers". Therefore, in GDCR whenever there is a reference to the term "Owner" it would always include "Developers developing any property." Clause-3 of GDCR prescribes procedure for acquiring development permission. Application has to be made in Form No.1 which can be filed by anyone including "Developer". Thus a "Developer" has a right to apply for development permission and to carry on all construction activities. Clause-11 prescribes conditions for development of land and clearly contemplates grant of development permission not only to "Owner" but also to a person who has a right to develop the land. Regulation-23 shows that it applies to the new construction, as distinguished from the applicability to the person applying for construction. In other words, the Developer caries out development activity as to comply with the Regulations whether or not he is the "Owner". This becomes further clear when one examines Clause-25, which pertains to penalties. Finally when the construction is completed the application for occupancy permission has to be made in form No.7 pursuant to Regulation No.6.2 (b) and that Building Completion Certificate is given by the authority in Form No.10 pursuant to Regulation No.7 in relation to development. Therefore, what is material is the development of the real estate and not, who has carried out the same.
13 It is a fact that the land was not registered in its name. It is also true that the assessee had the approval granted by local authority, i.e. BMC which stands in the name of the owner of the land. But on perusal of the Development and Construction agreement it is very clearl that the land owners have agreed to get their land developed through the assessee-firm for construction of housing project. From the translated copy of approval of local authority, i.e. BMC dated 17/07/2000 we find that it is in the name of Shri Ghanshyambhap A.Patel & Others through Power of Attorney holder Mahendrabhai A.Patel and in this approval letter, land owners is shown as the applicant. The relevant clause No.1 & 2 of the 'Agreement to sell', may now be looked into to find out what is the exact nature of the transaction. The relevant clause reads as under:-
"1) The above referred land in schedule is agreed to be sold by us, party of the Third Part, to party of the First Part at the rate of per sq.ft. at Rs.100/- & today & you party of the First part has jointly paid to party of the Third Part Rs.11,000/- (Rupees eleven thousands only) by cash, Subhanpura, Baroda.22 ITA No.2500/Ahd/2010
2)The above said amount paid as referred in para. I, you party of the First Part has to pay to party of the Third Part in four monthly instalment within eighteen months. During this period at the time of paying money the name of members that you suggest to be incorporated in agreement to sale/sale deed by part with internal understanding for which the seller will give consent.
As the land is covered by the Laws of Urban Land Ceiling Act, Rules and Regulation there under the party of the Second Part. Before Competent Authority and Additional Collector Baroda has put the said land & has declared on dt. /06/93. The said land to be kept as free hold.
The said land lay out plan, development permission to construct by the order dt: 14/1/96 No. L/152/95-96 the Baroda Deputy City Development Authority and permission to construct is granted by Baroda Municipal Corporation.
The owners of the land, executors of agreement to sale, by dt:
7/9/81 has passed the deed of agreement to sale favouring consenting party. Therefore they are taken as consenting party, in present agreement to sale. At the time of making agreement to sale we land owners, the executors have received full amount towards the sale price of the land and therefore the party of Third Part is made consenting party and therefore the amount of sale price is to be given to the consenting party by the purchaser as per this agreement to sale."
14 The relevant terms and conditions clearly states that the second party are the owners of the land. The agreement for development of the housing project and construction dated 18-05-2000 described in the schedule and the land is in their names in the Govt. records. The relevant clauses 1, 2, 3 & 4, read as under:-
"Who shall be hereinafter in this present Agreement of Development of Housing Project and Construction termed as The Party of the Third Part or You the said Firm or Developer-Builder in the meaning and context of the said term includes all the present and future partners/partners from time to time of the said Firm of the Party of the Third Part, who are alive, and heirs, successors, guardians, etc. of everybody.
1. Whereas The Party of the Second Part the confirming party are the original owners of the land described in Schedule below and is on their names in Government record.
2. The Party of the Second Part the confirming party as landlords had executed an Agreement of sale for the land described in 23 ITA No.2500/Ahd/2010 Schedule below in favour of The Party of the First Part on 7-9- 81 at the rate of Rs.18/- per Sq.Ft. and subject to the other conditions mentioned therein. Accordingly the Party of the First Part as decided full consideration price is paid to the Second Part the confirming party i.e. to landlords and therefore, landlords registered Sale Deed/the First Part or nominee / s of the party of the First part are in actual possession of the land described.
3. The Party of the Third Part are connected with the construction of business since many years and have experience of constructing residential houses.
4. With the consent of The Party of the First and Second Part, The Party of the Third Part as a developer and builder wants to do a project/scheme of constructing residential houses having area less than 1500 Sq. Ft. for the middle class society."
15 On perusal of clause 11 of these agreements we find that with the consent of the party of the first and second part, the rights and authorities are given to the third party, as a Developer-cum-Builder. The sub-clauses (8) & (9) to clause 11 elaborate that the Developer-cum-Builder has to take all the proceedings at Government, Semi-Government, Municipal Corporation office and in legal court and at other places on behalf of the party of the first and second part. All necessary applications and written statements, replies and in the forms all that is to be done by Developer-cum- Building Contractor. The relevant sub-clauses (8) & (9) read as under:
"8. That the said Developer cum Building Contractor in order to complete the scheme in order step by step but in prescribed time period, The Party of the First and Second Part and all the members desirous in joining in the scheme Developer cum Building Contractor whenever and wherever they need the signatures and admissions, they shall have to give that to the Developer cum Building Contractor and in special circumstances Developer cum Building Contractor in order to complete the scheme in order step by step but in prescribed time period, shall be entitled to receive General Power of Attorney form The Party of the First and Second Part.
9. In order to complete the scheme as per arrangement plan and in prescribed time period, Developer cum Building Contractor has to all the proceedings at Government and Semi-government and Municipal Corporation Office and in legal Courts and at other places 24 ITA No.2500/Ahd/2010 on behalf of The Party of the First and Second Part on necessary applications and written statements, replies and in the forms all that is to be done by Developer cum Building Contractor and for that hereby the authority and powers are given to him in spite of that in future if any Specific power of Attorney is to be obtained at that time The Party of the First and Second Part shall have to execute that in favour of Developer cum Building Contractor."
16 By clause 14 of this Agreement the possession is to be with the Developer-cum-Building Contractor, i.e. assessee-firm and it reads as under:-
"14. The land described in schedule below and the construction done on it, its actual possession shall be with Developer cum Building Contractor till the completion of this scheme and moreover till the total implementation of this agreement on the said land and the construction over it there shall be a contractual lien of the Developer cum Building Contractor."
17 Vide clause No.16 of this Agreement the parties of the first and second part of this agreement have handed over all the responsibilities of the scheme to the Developer-cum-Building Contractor. It reads as under:
"16 The party of the First and Second Part have handed over all the responsibilities of the scheme to the Developer cum Building Contractor so at present to the party of the first part as per rules and regulations he is getting F S I but in future it changes taken place in rules and regulations of F S I in such circumstances other than the present scheme on the land if special construction is allowed then for such additional work other than total construction made, as per rules and regulations by getting passed the plans form V M C Vadodara to do the construction all the rights and authorities shall by with Developer cum Building Contractor and thereafter also whatever F S I rights shall remain that also as per his agreement shall be with the party of the third part."
15 After discussing various clauses of the agreement, the Tribunal held as under:
"18 From the clauses of the Development and Construction Agreements as well as Agreement for Sale, both dated 18/05/2000, extracted above we observe that, these two Agreements effectively transfer to the assessee-firm all the rights of development and construction and to deal with the land for a consideration payable within a stipulated time; that the assessee had been put in possession of the land on the terms and conditions as mentioned in these two Agreements; that the assessee-firm 25 ITA No.2500/Ahd/2010 has also paid consideration of Rs.56 lacs during the two Financial Years; i.e. 2000-01 & 2001-02; that the assessee-firm has to obtain necessary approvals from the local authorities; i.e. BMC on behalf of the land-owners and all the expenses for such purposes are to be incurred by the assessee; that the assessee-firm has engaged the firm of Architect and also incurred expenses towards the charges payable to Corporation, etc. for obtaining the approvals; that even from the books of account, it is noticed that for obtaining the approval, the assessee-firm has paid the developmental charges to various regulating agencies, i.e. VUDA, BMC and GEB (Gujarat Electricity Board), etc.; and that these expenses are incurred by the assessee-firm and the Assessing Officer has brought out the complete details year-wise in his assessment orders at page No.5 reading as under:-
Sr.No. Particulars Financial Amount
Year (Rs.)
1. VMC charges paid to Vadodara 2000-01 65,532/-
Municipal Corporation
2. VMC charges paid to Vadodara 2001-02 31,116/-
Municipal Corporation
3. VUDA charges paid to Vadodara 2000-01 46,508/-
Development Authority
4. Electricity charges paid to GEB for 2000-01 1,99,944/-
getting electricity connection to its
project
19 The assessee commenced the work to develop which included the
development of sites, laying roads within the housing complex, providing for compound-walls of the housing complex, streetlights, drainage, etc.; that simultaneously the construction commenced the work of the housing work; that the cost of the entire Development and the Construction is substantially made out by the assessee-firm initially and partially recovered from the customers who are desirous to purchase any residential houses, i.e. the prospective buyers; and that the size of plot on which the project is developed is, definitely, in excess of one acre and the size of each residential house is less than 1500 Sq. ft.
20 On these undisputed facts we have to examine the provisions of the section 80-IB(10) of the Act. Before discussing the provisions appearing in the impugned years, it would be relevant to have a look the legislative history of the provision. The deduction for housing project was introduced for the first time in Asst. Year 1999-2000 by inserting sub-section (4F) in Section 80IA of the Act and the deduction was as per provisions of Sec.80IA(1) in respect of any profits and gains of such undertaking. The said section 80IA(4F) reads as under:-26 ITA No.2500/Ahd/2010
(4F) This section applies to an undertaking, engaged in developing and building housing projects approved by a local authority subject to the condition that the size of the plot of land has a minimum area of one acre, and the residential unit has a built up area not exceeding one thousand square feet :
Provided that the undertaking commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before the 31st day of March, 2001."
21 On a close reading of this provision, it would be apparent that it applied to an undertaking which was engaged in developing and building housing projects approved by a local authority and the deduction was subject to the conditions that (i) the size of the plot of land was a minimum area of one acre, and the residential unit has a built up area not exceeding 1000 Sq. ft; and (ii) the undertaking commenced development and construction of the housing project on or after 1st October, 1998, and completed the same before 31st March, 2001.
22 Section 80IA was later split into and spread in two sections- 80IA and 80IB by the Finance Act, 1999 with effect from 1st April 2000. The housing project fell in S. 80IB and forms part of sub-section (10) of Sec.
80IB. It grants deduction in respect of profit and gains from certain industrial undertaking other than infrastructure development undertakings. The relevant provision brought out reads as under:
"80-IB. Deduction in respect of profits and gains from certain industrial Undertakings other than infrastructure development undertakings.
(10) The amount of profits in case of an undertaking developing and building housing projects approved by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998, and completes the same before the 31st day of March, 2001;27 ITA No.2500/Ahd/2010
(b) the project is on the size of a plot of land which has minimum area of one acre; and
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place."
23 For enacting this provision, the Notes on Clauses to the Finance Bill, 1999 has explained that the provision also seeks to provide that for approved housing projects the profits which are fully deductible, the built- up area in regions other than outside twenty-five km. of municipal limits of Delhi and Mumbai, does not exceed one thousand five hundred square feet.
24 Further, the Memo contained in Finance Bill, 1999 has explained the provisions brought by the legislature w.e.f. 1st April, 2000 and the same reads as under:
"TAX INCENTIVE FOR PROMOTION OF HOUSING Liberalization of tax holiday to approved housing projects--Under s. 80-IA of the IT Act, profits of approved housing projects where the development and construction commences on or after 1st Oct., 1998 and is completed by 31st March, 2001 are fully deductible. The conditions necessary for claiming the benefit are that the approved housing project should be on minimum area of one acre and should have dwelling units with a maximum built-up area of 1,000 sq.ft.
It is proposed to modify the existing benefits to provide that in areas other than falling in and within 25 kms. from the municipal limits of Delhi and Mumbai, the built-up area of dwelling units may be up to a maximum limit of 1,500 sq. ft. instead of 1,000 sq. ft. at present to make them entitled for benefit. The built-up area for areas falling in Delhi and Mumbai and within 25 kms. of the municipal limits of both, however, shall remain the same.28 ITA No.2500/Ahd/2010
The proposed amendment will take effect from 1st April, 2000, and will, accordingly, apply in relation to the asst. yr. 2000-01 and subsequent years."
25 The provisions of Sec.80IB(10) thus are sought to provide that for approved housing project, the profits are fully deductible if the project has the built up area for the cities of Delhi and Mumbai, and the area within 25 km. from the municipal limit thereof does not exceed 1000 Sq. ft. and for other places the built up area of residential unit does not exceed 1500 Sq. ft. A provision is also made whereby any undertaking of an Indian company, which is entitled to deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger (a) no deduction to be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section to apply to the amalgamated or resulting company as they would have applied to the amalgamating or demerged company as if the amalgamation or demerger had not taken place.
26 The sub-section (10) relating to housing project was amended from time to time. Firstly, by Finance Act, 2000 w.e.f. 1st April, 2000 extending the outer limit for completion of the housing project on or before 31st March, 2002 as against 31st March, 2001 originally enacted. This sub- section was again amended by Finance Act, 2003 removing the time limit for completion of the project meaning thereby that for the Asst. Years 2002-2003, 2003-2004 and 2004-05, the assessment years with which we are concerned, there was no outer time limit for completion of the project. There have been certain further amendments in this section by Finance (No.2) Act, 2004 w.e.f. 1st April, 2005, but we are not concerned with these amendments insofar as all these appeals are concerned. Therefore, we are not dealing with the same.
27 A bare reading of this provisions of S. 80IB (10), as they stood in the years under consideration, the requirements for claiming deduction for housing projects are that (i) there must be an undertaking developing and building housing project; (ii) such housing project is approved by the local authority; (iii) the development and construction of housing project has commenced on or after 1st day of October, 1998; (iv) the housing project is on a size of a plot of land which has minimum area of one acre; and (v) the residential unit developed and built has a built up area of 1000 sq. ft. if it is situated in Delhi and Mumbai or within 25 km. of municipal limit of these cities and 1500 Sq. ft. at any other places. There is no other 29 ITA No.2500/Ahd/2010 condition, which is to be complied with by an assessee for claiming the deduction on profits of the housing project.
28 The contention of the Revenue Authorities that to claim deduction u/s.80IB(10), there is a condition precedent that the assessee must be owner of the land on which housing project is constructed has no force. We do not find any such condition as appearing in the provisions of the section extracted above. A plain reading of sub-section (10) of Sec.80IB reveals and makes it evident that there must be an undertaking developing and building a housing project as approved by a Local Authority. It does not have any further condition that such development and building of the housing project should also be on a land owned by an assessee undertaking. It might be true that the land belongs to the persons who has entered into an agreement with the assessee to develop and build housing project but on a perusal of the agreement as narrated above, it is evident that the development and building work has been carried out by the assessee in pursuance of a tripartite agreement and it is not by the land owners. Therefore, the mere fact that the land-owner and the undertaking developing and building housing project, are two different entities would not make any difference. The deduction would be eligible to the person who is developing and building housing project and not to the mere owner thereof.
29 It is also the case of the Revenue that the assessee was a mere contractor developing and building housing project and therefore, it could not be a developer. We fail to understand as to how such a situation could emerge. A person who enters into a contract with another person is no doubt a contractor. Having entered into agreements with landowners for development and building the housing project, was obviously a contractor but it does not derogate the assessee for being a developer, as well. The term contractor is not essentially contradictory to the term developer. As stated above it is the undertaking that develops or builds the housing project that is entitled to deduction irrespective of the fact whether that it is the owner or not or whether it is the contractor thereof. The requirement for claiming deduction is that such an undertaking must develop and build housing project, be it on their own land or on the land of others and for which a tripartite agreement has been entered into for development and building housing project; or be the assessee a contractor for developing and building housing project or an owner of the land.
30 What is the meaning of the term develop, developer, developing, development, we can find the answer in certain dictionaries, including the Law Dictionary.
30 ITA No.2500/Ahd/2010a. The Webster's Encyclopedia unabridged dictionary of the English Language gives following meanings of the term 'developer' as:
"1.One who or that which develops; 2.A person who invests in and develops the urban or Suburban potentialities of real estate b. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition gives meaning of the term 'developer' as person or company that develops land.
c. Random House Dictionary of the English Language, the following definitions can be found:
Develop:
a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state.
b. To cause to grow or expand.
Developer :
a. The act or process of developing; progress
b. Synonym: Expansion, elaboration, growth,
evolution, unfolding, maturing, maturation.
d. Webster Dictionary, the following definitions emerge:
a. To realize the potential of;
b. To aid in the growth of: Strengthen, develop the biceps c. To bring into being: make active (develop a business) d. To convert ( a tract of land ) for specific purpose, as by building extensively e. Law lexicon Dictionary, the following definitions could be seen:
Development a. To act, process or result of development or growing or causing to grow; the state of being developed.
b. Happening 31 ITA No.2500/Ahd/2010
31 The Supreme Court in the case of Gujarat Industrial Development Corporation and Others 227 ITR 414 (SC), considering the meaning of "Developer" held that the word "Development" appearing in the provisions should be understood in its wider sense and, therefore, granted exemption even though the Gujarat Industrial Development Corporation was engaged in the Industrial development. The development means the realization of potentialities of land or territory by building or mining. Accordingly, it can be safely said that a person who undertakes to develop real estate by developing and construction a housing project an eligible undertaking developing and building of housing projects within the meaning of section 80-IB(10) of the Act. In the present case in hand, the land owner has not made any conscious attempt to develop the property except ensuring their rights as land-owner so that the sale value of the land could be realized to them as per the terms of 'Agreement to Sale' and the 'Development Agreement'. The land-owners no doubt, have not thrown themselves into development of property. It is only the assessee who is developing the property. Throwing itself into the business of development and building of housing projects by taking all risks associated with the business by engaging architects, structural consultants, designing and planning of the housing schemes, payment of development charges, obtaining necessary permissions, approving plans, hiring machinery and equipments, hiring engineers, appointing contractors, etc. No doubt, the permission has been obtained in the name of the registered land-owners, but the same have been obtained by the assessee-firm through its partners who are holding Power of Attorney of the respective land-owners. It is a fact that the assessee is a 'Developer' and not a 'Contractor' as held by the lower authorities. The Developer is not working on remuneration for the land- owners, but Developer is working for himself in order to exploit the potential of its business in his own interest and, therefore, option for all business risks associated with the business of development of real estate including developing and building of housing projects. As per the provisions of section 2(1)(g) of Regulation of Employment and conditions of Service Act (27 of 1996), the tem 'Contractor' means a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building workers for any work of the establishment; and includes a sub-contractor.
32 In these circumstances, in our opinion, the assessee is entitled to deduction u/s. 80IB(10) as it had developed and built the housing project; it had started construction after 1st day of April 1998; the project is on the size of a plot of land which has a minimum area of one acre and the maximum built up area of the residential units are not more than 1500 Sq.
32 ITA No.2500/Ahd/2010ft., the property being situated in Baroda, a city other than Delhi and Mumbai.
33 It may also be born in mind the deduction is not exclusively to an assessee but to an undertaking developing and building housing project, be it developed as a contractor or as an owner. This fact is evident on the bare reading of sub-sec.(1) of Sec.80IB, sub-sec.(2) of Sec.80IB, which provides that "this section applies to an industrial undertaking which fulfills all the following conditions viz., ..............." and sub-section (12) which allows the deduction to the amended or resulting company in case of amalgamation or demerger of the original undertaking which had started developing and building the housing project. For the sake of convenience, sub-section (12) of Sec.80IB reproduced hereunder:-
"80IB(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger -
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place."
34 Even if that is so required, the assessee in the present case can also be said to be the owner of the land as it had made part payment to the land-owners during the Financial Years 2000-01 & 2001-02 for an amount of Rs.56 lacs, and taken the possession of the land for development and building the housing project and satisfy that condition as well of being the owner of the land in view of provisions of section 2(47) (v) of the Act. When the assessee has taken on the possession of immovable property or retained it in part performance of a contract of a nature referred to in section 53A of the Act of the Transfer of Property Act, 1882 it amounts to transfer under section 2(47)(v), which reads as under:-
"(47) " transfer ", in relation to a capital asset, includes,-33 ITA No.2500/Ahd/2010
(i) ...
(ii) ...
(iii) ...
(iv) ...
(iva)...
(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"
35 Section 53A of the Transfer of Property Act, 1882 referred to in the aforesaid section of the I. T. 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 the contract, though required to be registered, has not been registered, or, 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 contract:
Provided that nothing in this section shall affect the rights or a transferee for consideration who has no notice of the contract or of the part performance thereof."34 ITA No.2500/Ahd/2010
36 In view of above provisions of the Transfer of Property Act, vis-à- vis, the Income-tax Act to get the correct import of section 80-IB(10) of the Act we have to read along with section 80-IB(1) of the Act which also does not provide for any condition that the assessee should be owner of the land. The relevant provisions of sub-section (1) of section 80-IB, reads as under:-
"80IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-
sections (3) to (11) and (11A) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section."
37 The ld. DR relied on the decision of the Supreme Court in the case of V.S.M.R. Jagadishchandran (Decd.) 227 ITR 240 (SC), observing at page No.243 that "It has been held that where a mortgage was created by the previous owner during his time and the same was subsisting on the date of his death, the successor obtains only the mortgagor's interest in the property and by discharging the mortgage debt he acquires the mortgagee's interest in the property and, therefore, the amount paid to clear off the mortgage is the cost of acquisition of the mortgagee's interest in the property which is deductible as cost of acquisition under section 48 of the Act. In the present case, we find that the mortgage was created by the assessee himself. It is not a case where the property had been mortgaged by the previous owner and the assessee had acquired only the mortgagor's interest in the property mortgaged and by clearing the same he had acquired the interest of the mortgagee in the said property. The questions raised by the assessee in the application submitted under section 256(2) of the Act do not, therefore, raise any arguable question of law and the said application was rightly rejected by the High Court. In the circumstances, even though we are unable to agree with the reasons given in the impugned order, we are in agreement with the order of the High Court dismissing the application filed by the assessee under section 256(2) of the Act."
38 The argument is totally misconceived as in the present case, the assessee has performed his part of the contract in regard to "Agreement to Sale' and 'Development Agreement' and paid part of consideration to 35 ITA No.2500/Ahd/2010 perform his part and carried out development activities by constructing a housing project as per agreement. This being a tri-party agreement, i.e. the Development Agreement which has passed on a valid and rightful title to the prospective buyers, in no way it can be said that facts of case before the Supreme Court would apply to the present case.
39 We may refer to the provisions of Section 10(20A) of the Income- tax Act providing that : " Any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. " The Supreme court while interpreting the provisions of section 10(20A) of the Act, the purpose of which is almost similar to the present section 80IB, held in the case of Gujarat Industrial Development Corporation & Others (227 ITR 414), at page No.417 as under:-
"Any income falling within the ambit of the said clause would automatically slip out of the exigibility under the Income-tax Act. The clause pertains to any income of an authority constituted by or under any enacted law. This first limb of the clause is squarely available to the Corporation as it has been constituted under the Gujarat Act.
The second limb of the clause consists of two alternatives, of which the first is that the authority constituted by law should be for dealing with the need to provide housing accommodation. That alternative is obviously not available to the appellant-Corporation as nobody has a case that the appellant-Corporation has anything to do with the obligation to provide housing accommodation. It is the second alternative in the clause under which the appellant seeks shelter to be absolved from the liability to pay income-tax. As per that alternative, if the authority is constituted for the purpose of planning or development or improvement of any city or town or village or a combination of them, the income of such authority is not exigible to income-tax."
40 In the case of Tamil Nadu Civil Supplies Corporation Ltd. 249 ITR 214 (SC) referred to by the ld. DR, the Supreme Court has considered the issue as under:-
"The assessee before it had purchased certain houses from the Housing Board and had made part payment thereof. It had acquired possession of the houses but the deed of conveyance was not executed until after the financial year in question. Even so, the assessee's claim for depreciation of the buildings, which it had used 36 ITA No.2500/Ahd/2010 for the purpose of its business, was upheld on the basis that it had acquired dominion over the buildings.
We will assume the correctness of the judgment but', on the facts found, it is not possible to reach the conclusion that the assessee had acquired dominion over the mills in question. There is nothing on the record which indicates this nor is that the finding of the Tribunal."
41 The Supreme Court in this case has considered the issue and finally found that there is nothing on record which indicated that the assessee had acquired dominion over the mills in question on which depreciation was claimed in order to the findings of the Tribunal available. In view of these facts, the Supreme Court has dismissed the appeal of the assessee.
42 We may refer to decisions referred to by the ld. counsel for the assessee in the case of Supreme Court in the case of Mysore Minerals Ltd. 239 ITR 775 (SC), wherein by relying on the decision of CIT v/s. Podar Cement Pvt.Ltd.[1997] (226 ITR 625)[SC], the Supreme Court has elaborately discussed and defined the word "owner" and finally held as under:-
"Section 32 of the Income-tax Act confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee securing the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred.
What is ownership ? The terms "own", "ownership", "owned", are generic and relative terms. They have a wide and also a narrow connotation, The meaning would depend on the context in which the terms are used Black's Law Dictionary (6th edition), defines "owner" as under :
"Owner, The person in whom is vested the ownership, dominion, or title of property ; proprietor. He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases, even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right.
The term is, however, a nomen generalissimum, and its meaning is to be gathered from the connection in which it is used, and from 37 ITA No.2500/Ahd/2010 the subject-matter to which it is applied. The primary meaning of the word as applied to land is one who owns the fee and who has the right to dispose of the property, but the term also includes one having a possessory right to land or the person occupying or cultivating it.
The term 'owner' is used to indicate a person in whom one or more interests are vested for his own benefit . . . ."
In the same dictionary, the term "ownership" has been defined to mean, inter alia, a "collection of rights to use and enjoy property, including right to transmit it to others .... The right of one or more persons to possess and use a thing to the exclusion of others. The right by which a thing belongs to some one in particular, to the exclusion of all other persons. The exclusive right of possession, enjoyment and disposal ; involving as an essential attribute the right to control, handle, and dispose."
Dias on Jurisprudence (4th edition, at page 400) states :
"The position, therefore, seems to be that the idea of ownership of land is essentially one of the 'better right' to be in possession and to obtain it, whereas, with chattels the concept is a more absolute one. Actual possession implies a right to retain it until the contrary is proved, and to that extent a possessor is presumed to be owner."
Stroud's Judicial Dictionary gives several definitions and illustrations of ownership. One such definition is that the "owner" or "proprietor" of a property is the person in whom (with his or her assent) it is for the time being beneficially vested, and who has the occupation, or control, or usefruct, of it ; e.g., a lessee is, during the term, the owner of the property demised. Yet another definition that has been given by Stroud is :
" 'Owner' applies 'to every person in possession or receipt either of the whole, or of any part, of the rents or profits of any land or tenement ; or in the occupation of such land or tenement, other than as a tenant from year to year or for any less term or as a tenant at will'."
In State of U. P. v. Renusagar Power Company [1991] 70 Comp Cas 127, 149 (SC) is, was held that "the word 'own' is a generic term, embracing within itself several gradations of title, dependent on the circumstances, and it does not necessarily mean ownership in fee simple ; it means, 'to possess, to have or hold as property' ".
38 ITA No.2500/Ahd/2010In CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC), the question which came up for consideration before this court was whether the rental income from the house property which had come to vest in the assessee, but as to which the assessee was not legal owner for want of deed of title, was liable to be assessed as income from house property or as income from other sources. To be assessable as income from house property within the meaning of section 22 of the Act the property should be such " of which the assessee is the owner". This court upon a juristic analysis of the underlying scheme of the Act and resorting to contextual and purposive interpretation, also having reviewed several conflicting decisions of different High Courts, held that the liability to be assessed was fixed on a person who receives or is entitled to receive the income from the property in his own right. Vide para. 55, this court has held :
"We are conscious of the settled position that under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, 'to tax the income', we are of the view, 'owner' is a person who is entitled to receive income from the property in his own right."
In R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC), it was held for the purpose of section 9 of the Indian Income-tax Act, 1922, that the owner must be the person who can exercise the rights of the owner, not on behalf of the owner but in his own right.
We may usefully extract and reproduce the following classic statement of law from Perry v. Clissold [1907] AC 73 (PC) quoted with approval in Nair Service Society Ltd. v. K. C. Alexander, AIR 1968 SC 1165 :
"It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by the process of law within the period prescribed by the provisions of the statute of limitation applicable to the case, his right is for ever extinguished and the possessory owner acquires an absolute title."39 ITA No.2500/Ahd/2010
Podar Cement's case [1997] 226 ITR 625 (SC), is under the Income-tax Act and has to be taken as a trend-setter in the concept of ownership. Assistance from the law laid down therein can be taken for finding out the meaning of the term "owned" as occurring in section 32(1) of the Act.
In our opinion, the term "owned" as occurring in section 32(1) of the Income-tax Act, 1961, must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. "Building owned by the assessee" the expression as occurring in section 32(1) of the Income-tax Act means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc., but nevertheless is entitled to hold the property to the exclusion of all others."
43 In view of decision of the Supreme Court in the case of Mysore Minerals Ltd.(supra), wherein the term "owned" in section 32 has been given a wider meaning by holding that if an assessee was in possession of a property and had acquired dominion over it to the exclusion of others, he would be entitled depreciation u/s.32 irrespective of the legal title. In the present case the 'Development Agreement' and 'Agreement to Sale' the undertaking developing and building housing projects and claiming deduction of profits from such housing project, there is, definitely, a dominion of the Developer over the land to the exclusion of others inasmuch as possession of the land is given to the Developer by the land- owners to carry out the construction activity of the housing project. The Assessee-Developer has complied with all the conditions as provided u/s.80-IB (10) of the Act, so as to claim deduction. The assessee has also passed on the part consideration for acquiring the land through an 'Agreement to Sale' and in view of the provisions of Section 2(47) read with section 53-A of the Transfer of Property Act, 1882, the assessee has completely performed his part of the contract and developed the housing project and transferred the flats/tenements to the buyers in view of 'Agreement to Sale' as well as 'Development Agreement'. It shows that the assessee was in full possession of the land for the Development of Housing Project and has carried out all the activities of a complete housing project by taking all risks associated with this business. The assessee is 40 ITA No.2500/Ahd/2010 engaged in complete infrastructure including engaging architects, structural consultants, designing and planning of the housing schemes, payment of development charges, obtaining necessary permissions, on behalf of the land owners, got the plans approved, hiring of machinery and equipments, hiring engineers, appointing contractors, etc. 44 As discussed above and in view of the case-law of the Supreme Court in the case of Mysore Minerals Ltd (supra), wherein it has been categorically observed as regards to ownership that anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title might not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act, etc. In the present case before us, by virtue of 'Agreement to Sale' and 'Development Agreement', the assessee has acquired dominion over the land to the exclusion of others and he has completed the project in terms and conditions laid down u/s.80-IB(10) of the Act, to claim deduction on the profit derived from construction and development of residential housing project. There is no explicit condition enumerated in section 80-IB(10) of the Act as regards to requirement of ownership for the claim of deduction. In view of above facts and circumstances of the case as well as legal proposition laid down by the Supreme Court in the case of Mysore Minerals Ltd.(supra), we hold that the assessee is entitled for claim of deduction on the profit derived from Construction and Development of Residential Housing Project."
16 The facts involved in the case of the assessee are similar to the facts in the case of Radhe Developers (supra) and accordingly we are of the view that the assessee has acquired the dominant over the land and has developed the housing project by incurring all the expenses and taking all the risks involved therein. We may mention here that, in our opinion, the decision in the case of Radhe Developers (supra) will not apply in a case where the assessee has entered into the agreement for a fixed remuneration merely as a contractor to construct or develop th housing project on behalf of the landowner. The agreement entered into in that case will not entitle the Developer to have the dominant control over the project and all the risks involved therein will vest with the landowner only. The interest of the Developer will be restricted only for the fixed remuneration for which he would be rendering the services. The decision in the case of Radhe Developers (supra) has not dealt with such situation. The proposition of law laid down in the case of Radhe Developers cannot be applied universally without looking into the 41 ITA No.2500/Ahd/2010 development agreement entered into by the Developer along with the landowner. In the case of Shakti Corporation since the assessee has filed copy of the development agreement and crux of the agreement is that the assessee has purchased the land and has developed the housing project at its own, therefore, we are of the view that the assessee will be entitled for the deduction u/s 80IB(10). The decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati (supra) will not assist the Revenue, as the agreement is not sharing of the constructed area. In other cases the copy of agreement since has not been submitted before us, if submitted , the terms and conditions of the agreement were not specifically argued before and placed before us, we therefore, in the interest of justice and fair play to both the parties set aside the order of the CIT(A) and restore all other appeals to the file of the AO with the direction that the AO shall look into the agreement entered into by each of the assessees with the landowner and decide whether the assessee has in fact purchased the land for a fixed consideration from the landowner and has developed the housing project at its own cost and risks involved in the project. In case the AO 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 AO should allow the deduction to the assessee u/s 80IB(10). In case the AO finds that the Developer has acted on behalf of the landowner and has got the fixed consideration from the landowner for the development of the housing projects, the assessee should not be allowed deduction u/s 80IB(10) to the assessee.
17 In the result, all these appeals are allowed for statistical purposes."
7. W e find that the ld. CIT(A) in the instant case while referring to the aforesaid decisions in the case of M/s Shakti Corporation(supra) & M/s Radhe Developers(supra), concluded that the AO himself while adjudicating a similar issue accepted in the AY 2003-04 that risks and costs were borne by the assessee and accordingly, allowed the claim of the assessee .Thus, the facts on record reveal that the AO himself accepted a similar claim of the assessee in the AY 2003- 04 while a similar issue was set aside by the ITAT to the file of the AO vide order dated 21.11.2008 in ITA no.300/Ahd./2008 for the AY 2004-05 & order dated 26.3.2009 in ITA no.256/Ahd./2009 for the AY 2005-06 and the Revenue have not placed before us any material 42 ITA No.2500/Ahd/2010 controverting the aforesaid findings of the ld. CIT(A) nor brought to our notice any contrary decision and did not even inform the fate of the set aside matters for the AYs2004-05 & 2005-06. In these circumstances, especially when the ld. CIT(A) merely followed the decisions of the ITAT in the case of M/s Shakti Corporation(supra) & M/s Radhe Developers(supra) while there is no material before us to take a different view in the matter, we are not inclined to interfere. Therefore, ground nos. 1 & 2 raised by the Revenue in this appeal are dismissed.
8. No additional ground having been raised in terms of residuary ground no.3 in the appeal, accordingly, this ground is dismissed.
9. In the result, appeal is dismissed.
Order pronounced in the court today on 31-03- 2011
Sd/- Sd/- (D K TYAGI) (A N P AHUJ A) JUDICI AL MEMBER ACCOUNTANT MEMBER Dated : 31-03-2011 Copy of the order forwarded to:
1. M/s Shree Lakshmi Developers, Shreedhar Park Society, Opp. New Era School, Makarpura, Baroda
2. Income-tax Officer, W ard-2(5), 1 s t Floor, Aayakar Bhavan, Race Course Circle, Baroda
3. CIT concerned
4. CIT(A)-V, Baroda
5. DR, ITAT, Ahmedabad Bench-D, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar 43