Income Tax Appellate Tribunal - Ahmedabad
Madhav Builders, , Ahmedabad vs Assessee on 1 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD ''B" BENCH - AHMEDABAD
Before S/Shri Kul Bharat, JM, & Manish Borad, AM.
IT(SS)A No.383/Ahd/2014
Asst. Year: 2006-07
Madhav Builders, Vs. ACIT, Central Circle 1(4),
73, Nijanand Park Society, Vastral Ahmedabad.
Road, Vastral, Ahmedabad.
Appellant Respondent
PAN : AAJFM 9792J
Appellant by Shri Anil Kshatriya, AR
Respondent by Shri Jagdish, CIT/DR
Date of hearing: 05/11/2015
Date of pronouncement: 01/02/2016
ORDER
PER Manish Borad, Accountant Member.
This is an appeal filed by the assessee against the order of CIT(A)-I, Ahmedabad dated 26.09.2014 in appeal No.CIT(A)- I/483/CC-1(4)/2013-14 for assessment year 2006-07. The assessment was framed u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961 (in short the Act) by ACIT, CC-1(4), Ahmedabad on 31.01.2014. The grounds raised in this appeal are as under :-
1. In law, on the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in not considering the appellant's submissions made before him as such the order is against the principle of natural justice, bad in law and deserves to be cancelled.IT(SS)A No. 383/Ahd/2014 2
Asst. Year 2006-07
2. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the legitimate deduction u/s 80IB(10) of the Act of Rs.1,32,19,672/-. The same may kindly be directed to be allowed such claimed.
3. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming addition of Rs.2,34,39,999/-, being additionally claimed u/s 80IB(10) on the basis of seized records. The same may kindly be directed to be allowed on such legitimate claim.
4. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the charging interest u/s 234A, 234B, 234C & 234D of the Act. He may be directed to withdraw the same.
5. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the initiation of penalty proceedings u/s 271(1)(c) of the Act. He may be directed to withdraw the same.
6. The appellant firm craves leave to add, alter, amend and withdraw all or any grounds of appeal on or before hearing of the appeal.
2. The assessee has raised six grounds of appeal out of which ground no.1 is not pressed by the assessee, so the same is dismissed.
3. Ground No.4 is consequential.
4. Ground No.5 is premature, which needs no adjudication.
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5. Ground No.6 is general in nature which needs no adjudication.
6. Ground nos. 2 is related to inadmissibility of deduction u/s 80IB(10) of the Act at Rs.1,32,19,672/-.
7. Ground no.3 is against disallowing of deduction u/s 80IB(10)of the Act for surrender made on account of undisclosed income (on money found during search proceedings) at Rs.2,34,39,999/-.
8. Ground Nos. 2 & 3 are inter related so thay are taken together for disposal.
9. Briefly stated facts as culled out from the available record are that the assessee firm is engaged in the business of development and construction of residential houses. The assessee filed its return of income for Asst. Year 2006-07 under the provisions of section 139(1) of the Act on 18.12.2006 declaring total income of Rs.29,230/- (i.e. after claiming deduction of Rs.1,32,19,672/- u/s 80IB(10) of the Act). Scrutiny assessment was completed u/s 143(3) of the Act on 4.2.2008 and the income was assessed as per the income returned.
10. Thereafter a search action u/s 132 of the Act was carried out in the case of Galaxi group on 21.7.2011. The entire group IT(SS)A No. 383/Ahd/2014 4 Asst. Year 2006-07 consists of 4 sub-groups as mainly engaged in the business of construction and real estate. The case of the assessee belongs to Madhav Group. Search and seizure u/s 132 of the Act/survey u/s 133A of the Act were carried out at the residential as well as business premises of assessee as well as its partners. During the course of search proceedings as well as post search proceedings various incriminating materials relating to various firms of assessee group i.e. Madhav group were found and seized. Based on the seized material, the main persons of the assessee group Shri Motibhai Revabhai Prajapati, Shri Kantibhai R. Prajapati and Shri Bhagwanbhai R. Prajapati admitted undisclosed income relating to firm /group concern of Madhav group and also specified the manner in which such income has been derived.
11. Pursuant to search action u/s 132 of the Act proceedings u/s 153 were initiated by issuance of notice on 11.1.2012. In response to the notice assessee filed the return of income for Asst. Year 2006-07 on 9.2.1012 declaring total income of Rs.29,277/- after claiming deduction u/s 80IB(10) of the Act at Rs.3,66,59,672/-. The assessee claimed deduction u/s 80IB(10) of the Act for normal profits from business as developer at Rs.1,32,19,672/- as shown in original return of income and also claimed deduction u/s 80IB(10) of the Act for Rs.2,34,39,999/- on account of undisclosed income surrendered in the return of income pursuant to search action u/s 132 of the Act.
IT(SS)A No. 383/Ahd/2014 5Asst. Year 2006-07
12. During the course of assessment proceedings various replies and submissions were submitted by the assessee in support of its claim for deduction u/s 80IB(10) of the Act but Assessing Officer was not convinced by submissions of assessee on account of following reasons as mentioned in assessment order:-
"5.23 It is therefore held that the assessee is not eligible for deduction under section 80IB for the following reasons:-
1. The assessee is not both developer and builder as required by the provisions of section 80IB(10). Assessee is not a developer because the assessee did not conceptualise and own the project in as much as the assessee is not the owner of the land and the approval was not issued to it by the local authority.
2. The assessee entered into the project by way of tripartite agreement executed between the members. Shree Madhav Co-op. Housing Society Ltd. and the assessee firm and the construction work was done in accordance with such tripartite agreement. Hence the assessee is merely a contractor for the purposes of construction of the project.
3. The assessee has not sold any unit to the purchaser but the society has executed the sale deeds as a seller and the assessee joined only as a confirming party to the transaction.
This also proves that the assessee was merely a contractor/agent of the society.
4. As per the amendment to section 80IB by the Finance Act 2009 a work contractor who executes the work awarded by any person is not eligible for the deduction u/s 80IB. Any person includes Shree Madhav Co-op. Housing Society Ltd., which is a legal entity."
IT(SS)A No. 383/Ahd/2014 6Asst. Year 2006-07 On account of above reasons Assessing Officer denied the deduction u/s 80IB(10) of the Act as claimed by the assessee in its original return of income at Rs.1,32,19,672/- and also denied the deduction for the enhanced claim of deduction at Rs.2,34,39,999/- claimed by the assessee in the return filed in pursuance of notice u/s 153A of the Act. Accordingly income of the assessee was assessed at Rs.3,66,88,899/-.
13. Aggrieved, assessee went in appeal before CIT(A) However, ld. CIT(A) confirmed the addition made by the Assessing Officer dismissing the appeal of the assessee by observing in respect of ground nos.2 & 3 as under:-
Regarding ground no.2 "6. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is important to note here that the claim u/s 80IB of the I.T. Act, 1961 by another firm of the appellant's group (Madhav Group) i.e. Madhav Corporation for AYs. 2006-07, 2007-08 and 2008-09 has also been rejected by the Assessing Officer. In that firm in AY 2007-08 even during original assessment u/s 143(3) of the IT Act, 1961 the claim u/s 80IB of the IT Act, 1961 was rejected for detailed reasons proving that the appellant firm is a contractor and not the developer.
That order was confirmed by the CIT(A)-XV, Ahmedabad vide order in Appeal No.CIT(A)-XV/ITO/9(2)/266/09-10 dated 7.1.2011. The firm of the appellant group has gone to ITAT, Ahmedabad against the above mentioned order of CIT(A). The case is still pending before the ITAT for adjudication.
6.1 The appellant is the firm of the same group to which M/s Madhav Corporation belongs. The main working partners are the same in both the firms i.e. Shri Motibhai Revabhai Prajapati and Shri Kantibhai Revabhai Prajapati. The modus operandi and nature of work is also exactly the same.
6.2 The appellant filed his submission with exactly the same defence as was produced before the Assessing Officer. In his submission he relied on the decision of Gujarat High Court in the case of Radhe Developers and M/s Shakti Corporation In view of this and in absence of any additional material against the decision of CIT(A) IT(SS)A No. 383/Ahd/2014 7 Asst. Year 2006-07 except relying on the judgment by the judicial authorities in case of M/s Radhe Developers/Shakti Corporation, I am of the view that no interference is called for in the matter. As far as applicability of decision in case of M/s Radhe Developers, in appellant's case is concerned, the matter is already pending before ITAT in Madhav Corporation, a firm of appellant's own group for the AY 2007-08. In this situation at the moment, without going into merits of the case, I find it proper not to differ from the order passed by CIT(A)-XV, Ahmedabad in the case of Madhav Corporation. Accordingly, to maintain consistency, subject to outcome of the decision of ITAT, Ahmedabad, in case of Madhav Corporation, AY 2007-08 on the exactly similar issue, the appeal is dismissed."
Regarding ground no.3 "8. I have gone through the assessment order and submission of the A.R. of the appellant carefully. This ground is against the disallowance of Rs.2,34,39,999/-, the additional income shown by the appellant in the block return and claimed to be exempt u/s.80lB of the I.T. Act, 1961. This income is calculated by the appellant based on the seized material (page No.7 of annexure A/7 -party no.21). The Assessing Officer disallowed this claim firstly because the entire project is treated as ineligible for claim u/s.80IB of the I.T. Act. 1961. Secondly, the Assessing Officer has disallowed .this amount as the same does not fulfill the conditions laid down in Section 80IA(5) and 80IA(7) of the IT. Act, 1961 which are applicable to Section 80!B of the IT, Act, 1961 also. The provision of Section 80IA(7) reads as under:
"(7) The deduction under nub-section (I) from profits, and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and she assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant."
8.1 As the section 80IA(5) and 80IA(7) are very clear the additional income which is not shown in the regular books of accounts cannot be considered for the purpose of deduction u/s.80lB(10) of the I.T. Act, 1961. The books of account on this basis of which the Assessing Officer filed his return of income and was assessed u/s. 143(3) of the I.T. Act, 1961 do not contain this income of the appellant. This income is added to the appellant's income only subsequent to the search. As the income is not part of the regular books as per prevision of section 801A(5) and 801A(7) of the I.T. Act, 1961 are applicable and claim u/s.80IB(10) of the I.T. Act, 1961 is not admissible on this additional income of the appellant.
8.2. The Assessing Officer has also rightly applied the provisions of section 80IA10) for the following reasons:
IT(SS)A No. 383/Ahd/2014 8Asst. Year 2006-07
i) The assessee firm is closely connected with the partners and close relatives have provided funds uniformly for purchase of land by the Society.
• The arrangement made by the assessee for development is such that no profit whatsoever is passed to the Society, though it is the real owner of the land.
• This arrangement has actually resulted in abnormally high profits in the assessee's hand which has been orchestrated to claim higher deduction.
• The additional income offered on account of on-money received has been included in the income of the assesses with the intention of claiming higher than due deduction u/s, 80lB(10) of the Act.
Hence, in view of provisions of section 80IA (5) and 80IA (7) and also 80lA(10) of the I.T, Act. 1961, the additional income of the appellant cannot be treated as income eligible for the deduction u/s. 80lB (10) of the I T Act. 1961.
8.3 In view of above discussion, the disallowance of Rs.2,34,39,999/- is confirmed, the appeal on this ground is dismissed."
14. Aggrieved assessee is now in appeal before the Tribunal. ld. AR submitted that -
i) During the course of assessment proceedings the Assessing Officer called for details of assessee's claim for deduction u/s 80IB(10) of the Act of Rs.3,66,59,672/- attributable to housing project. The assessee submitted exhaustive details. However, the Assessing Officer disallowed assessee's claim u/s 80IB(10) of the Act, having treated the undisclosed profit as "income from other sources."
ii) That the assessee firm has built and developed the housing project within the meaning of sec.80IB(10) of the Act, on land survey No.1943 F.P. No.64 situated at village Vastral, Ta.Dist.
Ahmedabad. The total area of land was 38,365 sq.mtrs. The assessee firm built and developed the housing project namely "Madhav Bunglows" (Madhav Co-op. Housing Society Ltd.). For commencement of such project, permission (Rajachithi) was issued on 3/12/2004 by the local authority, as per copy of such documents furnished before the AO. As per the plan submitted by the firm and Rajachitthi granted by the local authority, there are 204 residential units and one water tank plus one electrical IT(SS)A No. 383/Ahd/2014 9 Asst. Year 2006-07 substation. The project completed on 29/06/2006, corresponding to AY 2007-08.
iii) As may be perused from the records of the AO the assessee firm claimed the legitimate deduction u/s 80IB(10) in the original return of income for AY 2004-05 to AY 2006-07, claiming deduction u/s 80IB(10) of the Act which have been allowed by the department in the scrutiny assessments framed u/s 143(3) of the Act, as per particulars below :-
A.Y. Amount claimed u/s Amount allowed by Sec. of Date of 8018(10) . the A.O. (Rs.) assessment assessment (RS.) order order 2004-05 75,72,250/- 75,72,2507- 143(3) 28/0372006 2005-06 1,66,40,8187- 1,66,40,8187- 143(3) 06/0772007 2006-07 1,32,19,6727- 1,32,19,6727- 143(3) 04702/2008 From the above, it may be appreciated that the department having scrutinized the claim of the assessee and allowed as such in the aforesaid years, however, in absence of any change in facts and/or circumstances of the case, there is no justification in rejecting the claim of the assessee firm in the subsequent proceedings u/s 143(3) r.w.s. 153A of the Act for A.Y. 2006-07.
iv) Further It is respectfully submitted that consequent to search u/s 132 of the Act at the business premises of the assessee, certain documents/papers were seized by the department on the basis of which, the assessee firm, has arrived at the undisclosed profit from the referred project [which fulfills the criteria of legitimate deductions u/s 8016(10) of the Act] to the tune of Rs. 2,34,39,999/- As per copy profit & loss account and balance-sheet placed on record, cumulatively the total claim of legitimate deduction u/s 80IB(10) on the basis of seized papers and regular books of accounts for the whole project worked out as under:- -
As per seized paper annexed Al/7: Rs. 2,34,39,999/- Add as per regular books of Accounts Rs. 1.32.19.672/- as claimed and allowed in IT(SS)A No. 383/Ahd/2014 10 Asst. Year 2006-07 original assessment order u/s 143(3) dated 04/02/2008.
Total claim made in block return Rs. 3,66,59,671/-
v) Further to substantiate, it claims, the assessee firm has submitted required documents i.e. copy of plans, copy of commencement of permission, B.U. permission along with requisite audit report, during the course of ssessment proceedings. The project was approved on 03/12/2004, the same has been completed on 29/06/2006, the size of plot on which the housing project was floated by the assessee firm, is 38,365 sq.mts. which exceed area of 1 acre, the residential unit of the project did not exceed the prescribed limit of 1500 sq.feet of built up area.
Thus, the basic conditions of claiming the legitimate deduction u/s 80IB(10) are duly-fulfilled.
15. As regards assessee's claim of deduction u/s 8OIB(10) on additional income referable to seized material ld. AR submitted that
(i) The original claim of deduction u/s 80IB(10) of Rs. 1,32,19,672/- has been enhanced by the Rs.2,34,39,999/- as worked out on the basis of details placed on record and the assessee's claim of additional profit has been based on seized document.
(ii) According to Ld. CIT(A), the entire project is treated as ineligible for claim u/s 8016(10) of the Act, simply following the views of the A.O. without giving his own independent findings. Secondly, he has noted that as per A.O. the claim does not fulfill the conditions laid down in Sec. 80!A(5) and 80IA(7) of the Act. On that basis, the Ld. CIT(A) has concluded that the additional income which is not shown in the regular books of accounts, cannot be considered for the purpose of deduction u/s 8016(10) of the Act and he has confirmed the disallowance of Rs.2,34,39,999/-.
(iii) As aforesaid, in the assessee's own case, the claim of the assessee made u/s 801B(10) of the Act, has been considered being in order and within the parameters of relevant provisions of the Act in the completed assessments in the past i.e. A.Y. 2004-05 to 2006- 07 [as submitted in Para 4(iii)above].
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(iv) Having regard to the aforesaid order, the issue involved in the assessee's case for the year under appeal is exactly identical. When the facts are identical, the revenue department is expected to adopt a consistent approach in finalization of the assessment, as per the ratio laid down by the Hon'ble Apex Court in RADHASWAMI SATSANG Vs. COMMISSIONER OF INCOME-
TAX [1992] 193 ITR 321 (SC). Otherwise also it is not open to the revenue department to keep on changing its stands, in respect of the same nature of transaction, without just cause [Berger Paints India Ltd.266 ITR 99 (SC)]. It therefore, flows that if an income is exempt either u/s. 2(14), 10 or otherwise, due effect of the same has to be given while framing the assessment.
(v) In the light of the facts as narrated above, it emerges from the records that the disclosed income attributable to 'on-money' has been duly offered for taxation in the form of enhanced profit while computing taxable income in the year under consideration. Meaning thereby undisclosed income was, in fact, received in the normal course. However, on one hand the undisclosed income is taxed; whereas Iegitimate deduction is disallowed. The departmental authorities have taken different stand. This is contrary to the intention of the legislature and against the letter and spirit of the beneficial provisions of the Act.
16. Further the ld. AR submitted that the issue stands settled in the assessee's own case by virtue of order passed by the Hon'ble Guiarat High Court in the assessee's case for assessment year for A.Y. 2004-05 was framed u/s 143(3) of the Act on 28/03/2006. Subsequently, by notice dated 17/03/2011, the assessment was reopened by the department. The assessee challenged the notice before the Hon'ble Gujarat High Court in S.C.A. No.17304 of 2011. Thereby Hon'ble High Court vide its order dated 27/12/2011 has quashed the notice u/s 148 and also consequential order of assessment passed pursuant thereto, While disposing of the Writ, the Hon'ble High Court has reasoned as under-
IT(SS)A No. 383/Ahd/2014 12Asst. Year 2006-07 "10. It can be noted from the record that for the assessment year 2004-05, as mentioned hereinabove, on 28/03/2006, the assessment in the case of the present petitioner is finalized u/s 143(3) of the Income Tax Act after allowing deduction of Rs, 75,72,250/~ u/s 80IB(10) of the Act. It can be noted that specific query was raised issuing the notice u/s 142(1) dated 10/02/2006, which had been replied to by the present petitioner stating therein that they are into the business of infrastructure, construction and doing business of construction of residential houses for the common man with further detail that firm had carried out the construction activity at the market value worth Rs.3.36 crores (rounded off). It appears that in the final assessment order, which was passed on 28/03/2006, it was noted that the assessee's firm is in the business of construction of housing project and it carried out the construction of housing project for and on behalf of M/s Madhav Co-operative Housing Society Limited. In the computation of income the deduction u/s 80IB(10) to the tune of Rs.75,72,250/- had been permitted. Thus, it can be seen that after raising specific query and on getting reply and after duly considering the same, the assessment order had been passed. This fact also is not being disputed by the respondent."
"14. As is mentioned hereinabove, this identical issue already has been discussed and this question has been held in favour of the assessee and in the present case also the petitioner being the works contractor should be availed the benefit of deduction u/s 80IB(10) of the Act and notice of reopening requires to be quashed."
Ld. AR further submitted that without prejudice to the about it is respectfully submitted that incidentally, recently Hon'ble ITAT Ahmedabad 'B' Bench, Ahmedabad had an occasion to consider allow-ability of claim of deduction u/s 54B of the Act against Capital Gain taxation on the "On money components" in the case of one of the partners of the firm namely ShriBhagwanbhai R. Prajapati in IT(SS) Appeal No. 377/Ahd/2014. The relevant ground of appeal raised in the case of Bhagwanbhai R. Prajapati reads as under.
IT(SS)A No. 383/Ahd/2014 13Asst. Year 2006-07 "On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, had grossly erred in aliowing the legitimate exemption u/s. 54B to the extent of Rs. 39,38,100/-being the sale consideration received as per registered sale deed only. She has not allowed the legitimate deduction u/s.54B on the von money' received on sale of agriculture land. The same may kindly be directed to be allowed legitimate deduction of Rs.92,47,100/- claimed u/s.54B on full sale consideration i.e. as per 'registered sale deed' von money' received on sale of said agriculture land."
The Co-ordinated Bench, in the case of Bhagwanbhai R. Prajapati held that beneficial provisions play in their own sphere and they are meant for benefit of the tax payers and observed as under :-
"6,2 Regarding al/owability of claim of claim of "On-money" the Ld. AR drew our attention to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Suman Paper & Boards Ltd. (2009) 221 CTR 0781 wherein it was held that in view of amendment on the provisions of section 158BB by the Finance Act, 2002 with retrospective effect from 1st July, 1995 the assessee was entitled to claim deduction under sec. 80-1 or section 80-IA in block assessment of the block period. The Revenue has acknowledged the benefit of deduction with regard to undisclosed Income of the block period.
6.3 In the case before us the issue is with regards to the benefit of exemption under section 54B with regard to the on money. Both are beneficial provisions in their own spheres so drawing the same analogy, we are of the view that assessee is entitled for getting benefit of exemption u/s 54B with regard to the 'On money'. This view is fortified by decision of Hon'ble Bombay High Court in the case of CIT vs. Sheth Developers (P) LTD. in ITA No. 3724 of 2010, wherein it was held that assessee was entitled to the benefit of Sec. 80IB and accordingly directed the A.O. to recomputed the tax payable for the block period 1.4.1995 to 21.2.2002 u/s 185BB after giving benefit of Sec. 80IB.Thus it was held that for block period assessee was entitled to claim deduction in its income under section 80IB,"IT(SS)A No. 383/Ahd/2014 14
Asst. Year 2006-07 In view of above decision, we hold that the assessee is entitled in claiming exemption on total income including on money. The Assessing Officer is directed accordingly.
Since, the issue involved in the case on hand, being the same and having bearing on the identical facts, by virtue of Hon'ble Tribunal's order (Supra) as well as by virtue of Hon'ble Gujarat High Court's order dated 27/12/2011 the issue involved in the case of the appellant is squarely "COVERED MATTER".
Ld. AR further submitted that incidentally, recently Hon'ble ITAT 'D' Bench Ahmedabad had an occasion to consider allowability of claim of deduction u/s 80IB(10) of the Act, against additional income on the "On money components" in the case of appellant's associated concerns namely M/s Madhav Corporatton vs. ACIT in ITCSS)A Nos. 380 to 382/AHD/2014(order dated 28/07/2015) The relevant ground of appeal raised in the referred case reads as under:-
Ground No.4 "On facts and in the circumstances of the case, the Ld. CIT(A)-1, Ahmedabad, has grossly erred in confirming the addition of Rs. 2,75,00,000/- reflected in seized documents by considering it as not related to profit of the Housing project. Though the same is forming part of total profit of the Housing project and therefore, the same may kindly be considered as part of profit of the Housing Project. The same may kindly be directed to consider as part of profit of the Housing Project and be allowed as deduction u/s 80IB(10) of the Act."
The relevant ground of appeal raised in the case of the present - appellant reads as under:-IT(SS)A No. 383/Ahd/2014 15
Asst. Year 2006-07 "On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred confirming addition of Rs,2,34,39,999/- being additionally claimed u/s80IB(10) on the basis of seized records. The same may kindly be allowed on such legitimate claim."
The Co-ordinated Bench in the case of M/s Madhav Corporation (Supra) has allowed the assessee's ground raised as above holding that the assessee is eligible for deduction u/s 80IB(10) of the Act in respect of undisclosed income assessed by the A.O. in accordance with the return filed by the assessee u/s 153A of the Act, in response to notice u/s 153A of the Act issued by the department. The relevant portion of the order dated 28/07/2015 is reproduced as under:-
Para. 5.3 "Even otherwise based on the rule of consistency if the eligible project undertaken remains the same and the conditions are satisfied and if deduction is allowable in the first assessment year (which is A.Y. 2006-07 in the assessee's case) then the same has to be allowed in the subsequent assessment years. We find that coordinate "D" bench of Tribunal in ITA No. 496/Ahd/2011 A.Y. 2007-08 in the case of Golden Developers Vs. ITO(OSD), Range-9, Ahmedabad dated 13/11/2014, it was held that in case the applicant is entitled for claim of deduction u/s 80IB(10) in A.Y.2006-07 then the appellant is also eligible for the said in A.Ys. 2007- 08 & 2008-09.
Following same reasoning, we hold that the assessee on this additional income of Rs. 85,66,22s/- for A.Y. 2008-09 is entitled for claiming deduction u/s 80IB(10) of the Act as discussed above. Assessing Officer is directed accordingly,"
In the case on hand, the claim u/s 80IB(10) of the Act was originally allowed in A.Ys. 2004-05, 2005-06 & 2006-07 by passing the assessment orders u/s 143(3) of the Act dated 28/03/2006, 06/07/2007 & 04/02/2008 respectively. Therefore, the deduction of Rs. 1,32,19,672/-originally allowed in A.Y. 2006-07, cannot be disallowed again but is allowable for the same assessment year under appeal i.e. A.Y. 2006-07 as per the binding decisions of two Coordinated Benches (Supra) as per -Ground No.2 of the appeal. In support of this, contention copies of original* IT(SS)A No. 383/Ahd/2014 16 Asst. Year 2006-07 assessment orders passed u/s 143(3) for A.Ys. 2004-5, 2005-06 & 2006- 07 are enclosed."
17. The DR vehemently supported the orders of the lower authorities.
18. We have heard the rival contentions and perused the material on record and referred to various decisions relied upon. The issue in this appeal revolves round the admissibility of deduction u/s 80IB(10) of the Act for the claim made at the time of filing original return of income at Rs.1,32,19,672/- and additional claim of deduction u/s 80IB(10) of the Act at Rs.2,34,39,999/- for the income surrendered during search proceedings on the basis of indiscriminating material found and seized and the same being surrendered in the return of income filed in pursuance to notice u/s 153A(1) of the Act.
19. Before going further to examine the facts of the case let us go through the provisions of section 80IB(10) of the Act which reads as follows :-
Sec.80IB[(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the 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 such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 98[but not later than the 31st day of March, IT(SS)A No. 383/Ahd/2014 17 Asst. Year 2006-07 2005], within four years from the end of the financial year in which the housing project is approved by the local authority;
[(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; [***]
(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher];] [(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and
(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:--
(i) the individual or the spouse or the minor children of such individual,
(ii) the Hindu undivided family in which such individual is the karta,
(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] [Explanation.--For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).] IT(SS)A No. 383/Ahd/2014 18 Asst. Year 2006-07 From going through the provisions of section 80IB(10) of the Act, submissions made by the assessee before the lower authorities, observations made by the Assessing Officer and findings of ld.
CIT(A), following matters need to be analyzed in the present case-
(1) Whether the assessee is a developer or a works contractor; (2) Whether the assessee fulfills all the conditions of section 80IB(10) of the Act other than the matters mentioned at point (1) above;
(3) Whether it is a pre-condition for claiming exemption u/s 80IB(10) of the Act that the developer owns the land on which the housing project has been constructed;
(4) Whether the assessee is eligible to claim deduction u/s 80IB(10) of the Act for the undisclosed income surrendered during search/survey action in a situation when assessee has been assessed in previous years and has been allowed the deduction u/s 80IB(10) of the Act.
20. We will now analyze the above matters one by one to arrive at the decision. The most crucial issue is -
(1) Whether the assessee is a developer or a works
contractor
With retrospective amendment which came in force by Finance Act 2009 effective from 1.4.2001 whereby to remove the doubts it was declared that the provisions of section 80IB(10) shall not apply to any undertaking which executes housing project as an works contractor. In other words if an assessee is a developer and not a works contractor then only he will be eligible for deduction u/s 80IB(10) of the Act. During the course of hearing ld. AR has IT(SS)A No. 383/Ahd/2014 19 Asst. Year 2006-07 submitted that the assessee firm in the capacity as a developer has built and developed the housing project on land survey No.1043 F.P.64 situated at village Vastral, Ta. Dist. Ahmedabad. The total area of the land was 38,365 sq.meters and the housing project in the name of Madhav Bungalows was developed. Permission for commencement of this project was issued on 30.12.2004 to Madhav Co-op. Housing Society Ltd. as the land was owned by Madhav Co-op. Housing Society Ltd. As per this plan 204 residential units, one water tank and electrical sub-station were to be developed. Before receiving the permission on 3.12.2004, a development agreement dated 27.8.2003 was entered into between the land owner Madhav Co-op. Housing Society Ltd. and developer Madhav Builders i.e. the assessee. The assessee firm has been claiming legitimate deduction u/s 80IB(10) of the Act for Asst. Year 2004-05 to Asst. Year 2005-06. Ld. AR submitted that assessee has been working in the capacity of a developer and not as a works contractor.
21. On the other hand, ld. DR referred to the decision of Hon'ble Jurisdictional High Court dated 27.12.2011 in assessee's own case in Special Civil Application 17304 of 20011 wherein their Lordships Have observed as under :-
"13. We also had occasion to deal with the similar question in Special Civil Application No. 15966 of 2011 in the case of Pravinkumar Bhogilal Shah vs. Income Tax Officer (OSD) and following other decisions of this Court, the issue has been held in favour of the assessee. It needs to be noted that prior to the amendment, which had to be given retrospective effect, there was no distinction between the term "developer" and "works contract". All that was required of the assessee had been IT(SS)A No. 383/Ahd/2014 20 Asst. Year 2006-07 disclosed and this was pursuant to the amendment brought in by the statute with effect from 1.4.2001. There has been denial of benefit under Section 80IB(10) to the works contractor executing the housing project and, therefore, it would not be feasible for any person to contemplate any such retrospective amendment and disclose in the return, which was otherwise not required. As can be seen from the assessment order as well as from the record that has been placed before the Court that the petitioner had disclosed all the material facts which were necessary for the purpose of assessment and as the notice under challenge is issued on expiry of the period of 4 years from the end of the relevant year of assessment under consideration, there is nothing to indicate nor anything to establish that the assessee has not disclosed fully and truly all material facts. The very edifice to the impugned notice is not to be held sustainable.
14. As is mentioned hereinabove, this identical issue already has been discussed and this question has been held in favour of the assessee and in the present case also the petitioner being the works contractor should be availed the benefit of deduction under Section 80IB(10) of the Act and notice of reopening requires to be quashed. As mentioned earlier since there was no time available for communication as the notice along with the interim order had been passed on 28.11.2011, and pursuant to the notice under challenge when the assessment order has been passed by the Assessing Officer on the very same day, when the very notice is not being found sustainable, there is a need to quash both the impugned notices dated 17.3.2011 18.11.2011 and all consequential proceedings and the order of assessment dated 28.12.2011 passed pursuant thereto. Petition is accordingly allowed. No order as to costs."
22. By referring to the above mentioned paragraph in the decision of Hon. Gujarat High Court in assessee's own case, ld. DR mentioned that the assessee was being termed as "works contractor" and, therefore, submitted that as the Hon. High Court has mentioned the assessee as a works contractor, the same should be construed for the purpose of section 80IB(10) of the Act and the assessee should not be allowed the benefit of section 80IB(10) of the Act as the assessee is not a developer but works contractor.
23. By going through the decision of Hon. Jurisdictional High Court in assessee's own case we find that this Special Civil IT(SS)A No. 383/Ahd/2014 21 Asst. Year 2006-07 Application of assessee was filed by the assessee against the action of Assessing Officer for reopening of assessment by issuing an impugned notice u/s 148 for Asst. Year 2004-05 being undertaken beyond four years after the end of the regular assessment year and even after the scrutiny assessment was completed u/s 143(3) of the Act, assessee has disclosed fully and truly all material facts. Hon. High Court has discussed the issue relating to reopening of assessment and has decided the same in favour of the petitioner and held that the action of Assessing Officer was not justified in reopening the assessment. We find that this Special Civil Application was not in relation to the issue that whether the assessee is a developer or a works contractor and therefore there was no occasion to discuss this issue in the decision on the Special Civil Application filed before the Hon. Curt. Therefore, we are not convinced with the contention of ld. DR of treating the assessee as works contractor only on the basis of mentioning in a general parlance that the assessee is works contractor. Now going ahead we will examine this aspect in detail in the light of the facts of the case that whether the business activity carried on by the assessee are in the nature of a developer or of a works contractor. In order to study the difference between a developer and a contractor we would like to refer to the decision of ITAT, Chennai Bench in the case of Prime Developers vs. ITO, Ward -1(4)-Tirupur in ITA No.933(Mds) of 2013, for Asst. Year 2009-10 dated September 23, 2015, which reads as under :-
6.1 The contention of the ld. AR is that the assessee is a developer and not mere a contractor and being so, the assessee is entitled to deduction under section 80-IB(10) of IT(SS)A No. 383/Ahd/2014 22 Asst. Year 2006-07 the Act. Now, we have to examine as to whether the assessee can be called as a "developer" within the meaning of section 80-IB(10) read with Explanation I herein above.
The ld. AR submitted that the work carried on by the assessee made it a developer entitled for deduction under section 80-IB(10) of the Act. According to him, a developer is a person who develops the facility and such person may or may not be a contractor. On the other hand, a contractor is stated to be a legal term whose rights and duties vis- à-vis contractee are determined by way of legal document called the contract. According to the ld. AR, the assessee has undertaken all risks involved in the project including technological inputs, entrepreneurial inputs etc. Besides, there is heavy financial involvement in terms of deployment of man and machine as well as all materials. At this point, it is pertinent to note that the judgment of the Supreme Court in the case of Hindustan Aeronautics Ltd. v. State of Orissa [1989] 55 STC 327 in which it has been observed that in a contract for work, the person producing has no property in the thing produced as a whole, even if part or whole of the material used by him may have been his property earlier. Further, in another judgment of the Supreme Court in the case of State of Tamil Nadu v. Anandam Viswanathan [1989] 1 SCC 613 in which it was held that the nature of contract can be found only when the intention of parties are found out. The fact that in the execution of the works contract some material are used and the property in the goods so used passes to the other party, the contractor undertaking the work will not necessarily be deemed, on that account, to sell the material. It was, therefore, argued that the developer is a person who brings in additional resources by way of investment and technical expertise for developing the infrastructure facilities. Since the assessee had simply done a part of work of civil construction relating to the housing project, he stated that it is not eligible for deduction.
6.2 We find that the words 'developer' and 'contractor' have not been defined in or for the purposes of section 80-IB(10). The primary question which arises is that how to find out the meaning of a word or an expression which is not defined in the Act. It is a settled legal position that ordinarily the meaning or definition of a word used in one statute cannot per se be imported into another as has been held by the Supreme Court in the case of Union of India v. R.C. Jain [1981] 2 SCC 308. Therefore, the meaning of the words developer and contractor, as put forth before us by the rival parties from other legislations, be they State or Central enactments, cannot be automatically applied in the present context. In order to ascertain the meaning of a word not defined in the Act, a useful reference can be made to the General Clauses Act, 1897. If a particular word is not defined in the relevant statute but has been defined in the General Clauses Act, such definition throws ample light for guidance and adoption in the former enactment. According to s. 3 of the General Clauses Act the definitions given in this Act shall have applicability in all the Central Acts unless a contrary definition is provided of a particular word or expression. On scanning s. 3 of the General Clauses Act we observe that neither the word 'contractor' nor 'developer' has been defined therein. Thus, the General Clauses Act is also of no assistance in this regard. Going ahead, when these words are neither defined in the IT Act, 1961 nor in the General Clauses Act, the next question is that wherefrom to find the meaning of such words. There is no need to wander here and there in search of an answer which has been aptly given by the Supreme Court in the case of CWT v. Officer-In-Charge (Court of Wards) [1976] 105 ITR 133 (SC) in which it was held that the ordinary dictionary meaning of a word cannot be disregarded.
6.3 Coming back to our point of ascertaining the meaning of the words 'contractor' as well as 'developer', which have neither been defined in the Act nor in the General Clauses Act, we fall upon Oxford Advanced Learner's Dictionary to find out their meaning. According to this dictionary "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do IT(SS)A No. 383/Ahd/2014 23 Asst. Year 2006-07 work or provides services or goods to another. The New Shorter Oxford Dictionary defines the word "contractor" as: "A person who enters into a contract or agreement. Now chiefly spec. a person or firm that undertakes work by contract, especially for building to specified plans". In the light of the meaning ascribed to these words by the dictionaries it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary the contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer. His duty is to translate such design into reality. There may, in certain circumstances, be overlapping in the work of developer and contractor, but the line of demarcation between the two is thick and unbreachable. When the person acting as developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the contractor. It is no doubt that in certain circumstances a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre- decided plan.
6.4 So, in order to be eligible for deduction, the development should be that of housing project as a whole and not a particular part of it, as has been contended by the ld. AR. It may be possible that some part of the housing project is assigned by the land lord to some contractor for doing it on his behalf. That will not put the doer of such work in the shoes of a developer.
24. The above referred decision of the Tribunal, Chennai Bench makes it crystal clear that a developer takes on the basic of housing project right from the beginning i.e. from the point of time when the plan of the housing project are approved, travels through the creating of design of the project, arranging of finance as well as booking of the units of the project and to appoint various agencies relating to the start and finishing of the project which inter alia also includes the appointment of various types of contractors for different types of works to be carried out. In the present case, the above said aspect can be examined by going through some of the clauses of development agreement dated 26.8.2003 between the assessee i.e Madhav Builders and Shree Madhav Co-op. Housing Society Ltd. copy of whch is placed in the paper book dated IT(SS)A No. 383/Ahd/2014 24 Asst. Year 2006-07 3/11/2015 at pages 1 to 110. Some parts of development agreement are as under :-
(3) The said organizer/building is carrying out all constructed related work. In this way, the main work and activity of the said builder is to development housing projects or to remain attached with the work of construction and to carry out/get carried out the construction work.
(5) In order to fulfill the desire of procuring residential units for its members on the said property, as per the wish of the members by the said housing society on the above referred property, the society is planning to organize a scheme of residential housing units on the said land but the said housing society is lacking the skill and the funds required for financial investment for fulfilling the said scheme and due to lack of necessary efficiency and necessary expertise and time by the office-bearers of the housing society for enrolling new members in the said housing society as and when required, they themselves are not in a position to organize a scheme on the said land and under such circumstances, the said housing society has till date taken help of the First Party Builder. And from now onwards, appointing the said builder as organizer/builder, the society is planning of entrusting the liability of organizing the said scheme to the said First Party
-Organiser and for that the society is desirous of handing over all the working powers. And whereas as the said First Party - Organiser / Builder Partnership firm is holding necessary qualification, efficiency, working capacity and skill required for organizing the scheme as per the desirous of the members of the housing society the said housing society is desirous of handing over and entrusting such liability and responsibility by appointing the said organizer/developer/builder in pursuance to the said Development Agreement and the said organizer has accepted such responsibility. Moreover, the said organizer accepts the responsibility and liability of developing the land mentioned in the said agreement to sale as stated hereinabove by entering into this agreement.IT(SS)A No. 383/Ahd/2014 25
Asst. Year 2006-07 (6) The planning of the above stated scheme of the said housing society is to be done by the said organizer and the name of the said scheme has been given as Madhav Park Part-4 (Shri Madhav Co-op. Housing Society Ltd.), which name would remain forever. And without the written permission of the said housing society, no change in the name can be made.
(7) As stated herein above, the said developer/Organiser/builder is entrusted the below mentioned powers for organizing the said housing society scheme.
(7.1) To appoint Architect, Engineer, Supervisor, Contractor, Legal Advisor and other professionals whose services are required for completing the said scheme and to decide and fix their area of operation and to decide their remuneration and fee, which is to be borne by the Second Party -Executant.
(7.2) To enter into contract, sub-contract, labour contract, material contract etc. in order to complete by carrying out construction in the scheme of the said housing society as per the specification, as per the item or on lump sum price and to provide necessary basic materials etc. for completing the said housing society scheme and for that the organizer will provide all types of help and aid.
(7.3) The organizer will have to collect construction fund, land fund and the amounts of deposits with regard to other expenses from the present members and from the proposed members in order to meet with the construction cost and other related expenses of the said scheme by issuing pucca receipt thereof.
(7.9) The said organizer would allot concerned properties to the member of the said housing society getting enrolled in the said schemes as per the said scheme and in the final scheme that would be formed after necessary changes and in the concerned tenement, open land and common amenities etc. But the final decision of the said organizer with IT(SS)A No. 383/Ahd/2014 26 Asst. Year 2006-07 regard to the allotment of the property to the members would be acceptable and binding to the said housing society and its members and proposed members.
(7.10) The said housing housing society has entrusted all the rights and powers to the organizer for the purpose of completing and erecting the said scheme and all other related powers and therefore the said organizer will have to complete the said scheme using his discrepancy and as per his wisdom by taking decision that may be deemed fit and proper by him and till the society does not complete the accounts related to the funds invested by the organizer from the date of the implementation of the said scheme is to be maintained by the organizer. The concerned accounts submitted by the said organizer to the said housing society is to be accepted by the said housing society without any dispute and objection and moreover the accounts pertaining to the said scheme submitted by the said organizer is to be accepted by the housing society without any sort of criticism, remark, audit or doubt whatsoever and the said accounts are to be included in the records of the housing society and moreover an understanding has been arrived at between the parties that with regard to the audit of the said housing society, the accounts procured by the said organizer by the said housing society and the accounts as per the gradual progress of the said scheme is to be understood as acceptable and the records and books of accounts of the said organizer with regard to the same would not be subject to audit or verification, which has been clearly understood by both the parties.
(7.11) As per the said scheme, the said organizer has given related estimated lumpsum price of the said scheme and the construction of the tenements etc. as shown in the plan but as per the stagewise progress of the said scheme and as per the changes that may be made in the said scheme and whatever changes that may be made in the concerned circumstances, the said organizer would be authorised to revise the said estimated amount and the same would be acceptable and binding to the said housing society and its IT(SS)A No. 383/Ahd/2014 27 Asst. Year 2006-07 members and the new members getting enrolled in the said scheme.
(7.13) If the first party is required to submit necessary applications, replies, statements and forms for and on behalf of the second party in any Government or Semi Government office or legal court or any other place then all such proceedings is to be done by the first party and the first party is hereby empowered for the same. Inspite of that in future if any specific power of attorney or authority is required to be submitted then at that time the second party will have to give concerned authority or power of attorney in favour of the first party.
25. By going through the various clauses of the development agreement dated 28.8.2003 between the assessee and the land owner Shree Madhav Co-op. Housing Society, it can be construed that the assessee is having much wider authority -rights and powers for accomplishing the plan of the housing project and certainly such type of powers and rights which are exercised along with collection of revenue from each unit of the housing project and successful completion of each part of the housing project very well justify to large extent that assessee was working as developer and not works contractor. Further we have also examined the financial statement of the assessee and find that in the audited balance sheet as on 31.3.2006 assessee has shown sundry debtor of Rs.1,99,21,445/-, the list of which includes 42 parties including Shri Madhav Co-op. Housing Society Ltd. being a sundry debtor of Rs.8,87,166/- and the remaining amount of debtor i.e. Rs.1,90,34,279/- are being debit balance in the names of various flat owners from whom the assessee had yet to receive the amount IT(SS)A No. 383/Ahd/2014 28 Asst. Year 2006-07 which it has spent for the housing project. This shows that assessee was not working only as a work contractor on behalf of Shree Madhav Co-op. Housing Society Ltd. else the assessee would have been showing the complete outstanding balance in the name of Shree Madhav Co-op. Housing Society Ltd. This fact has not been controverted by the revenue at any stage below and, therefore, looking to the terms and conditions of the development agreement and audited financial statement of the assessee, we are of the view that assessee comes under the category of developer and not of works contractor and, therefore, comes within the definition of developer as referred in the provisions of section 80IB(10) of the Act.
(2) Whether the assessee fulfills all the conditions of section 80IB(10) of the Act other than the matters mentioned at point (1) above;
26. The issue entails upon to examine that whether the assessee (now as we have held that assessee is a developer) fulfills all the other conditions which are required to be adhered upon for claiming the deduction u/s 80IB(10). We find that assessee has been granted deduction u/s 80IB(10) at Rs.75,72,250/- in Asst. Year 2004-05 which was assessed u/s 143(3) of the Act by ITO, Ward 9(2), Ahmedabad on 28.03.2006. Similarly, for Asst. Year 2005-06 assessee was allowed deduction u/s 80IB(10) at Rs.1,66,40,818/- vide assessment order u/s 143(3) of the Act dated 6.7.2007 issued by ITO Wd-9(2), Ahmedabad and even for Asst. Year 2006-07 assessee was granted deduction at IT(SS)A No. 383/Ahd/2014 29 Asst. Year 2006-07 Rs.1,32,19,672/- u/s 80IB(10) of the Act in the assessment completed u/s 143(3) of the Act on 4.1.2008. So from these statistics it is amply clear that assessee has been consistently allowed benefit u/s 80IB(10) of the Act by the assessing officer and certainly assessee being a developer must have furnished all the relevant information required to justify its claim to be eligible for deduction u/s 80IB(10). Further in support of our above observations, we find that Co-ordinate bench in the case of Golden Developer vs. ITO (OSD), Range-9, Ahmedabad, in ITA No.496/Ahd/2011 for Asst. Year 2007-08, vide its order dated 13.11.2014 has dealt with similar issue and has held as follows :-
"4.2. The contention of the assessee is that in earlier years claim of the assessee was allowed by the Department in scrutiny assessment. The ld.counsel for the assessee has drawn our attention towards page-7 of the paper-book, wherein the assessment order pertaining to the AY 2005-06 is enclosed. The AO has allowed the claim of the assessee for deduction u/s.80-IB(10) of the Act. At page No.10 of the paper-book is enclosed the assessment pertaining to the AY 2006-07, wherein also the AO also allowed the claim of the assessee of deduction u/s.80IB(10) of the Act. Facts are identical and project is also same and the Revenue has not pointed out as to how the claim that was allowed in earlier years and ITA No.496 /Ahd/2011 M/s.Golden Developers vs. ITO (OSD) Asst.Year - 2007-08 - 6 - under the same facts and circumstances would be disallowable in the year under consideration. It is settled position of law that every year is an independent year, however, the rule of consistency is to be adopted by the Revenue authority while framing the assessment. In the present case, the Revenue has not brought out any new material on the basis of which a different view has been taken for the year under consideration. If the assessee was 'developer' in the earlier years, it would remain so in the following years unless a new material comes to notice of AO or otherwise which was available on record but was not considered in earlier years. Nowhere in the orders of the authorities below this fact has been recorded. Therefore, in our considered view, the Revenue was not justified in rejecting the claim for deduction u/s.80IB(10) of the Act in this year. It is also noteworthy that the authorities below have not recorded any finding as to what was the remuneration fixed by the contract and how the submission of the assessee that it was bearing all risks and consequences arising from the contract were not correct. In fact, the AO has stated these stipulations are only intended to make the Society toothless but they cannot convert by any stretch of imagination an agreement IT(SS)A No. 383/Ahd/2014 30 Asst. Year 2006-07 for construction into a conveyance deed in the eyes of the law. It is not disputed that such terms and conditions were in the agreement in the earlier years also. On the basis of such terms the assessee was found to have fulfilled the conditions as envisaged u/s.80IB(10) of the Act. In our considered view, the construction of any agreement cannot be different in two different assessment years, therefore the orders of the authorities below rejecting the claim of deduction u/s.80-IB(10) of the Act cannot be confirmed, more ITA No.496 /Ahd/2011 M/s.Golden Developers vs. ITO (OSD) Asst.Year - 2007-08 - 7 - particularly in the light of the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT vs. Radhe Developers reported at (2012) 341 ITR 403 (Guj.) and followed subsequently in a series of decisions of this Tribunal. Thus, this sole ground of the assessee's appeal is allowed and the disallowance made by the AO is hereby deleted."
27. Relying on the above decision of the co-ordinate bench in the case of Golden Developer vs. ITO (OSD), Range-9, Ahmedabad (supra) and looking to the facts of the case of assessee and applying the ratio of consistency, we find that assessee has successfully been able to fulfill all the requisite conditions for getting deduction u/s 80IB(10) of the Act.
(3) Whether it is a pre-condition for claiming exemption u/s 80IB(10) of the Act that the developer holds the land on which the housing project has been constructed;
28. Objection has been raised by the Assessing Officer during assessment proceedings by mentioning the fact that assessee was not the owner of the land on which the housing project was carried out and all the permissions were granted to the land owner i.e. Shree Madhav Co-op. Housing Society Ltd. and not the assessee and approval of plan of construction issued by the local authority was in the name of land owner and not the assessee and the constructions were done in a tripartite agreement executed between the members, Shree Madhav Co-op. Housing Society Ltd. and the assessee and, therefore, Assessing Officer was of the IT(SS)A No. 383/Ahd/2014 31 Asst. Year 2006-07 view that assessee is merely a contractor for the purpose of construction of the project.
29. We find that apart from the fact discussed above that assessee is a developer and not a works contractor, assessee is eligible for deduction u/s 80IB(10) of the Act in a situation when the land on which the housing project is constructed is not in the ownership of the developer. This finding is based on the decision of Hon. Jurisdictional High Court in the case of Radhe Developers wherein their Lordships has given the decision that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners. Relevant extract of the decision is as under :-
"39. We may now move on to the question of ownership of the land.
40. Relevant portion of Section 2(47) reads as under:-
"2(47): "transfer", in relation to a capital asset, includes,-
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882);
or Section 53A of the Transfer of Property Act reads as under:-
53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any IT(SS)A No. 383/Ahd/2014 32 Asst. Year 2006-07 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 of a transferee for consideration who has no notice of the contract or of the part performance thereof."
41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of Income Tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of Mysore Minerals Ltd. vs. Commissioner of Income Tax (supra), and in the case of Commissioner of Income-Tax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary.
42. In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect.
43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before the Apex Court, the land owner had entered into an agreement with the builder requiring him to construct apartment building on the land in question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under Section 80IB( 10) of the Act.
44. In the case K. Raheja Development Corporation vs. State of Karnataka (supra), the Apex Court considered whether the builder, who was engaged in the development of property and for such purpose had entered into an agreement with the land owner, can be stated to have executed works contract. Such interpretation was rendered in the background of the term IT(SS)A No. 383/Ahd/2014 33 Asst. Year 2006-07 "works contract" defined in Section 2(1)(v-i) of the Karnataka Sales Tax Act, which reads as under:-
"12. Section 2(1)(v-i) is relevant. It defines a "works contract" as follows:
"2.(1)(v-i) 'works contract' includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;"
It is thus to be seen that under the Karnataka Sales Tax Act the definition of the words "works contract" is very wide. It is not restricted to a "works contract" as commonly understood i.e. a contract to do some work on behalf of somebody else. It also includes "any agreement for carrying out either for cash or for deferred payment or for any other valuable consideration, the building and construction of any movable and immovable property". (emphasis supplied) The definition would therefore take within its ambit any type of agreement wherein construction of a building takes place either for cash or deferred payment, or valuable consideration. To be also noted that the definition does not lay down that the construction must be on behalf of an owner of the property or that the construction cannot be by the owner of the property. Thus even if an owner of property enters into an agreement to construct for cash, deferred payment or valuable consideration a building or flats on behalf of anybody else, it would be a works contract within the meaning of the term as used under the said Act."
It was in background of this definition provided by the statute that the Apex Court concluded that the agreement was one of works contract. The Apex Court observed that the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration. Thus the interpretation rendered by the Apex Court in the said decision was based on not the normal meaning of term "works contract" but on the special meaning assigned to it under the Act itself, which provided for a definition of the inclusive nature.
45. Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners.
30. Further in the case of CIT vs. Moon Star Developers in Tax Appeal No.549 of 2008 & others, vide judgment dated 5 & 11/03/2014, Hon. Jurisdictional High Court on similar issue has held as under :-
"36. We have noted at some length, the relevant terms and conditions of the development agreements between the IT(SS)A No. 383/Ahd/2014 34 Asst. Year 2006-07 assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Subcontractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also IT(SS)A No. 383/Ahd/2014 35 Asst. Year 2006-07 responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk.
37. By no stretch of imagination can it be said that the assessee acted only as a works contractor. The terms works contractor has been receiving judicial attention in several cases.
xxxxxx xxxxxx
41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of Income Tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of Mysore Minerals Ltd. vs Commissioner of Income Tax (supra), and in the case of Commissioner of IncomeTax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood IT(SS)A No. 383/Ahd/2014 36 Asst. Year 2006-07 differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary.
42. In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing there from was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect.
43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before the Apex Court, the land owner had entered into an agreement with the builder requiring him to construct apartment building on the land in question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under Section 80IB(10) of the Act.
xxxxx IT(SS)A No. 383/Ahd/2014 37 Asst. Year 2006-07 xxxxx
45. Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners."
4. Under the circumstances, in the present group of Tax Appeals also, such question is answered against the Revenue and in favour of the assessees".
31. Respectfully following the above decisions, we are of the considered view that even in the situation if the assessee is not the owner of the land, nor approval for construction received from the local authority is in its name but still assessee being a developer and fulfilling all the conditions embedded in the provisions of section 80IB(10) of the Act assessee is eligible for deduction under section 80IB(10) of the Act.
(4) Whether the assessee is eligible to claim deduction u/s 80IB(10) of the Act for the undisclosed income surrendered during search/survey action in a situation when assessee has been assessed in previous years and has been allowed the deduction u/s 80IB(10) of the Act.
32. In the case of assessee pursuant to search proceedings u/s 132 of the Act, on the basis of seized papers/documents assessee surrendered Rs.2,34,39,999/- as undisclosed profits from the housing project namely Madhav Bunglows by showing it in the return filed pursuant to ntice u/s 153A of the Act. However, assessee simultaneously claimed deduction u/s 80IB(10) of the Act IT(SS)A No. 383/Ahd/2014 38 Asst. Year 2006-07 for its undisclosed income on the ground that assessee was not having any other business activities except the business activities carried on as a developer of housing project coming within the ambit of section 80IB(10) of the Act and nor there was any other charge on the assessee of earning this undisclosed income from any other sources except the business activity of working as a developer of the housing project and, therefore, assessee claimed an additional deduction of Rs.2,34,39,999/- u/s 80IB(10) of the Act. From perusal of the records, we find that in the group cases of assessee in one of the case i.e. Madhav Corporation vs. ACIT Central Circle-1(4), Ahmedabad in IT(SS)A No.380 to 382/Ahd/2014 for Asst. Year 2006-07 to 2008-09 has discussed the issue in detail and held as under :-
5. Next issue in A.Y 2008-09 is regarding additional claim of deduction u/s.80IB(10) of the Act.
"Modification of the correct figure in original ground No.3 On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred in confirming addition of Rs. 85,66,228/- being additional claim of deduction u/s. 80IB(10) on the basis of seized records. The same may kindly be directed to be allowed on such legitimate claim,"
5.3 In case before us, assessee has earned additional income which amount is disclosed consequence upon the search, hence it partakes the character of business income and the assessee has admitted that the said amount was a part of income earned from the project undertaken namely by it. Therefore, the amount has direct and proximate connection with the normal business/development activities, hence as eligible for deduction u/s. 80IB (10) of the Act. Once on the basis of declaration of the assessee, the income of the assessee was accepted and has been assessed in the hands of the assessee, the department has only disputed the factum that the project undertaken by the assessee firm is not eligible for housing project u/s. 80IB of the Act. Thus, viewing correct interpretation of the provision of the Act in the tune of the aforesaid judgments, the undisclosed income i.e. "on money" being part of business income only. The same forms part of book profit and it has no other sources of IT(SS)A No. 383/Ahd/2014 39 Asst. Year 2006-07 income and whatever income arising to the assessee firm is business income. The head of income has to be determined from the nature of business which assessee was being carried at the time of search. Therefore, additional income disclosed by the assessee being part and parcel of business income only i.e. already IT(SS)A Nos. 380 to 382/Ahd/2014 Asst. Years 2006-07 to 2008-09 15 disclosed by the assessee firm during the course of search has been business income and the assessee is eligible for deduction u/s. 80IB(10) of the Act. In view of the above and consequent to search u/s. 132 of the Act, document marked as Page No. 116 at Annex. A/19 was seized by the Department which contain noting of calculation of profit for the housing project executed by the assessee and such profit was inclusive of "On Money" component. In response to notice u/s. 153A of the Act, the returns of income u/s. 153A are filed which are the returns of income u/s. 139 of the Act. The Assessing Officer has made assessment on the said returns income. The said assessment orders were challenged before the concern CIT(A), who passed appellate orders on it negating claim of assessee. We find that assessee has demonstrated with supportive documentary evidence that it is eligible for the claim of deduction u/s. 80IB(10) of the Act and the same is allowable not only on the profit disclosed in the pre-search returns of income filed u/s. 139(1) but also on the entire profit including the one disclosed additionally subsequent to the search proceeding u/s. 132 of the Act and disclosed in the return of income filed u/s. 153A of the Act. Even otherwise based on the rule of consistency if the eligible project undertaken remains the same and the conditions are satisfied and if deduction is allowable in the first assessment year (which is A.Y. 2006-07 IT(SS)A Nos. 380 to 382/Ahd/2014 Asst. Years 2006-07 to 2008-09 16 in the assessee's case) then the same has to be allowed in the subsequent assessment years. We find that coordinate "D" bench of Tribunal in ITA no. 496/Ahd/2011 A.Y. 2007- 08 in the case of Golden Developers Vs. ITO (OSD), Range-9, Ahmedabad dated 13/11/2014, it was held that in case the appellant is entitled for claim of deduction u/s. 80IB(10) in A.Y.2006-07 then the appellant is also eligible for the said deduction in A.Ys.2007-08 & 2008-09. Following same reasoning, we hold that the assessee on this additional income of Rs.85,66,228/- for A.Y. 2008-09 is entitled for claiming deduction u/s. 80IB(10) of the Act as discussed above. Assessing Officer is directed accordingly."
33. Respectfully applying the judgment of co-ordinate bench in the case of Madhav Corporation (supra), we are of the view that assessee is eligible to claim deduction u/s 80IB(10) of the Act for the undisclosed income surrendered during search/survey action in a situation when assessee has been assessed in previous years and has been allowed deduction u/s 80IB(10) of the Act as well as there is no other source of income of the assessee other than the business of developing housing projects.
IT(SS)A No. 383/Ahd/2014 40Asst. Year 2006-07
34. We, therefore, to summarize our decision on ground nos.2 & 3 in view of our overall discussions made above as well as placing reliance on various judicial pronouncements, we are of the view that assessee is a developer and not works contractor and is eligible for deduction under section 80IB(10) of the Act for Rs.1,32,19,672/- as well as for income surrendered during search/survey proceedings at Rs.2,34,39,999/-. Accordingly, these grounds of assessee's appeal are allowed.
35. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open Court on 1st February, 2016 Sd/- Sd/-
(Kul Bharat) (Manish Borad)
Judicial Member Accountant Member
Dated 01/02/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
IT(SS)A No. 383/Ahd/2014 41
Asst. Year 2006-07
1. Date of dictation: 28-29/01/2016
2. Date on which the typed draft is placed before the Dictating Member: 01/02/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 1/2/16
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: