The ITO, Ward-9(1),, Ahmedabad v. M/s. Swastik Associates, Ahmedabad

ITA 1410/AHD/2010 | 2006-2007
Pronouncement Date: 28-07-2011 | Result: Dismissed

Appeal Details

RSA Number 141020514 RSA 2010
Assessee PAN ABAFS6575R
Bench Ahmedabad
Appeal Number ITA 1410/AHD/2010
Duration Of Justice 1 year(s) 2 month(s) 25 day(s)
Appellant The ITO, Ward-9(1),, Ahmedabad
Respondent M/s. Swastik Associates, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 28-07-2011
Date Of Final Hearing 01-07-2011
Next Hearing Date 01-07-2011
Assessment Year 2006-2007
Appeal Filed On 03-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D. AGARWAL VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER DATE OF HEARING : 01/07/2011 DRAFTED ON: 06/0 7/2011 ITA NO.1410/AHD/2010 ASSESSMENT YEAR : 2006-07 THE ITO WARD-9(1) AHMEDABAD VS. M/S.SWASTIK ASSOCIATES RAIPUR MILLS COMPOUND SARASPUR ROAD AHMEDABAD PAN/GIR NO. : ABAFS 6575 R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI G.S.SOURYAVANSHI SR.D.R. RESPONDENT BY: SHRI P.M. MEHTA (ADV.) O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XV AHMEDABAD DATED 15 TH MARCH-2010 AND THE SUBSTANTIVE GROUND READS AS UND ER:- 1. THE LD. COMMISSIONER OF INCOME-TAX(A)-XV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFI CER TO ALLOW THE ASSESSEES CLAIM FOR DEDUCTION OF RS.36 81 264/- U/S.80IB(10). 2. FACTS IS BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT DATED 26/12/2 008 WERE THAT THE ASSESSEE-FIRM IS STATED TO BE IN THE BUSINESS OF CO NSTRUCTION OF HOUSING PROJECT. THE ASSESSEE HAS CLAIMED A DEDUCTION ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 2 - U/S.80IB(10) OF THE ACT OF RS.36 81 264/- WHICH WAS QUESTIONED BY THE AO. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS CREDITED THE RECEIPTS FROM THE PROJECT KNOWN AS SWASTIK BUNGALO WS OF RS.1 57 48 890/- IN THE PROFIT AND LOSS ACCOUNT. A FTER DEBITING THE EXPENDITURE NET PROFIT AS PER P&L ACCOUNT WAS DISCL OSED AT RS.37 09 590/-. BEFORE DISALLOWING THE CLAIM THE AO HAS MADE CERTAIN OBSERVATIONS AND THE CRUX WAS SUMMARIZED A S UNDER: THE ISSUE INVOLVED IS WHETHER AN ASSESSEE CARRYIN G ON THE ACTIVITY OF DEVELOPING AND BUILDING HOUSING PROJECTS ON A LAND WHICH IS NOT OWNED BY HIM BUT BY LANDOWNERS WITH WHOM THE ASSESSEE HAS ENTERED INTO A DEVELOPMENT AGREEMENT CAN BE SAID TO BE ENTITLED TO DEDUCTION U/S.80IB(10) WHEN THE APPROVAL OF THE PROJECT IS GRANTED BY THE LOCAL AUTHORITY TO THE LANDOWNER AND NOT TO THE ASSESSEE. A DETAILED DISCUSSION IS MADE IN THE MATTER HEREUNDER. 2.1. THE CLAIM WAS DISALLOWED BY THE AO BY ASSIGNIN G CERTAIN REASONS THAT THE LAND WAS PURCHASED BY A CO-OPERAT IVE HOUSING SOCIETY VIZ. RAIPUR (RAKHIAL) CO-OPERATIVE HOUSING SOCIETY LTD. THAT THE LAND WAS NOT PURCHASED BY THE ASSESSEE. THAT THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH THE PROJECT WAS DEVELOPED. THAT THE ASSESSEE HAD NOT TAKEN THE APPROVAL FROM THE LOCAL AUTHORITY ABOUT THE SAID HOUSING PROJECT. THAT TH E ORIGINAL DEVELOPMENT PERMISSION WAS TAKEN BY THE SAID HOUSIN G SOCIETY. THAT THE FIRM HAD ACTED ONLY AS AN AGENT. 2.2. AFTER ASSIGNING THESE REASONS THE AO HAS OBSE RVED THAT THE ASSESSEE HAD NOT ACQUIRED THE DOMINANT CONTROL OVER THE PROJECT. IN ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 3 - HIS OPINION THE ASSESSEE-FIRM HAD ACTED MERELY AS A CONTRACTOR BY ENTERING INTO A CONSTRUCTION AGREEMENT WITH THE LAN D OWNER. IN HIS OPINION THE ASSESSEES CLAIM OF DEDUCTION U/S.80IB (10) OF THE ACT WAS NOT ACCEPTABLE. HE HAS THUS CONCLUDED THAT IN TERMS OF THE DEVELOPMENT AGREEMENT BETWEEN THE LAND OWNER AND TH E ASSESSEE IT WAS FOUND THAT THE ASSESSEE WAS NOT THE CONSTRUCTIV E OWNER OF THE LAND BECAUSE THE ASSESSEE HAS NOT PURCHASED THE LAN D OR EVEN NOT CONTRIBUTED ANY AMOUNT TOWARDS THE PURCHASE OF THE LAND NOR ACQUIRED ANY DOMINANT CONTROL OVER THE LAND. THE A SSESSEE HAS OBTAINED ONLY CONSTRUCTION RIGHTS FOR WHICH HE WAS NOT ENTITLED FOR THE CLAIMED DEDUCTION. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS DISCUSSED THE ISSUE AT LENGTH AND THEREAFTER GIVEN CERTAIN FINDINGS WHICH CAN BE LISTED IN SHORT AS FOLLOWS:- 1. THAT THE HOUSING PROJECT WAS COMPLETED WITHIN THE SPECIFIED TIME LIMITS AS PRESCRIBED U/S.80IB(10)(A). 2. THAT THE SECOND CONDITION AS STIPULATED IN SECTION 80IB(10)(B) IN RESPECT OF SIZE OF THE PLOT HAS ALSO BEEN FULFIL LED AND THE SIZE OF THE PLOT HAS NOT BEEN DISPUTED. 3. THAT THE CONDITION AS STIPULATED U/S.80IB(10)(C) E ACH RESIDENTIAL UNITS HAS A MAXIMUM BUILT-UP AREA OF 15 00 SQ.FT. AND IT HAS NOT BEEN DISPUTED BY THE AO. ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 4 - 4. THAT THE CONDITIONS AS STIPULATED U/S.80IB(10)(D) ABOUT THE BUILT UP AREA OF SHOPS AND COMMERCIAL ESTABLISHMENT HAS NOT BEEN DISPUTED. 3.1. IN RESPECT OF THE L EGAL CONTROVERSY ABOUT THE OWNERSHIP OF THE LAND LD.CIT(A) HAS FOLLOWED M/S.SHAKTI CORPORATION VADODARA IN ITA NO.1503/AHD/2008 FOR A.Y. 2005-06 ORDER DATED 07/11 /2008 OF RESPECTED CO-ORDINATE BENCH A ITAT AHMEDABAD. T HE LD.CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE WAS FOUND TO HAVE PURCHASED AS ALSO DEVELOPED THE LAND. THE ASSESSEE HAD ACQUIRED DOM INANT CONTROL OVER THE PROJECT AND DEVELOPED THE HOUSING PROJECT AT IT S OWN COST. THE ASSESSEE HAS PAID THE AMOUNT TO THE SOCIETY AND THE YEAR-WISE BREAK-UP WAS GIVEN IN THE APPELLATE ORDER AS UNDER:- AY LAND COST ACCOUNTED IN P&L A/C.(RS) AY 2006-07 41 92 300 AY 2007-08 1 78 20 450 AY 2008-09 43 36 700 AY 2009-10 15 65 077 TOTAL 2 79 14 527 3.2. IN RESPECT OF THE DOMINANT CONTROL OVER THE PR OJECT AND THAT THE CLAUSES OF THE DEVELOPMENT AGREEMENT HAVE AFFIRMED THE ASSESSEES INVOLVEMENT THE LD.CIT(A) HAS REPRODUCED CLAUSE-D AND OTHER CLAUSES AS FOLLOWS:- ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 5 - CLAUSE D: THE PARTY OF THE OTHER PART (THE APP ELLANT) WILL HAVE TO ACCEPT MONEY TOWARDS THE SHARE FOR THE LAND AND CONSTRUCTION FROM THE PERSONS ENROLLED IN THE PROJECT. OUT OF S UCH MONIES RECEIVED BY THE PARTY OF THE OTHER PART IT WILL HA VE PAY TO THE SOCIETY SUCH AMOUNT TOWARDS LAND CONTRIBUTION AS MAY BE DECIDED BY THE SOCIETY. SAVE AND EXCEPT THIS AMOUNT THE PA RTY OF THE ONE PART SHALL HAVE NO OTHER RIGHT OVER ANY MONIES COLL ECTED BY THE PARTY OF THE OTHER PART FROM THE MEMBERS OF THE SOC IETY. BUT IT WILL BE THE TOTAL RESPONSIBILITY OF THE PARTY OF THE OTH ER PART TO DEVELOP ALL THE AMENITIES AND COMMON FACILITIES UPON THE LA ND OF THE PARTY OF THE ONE PART AS PER THE AGREEMENT ARRIVED AT BE TWEEN THE PARTIES AND THE PARTY OF THE ONE PART WILLINGLY ACC EPTS THIS RESPONSIBILITY. CLAUSE 4 : RESPONSIBILITY OF THE APPELLANT FOR GE TTING FINANCE FOR THE DEVELOPMENT OF THE PROJECT. CLAUSE 7 : PHYSICAL POSSESSION OF THE LAND PASSES TO THE APPELLANT. CLAUSE 10: THE PRICE OF THE LAND WITH CONSTRUCTION SHALL BE FIXED BY THE APPELLANT AND SHALL BE COLLECTED BY THE APPELLA NT. 4. RELIEF BEING GRANTED NOW THE REVENUE IS IN APPE AL. 5. FROM THE SIDE OF THE REVENUE LD.DR MR. G.S.SURY AVANSHI AND THE FROM THE SIDE OF THE RESPONDENT-ASSESSEE MR.P.M.MEH TA HAVE APPEARED AND RESPECTIVELY PLACED RELIANCE ON THE ORDERS OF T HE AO AND CIT(A). 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED AN ORDER OF ITAT BENCH D AHMEDABAD PRO NOUNCED IN THE BUNCH OF CASES NAMELY M/S. SHREEJI DEVELOPERS AT S L.NO.1 BEARING ITA NO.1650/AHD/2010 FOR A.Y. 2007-08 ORDER DATED 06/08 /2010 WHEREIN THE DECISIONS OF THIS VERY BENCH PRONOUNCED IN THE CASE OF M/S.SHAKTI ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 6 - CORPORATION (SUPRA) AND M/S.RADHE DEVELOPERS HAVE B EEN DISCUSSED AND FOLLOWED. IN ADDITION TO THE ABOVE LEGAL POSITIO N LD.AR MR.P.M.MEHTA HAS ALSO DRAWN OUR ATTENTION IN RESPECT OF SOME OF THE BASIC FACTS OF THE CASE. HE HAS INFORMED THAT A PROJECT KNOWN AS SW ASTIK BUNGALOWS WAS DEVELOPED BY THE ASSESSEE. THE LAND WAS PURCHA SED BY RAIPUR COMMERCIAL CO-OPERATIVE SOCIETY LTD. ALL DEVELOP MENT RIGHTS AND THE LAND WAS TRANSFERRED TO THE ASSESSEE. THE ASSESSEE HAD TO DEVELOP THE PROJECT AT ITS OWN COST AND RISK AS PER THE DEVELOP MENT AGREEMENT. LD.AR HAS ALSO DRAWN OUR ATTENTION ON THE YEAR-WISE DETAILS OF THE EXPENDITURE TOWARDS DEVELOPMENT OF THE PROJECT SUC H AS BUILDING EXPENSES LABOUR EXPENSES BUILDING MATERIAL PURCHA SED ETC. WHICH WERE CLAIMED TO HAVE BEEN REFLECTED IN THE BOOKS OF ACCO UNT OF THE ASSESSEE AND NOT IN THE BOOKS OF ACCOUNT OF THE SOCIETY. IT WAS ALSO DEMONSTRATED THAT THE SALE CONSIDERATION IN RESPECT OF SALE OF E ACH UNIT WAS RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS. AS FAR AS THE S ALES WERE CONCERNED THE ASSESSEE WAS HANDLING THE SAME AND NOT ACTED AS A C OMMISSION AGENT DEALING WITH THE CUSTOMERS ON BEHALF OF THE LAND-OW NER. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE AND THE F ACTUAL FINDING GIVEN BY LD.CIT(A) WE ARE OF THE VIEW THAT THE ASSESSEE HAD DOMINANT CONTROL OVER THE PROJECT AND IN A WAY PAID THE SUBSTANTIAL AMOUNT TO THE CO-OP. SOCIETY CLAIMED TO BE TOWARDS THE COST OF LAND THE REFORE ALL THESE FACTS THUS INDICATE THAT THE AFORE CITED DECISIONS OF THE RESPECTED CO-ORDINATE BENCHES DO APPLY ON THE FACTS OF THIS APPEAL. THE REFORE FOLLOWING THESE DECISIONS WE FIND NO FORCE IN THE GROUND OF THE R EVENUE AND DISMISSED THE SAME. ITA NO. 1410/AHD/2010 THE ITO VS. M/S.SWASTIK ASSOCIATES ASST.YEAR 2006-07 - 7 - 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 28 TH JULY 2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 28 / 07 /2011 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XV AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION.. 05.07.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06.07.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S28.7.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.7.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER