The ACIT, Circle-5,, Baroda v. Mahalaxmi Builders, Baroda

ITA 161/AHD/2008 | 2003-2004
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 16120514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 161/AHD/2008
Duration Of Justice 3 year(s) 2 month(s) 15 day(s)
Appellant The ACIT, Circle-5,, Baroda
Respondent Mahalaxmi Builders, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 25-03-2011
Date Of Final Hearing 30-09-2010
Next Hearing Date 30-09-2010
Assessment Year 2003-2004
Appeal Filed On 10-01-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND D.C.AGRAWAL AM A.C.I.T. CIR-5 BARODA. VS. M/S MAHALAXMI BUILDERS VRINDAVAN RESIDENTIAL PROJECT OPP. NAGESHWAR TEMPLE HARNI ROAD BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. SHRIDHAR CIT DR RESPONDENT BY:- SHRI P. M. MEHTA AR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) BARODA HAS ERRED IN DELETING THE ADDITION OF RS.3 1 9 800/- BEING INTEREST ATTRIBUTABLE TO THE INTEREST FREE ADVANCES OF RS.1 22 64 788/- TO THE PARTNERS. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.76 07 792/- UNDER SECTION 80IB(10) OF THE INCOME-TAX ACT DESPITE THE ASSESSEE S UNDERTAKING NOT BEING APPROVED BY THE LOCAL AUTHORI TY. THE LD. CIT(A) RELIED ON THE ITATS DECISION IN THE CASE OF M/S RADHE DEVELOPERS. THE SAID DECISION HAVE NOT BEEN ACCEPTE D BY THE DEPARTMENT AND AN APPEAL TO THE HIGH COURT HAS BEEN FILED. (3) THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE A PPROVAL FOR DEVELOPING AND BUILDING HOUSING PROJECTS WAS GRANTE D TO THE ITA NO.161/AHD/2008 ASST. YEAR 2003-04 ITA NO.161/AHD/2008 ASST. YEAR2003-04 2 ORIGINAL OWNERS OF THE LAND AND NOT TO THE ASSESSEE WHO ACTED ONLY AS AN AGENT FOR EXECUTION OF THE PROJECT OF VR INDAVAN TOWNSHIP WHICH RIGHTS WERE OBTAINED BY THE ASSESSE E FIRM FROM THE ORIGINAL OWNERS. (4) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LAND B EING AN ESSENTIAL AND INTRINSIC PART OF DEVELOPING AND BUIL DING OF A HOUSING PROJECT APPROVAL IS GRANTED BY THE LOCAL A UTHORITY TO THE OWNER OF THE LAND FOR DEVELOPING AND BUILDING HOUSI NG PROJECTS THEREON AND ANY OTHER PERSON TO WHOM HE ENTRUSTS TH E WORKS CONNECTED WITH THE EXECUTION OF THE PROJECT INSTEAD OF TAKING IT UP HIMSELF CANNOT BE SAID TO BE AN UNDERTAKING DEV ELOPING AND BUILDING HOUSING PROJECTS APPROVED BY THE LOCAL AUT HORITY WITHIN THE MEANING OF SECTION 80IB(10) OF THE ACT. (5) THE LD. CIT(A) FAILED TO APPRECIATE THAT IT IS THE OWNERS OF THE LAND WHO ENTERED INTO AGREEMENTS FOR SALE OF THE DE VELOPED UNITS TO THE BUYERS AND THE ASSESSEE ACTED ONLY AS A CONFIRMING PARTY WHICH RENDERS THE OWNERS OF THE LAND AND NOT THE ASSESSEE AS AN UNDERTAKING IN TERMS OF SECTION 80IB(10). (6) THE LD. CIT(A) ERRED IN ADOPTING LIBERAL INTERPRETA TION OF A BENEVOLENT PROVISION DESPITE THE SAME DOING VIOLENC E TO THE EXPRESS LANGUAGE USED IN THE PROVISION IN CONTRAVEN TION OF THE RATIO SETTLED IN THE CASE OF PETRON ENGINEERING CON STRUCTION P. LTD. VS. CBDT 175 ITR 523 (SC) CIT VS. BUDHARAJA & CO. 204 ITR 412 (SC) PANDIAN CHEMICALS LTD. VS. CIT 262 IT R 278 (SC) AND IPCA LABORATORIES LTD. VS. CIT 262 ITR 278 (SC). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE DEVELOPMENT AND CONSTRUCTION OF HOUSING/COMMERCIAL PROJECT. THE COMPANY HAS BEEN FOLLOWING PROJECT COMPLETION METHO D FOR RECOGNIZING REVENUE ARISING OUT OF SUCH PROJECT. DURING THIS YE AR ASSESSEE COMPANY COMPLETED VRINDAVAN RESIDENTIAL PROJECT AT BARODA W HOSE INCOME WAS OFFERED FOR TAXATION THIS YEAR. THE ASSESSEE FILED RETURN OF INCOME SHOWING TOTAL INCOME OF RS.62 03 590/- ON 25.11.200 3 CLAIMING DEDUCTION U/S 80IB(10) AT RS.7 17 90 881/-. ITA NO.161/AHD/2008 ASST. YEAR2003-04 3 3. THE FIRST ISSUE RELATES TO DELETING THE ADDITION OF RS.3 19 800/- BEING THE INTEREST ATTRIBUTABLE TO INTEREST FREE AD VANCES OF RS.1 22 64 788/- TO THE PARTNERS. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE AO NOTED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES T O THE EXTENT OF RS.3 19 800/- TAKEN BY IT FROM THE BANK AND THE DEP OSITORS. THE AO NOTICED THAT THE PARTNERS OF THE FIRM HAD MADE HUGE WITHDRAWALS AMOUNTING TO RS.1 22 64 788/- AND THEY HAD DEBIT BA LANCE DURING THE YEAR. NO INTEREST IS CHARGED ON THE DEBIT BALANCE F ROM THE CAPITAL ACCOUNT. IT WAS EXPLAINED THAT INTEREST WAS PAID ON LOAN TAK EN FROM BANK AND DEPOSITORS AND WHICH WAS UTILIZED IN THE BUSINESS O F THE ASSESSEE. FURTHER PARTNERSHIP DEED DID NOT PROVIDE FOR CHARGING OR GI VING INTEREST ON THE CAPITAL OF THE PARTNERS. IT WAS ALSO SUBMITTED THAT PROFIT WAS FINALLY RETURNED ON THE BASIS OF PROJECT COMPLETION METHOD BUT THE PARTNERS HAVE WITHDRAWN THE MONEY ON THE BASIS OF ESTIMATED ANNUA L PROFIT ASSESSEE FIRM COULD HAVE EARNED. WITHDRAWALS WERE FINALLY SE T OFF BY CREDITING THE PROFITS DURING THIS YEAR. THE AO DID NOT ACCEPT THE ABOVE EXPLANATION. ACCORDING TO HIM ASSESSEE HAS FAILED TO SHOW THAT B ORROWINGS WERE UTILIZED FOR THE PURPOSE OF BUSINESS. HE REFERRED T O LARGE NUMBER OF JUDGMENTS ON THIS ISSUE AS MENTIONED BY HIM IN PARA 4.2 OF HIS ORDER. 4. THE LD. CIT(A) ALLOWED THE CLAIM OF INTEREST ON THE GROUND THAT CAPITAL IS BORROWED FOR THE PURPOSE OF BUSINESS. TH E AO HAS FAILED TO PROVE ANY NEXUS BETWEEN THE BORROWINGS OF THE FUNDS AND THE WITHDRAWALS BY THE PARTNERS. ACCORDING TO HIM PROFI TS EARNED DURING THE YEAR WAS SUFFICIENT TO COVER THE WITHDRAWAL BY THE PARTNERS. 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). IT IS BECAUSE THERE IS A FINDI NG BY LD. CIT(A) THAT ITA NO.161/AHD/2008 ASST. YEAR2003-04 4 MONEY WAS BORROWED BY THE ASSESSEE FROM BANK AND OT HER DEPOSITORS FOR THE PURPOSE OF BUSINESS AND ONCE IT IS SO THE QUEST ION OF ANY DISALLOWANCE OUT OF ANY INTEREST PAID THEREFROM DOES NOT ARISE. IT IS IMMATERIAL WHETHER THE PARTNERS HAVE MADE HEAVY WITHDRAWALS. SO LONG A S FINDING OF THE LD. CIT(A) THAT BORROWED MONEY WAS UTILIZED FOR THE PUR POSE OF BUSINESS NO DISALLOWANCE CAN BE MADE OUT OF INTEREST PAYMENT. H ON. SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATION (2008) 298 ITR 298 HELD THAT NO DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) C AN BE DONE IF BORROWED FUNDS ARE UTILIZED FOR THE PURPOSE OF BUSINESS. IN VIEW OF THIS WE CONFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS DISMISSED. 6. THE NEXT ISSUE IS THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB(10). THE AO NOTED THAT ASSESSEE CLAIMED DEDUCT ION U/S 80IB(10) OF RS.7 17 90 881/-. WHILE WORKING OUT DEDUCTION MADE BY THE ASSESSEE THE AO FOUND THAT PROFIT FROM ELIGIBLE BUSINESS WAS RS. 7 79 72 310/-. OUT OF THIS IT HAS REDUCED A SUM OF RS.1 34 92 927/- BEING THE LOSS OF NON- ELIGIBLE PROJECT. THE EXACT WORKING GIVEN BY THE AS SESSEE FOR SPECIFIED LOSS FROM NON-ELIGIBLE PORTION OF THE CONSTRUCTION WAS AS UNDER :- AMOUNT (RS.) TOTAL COST OF CONSTRUCTION OF NON- ELIGIBLE PORTION (AS CERTIFIED BY ARCHITECT) 18760000/- TOTAL RECEIPTS FROM NON-ELIGIBLE PORTION 5267073/- LOSS INCURRED IN (-) 13492927 THE AO NOTED THAT ASSESSEE HAS NOT SUBMITTED ANY DO CUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM OF LOSS OF RS.1 34 92 927/- AND TOTAL RECEIPTS AT RS.52 67 073/- FROM THE NON ELIGIBLE PORTION. THE A O THEN REFERRED TO THE WORKING DONE BY THE AO IN ASST. YEAR 2001-02 FOR WO RKING OUT PROFIT ITA NO.161/AHD/2008 ASST. YEAR2003-04 5 FROM NON-ELIGIBLE PORTION FOR BEING EXCLUDED FROM T OTAL PROFITS OF THE PROJECT. THE CALCULATION THAT WAS SO DONE ON PRO-RA TA BASIS BY TAKING UP TOTAL BUILT UP AREA FINDING PERCENTAGE OF NON-ELIGI BLE AREA. THIS WAS WORKED OUT AT 18.021% AS UNDER :- TOTAL BUILT UP AREA 384539 SFT. AREA UNDER DUPLEX/TENEMENTS/FLATS 315243 SFT. AREA UNDER SHOPS AND OFFICES 69296 SFT (18.021% OF THE TOTAL BUILT UP AREA THE AO ACCORDINGLY APPLIED THE RATIO AT 18.021% TO THE PROFITS OF THE BUSINESS AND EXCLUDED THE SAME FOR COMPUTING ELIGIB LE PROFITS. THE ELIGIBLE PROFIT WAS ACCORDINGLY WORKED AT RS.6 41 8 3 089/-. THE TOTAL WORKING OF THIS FIGURE IS GIVEN BY THE AO IN THE AN NEXURE-I OF HIS ASSESSMENT ORDER AS UNDER :- PARTICULARS AMOUNT (RS.) THE PROFIT OF THE BUSINESS (AS PER PAT 1 OF ANNEXURE B OF FORM NO.10CCB) 9 14 65 237/- LESS: LOSS FROM NON ELIGIBLE PROJECT (AS PER PART 1 OF ANNEXURE B OF FORM NO.10CCB) 1 34 92 927/- 7 79 72 310/- ADD: INTEREST DISALLOWED (AS PER PARA 6) 3 19 800/- REVISED PROFIT OF THE BUSINESS 7 82 92 110/- AREA OF ELIGIBLE PROJECT IN % 81.979 AREA OF NON ELIGIBLE PROJECT IN % 18.021 TOTAL AREA 100.000 DEDUCTION U/S 80IB(10) FOR ELIGIBLE PROJECT REVISED PROFIT OF BUSINESS X AREA OF ELIGIBLE PROJECT/TOTAL AREA 7 82 92 110 X 81.979/100.000 = 6 41 83 089 ITA NO.161/AHD/2008 ASST. YEAR2003-04 6 SO THE DEDUCTION U/S 80IB(10) IS RS.6 41 83 089/- ADDITION ON ACCOUNT OF DEDUCTION U/S 80IB(10) DEDUCTION CLAIMED IN RETURN OF INCOME 7 17 90 881/- LESS: DEDUCTION ALLOWABLE 6 41 83 089/- ADDITION ON ACCOUNT OF DEDUCTION U/S 80IB(10) 76 07 792/- ON THIS BASIS THE AO DISALLOWED THE CLAIM OF DEDUCT ION U/S 80IB(10 AT RS.76 07 792/-. 7. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT EXPENDITURE OF RS.1 34 92 927/- IS SPECIFICALLY ALL OCABLE TO THE NON- ELIGIBLE PART OF THE BUSINESS AND THEREFORE NON-E LIGIBLE PART OF THE CONSTRUCTION HAD SHOWN A LOSS AND ACCORDINGLY THE CALCULATION MADE BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80IB(10) WA S CORRECT. THE ASSESSEE IN FACT HAD CARRIED OUT THE CALCULATION OF DEDUCTION U/S 80IB(10) AS UNDER :- PARTICULARS AMOUNT(RS.) GROSS TOTAL INCOME AS PER INCOME TAX RETURN 7 79 9 4 475/- LESS: DIVIDEND AND OTHER INCOME - 22 165/- ADD: EXPENSES NOT INCURRED FOR ELIGIBLE PROJECT 1 3 4 92 927/- ALLOCABLE PROFIT 9 14 65 237/- TOTAL TURNOVER 27 14 11 910/- TURNOVER OF ELIGIBLE PROJECT 21 30 32 663/- TURNOVER OF NON ELIGIBLE PROJECT 5 83 79 247/- ALLOCATION TO ELIGIBLE PROJECT (91465237 X 213032663/271411910) 7 17 90 881 ALLOCATION TO NON ELIGIBLE PROJECT (914665237 X 58379247/271411910) 1 96 74 356/- 9 14 65 237/- INCOME FROM NON ELIGIBLE PROJECT ALLOCATION TO NON-ELIGIBLE PROJECT 1 96 74 356/- ITA NO.161/AHD/2008 ASST. YEAR2003-04 7 ADD: DIVIDEND AND OTHER INCOME 22 165/- LESS: EXPENSES NOT INCURRED FOR ELIGIBLE PROJECT 1 34 92 927/- TAXABLE INCOME FROM NON ELIGIBLE PROJECT 62 03 594/- 8. THE LD. DR SUBMITTED THAT THE CONSTRUCTION MADE BY THE ASSESSEE CONSISTED OF ELIGIBLE PART BEING THE HOUSES AND NON -ELIGIBLE PARTS BEING SHOPS AND COMMERCIAL ESTABLISHMENTS. THE TOTAL AREA CONSTRUCTED BY THE ASSESSEE WAS 3 84 589 SFT. OUT OF WHICH AREA FOR SH OPS AND COMMERCIAL ESTABLISHMENTS WAS 69 296 SFT WHICH IS 18.021% OF T HE TOTAL BUILT UP AREA. ACCORDINGLY THE PROFITS OF THE BUSINESS WHICH WAS A T RS.7 82 92 110/- SHOULD BE PROPORTIONATELY APPORTIONED BETWEEN ELIGI BLE AND NON-ELIGIBLE PROFITS. THERE IS NO REASON TO TAKE A DIFFERENT VIE W AND ASSESSEE HAS FAILED TO PROVE THAT IT HAS INCURRED LOSS IN THE NON ELIGI BLE PORTION. 9. ON THE OTHER HAND THE LD. AR SUPPORTED THE ORDE R OF LD. CIT(A). HE SUBMITTED THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT REJECTED AND THEREFORE EXPENDITURE INCURRED ON SHOPS AND OFFICE S CANNOT BE IGNORED. THE BOOKS OF THE ASSESSEE ARE AUDITED AND NO DEFAUL T HAS BEEN FOUND THEREIN. THE ASSESSEE HAS IN FACT SUBMITTED THE DET AILS OF THE LOSS INCURRED ON NON-ELIGIBLE PROFITS IN THE NOTES FORMING PART O F THE ACCOUNT IN SCHEDULE-C OF THE BALANCE SHEET. THE AUDITORS HAVE ALSO POINTED OUT THE LOSS INCURRED ON NON ELIGIBLE PROJECTS AFTER VERIFY ING ALL THE RECORDS AND PERTAINING TO WHICH INCOME AND EXPENDITURE OF THE P ROJECT. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. WE OBSERVE THAT AO HAS IN FACT ESTIMATED THE PROFITS FROM NON ELIGIBLE BUSINESS BY REJECTING THE LOSS SHOWN BY TH E ASSESSEE. IN OUR CONSIDERED VIEW SUCH ESTIMATION IS NOT PERMISSIBLE UNLESS BOOKS OF ACCOUNTS ARE REJECTED BY THE AO. IN ENTIRE ORDER OF THE AO WE DO NOT FIND ANY OBSERVATION ABOUT DEFECTS IN THE BOOKS OF ACCOU NT POINTED OUT BY THE AO. ONCE BOOKS OF ACCOUNT ARE NOT REJECTED PROFITS OF BUSINESS EITHER OF ITA NO.161/AHD/2008 ASST. YEAR2003-04 8 ELIGIBLE BUSINESS OR OF NON ELIGIBLE BUSINESS CANNO T BE ESTIMATED. THEREFORE THE CALCULATION DONE BY THE ASSESSEE AND CERTIFIED BY THE AUDITORS HAS TO BE ACCEPTED. EVEN THOUGH AO MAY NOT AGREE WHEN AND HOW ASSESSEE WOULD HAVE INCURRED EXPENDITU RE WHILE EARNING PROFITS ON NON-ELIGIBLE PORTION BUT THIS IS MERELY A SUSPICION. ONCE ACCOUNTS ARE AUDITED AND ACCEPTED BY THE AO SUCH AS BY ACCEPTING THE TOTAL PROFIT AS DECLARED BY THE ASSESSEE THEY CANNO T BE TREATED AS REJECTED FOR ONE PART OF THE BUSINESS I.E. CONSTRUCTION OF N ON ELIGIBLE PORTION OF THE PROJECT. OUR VIEW THAT PROFITS CANNOT BE ESTIMATED WITHOUT POINTING OUT DEFECTS AND REJECTING THE BOOKS BY INVOKING THE PRO VISIONS OF SECTION 145(3) EARLIER U/S 145(1). IT IS SUPPORTED BY FOLLO WING SEVERAL AUTHORITIES: HON. GAUHATI HIGH COURT IN MADNANI CONSTRUCTION COR PN. (P) LTD. VS. CIT (2008) 296 ITR 45 (GAU) HAS HELD THAT ACCOUNTS CANNOT BE REJECTED IF AO DID NOT FIND BOOKS OF ACCOUNTS INCOR RECT OR ANY INFIRMITY IN THE AUDIT REPORT AND THEREFORE RESORT TO BEST JUDG MENT ASSESSMENT CANNOT BE TAKEN. IN CIT VS. RAJNIKANT DAVE (2006) 281 ITR 06 (ALL) IT IS HELD THAT IF THERE IS NO FINDING THAT BOOKS OF ACCOUNTS ARE INCOMPLETE OR INCORRECT ACCOUNTS CANNOT BE REJECTED. IN ASHOK REFRACTORY (P) LTD. VS. CIT (2005) 279 ITR 457 (CAL) IT IS HELD THAT EVEN THOUGH THERE MAY BE ABSENCE OF STOCK REGISTER OR ITEM-WISE ACCOUNTING O F STOCK BUT IF THERE IS NO FINDING THAT INCOME CANNOT BE DEDUCED FROM THE M ETHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE THEN ACCOUNTS CANNOT BE RE JECTED AND SECTION 145 CANNOT BE INVOKED. SIMILAR VIEW WAS TAKEN BY HON. CALCUTTA HIGH COURT IN JUGGILAL KAMLAPATH UDYOG LTD. VS. CIT (200 5) 278 ITR 52 (CAL) WHEREIN IT IS HELD THAT IF THERE IS NO FINDING THAT INCOME CANNOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSE E THEN REJECTION OF ACCOUNTS WOULD BE INVALID. HON. GUJARAT HIGH COURT IN CIT VS. VIKRAM PLASTICS (1999) 239 ITR 161 (GUJ) HELD THAT WHERE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED REGULARLY AND NO DEFE CTS HAVE BEEN FOUND ITA NO.161/AHD/2008 ASST. YEAR2003-04 9 IN THE ACCOUNTS THEN TRIBUNAL WILL BE JUSTIFIED IN HOLDING THAT ACCOUNTS CANNOT BE REJECTED UNDER SECTION 145. UNDER THIS SI TUATION THE ACTION OF THE LD. AO AND THAT OF LD. CIT(A) CANNOT BE UPHELD IN ESTIMATING THE PROFITS OF PART OF THE BUSINESS AND ACCEPTING THE P ROFITS OF THE OTHER PART. IN VIEW OF ABOVE WE DECLINE TO INTERFERE IN THE OR DER PASSED BY LD. CIT(A). THIS GROUND OF REVENUE IS ALSO REJECTED. 11. THE OTHER GROUND NOS. 3 TO 6 RELATE TO ALLOWABI LITY OF DEDUCTION UNDER SECTION 80IB(10) TREATING THE ASSESSEE AS A D EVELOPER. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE CASE OF RADHE D EVELOPERS DECIDED BY THE TRIBUNAL AHMEDABAD BENCH IN RADHE DEVELOPERS VS . ITO (2008) 23 SOT 420 (AHMEDABAD). SINCE IN THIS CASE ASSESSEE HA S DOMINANT CONTROL OVER THE LAND IT HAS INVESTED IN THE CONSTRUCTION OF FLATS IT HAS SHARED THE PROFIT AND LOSS HE WOULD BE TREATED AS A DEVELOPER AS PER JUDGEMENT IN THE CASE OF RADHE DEVELOPER. IN THAT IT CASE IT HAS BEE N HELD AS UNDER :- 24. FURTHER THE MEMO CONTAINED IN FINANCE BILL 19 99 HAS EXPLAINED THE PROVISIONS BROUGHT BY THE LEGISLATURE WITH EFFECT F ROM 1-4-2000 AND THE SAME READS AS UNDER: TAX INCENTIVE FOR PROMOTION OF HOUSING.LIBERALIZA TION OF TAX HOLIDAY TO APPROVED HOUSING PROJECTS. UNDER SECTION 80-IA OF T HE INCOME-TAX ACT PROFITS OF APPROVED HOUSING PROJECTS WHERE THE DEVELOPMENT AND CONSTRUCTION COMMENCES ON OR AFTER 1-10-1998 AND IS COMPLETED BY 31-3-2001 ARE FULLY DEDUCTIBLE. THE CONDITIONS NECESSARY FOR CLAIMING THE BENEFIT ARE T HAT THE APPROVED HOUSING PROJECT SHOULD BE ON MINIMUM AREA OF ONE ACRE AND S HOULD HAVE DWELLING UNITS WITH A MAXIMUM BUILT-UP AREA OF 1 000 SQ. FT. IT IS PROPOSED TO MODIFY THE EXISTING BENEFITS TO PROVIDE THAT IN AREAS OTHER THAN THOSE FALLING IN AND WITHIN 25 KMS. FROM THE MUNICIPAL LIMITS OF DELHI AND MUMBAI THEB UILT-UP AREA OF DWELLING UNITS MAY BE UPTO A MAXIMUM LIMIT OF 1 500 SQ. FT. INSTEA D OF 1 000 SQ. FT. AT PRESENT TO MAKE THEM ENTITLED FOR BENEFIT. THE BUILT-UP AREA F OR AREAS FALLING IN DELHI AND MUMBAI AND WITHIN 25 KMS. OF THE MUNICIPAL LIMITS O F BOTH HOWEVER SHALL REMAIN THE SAME. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1-4-20 00 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AN D SUBSEQUENT YEARS. ITA NO.161/AHD/2008 ASST. YEAR2003-04 10 25. THE PROVISIONS OF SECTION 80-IB(10) THUS ARE SO UGHT TO PROVIDE THAT FOR APPROVED HOUSING PROJECT THE PROFITS ARE FULLY DEDUCTIBLE I F THE PROJECT HAS THE BUILT-UP AREA FOR THE CITIES OF DELHI AND MUMBAI AND THE AREA WITHIN 25 KMS. FROM THE MUNICIPAL LIMIT THEREOF DOES NOT EXCEED 1 000 SQ. FT. AND FOR OTHER PLACES THE BUILT UP AREA OF RESIDENTIAL UNIT DOES NOT EXCEED 1 500 SQ. FT. A PR OVISION IS ALSO MADE WHEREBY ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO DEDUCTION UNDER THIS SECTION IS TRANSFERRED BEFORE THE EXPIRY OF THE PERIOD SPECIF IED IN THIS SECTION TO ANOTHER INDIAN COMPANY IN A SCHEME OF AMALGAMATION OR DEMERGER (A) NO DEDUCTION TO BE ADMISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE DEMER GED COMPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKE S PLACE; AND (B) THE PROVISIONS OF THIS SECTION TO APPLY TO THE AMALGAMATED OR RESU LTING COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR DEMERGED COMPANY AS IF THE AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE. 26. THE SUB-SECTION (10) RELATING TO HOUSING PROJEC T WAS AMENDED FROM TIME TO TIME. FIRSTLY BY FINANCE ACT 2000 WITH EFFECT FROM 1-4 -2000 EXTENDING THE OUTER LIMIT FOR COMPLETION OF THE HOUSING PROJECT ON OR BEFORE 31-3 -2002 AS AGAINST 31-3-2001 ORIGINALLY ENACTED. THIS SUB-SECTION WAS AGAIN AMEN DED BY FINANCE ACT 2003 REMOVING THE TIME-LIMIT FOR COMPLETION OF THE PROJE CT MEANING THEREBY THAT FOR THE ASSESSMENT YEARS 2002-03 2003-04 AND 2004-05 THE ASSESSMENT YEARS WITH WHICH WE ARE CONCERNED THERE WAS NO OUTER TIME-LIMIT FOR CO MPLETION OF THE PROJECT. THERE HAVE BEEN CERTAIN FURTHER AMENDMENTS IN THIS SECTION BY FINANCE (NO. 2) ACT 2004 WITH EFFECT FROM 1-4-2005 BUT WE ARE NOT CONCERNED WITH THESE AMENDMENTS INSOFAR AS ALL THESE APPEALS ARE CONCERNED. THEREFORE WE ARE NOT DEALING WITH THE SAME. 27. A BARE READING OF THESE PROVISIONS OF SECTION 8 0-IB(10) AS THEY STOOD IN THE YEARS UNDER CONSIDERATION THE REQUIREMENTS FOR CLAIMING DEDUCTION FOR HOUSING PROJECTS ARE THAT (I) THERE MUST BE AN UNDERTAKING DEVELOPING AN D BUILDING HOUSING PROJECT; (II) SUCH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHO RITY; (III) THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT HAS COMMENCED ON OR AFTER 1-10-1998; (IV) THE HOUSING PROJECT IS ON A SIZE OF A PLOT OF LAND WHIC H HAS MINIMUM AREA OF ONE ACRE; AND (V) THE RESIDENTIAL UNIT DEVELOPED AND BUILT HA S A BUILT UP AREA OF 1 000 SQ. FT. IF IT IS SITUATED IN DELHI AND MUMBAI OR WITHIN 25 KMS OF MUNICIPAL LIMIT OF THESE CITIES AND 1 500 SQ. FT. AT ANY OTHER PLACE. THERE IS NO O THER CONDITION WHICH IS TO BE COMPLIED BY AN ASSESSEE FOR CLAIMING THE DEDUCTION ON PROFITS OF THE HOUSING PROJECT. 28. THE CONTENTION OF THE REVENUE AUTHORITIES THAT TO CLAIM DEDUCTION UNDER SECTION 80-IB(10) THERE IS A CONDITION PRECEDENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO FORC E. WE DO NOT FIND ANY SUCH CONDITION AS APPEARING IN THE PROVISIONS OF THE SEC TION EXTRACTED ABOVE. A PLAIN READING OF SUB-SECTION (10) OF SECTION 80-IB REVEAL S AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HO USING PROJECT AS APPROVED BY A ITA NO.161/AHD/2008 ASST. YEAR2003-04 11 LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDI TION THAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSON WHO HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT AS NARRATED ABOVE IT IS EVIDENT T HAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUA NCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND-OWNERS. THEREFORE THE MERE F ACT THAT THE LANDOWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELI GIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. 29. IT IS ALSO THE CASE OF THE REVENUE THAT THE ASS ESSEE WAS A MERE CONTRACTOR DEVELOPING AND BUILDING HOUSING PROJECT AND THEREF ORE IT COULD NOT BE A DEVELOPER. WE FAIL TO UNDERSTAND AS TO HOW SUCH A SITUATION CO ULD EMERGE. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A C ONTRACTOR. HAVING ENTERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUIL DING THE HOUSING PROJECT ASSESSEE WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT ES SENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOVE IT IS THE UNDERTAKING T HAT DEVELOPS OR BUILDS THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHETHER THAT IT IS THE OWNER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREOF. THE REQUIREMENT FOR CLAIMING DEDUCTION IS THAT SUCH AN UNDERTAKING MUST DEVELOP AND BUILD HOUSING PROJECT BE IT ON THEIR OWN LAND OR ON THE LAND OF OTHERS AND FOR WHICH A TRIPA RTITE AGREEMENT HAS BEEN ENTERED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRACTOR FOR DEVELOPING AND BUILDING HOUSING PROJECT OR AN OWNER OF THE LAND. 30. WHAT IS THE MEANING OF THE TERM DEVELOP DEVELO PER DEVELOPING DEVELOPMENT WE CAN FIND THE ANSWER IN CERTAIN DICTIONARIES INCLUD ING THE LAW DICTIONARY. ( A ) THE WEBSTERS ENCYCLOPEDIA UNABRIDGED DICTIONARY OF THE ENGLISH LANGUAGE GIVES FOLLOWING MEANINGS OF THE TERM DEVELOPER AS : 1. ONE WHO OR THAT WHICH DEVELOPS; 2. A PERSON WHO INVESTS IN AND DEVELOPS THE URBAN OR SUBURBAN POTENTIALITIES OF REAL ESTATE. ( B ) OXFORD ADVANCED LEARNERS DICTIONARY OF CURRENT ENGL ISH FOURTH INDIAN EDITION GIVES MEANING OF THE TERM DEVELOPER AS PE RSON OR COMPANY THAT DEVELOPS LAND. ( C ) RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE THE FOLLOWING DEFINITIONS CAN BE FOUND : DEVELOP : ( A ) TO BRING OUT THE CAPABILITIES OR POSSIBILITIES OF; BRING TO A MORE ADVANCED OR EFFECTIVE STATE. ( B ) TO CAUSE TO GROW OR EXPAND. DEVELOPER : ( A ) THE ACT OR PROCESS OF DEVELOPING; PROGRESS. ITA NO.161/AHD/2008 ASST. YEAR2003-04 12 ( B ) SYNONYM: EXPANSION ELABORATION GROWTH EVOLUTION UNFOLDING MATURING MATURATION. ( D ) WEBSTER DICTIONARY THE FOLLOWING DEFINITIONS EMERGE : ( A ) TO REALIZE THE POTENTIAL OF; (B) TO AID IN THE GROWTH OF : STRENGTHEN DEVELOP THE BICEPS (C) TO BRING INTO BEING : MAKE ACTIVE (DEVELOP A B USINESS) (D) TO CONVERT ( A TRACT OF LAND ) FOR SPECIFIC PU RPOSE AS BY BUILDING EXTENSIVELY ( E ) LAW LEXICON DICTIONARY THE FOLLOWING DEFINITIONS COULD BE SEEN : DEVELOPMENT ( A ) TO ACT PROCESS OR RESULT OF DEVELOPMENT OR GROWING OR CAUSING TO GROW; THE STATE OF BEING DEVELOPED. (B) HAPPENING. 31. THE SUPREME COURT IN THE CASE OF GUJARAT INDUST RIAL DEVELOPMENT (SUPRA) CONSIDERING THE MEANING OF DEVELOPER HELD THAT TH E WORD DEVELOPMENT APPEARING IN THE PROVISIONS SHOULD BE UNDERSTOOD IN ITS WIDER SENSE AND THEREFORE GRANTED EXEMPTION EVEN THOUGH THE GUJARAT INDUSTRIAL DEVELO PMENT CORPORATION WAS ENGAGED IN THE INDUSTRIAL DEVELOPMENT. THE DEVELOPMENT MEAN S THE REALIZATION OF POTENTIALITIES OF LAND OR TERRITORY BY BUILDING OR MINING. ACCORDI NGLY IT CAN BE SAFELY SAID THAT A PERSON WHO UNDERTAKES TO DEVELOP REAL ESTATE BY DEV ELOPING AND CONSTRUCTING A HOUSING PROJECT IS AN ELIGIBLE UNDERTAKING; DEVELOP ING AND BUILDING OF HOUSING PROJECTS WITHIN THE MEANING OF SECTION 80-IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND THE LANDOWNER HAS NOT MADE ANY CONSCIOUS ATTE MPT TO DEVELOP THE PROPERTY EXCEPT ENSURING THEIR RIGHTS AS LANDOWNER SO THAT T HE SALE VALUE OF THE LAND COULD BE REALIZED TO THEM AS PER THE TERMS OF AGREEMENT TO SALE AND THE DEVELOPMENT AGREEMENT. THE LANDOWNERS NO DOUBT HAVE NOT THRO WN THEMSELVES INTO DEVELOPMENT OF PROPERTY. IT IS ONLY THE ASSESSEE WH O IS DEVELOPING THE PROPERTY. THROWING ITSELF INTO THE BUSINESS OF DEVELOPMENT AN D BUILDING OF HOUSING PROJECTS BY TAKING ALL RISKS ASSOCIATED WITH THE BUSINESS BY EN GAGING ARCHITECTS STRUCTURAL CONSULTANTS DESIGNING AND PLANNING OF THE HOUSING SCHEMES PAYMENT OF DEVELOPMENT CHARGES OBTAINING NECESSARY PERMISSIONS APPROVING PLANS HIRING MACHINERY AND EQUIPMENTS HIRING ENGINEERS APPOINTING CONTRACTOR S ETC. NO DOUBT THE PERMISSION HAS BEEN OBTAINED IN THE NAME OF THE REGISTERED LAN DOWNERS BUT THE SAME HAVE BEEN OBTAINED BY THE ASSESSEE-FIRM THROUGH ITS PARTNERS WHO ARE HOLDING POWER OF ATTORNEY OF THE RESPECTIVE LANDOWNERS. IT IS A FACT THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS BUT DEVELOPER IS W ORKING FOR HIMSELF IN ORDER TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN IN TEREST AND THEREFORE OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVE LOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS. AS PER THE PROVISIONS OF SECTION 2(1)(G) OF REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVI CE ACT (27 OF 1996) THE TERM CONTRACTOR MEANS A PERSON WHO UNDERTAKES TO PRODU CE A GIVEN RESULT FOR ANY ESTABLISHMENT OTHER THAN A MERE SUPPLY OF GOODS OR ARTICLES OF MANUFACTURE BY THE EMPLOYMENT OF BUILDING WORKERS OR WHO SUPPLIES BUIL DING WORKERS FOR ANY WORK OF THE ESTABLISHMENT; AND INCLUDES A SUB-CONTRACTOR. ITA NO.161/AHD/2008 ASST. YEAR2003-04 13 32. IN THESE CIRCUMSTANCES IN OUR OPINION THE AS SESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80-IB(10) AS IT HAD DEVELOPED AND BUILT THE HOUSING PROJECT; IT HAD STARTED CONSTRUCTION AFTER 1-4-1998; THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND THE MAXIMUM BUILT-UP A REA OF THE RESIDENTIAL UNITS IS NOT MORE THAN 1 500 SQ. FT. THE PROPERTY BEING SITU ATED IN BARODA A CITY OTHER THAN DELHI AND MUMBAI. 33. IT MAY ALSO BE BORN IN MIND THAT DEDUCTION IS N OT EXCLUSIVELY TO AN ASSESSEE BUT TO AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJ ECT BE IT DEVELOPED AS A CONTRACTOR OR AS AN OWNER. THIS FACT IS EVIDENT ON THE BARE READING OF SUB-SECTION (1) OF SECTION 80-IB SUB-SECTION (2) OF SECTION 80-IB WHICH PROVIDES THAT THIS SECTION APPLIES TO AN INDUSTRIAL UNDERTAKING WHICH FULFILS ALL THE FOLLOWING CONDITIONS VIZ. . . . AND SUB-SECTION (12) WHICH ALLOWS THE DEDUCTION TO THE AMENDED (SIC) OR RESULTING COMPANY IN CASE OF AMALGAMATION OR DEMERGER OF THE ORIGINAL UNDERTAKING WHICH HAD STARTED DEVELOPING AND BUILDING THE HOUSING PROJECT . FOR THE SAKE OF CONVENIENCE SUB-SECTION (12) OF SECTION 80-IB IS REPRODUCED HER EUNDER : (12) WHERE ANY UNDERTAKING OF AN INDIAN COMPANY WH ICH IS ENTITLED TO THE DEDUCTION UNDER THIS SECTION IS TRANSFERRED BEFORE THE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION TO ANOTHER INDIAN COMPAN Y IN A SCHEME OF AMALGAMATION OR DEMERGER. (A) NO DEDUCTION SHALL BE ADMISSIBLE UNDER THIS SE CTION TO THE AMALGAMATING OR THE DEMERGED COMPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKES PLACE; AND (B ) THE PROVISIONS OF THIS SECTION SHALL AS FAR AS MAY BE APPLY TO THE AMALGAMATED OR THE RESULTING COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR THE DEMERGED COMPANY IF THE AMALGAM ATION OR DEMERGER HAD NOT TAKEN PLACE. 34. EVEN IF THAT IS SO REQUIRED THE ASSESSEE IN TH E PRESENT CASE CAN ALSO BE SAID TO BE THE OWNER OF THE LAND AS IT HAD MADE PART PAYMENT TO THE LANDOWNERS DURING THE FINANCIAL YEAR S 2000-01 AND 2001-02 FOR AN AMOUNT OF RS.56 LAKHS AND TAKEN THE POSSESSION OF THE LAND FOR DEVELOPMENT AND BUILDING THE HOUSING P ROJECT AND SATISFY THAT CONDITION AS WELL OF BEING THE OWNER O F THE LAND IN VIEW OF PROVISIONS OF SECTION 2(47)(V) OF THE ACT. WHEN THE ASSESSEE HAS TAKEN ON THE POSSESSION OF IMMOVABLE PROPERTY OR RE TAINED IT IN PART PERFORMANCE OF A CONTRACT OF A NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 IT AMOUNT S TO TRANSFER UNDER SECTION 2(47)(V) WHICH READS AS UNDER : (47) TRANSFER IN RELATION TO A CAPITAL ASSET I NCLUDES (I)TO (IVA)** ** ** ITA NO.161/AHD/2008 ASST. YEAR2003-04 14 (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 (4 OF 1882); OR 35. SECTION 53A OF THE TRANSFER OF PROPERTY ACT 18 82 REFERRED TO IN THE AFORESAID SECTION OF THE INCOME-TAX ACT READS AS U NDER : 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CO NSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON H IS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFE R 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 P ART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE O F THE CONTRACT AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT THEN NOTWITHSTANDING THAT THE CONTRACT THOUGH REQU IRED TO BE REGISTERED HAS NOT BEEN REGISTERED OR WHERE THE RE IS AN INSTRUMENT OF TRANSFER THAT THE TRANSFER HAS NOT BEEN COMPLET ED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING I N FORCE THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL B E DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMI NG UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANS FEREE HAS TAKEN OR CONTINUED IN POSSESSION OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE CONTRACT : PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OR A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. ITA NO.161/AHD/2008 ASST. YEAR2003-04 15 36. IN VIEW OF ABOVE PROVISIONS OF THE TRANSFER OF PROPERTY ACT VIS-A-VIS THE INCOME- TAX ACT TO GET THE CORRECT IMPORT OF SECTION 80-IB( 10) OF THE ACT WE HAVE TO READ ALONG WITH SECTION 80-IB(1) OF THE ACT WHICH ALSO DOES NO T PROVIDE FOR ANY CONDITION THAT THE ASSESSEE SHOULD BE OWNER OF THE LAND. THE RELEVANT PROVISIONS OF SUB-SECTION (1) OF SECTION 80-IB READ AS UNDER : 80-IB. DEDUCTION IN RESPECT OF PROFITS AND GAINS F ROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS.(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO (11) AN D (11A) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION BE A LLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUCTION FROM SUCH PROFI TS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASS ESSMENT YEARS AS SPECIFIED IN THIS SECTION. 19. FURTHER WHO SHOULD BE DEVELOPER HAS BEEN DISCUS SED BY HON. SUPREME COURT IN GUJARAT INDUSTRIAL DEVELOPMENT COR PORATION VS. CIT (1997) 229 ITR 414 (SC) WHERE IN PARA 7 THEREOF THE ISSUE HAS BEEN DISCUSSED. THE TRIBUNAL IN RADHE DEVELOPERS CASE H AS REFERRED TO THAT JUDGMENT AND HAS OBSERVED AS UNDER :- 31. THE SUPREME COURT IN THE CASE OF GUJARAT INDUS TRIAL DEVELOPMENT (SUPRA) CONSIDERING THE MEANING OF DE VELOPER HELD THAT THE WORD DEVELOPMENT APPEARING IN THE PROVIS IONS SHOULD BE UNDERSTOOD IN ITS WIDER SENSE AND THEREFORE GRANT ED EXEMPTION EVEN THOUGH THE GUJARAT INDUSTRIAL DEVELOPMENT CORP ORATION WAS ENGAGED IN THE INDUSTRIAL DEVELOPMENT. THE DEVELOPM ENT MEANS THE REALIZATION OF POTENTIALITIES OF LAND OR TERRITORY BY BUILDING OR MINING. ACCORDINGLY IT CAN BE SAFELY SAID THAT A P ERSON WHO UNDERTAKES TO DEVELOP REAL ESTATE BY DEVELOPING AND CONSTRUCTING A HOUSING PROJECT IS AN ELIGIBLE UNDERTAKING; DEVELOP ING AND BUILDING OF HOUSING PROJECTS WITHIN THE MEANING OF SECTION 80- IB(10) OF THE ACT. IN THE PRESENT CASE IN HAND THE LANDOWNER HAS NOT MADE ANY CONSCIOUS ATTEMPT TO DEVELOP THE PROPE RTY EXCEPT ENSURING THEIR RIGHTS AS LANDOWNER SO THAT THE SALE VALUE OF THE ITA NO.161/AHD/2008 ASST. YEAR2003-04 16 LAND COULD BE REALIZED TO THEM AS PER THE TERMS OF AGREEMENT TO SALE AND THE DEVELOPMENT AGREEMENT. THE LANDOWNE RS NO DOUBT HAVE NOT THROWN THEMSELVES INTO DEVELOPMENT OF PROPERTY. IT IS ONLY THE ASSESSEE WHO IS DEVELOPING THE PROPE RTY. THROWING ITSELF INTO THE BUSINESS OF DEVELOPMENT AND BUILDIN G OF HOUSING PROJECTS BY TAKING ALL RISKS ASSOCIATED WITH THE BU SINESS BY ENGAGING ARCHITECTS STRUCTURAL CONSULTANTS DESIGN ING AND PLANNING OF THE HOUSING SCHEMES PAYMENT OF DEVELOP MENT CHARGES OBTAINING NECESSARY PERMISSIONS APPROVING PLANS H IRING MACHINERY AND EQUIPMENTS HIRING ENGINEERS APPOINT ING CONTRACTORS ETC. NO DOUBT THE PERMISSION HAS BEEN OBTAINED IN THE NAME OF THE REGISTERED LANDOWNERS BUT THE SAME HAV E BEEN OBTAINED BY THE ASSESSEE-FIRM THROUGH ITS PARTNERS WHO ARE HOLDING POWER OF ATTORNEY OF THE RESPECTIVE LANDOWNERS. IT IS A FACT THAT THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR AS HELD BY THE LOWER AUTHORITIES. THE DEVELOPER IS NOT WORKING ON REMUNERATION FOR THE LANDOWNERS BUT DEVELOPER IS WORKING FOR HI MSELF IN ORDER TO EXPLOIT THE POTENTIAL OF ITS BUSINESS IN HIS OWN IN TEREST AND THEREFORE OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF DEVELOPMENT OF REAL ESTATE INCLUDING DEVELOPING AND BUILDING OF HOUSING PROJECTS. AS PER THE PROVISIONS OF SECTION 2(1)(G) OF REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVICE ACT (27 OF 1996) THE TERM CONTRACTOR MEANS A PERSON WHO UND ERTAKES TO PRODUCE A GIVEN RESULT FOR ANY ESTABLISHMENT OTHER THAN A MERE SUPPLY OF GOODS OR ARTICLES OF MANUFACTURE BY THE EMPLOYMENT OF BUILDING WORKERS OR WHO SUPPLIES BUILDING WORKERS F OR ANY WORK OF THE ESTABLISHMENT; AND INCLUDES A SUB-CONTRACTOR. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE T RIBUNAL WE TREAT THESE GROUNDS AS REJECTED. AS A RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25/3/11. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 25/3/11. MAHATA/- ITA NO.161/AHD/2008 ASST. YEAR2003-04 17 ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (DCA) (B.S.) AM JM COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 15/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 18/3/ 2011 MEMBER.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 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 .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..