The ACIT, Central Circle-1(3),, Ahmedabad v. Shri Nagjibhai N.Shingala, Ahmedabad

ITA 2136/AHD/2011 | 2008-2009
Pronouncement Date: 25-10-2016 | Result: Dismissed

Appeal Details

RSA Number 213620514 RSA 2011
Assessee PAN AISPP9195P
Bench Ahmedabad
Appeal Number ITA 2136/AHD/2011
Duration Of Justice 5 year(s) 1 month(s) 26 day(s)
Appellant The ACIT, Central Circle-1(3),, Ahmedabad
Respondent Shri Nagjibhai N.Shingala, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 25-10-2016
Date Of Final Hearing 14-10-2016
Next Hearing Date 14-10-2016
Assessment Year 2008-2009
Appeal Filed On 29-08-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI JM & SHRI MANISH BORAD AM. ITA NO.2136/AHD/2011 WITH CO NO.215/AHD/2011 ASST. YEAR: 2008-09 ACIT CC-1(3) AHMEDABAD. VS. SHRI NAGJIBHAI N. SHINGALA PROP. OF PARTH CORPORATION 25 ANJAN PARK SOCIETY HIRAWADI ROAD SAIJPUR BOGHA AHMEDABAD. APPELLANT RESPONDENT PAN AISPP 9195P ITA NO.2164/AHD/2012 ASST. YEAR: 2008-09 SHRI NAGJIBHAI N. SHINGALA PROP. OF PARTH CORPORATION 25 ANJAN PARK SOCIETY HIRAWADI ROAD SAIJPUR BOGHA AHMEDABAD. VS. ACIT CC-1(3) AHMEDABAD. APPELLANT RESPONDENT AND ITA NO.1546/AHD/2012 ALONG WITH CO NO.164/AHD/2012 ASST. YEAR: 2009-10 ACIT CC-1(3) AHMEDABAD. VS. SHRI NAGJIBHAI N. SHINGALA PROP. OF PARTH CORPORATION 25 ANJAN PARK SOCIETY HIRAWADI ROAD SAIJPUR BOGHA AHMEDABAD. APPELLANT RESPONDENT ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 2 APPELLANT BY SHRI SUMIT KUMAR VARMA SR.DR RESPONDENT BY SHRI DHIREN SHAH AR DATE OF HEARING: 14/10/2016 DATE OF PRONOUNCEMENT: 25/10/2016 O R D E R PER MANISH BORAD ACCOUNTANT MEMBER . THESE APPEALS AND CROSS OBJECTIONS RELATE TO ASST. YEARS 2008-09 AND 2009-10. FOR ASST. YEAR 2008-09 THERE A RE CROSS APPEALS AND CROSS OBJECTION BY ASSESSEE AND FOR ASS T. YEAR 2009- 10 REVENUE IS IN APPEAL AND ASSESSEE HAS FILED THE CROSS OBJECTION. AS THESE APPEALS AND CROSS OBJECTIONS RELATE TO THE SAME ASSESSEE AND THE ISSUED INVOLVED ARE SIMILAR THEY HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. REVENUES APPEALS FOR ASST. YEARS 2008-09 AND 20 09-10 ARE ON COMMON GROUNDS AGAINST THE ORDER OF LD. CIT(A) A LLOWING CLAIM OF DEDUCTION U/S 80IB(10) OF THE I.T. ACT 1961 (IN SH ORT THE ACT) OF RS.38 18 500/- FOR ASST. YEAR 2008-09 AND RS.2 16 9 6 222/- FOR ASST. YEAR 2009-10 WHICH WERE DENIED BY ASSESSING OFFICE R. 3. ON THE OTHER HAND ASSESSEE HAS RAISED CROSS OBJE CTION AGAINST THE APPEAL OF REVENUE AND ALSO FILED CROSS APPEAL AGAINST THE ORDER OF LD. CIT(A). FOR ASST. YEAR 2008-09 FOR CON FIRMING THE ADDITION ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 3 OF RS.68 601/- TOWARDS EXPENDITURE INCURRED FOR EAR NING AGRICULTURAL INCOME. 4. FIRST WE WILL TAKE THE ISSUE REGARDING THE ALLOW ABILITY OF DEDUCTION U/S 80IB(10) OF THE ACT. WE WILL TAKE THE FACTS OF ASSESSMENT YEAR 2008-09 AS BASE FOR ADJUDICATING T HE APPEAL OF REVENUE. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL RUNNING A PROPRIETARY CONCERN IN THE NAM E OF PARTH CORPORATION ENGAGED IN THE BUSINESS OF BUILDING RE SIDENTIAL HOUSES. RETURN OF INCOME WAS FILED ON 29.9.2008 DECLARING T OTAL INCOME AT RS.NIL AFTER CLAIMING DEDUCTION OF RS.38 18 500/- U /S 80IB(10) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT FOLLOWED BY NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED AND SERVED. NECESSARY INFO RMATION AS DESIRED BY ASSESSING OFFICER WERE FURNISHED BY THE ASSESSEE FROM TIME TO TIME. WHILE EXAMINING THE CLAIM U/S 80IB(10 ) OF THE ACT ASSESSING OFFICER OBSERVED THAT THE LAND ON WHICH R ESIDENTIAL PROJECT HAS BEEN CONSTRUCTED AND DEDUCTION U/S 80IB(10) OF THE ACT HAS BEEN CLAIMED IS NOT IN THE NAME OF ASSESSEE. ASSESSING OFFICER WAS OF THE VIEW THAT OWNERSHIP OF THE LAND IS AN ESSENTIAL ELE MENT FOR DEVELOPING AND BUILDING HOUSING PROJECT. THE APPROVAL FOR THE PROJECT WAS GRANTED BY THE COMPETENT AUTHORITY IN THE NAME OF L AND OWNER ONLY. ASSESSING OFFICER TOOK A VIEW THAT THE ASSESSEE IS A MERE CONTRACTOR AND HAS ACTED ON BEHALF OF THE CO-OP. SOCIETY AND N OT AS A BUILDER OR DEVELOPER ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF TH E ACT. THE ASSESSING OFFICER ALSO WHILE EXAMINING THE AGRICULT URAL INCOME MADE ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 4 AN ADDITION OF DISALLOWANCE OF 25% TO THE AGRICULTU RAL INCOME IN ABSENCE OF SUPPORTING EVIDENCES. 5. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A). LD. CIT(A) ALLOWED THE CLAIM U/S 80IB(10) OF THE ACT BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF RA DHE DEVELOPERS VS. ITO IN ITA NO.2482/AHD/2006 AND IN THE CASE OF ITO VS. SHAKTI CORPORATION IN ITA NO.1503/AHD/2008 . HOWEVER LD. CIT(A) CONFIRMED THE ADDITION OF RS.68 601/-. 6. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 7. LD. DR VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF ASSESSING OFFICER. 8. ON THE OTHER HAND LD. AR SUBMITTED THAT THE ASSE SSEE HAS ACQUIRED THE LAND FOR DEVELOPING & BUILDING HOUSIN G PROJECT THROUGH SPECIAL PURPOSES VEHICLE (SVP) IN THE NAME OF PAN CHAMRUT CO-OP. HSG. SOC. LTD. THROUGH A BANAKHAT AND THE PAYMENT OF LAND WAS MADE BY ASSESSEES SOLE PROPRIETARY CONCERN. FURTHE R DEVELOPMENT AGREEMENT WAS ENTERED INTO BY ASSESSEE WITH THE SOC IETY FOR DEVELOPMENT OF THE HOUSING PROJECT. LD. AR FURTHER SUBMITTED THAT FOR THE PURPOSE OF DEVELOPMENT LAND WAS IN THE POSSESS ION OF ASSESSEE. ALL THE CONDITIONS OF SECTION 80IB(10) HAVE BEEN FU LFILLED. PERMISSION FOR DEVELOPMENT WAS OBTAINED BY ASSESSEE FROM AUDA INCLUDING INCURRING FEES. DEVELOPMENT WAS CARRIED OUT AT THE RESPONSIBILITY AND RISK OF THE ASSESSEE AND THERE IS NO INCOME BY WAY OF PERCENTAGE OF ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 5 COLLECTION AND RATHER IT WAS A PROFIT ON DEVELOPMEN T WORK. LD. AR FURTHER SUBMITTED THAT FLAT PRICE WAS COLLECTED BY ASSESSEE. DECISION ON SALE OF THE UNITS WAS TAKEN BY THE ASSESSEE. IN OTHER WORDS ASSESSEE WAS A DEEMED OWNER AND HAS ACTED IN THE CA PACITY OF A DEVELOPER AND THUS ELIGIBLE FOR DEDUCTION U/S 80IB( 10) OF THE ACT AND LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF DEDUCTI ON U/S 80IB(10) OF THE ACT. LD. AR FURTHER SUBMITTED THAT THE ISSUE IS NOW WELL SETTLED BY THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT IN T HE CIT VS. RADHE DEVELOPERS (2012) 341 ITR 403 CIT VS. VISHAL DEVEL OPERS IN TAX APPEAL NO.507 OF 2014 IN THE CASE OF ACIT VS. M/S S OMESHWAR DEVELOPERS IN ITA NO.1300 OF 2008. FURTHER HON. SUP REME COURT HAS DISMISSED THE SLP DATED 7/9/2012 FILED BY REVENUE AGAINST THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF A CIT VS. SOMESHWAR DEVELOPERS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY GRIEVANCE OF THE REVENUE IS AGA INST THE ORDER OF LD. CIT(A) ALLOWING DEDUCTION U/S 80IB(10) OF THE A CT AT RS.38 18 500/-. THE BASIC REASON DUE TO WHICH LD. A SSESSING OFFICER DENIED THE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80IB (10) OF THE ACT WAS THAT THE LAND ON WHICH THE RESIDENTIAL PROJECT WAS DEVELOPED BY ASSESSEE WAS NOT OWNED BY HIM AND ASSESSEE WAS A ME RE CONTRACTOR ON BEHALF OF THE SOCIETY. 10. WE FURTHER OBSERVE THAT LD. CIT(A) HAS ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT BY OBSER VING AS FOLLOWS :- ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 6 4.4 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE SUBMISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSESSING OFFICER. THE AO'S ARGUMENTS ARE MAINLY BASED ON TWO GROUNDS I.E. THE LAND WAS REGIS TERED IN THE E OF THE LANDLORD AND THAT THE PERMISSION FOR DEVELOPMENT WAS IN THE NAME OF LANDLORD..AS AGAINST THIS THE APPELLANT HAS CLARIFIED AND PROVE D THAT THE DEVELOPMENT WAS CARRIED OUT BY THEM. EVEN THE COST FOR OBTAINING PE RMISSION WAS BORNE BY THE APPELLANT. THE APPELLANT HAD ENTERED INTO BOTH THE AGREEMENTS FOR DEVELOPMENT AS ALSO BAHAKHAT FOR PURCHASE OF LAND W ITH THE SOCIETY AND AS PER THE AGREEMENT THEY HAVE CARRIED OUT THE DEVELOP MENT WORK. THUS APPELLANT IN PRESENT CASE HAS ACQUIRED DOMINA NT CONTROL OVER THE LAND AND AS PER BANAKHAT AGREEMENT ENTERED WITH SOCIETY; .DEVELOPER WAS BOUND TO PAY AMOUNT FOR ACQUIRING THE LAND IRRESPECTIVE O F THE FACT WHETHER IT IS ABLE TO SELL THE UNITS. POSSESSION OF THE LAND WAS ALSO GIVEN TO APPELLANT DEVELOPER AND RISKS ASSOCIATED WITH HOUSING PROJECT WERE BORN E BY APPELLANT. IT IS ADDED THAT THE APPELLANT HAS NOT EARNED REMUNERATION AT F IXED RATE. ON THE MAIN ISSUE OF OWNERSHIP OF. LAND AND APPROVAL BEING IN T HE NAME OF LANDOWNER FOR CLAIM OF DEDUCTION U/S. 80IB (10) IT IS SEEN THAT ALTHOUGH THE ISSUE WAS DECIDED IN FAVOR OF THE APPELLANT AND AGAINST REVEN UE BY : THE ORDER OF THE JURISDICTIONAL ITAT IN THE CASE OF RADHE DEVELOPER S VS ITO WARD 3(2) BARODA NO 2482/AHD/2006 A BENCH AHMEDABAD HOWEVE R THE DECISION WAS PARTLY MODIFIED BY THE SUBSEQUENT DECISION IN THE C ASE OF ITO VS M/S. SHAKTI. CORPORATION ITA NO. 1503/AHD/2008 DATED .07/11/2008 WHEREIN THE HON'BLE ITAT HAS INDICATED THAT THE BENEFIT UNDER 80IB(10) WOULD BE AVAILABLE IF THE DEVELOPER HAS DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT ITS OWN COST AND RISK AND THE BENEFIT WOULD BE DENIED IF THE ASSESSEE HAD ENTERED INTO .AN AGREEMENT FOR A FIXED REMUNERATION AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE PROJECT ON BEHALF OF THE L AND OWNER. FURTHER HON'BLE APEX COURT IN THE CASE OF FAQIR CHAND GULATI VS UPP AL AGENCIES PVT. LTD. & ANR. (CIVIL APPEAL NO. 3302 OF 2005) DATED 10/07/20 08 HAS HELD THAT I) A DEVELOPMENT AGREEMENT IS ONE WHERE THE LAN D HOLDER PROVIDES THE LAND. THE BUILDER PUTS UP A BUILDING. THEREAFTE R THE LAND OWNER AND BUILDER SHARE THE CONSTRUCTED AREA. THE BUILDER DEL IVERS THE OWNER'S SHARE TO THE LAND HOLDER AND RETAINS THE BUILDER'S SHARE. THE LAND HOLDER SELLS/TRANSFERS UNDIVIDED SHARE'/S IN THE LAND CORR ESPONDING TO THE BUILDER'S SHARE OF THE BUILDING TO THE BUILDER OR H IS NOMINEES. THE LAND HOLDER WILL HAVE NO SAY OR CONTROL IN THE CONSTRUCT ION OF HAVE ANY . SAY AS TO WHOM AND AT WHAT COST THE BUILDER'S SHARE-OF APARTMENTS ARE TO BE DEALT WITH OR DISPOSED OF. SUCH AN AGREEMENT IS NOT A 'JOINT VENTURE' IN THE LEGAL SENSE. IT IS A CONTRACT FOR S ERVICES.' II) ON THE OTHER HAND AN AGREEMENT BETWEEN THE O WNER OF A LAND AND A BUILDER FOR CONSTRUCTION OF APARTMENTS AND S ALE OF THOSE ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 7 APARTMENTS SO AS TO .SHARE THE PROFITS IN A PARTICU LAR RATIO MAY BE A JOINT VENTURE IF THE AGREEMENT DISCLOSES AN INTENT THAT BOTH PARTIES SHALL EXERCISE JOINT CONTROL OVER THE CONSTRUCTION/ DEVELOPMENT AND BE ACCOUNTABLE TO EACH OTHER FOR THEIR RESPECTIVE ACTS WITH REFERENCE TO THE PROJECT. 4.5. IT IS SEEN THAT THE ENTIRE RISK IS OF THE APPELLANT WHO IS DEVELOPING THE PROJECT AND THERE IS NO AGREEMENT FOR FIXED REMUNERATION AS A CONTRACTOR. IN THE INSTANT CASE THE APPELLANT HAS PURCHASED THE LAND FOR FIXE D CONSIDERATION AND HAS DEVELOPED THE HOUSING PROJECT ON ITS OWN COST AND T HERE IS NO JOINT VENTURE WITH THE LAND OWNER AND THUS IN TERMS OF DECISION IN THE CASE OF M/S. SHAKTI CORPORATION AND THE RATIO OF .THE DECISION OF ITAT AHMEDABAD IN THE CASE OF RADHE DEVELOPERS THE AO IS DIRECTED TO ALLOW DEDUCT ION U/S.80IB(10) TO THE AP PELLANT. GROUND NO.1 IS ALLOWED. 11. WE FURTHER OBSERVE THAT SIMILAR TYPE OF ISSUE W HEREIN ASSESSEE IS NOT THE OWNER OF LAND BUT HAS CARRIED OUT ALL TH E ACTIVITIES STARTING FROM GETTING APPROVAL ARRANGING NECESSARY FINANCE FOR THE DEVELOPMENT OF THE PROJECT ENTERING INTO DEVELOPME NT AGREEMENT WITH THE LAND OWNER TAKING OF DECISION FOR THE CON STRUCTION OF THE PROJECT SELLING OF VARIOUS UNITS OF THE DEVELOPED PROJECT COLLECTION OF MONEY WORKING ON THE BASIS OF PROFIT OF THE PROJEC T AND NOT MERELY ON A PERCENTAGE BASIS AND OVERALL HAVING A DOMINANT CO NTROL OF THE PROJECT WERE DENIED DEDUCTION U/S 80IB(10) OF THE ACT CAME UP BEFORE THE HON. JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. RADHE DEVELOPERS (SUPRA) ; WHEREIN THEIR LORDSHIPS HAVE DECIDED IN FAVOUR OF ASSESSEE AND ALLOWED DEDUCTION U/S 80IB(1 0) OF THE ACT IN SUCH SITUATION BY OBSERVING AS BELOW :- 39. WE MAY NOW MOVE ON TO THE QUESTION OF OWNERSHIP OF THE LAND. 40. RELEVANT PORTION OF SECTION 2(47) READS AS UNDE R:- 2(47): TRANSFER IN RELATION TO A CAPITAL ASSET INCLUDES - (V) ANY TRANSACTION INVOL VING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN P ART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT 1882(4 OF 1882); OR SECTION 53A OF THE TRANSFER OF PROPERTY ACT READS A S UNDER:- 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVAB LE PROPERTY BY WRITING SIGNED BY HIM ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 8 OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY AND THE TRAN SFEREE HAS IN PART PERFORMANCE OF THE CONTRACT TAKEN POSSESSION OF THE PROPERTY OR ANY P ART 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 OF THE CONTRACT AND T HE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT THEN N OTWITHSTANDING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER THAT THE TRANSFER HAS NOT B EEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE TH E TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF W HICH THE TRANSFEREE 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 SHA LL 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 P OSSESSION THEREOF AND HAD ALSO CARRIED OUT THE CONSTRUCTION WORK FOR DEVELOPMENT OF THE HO USING PROJECT. COMBINED READING OF SECTION 2(47)(V) AND SECTION 53A OF THE HC-NIC PAGE 37 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 38/42 JUDGMENT TRA NSFER OF PROPERTY ACT WOULD LEAD TO A SITUATION WHERE THE LAND WOULD BE F OR 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 A SSESSEE WOULD BE THE OWNER OF THE LAND FOR THE PURPOSE OF THE SAID ACT. IT IS TRUE TH AT THE TITLE IN THE LAND HAD NOT YET PASSED ON TO THE ASSESSEE. IT IS EQUALLY TRUE THAT SUCH TI TLE 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 T ITLE 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 LA ND IN QUESTION. AS HELD BY THE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. VS. COMMI SSIONER 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 DIFFEREN TLY 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 SIMIL AR TERMS AND CONDITIONS. IT IS TRUE THAT THERE HC-NIC PAGE 38 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 39/42 JUDGMENT WERE CERTAIN MINOR DI FFERENCES HOWEVER IN SO FAR AS ALL MATERIAL ASPECTS ARE CONCERNED WE SEE NO SI GNIFICANT 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 THEREF ROM WAS TO BE RECEIVED BY THE ASSESSEE. IT IS TRUE THAT THE AGREEMENT PROVIDED THAT THE ASS ESSEE 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 PROJE CT WAS BEING DEVELOPED BY HIM AT HIS ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 9 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 DIFFE RENT JUDGMENTS CITED BY THE REVENUE. THE DECISION IN CASE OF FAQIR CHAND GULATI VS. UPPA L AGENCIES PRIVATE LIMITED AND ANOTHER (SUPRA) WAS RENDERED IN THE BACKGROUND OF T HE 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 CONSTRU CT APARTMENT BUILDING ON THE LAND IN HC-NIC PAGE 39 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 40/42 JUDGMENT QUESTION. PART OF THE CONSTRUCTED AR EA WAS TO BE RETAINED BY THE OWNER OF THE LAND. IN CONSIDERATION OF THE LAND PRICE REM AINING AREA WAS FREE FOR THE BUILDER TO SELL. WHEN THE LAND OWNER FOUND SERIES OF DEFECTS I N THE CONSTRUCTION HE APPROACHED THE CONSUMER PROTECTION FORUM. IT WAS IN THIS BACKGROUN D THE APEX COURT WAS CONSIDERING WHETHER THE LAND OWNER CAN BE STATED TO BE A CONSUM ER 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 SEC TION 80IB(10) OF THE ACT. 44. IN THE CASE K. RAHEJA DEVELOPMENT CORPORATION V S. 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 A GREEMENT WITH THE LAND OWNER CAN BE STATED TO HAVE EXECUTED WORKS CONTRACT. SUCH INTERP RETATION WAS RENDERED IN THE BACKGROUND OF THE TERM 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 CON TRACT' INCLUDES ANY AGREEMENT FOR CARRYING OUT FOR CASH DEFERRED PAYMENT OR OTHER VA LUABLE CONSIDERATION HC-NIC PAGE 40 OF 42 CREATED ON TUE MAY 10 11:53:01 IST 2016 TAXAP /546/2008 41/42 JUDGMENT THE BUILDING CONSTRUCTION MANUFACTURE PROCESSING FABRICATION ERECTION INSTALLATION FITTING OUT IMPROVEMENT MODIFICATION REPAIR OR C OMMISSIONING OF ANY MOVABLE OR IMMOVABLE PROPERTY; IT IS THUS TO BE SEEN THAT UND ER THE KARNATAKA SALES TAX ACT THE DEFINITION OF THE WORDS WORKS CONTRACT IS VERY WI DE. 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 TH E 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 VALUA BLE CONSIDERATION. TO BE ALSO NOTED THAT THE DEFINITION DOES NOT LAY DOWN THAT THE CONSTRUCT ION 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 CO NSTRUCT FOR CASH DEFERRED PAYMENT OR VALUABLE CONSIDERATION A BUILDING OR FLATS ON BEHAL F OF ANYBODY ELSE IT WOULD BE A WORKS CONTRACT WITHIN THE MEANING OF THE TERM AS USED UND ER 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 DEFINITI ON AND INCLUDES NOT MERELY THE WORKS ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 10 CONTRACT AS NORMALLY UNDERSTOOD BUT IT IS A WIDE DE FINITION WHICH INCLUDES ANY AGREEMENT FOR CARRYING OUT BUILDING OR CONSTRUCTION ACTIVITY FOR CASH DEFERRED PAYMENT OR OTHER VALUABLE CONSIDERATION. THUS THE INTERPRETATION REN DERED BY THE APEX COURT IN THE SAID DECISION WAS BASED ON NOT THE NORMAL MEANING OF TER M WORKS CONTRACT BUT ON THE SPECIAL MEANING ASSIGNED TO IT UNDER THE ACT ITSELF WHICH PROVIDED FOR A DEFINITION OF THE INCLUSIVE NATURE. HC-NIC PAGE 41 OF 42 CREATED ON T UE MAY 10 11:53:01 IST 2016 TAXAP/546/2008 42/42 JUDGMENT 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 PASSE D ON TO THE ASSESSEES AND IN SOME CASES THE DEVELOPMENT PERMISSIONS MAY ALSO HAVE BE EN OBTAINED IN THE NAME OF THE ORIGINAL LAND OWNERS. 46. WE FIND THAT IT IS NOT EV EN THE CASE OF THE REVENUE THAT OTHER CONDITIONS OF SECTION 80IB OF THE ACT WERE NOT FULF ILLED. WE THEREFORE ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND DISPOSE OF ALL APPEALS ACCORDINGLY. 12. WE FURTHER OBSERVE THAT SIMILAR VIEW HAS BEEN T AKEN BY THE HON. JURISDICTIONAL HIGH COURT IN THE CASE OF CCIT VS. VISHAL DEVELOPERS (SUPRA) AND HON. SUPREME COURT IN THE CA SE OF ACIT VS. M/S SOMESHWAR DEVELOPERS (SUPRA). RESPECTFULLY FOLL OWING THE JUDGMENTS OF HON. JURISDICTIONAL HIGH COURT AND THA T OF HON. APEX COURT AND EXAMINING THE FACTS OF THE PRESENT CASE WE FIND THAT ASSESSEE HAS CLARIFIED AND PROVED THAT ALL NECESSAR Y DOCUMENTS AND DEVELOPMENT OF THE PROJECT WAS CARRIED OUT BY HIM. THE COST FOR OBTAINING PERMISSION WAS BORNE BY THE ASSESSEE. ASS ESSEE HAS ENTERED INTO BOTH THE AGREEMENTS VIZ. FOR PURCHASE OF LAND OF THE SOCIETY AND FOR CARRYING OUT THE DEVELOPMENT WORK. IN ALL ASSESSEE HAS ACQUIRED THE DOMINANT CONTROL OVER THE LAND. PO SSESSION OF THE LAND WAS TAKEN AND HOUSING PROJECT WAS DEVELOPED. A LL OTHER DECISION RELATING TO CONSTRUCTION ARCHITECTURAL WORKING FI NANCE RELATING ISSUES SELLING OF UNITS AND COLLECTION OF THE PRICE OF THE UNITS HAVE BEEN UNDERTAKEN BY THE ASSESSEE AND THE PROFIT/LOSS AS A RISEN FROM THE PROJECT BELONGING TO THE DEVELOPER I.E. THE ASSESSE E. WE ARE ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 11 THEREFORE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM U/S 80IB(10) OF THE ACT AND WE FIND NO REASON TO INTERF ERE WITH THE ORDER OF LD.CIT(A). WE UPHOLD THE SAME. ACCORDINGLY APPE AL OF THE REVENUE IS DISMISSED. 13. OTHER GROUNDS OF ITA NO.2136/AHD/2011 ARE OF GE NERAL IN NATURE WHICH NEED NO ADJUDICATION. 14. NOW WE TAKE UP ITA NO.1546/AHD/2012 FOR ASST. Y EAR 2009-10. WE FIND THAT ONLY ISSUE RAISED BY REVENUE FOR ASST. YEAR 2009-10 IS AGAINST ALLOWABILITY OF DEDUCTION U/S 80IB(10) OF T HE ACT BY LD. CIT(A) AT RS.2 16 96 222/-. AS WE HAVE ALREADY DECIDED FOR ASST. YEAR 2008- 09 VIDE ITA NO.2136/AHD/2011 THAT ASSESSEE HAS FULF ILLED ALL THE CONDITIONS FOR CLAIMING DEDUCTION U/S 80IB(10) OF T HE ACT WE ACCORDINGLY APPLY THE SAME DECISION FOR ASST. YEAR 2009-10 ALSO AND FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A) ALLOWING DEDUCTION U/S 80IB(10) OF THE ACT AT RS.2 16 96 222 /- AND UPHOLD THE SAME. ACCORDINGLY WE DISMISS THE GROUND RAISED BY T HE REVENUE. 15. OTHER GROUNDS OF THE APPEAL ARE OF GENERAL NATU RE WHICH NEED NO ADJUDICATION. 16. CROSS OBJECTIONS BY ASSESSEE FOR ASST. YEARS 20 08-09 AND 2009-10 BEARING NOS.215/AHD/2011 & 164/AHD/2012 RE SPECTIVELY AGAINST THE APPEALS OF REVENUE HAVE NOT BEEN PRESSE D AND HENCE THE SAME ARE DISMISSED AS NOT PRESSED. ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 12 17. NOW WE TAKE UP THE CROSS APPEAL BY ASSESSEE FOR ASST. YEAR 2008-09 WHEREIN THE GROUNDS RAISED ARE AS UNDER :- 1. THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN PARTLY ALLOWING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FUL LY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. I) ADDITION ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING AGRICULTURE INCOME - RS. 68.601/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 68 601/- ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING AGRICULTURE INCOME BY MAKING N OBSERVATION THAT IN THE ABSENCE OF SUPPORTING EVIDENCES BY THE APPELLANT THAT THE EXPE NDITURE WAS INDEED MUCH LESS THAN NORMALLY WARRANTED THE ESTIMATION O F 25% OF EXPENDITURE BY ASSESSING OFFICER AND THE ADDITION O F RS.68601/- IS THUS CONFIRMED. 2. THE APPELLANT RESERVES HIS RIGHT TO ADD AMEND ALTER OR MODIFY ANY OF THE GROUNDS STATED HEREINABVE EITHER BEFORE OR AT T HE TIME OF HEARING. 18. WE OBSERVE THAT LD. CIT(A) HAS CONFIRMED THE AD DITION BY OBSERVING AS UNDER :- I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE SU BMISSIONS OF THE APPELLANT AND PERUSED THE ARGUMENTS OF THE ASSESSING OFFICER. IT IS COMMON KNOWLEDGE THAT FOR EARNING AGRICULTURE INCOME EXPENDITURE SUC H AS ON SEEDS MANURE WATER TILLING LEVELING SOWING HARVESTING ETC. M UST HAVE BEEN INCURRED I AND SUCH EXPENDITURE ARE NORMALLY IN THE RANGE OF 25-30 %. IN THE ABSENCE OF SUPPORTING EVIDENCES BY THE APPELLANT THAT THE EXPE NDITURE WAS INDEED MUCH LESS THAN NORMALLY WARRANTED THE ESTIMATION OF 25% OF EXPENDITURE BY ASSESSING OFFICER IS REASONABLE AND THE ADDITION OF RS. 68601/- IS THUS CONFIRMED. GROUND NO.2 IS DISMISSED. 19. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. LD. AR COULD NOT SUBSTANTIATED THE GROUND WITH ANY MATERIA L EVIDENCE. WE ARE THEREFORE OF THE VIEW THAT ASSESSEE FAILED IN KEEPING PROPER BILLS AND SUPPORTING DOCUMENTS FOR THE EXPENDITURE INCURR ED FOR EARNING THE EXEMPT AGRICULTURAL INCOME SUCH AS BILL OF SEED S PESTICIDES ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 13 LABOUR CHARGES ETC. IN THE GIVEN FACTS OF THE CASE ASSESSEE HAS JUST MADE AN AD HOC EXPENDITURE OF RS.25 500/- WITHOUT S HOWING ANY SUPPORTING BEFORE THE LOWER AUTHORITIES. ACCORDINGL Y WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A ) TOWARDS MAKING ADDITION OF RS.68 601/- TO THE TOTAL INCOME BY TAKI NG 25% OF INCOME AN EXPENDITURE FOR EARNING AGRICULTURAL INCOME. THE REFORE WE UPHOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF ASSESSEE IS DISMISSED. 20. OTHER GROUNDS ARE OF GENERAL NATURE WHICH NEED NO ADJUDICATION. 21. IN THE RESULT THE APPEALS OF REVENUE AND THAT OF ASSESSEE ALONG WITH THE CROSS OBJECTIONS ALL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 25/10/2016 MAHATA/- ITA NO. 2136 2164/AHD/2011 & OTHERS ASST. YEAR 2008-09 & 2009-10 14 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 1. DATE OF DICTATION: 24/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 25/10/2016 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 TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:2 6/10/2016 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: