The ACIT, Central Circle-5,, Baroda v. M/s. Maha Developers,, Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI BHAVNESH SAINI JM & SHRI A N PAHUJA AM ITA NOS.2377 2378 & 2379/AHD/2009 (ASSESSMENT YEARS:-2003-04 2004-05 & 2005-06) ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE- 2 BARODA V/S M/S MAHA DEVELOPERS KRISHNA COMPOUND NEW KHANDERAO MARKET PRATAPNAGAR BARODA PAN: AADFM 9004 D [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI R K DHANESTA DR ASSESSEE BY:- SHRI MEHUL K PATEL AR O R D E R A N PAHUJA: THESE THREE APPEALS BY THE REVENUE DIRECTED AGAINS T THREE SEPARATE ORDERS DATED 4 TH FEBRUARY 2009 OF THE LD. CIT(APPEALS)-IV AHMEDABAD FOR THE ASSESSMENT YEAR S (AY) 2003- 04 2004-05 AND 2005-06 RAISE THE FOLLOWING SIMILA R GROUNDS:- (I) THE CIT(A) HAS ERRED IN LAW AND FACTS IN CIRCU MSTANCES OF THE CASE IN DELETING ADDITION OF RS.42 89 819/- IN THE AY 2 003-04 RS.8 10 000/- IN THE AY 2004-05 AND RS.21 27 700/- IN THEAY 2005- 06 ON ACCOUNT OF DEDUCTION U/S 80IB(10) OF THE ACT. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. (III) IT IS THEREFORE PRAYED THAT THE ORDER OF TH E LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE E XTENT. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS FOR THE AY 2003-04 ARE THAT A SEARCH U/S 132 OF THE OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] WAS CONDUCTED ON 24-01-20 05 IN THE CASE OF SHRI ASHWIN K PATEL GROUP INCLUDING THE ASSESSEE DEALING IN LAND DEVELOPMENT AND BUILDING CONSTRUCTION. CONSEQUENTLY A NOTICE DATED 23-03-2006 WAS ISSUED U/S 153A OF THE ACT. IN RESPONSE THE ASSESSEE FILED RETURN DECLARING INCOME RS.95 120/- ON 29-06-2006. INTER ALIA THE ASSESSEE CLAIMED DEDUCTION OF RS.42 89 819/- U/S ITA N OS. 2377 TO 2379/A/09 2 80IB(10) OF THE ACT IN RESPECT OF THEIR HOUSING PRO JECT VRAJ VIHAR. SINCE APPROVAL FOR HOUSING PROJECT WAS GRANTED BY T HE LOCAL AUTHORITY TO PERSONS OTHER THAN THE ASSESSEE AND THE LATTER W AS NOT THE OWNER OF THE LAND THE AO DISALLOWED THE CLAIM FOR DEDUCT ION U/S 80IB(10) OF THE ACT ON THE GROUND THAT APPROVAL OF THE .LOC AL AUTHORITY HAS TO BE OF THE PROJECT OF AN INDUSTRIAL UNDERTAKING OF THE ASSESSEE DERIVING INCOME FROM THE HOUSING PROJECT AND THAT D EDUCTION CAN NOT BE ALLOWED TO A PERSON WITH WHOM THE APPROVAL HOLDE R HAS MERELY ENTERED IN TO AN AGREEMENT FOR EXECUTION OF THE PRO JECT. 2.1 LIKEWISE IN THE ASSESSMENT YEARS 2004-05 AND 2005-06 THE AO DISALLOWED A SIMILAR CLAIM FOR DEDUCTION U/S 80 IB(10) OF THE ACT. 3. ON APPEAL THE LEARNED CIT(A) ALLOWED THE CL AIM OF THE ASSESSEE FOR THESE THREE ASSESSMENT YEARS RELYING INTER ALIA ON THE DECISION IN THE ITAT AHMEDABAD BENCH IN CASE O F RADHE DEVELOPERS V/S. ITO 113 TTJ 300 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET BOTH THE PARTIES AGREED THAT THE ISSUE IS REQUIRED TO BE RESTORED TO THE FI LE OF THE AO FOR RE- ADJUDICATION IN THE LIGHT OF THE DECISION DATED 07- 11-2008 OF THE ITAT IN THE CASE M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503/AHD/2008 . 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. AS CONTENDED BY BOTH THE PARTIES WE FIND THAT A SIMILAR ISSUE WAS CONSI DERED IN A DECISION DATED 7.11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI COR PORATION & OTHERS IN ITA NO. 1503 /AHD./2008 WHEREIN AFTER ANALYZING THE DECISI ONS OF HONBLE APEX COURT IN THE CASE OF FAKIRCHAND GULATI VS. UPPAL AGENCY PVT. LTD. IN CIVIL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. ITA N OS. 2377 TO 2379/A/09 3 2482/AHD/2006 IN THE CASE OF M/S RADHE DEVELOPERS & OTHERS THE BENCH CONCLUDED AS UNDER: 16 THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE SIMILAR TO THE FACTS IN THE CASE OF RADHE DEVELOPER S (SUPRA) AND ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HA S ACQUIRED THE DOMINANT OVER THE LAND AND HAS DEVELOPED THE HOUSIN G PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THAT IN OUR OPINION THE DECIS ION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WILL NOT APPLY IN A CAS E WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT FOR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED I NTO IN THAT CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PROJECT AND ALL THE RISKS INVOLVED THEREIN WILL VES T WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRIC TED ONLY FOR THE FIXED REMUNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA ) HAS NOT DEALT WITH SUCH SITUATION. THE PROPOSITION OF LAW LAID DO WN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITH OUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE DEVEL OPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SI NCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGREEMENT AND CRU X OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN THEREFORE WE ARE OF THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DED UCTION U/S 80IB(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GULATI (SUPRA) WILL NOT ASSIST THE REVE NUE AS THE AGREEMENT IS NOT FOR SHARING OF THE CONSTRUCTED ARE A. IN OTHER CASES THE COPY OF AGREEMENT SINCE HAS NOT BEEN SUBMITTED BEFORE US IF SUBMITTED THE TERMS AND CONDITIONS OF THE AGREEME NT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US WE THEREFORE IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS T O THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EACH OF THE ASSESSEES WITH THE LANDOWNER AN D DECIDE WHETHER THE ASSESSEE HAS IN FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE P ROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PRO JECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS THE A O SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT THE DEVELOPER HAS ACTED ON BEHALF OF THE LANDO WNER AND HAS GOT THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJECTS THE ASSESSEE SHOULD NOT BE AL LOWED DEDUCTION U/S 80IB(10). ITA N OS. 2377 TO 2379/A/09 4 5.1. SINCE BOTH THE PARTIES AGREED THAT THE MAT TER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISION OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NO. 1503 /AHD./2008 WHILE COPY OF D EVELOPMENT AGREEMENT IN THE INSTANT CASE IS NOT BEFORE US IN THE INTEREST OF FAIR PLAY & JUSTICE WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ANALYSE THE RELEVA NT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE A SSESSEE WITH THE LANDOWNER(S) IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAKING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS KEEPING IN VIEW THE AFORESAID DECISION OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER DECIDE AS TO WHETHER THE UNDERTAKIN G OF THE ASSESSEE HAS INDEED PURCHASED THE LAND FOR A FIXED CONSIDERA TION FROM THE LANDOWNER AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE LAND HAD BEEN PURCHASED BY THE UNDERTAKING OF THE ASSESSEE AND HAS ALL THE DOMINANT CONTROL OVER THE PROJECT AND D EVELOPED THE LAND AT THEIR OWN COST AND RISKS THE AO SHOULD ALLOW TH E DEDUCTION U/S 80IB(10)OF THE ACT IN ACCORDANCE WITH LAW. IN CAS E THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON B EHALF OF THE LANDOWNER(S) AND HAS GOT ONLY THE FIXED CONSIDERATI ON FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC T THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS GROUND NO. I IN THESE THREE APPEA LS IS DISPOSED OF AS INDICATED HEREINBEFORE. 6. GROUND NOS. II & III IN THESE THREE APPEALS B EING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION AN D ARE THEREFORE DISMISSED. ITA N OS. 2377 TO 2379/A/09 5 7. IN THE RESULT THESE THREE APPEALS ARE ALLOWED B UT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 24-02-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 24-02-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S MAHA DEVELOPERS KRISHNA COMPOUND NEW KHAND ERAO MARKET PRATAPNAGAR BARODA 2. ACIT CENTRAL CIRCLE-2 BARODA 3. CIT CONCERNED 4. CIT(A)-IV AHMEDABAD 5. DR ITAT AHMEDABAD BENCH-B AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD