The ACIT, Central Circle-2(2),, Baroda v. M/s. Shree Narayan Enterprise, Baroda

ITA 2541/AHD/2012 | 2009-2010
Pronouncement Date: 06-10-2016 | Result: Dismissed

Appeal Details

RSA Number 254120514 RSA 2012
Assessee PAN AAPFS6878K
Bench Ahmedabad
Appeal Number ITA 2541/AHD/2012
Duration Of Justice 3 year(s) 10 month(s) 28 day(s)
Appellant The ACIT, Central Circle-2(2),, Baroda
Respondent M/s. Shree Narayan Enterprise, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 06-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 06-10-2016
Date Of Final Hearing 12-07-2016
Next Hearing Date 12-07-2016
Assessment Year 2009-2010
Appeal Filed On 08-11-2012
Judgment Text
I.T.A. NO. 2541/AHD/12 ASSESSMENT YEAR 2009 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO . 2541 /AHD/1 2 ASSESSMENT YEAR 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) BARODA .APPELLANT VS. SH REE NARAYAN ENTERPRISE . . RESPONDENT C 201 TIMES SQUARE BESIDES PETROL PUMP FATEHGANJ BARODA 390 002 [PAN: AAPFS6878K] APPEARANCES BY: SANJEEV KUMAR DEV FOR THE A PPELLANT NONE FOR THE RE SPONDEN T DATE OF CONCLUDING THE HEA RING : 12/07/2016 DATE OF PRONOUNCING THE ORDER : 06 /10/2016 O R D E R PER PRAMOD KUMAR AM : 1. BY WAY OF THIS APPEAL DIRECTED AGAINST THE ORDER DATED 14 TH AUGUST 2012 BY THE CIT(A) FOR THE ASSESSMENT YEAR 2009 - 10 THE ASSESSING OFFICE R HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING THE DEDUCTION OF RS 1 45 25 612 UNDER SECTION 80IB(10) OF THE INCOME TAX ACT 1961 WITHOUT APPRECIATING THAT THE LEGA L RELATIONSHIP BETWEEN THE ASSESSEE AND THE END USER OF THE UNITS WAS THAT OF WORKS CONTRACT . 2. TO ADJUDICATE ON THIS APPEAL ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE I.T.A. NO. 2541/AHD/12 ASSESSMENT YEAR 2009 - 10 PAGE 2 OF 5 ASSESSING OFFIC ER NOTED THAT WHILE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) AMOUNTING TO RS 1 45 25 612 THE ASSESSEE IS NOT OWNER OF THE LAND ON WHICH THE RESIDENTIAL UNITS ARE DEVELOPED AND THE APPROVAL BY THE MUNICIPAL AUTHORITIES IS ALSO NOT IN T HE NAME OF THE ASSESSEE. IT WAS ALSO NOTED THAT THE ASSESSEE HAS EXECUTED BANAKHET CUM DEVELOPMENT AGREEMENT WITH THE ACTUAL OWNERS OF THE LAND AND THE SALE DEEDS WERE DIRECTLY EXECUTED BY THESE LANDOWNERS IN THE FAVOUR OF END BUYERS. ON THESE FACTS THE DEDUCTION UNDER SECTION 80IB(10) WAS DECLINED. HOWEVER WHEN THE MATTER TRAVELLED IN APPEAL BEFORE THE CIT(A) LEARNED CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFICER AND HELD THAT THAT AS THE ASSESSEE HAS DOMINANT CONTROL OVER THE LAND AND THE LIMIT ED INTEREST OF THE LANDOWNER IS FIXED AGREED PRICE OF THE LAND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10). THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE BUT NONE APPEARED FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 4. WE FIND THAT THE ISSUE IN APPEAL IS DIRECTLY COVERED BY A COORDINATE BENCH DECISION IN THE CAS E OF SHRI UMEYA CORPORATION VS ITO (ITA NO. 21/AHD/ 2010; ORDER DATED 7 TH JULY 2015) WHICH HAS SUMMING UP THE LEGAL POSITION OBSERVED AS FOLLOWS: 6 . WE FIND THAT IN THE CASE OF CIT VS R ADHE DEVELOPERS [(2012) 341 ITR 403 (GUJ)] HON BLE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO CONSIDER THE ISSUE OF OWNERSHIP OF LAND ON WHICH HOUSING PROJECT IS DEVELOPED IN THE CONTEXT OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10). HON BLE JURISDICTIONAL HIGH COURT HAS IN THIS CONTEXT INTER ALIA OBSERVED AS FOLLOWS: 32. SEC. 80 - IB(10) OF THE ACT THUS PROVIDES FOR DEDUCTIONS TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS UNDER CERTAIN CIRCUMSTANCES NOTED ABOVE. IT DOES NOT PROVIDE THAT THE LAND MUST BE OWNED BY THE ASSESSEE SEEKING SUCH DEDUCTIONS. I.T.A. NO. 2541/AHD/12 ASSESSMENT YEAR 2009 - 10 PAGE 3 OF 5 33. IT IS WELL SETTLED THAT WHILE INTERPRETING THE STATUTE PARTICULARLY THE TAXING STATUTE NOTHING CAN BE READ INTO THE PROVISIONS WHICH HAS NOT BEEN PROVIDED BY THE LEGISLATURE. THE CONDITION WHICH IS NOT MADE PART O F S. 80 - IB(10) OF THE ACT NAMELY THAT OF OWNING THE LAND WHICH THE ASSESSEE DEVELOPS CANNOT BE SUPPLIED BY ANY PURPORTED LEGISLATIVE INTENT. 34. WE HAVE REPRODUCED RELEVANT TERMS OF DEVELOPMENT AGREEMENTS IN BOTH THE SETS OF CASES. IT CAN BE SEEN FROM THE TERMS AND CONDITIONS THAT THE ASSESSEE HAD TAKEN FULL RESPONSIBILITIES FOR EXECUTION OF THE DEVELOPMENT PROJECTS. UNDER THE AGREEMENTS THE ASSESSEE HAD FULL AUTHORITY TO DEVELOP THE LAND AS PER HIS DISCRETION. THE ASSESSEE COULD ENGAGE PROFESSIONAL HE LP FOR DESIGNING AND ARCHITECTURAL WORK. ASSESSEE WOULD ENROLL MEMBERS AND COLLECT CHARGES. PROFIT OR LOSS WHICH MAY RESULT FROM EXECUTION OF THE PROJECT BELONGED ENTIRELY TO THE ASSESSEE. IT CAN THUS BE SEEN THAT THE ASSESSEE HAD DEVELOPED THE HOUSING PRO JECT. THE FACT THAT THE ASSESSEE MAY NOT HAVE OWNED THE LAND WOULD BE OF NO CONSEQUENCE. 7. IN OUR HUMBLE UNDERSTANDING THEREFORE IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES AS A RESULT OF EXECUTION OF PROJECT AS SUCH BELONG PREDOMINANTLY TO THE ASSESSEE THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS ACCORDINGLY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREPRE NEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVELOPING AND BUILDING HOUSING PROJECTS BY BUYING ON OUTRIGHT BASIS AND CONSTRUCTING RESIDENTIAL UNITS THEREON COULD PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE O F ACTIVITY BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BECAUSE THE ASSESSE HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSING PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS A CTIVITY AS LONG AS THE RISKS AND RE WARDS OF DEVELOPING THE HOUSING PROJECT IN SUBSTANCE REMAIN WITH THE ASSESSE. IT IS DIFFICULT IF NOT ALTOGETHER IMPOSSIBLE TO VISUALIZE ALL THE BUSINESS MODELS THAT AN ASSESSE E MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS IN SUBSTANCE THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME BUT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY FOR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOPING AND BUILDING A I.T.A. NO. 2541/AHD/12 ASSESSMENT YEAR 2009 - 10 PAGE 4 OF 5 HOUSING PROJECT . THERE IS NO JUSTIFICATION CONCEPTUAL OR LEGAL IN RESTRICTING ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINESS MODEL THAT AN ENTREPRENEUR ADOPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HOUSING PROJECT. 8. AS REGARDS LEARNED CIT(A) S RELIANCE ON THE DECISION OF A LARGER BENCH OF THIS TRIBUNAL IN THE CASE OF B T PATIL & SONS (BELGAUM) CONSTRUCTIONS PVT LTD VS ACIT [(2010) 1 ITR (TRIBUNAL) 703 (MUM)] WHAT HAS BEEN REFERRED TO BY HER IS THE VIEW OF THE TH REE MEMBER BENCH RESOLVING THE POINT OF DIFFERENCE BETWEEN THE MEMBERS OF THE DIVISION BENCH. HOWEVER THIS VIEW WAS STILLBORN AND ITS RELEVANCE IS CONFINED TO ACADEMIC SIGNIFICANCE FOR THE REASON THAT THAT WHILE GIVING EFFECT TO THE MAJORITY VIEW VIDE ORDER DATED 28TH FEBRUARY 2013 AND ON SOMEWHAT PECULIAR FACT SITUATION IN THIS CASE THE FINAL ORDER OF THE TRIBUNAL DID NOT ENDORSE THESE VIEWS. QUITE TO THE CONTRARY FOLLOWING HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS ABG HEAVY INDUSTRIE S LTD AND ORS [(2010) 322 ITR 323 (BOM)] AND UPON BY TAKING INTO ACCOUNT HON BLE BOMBAY HIGH COURT S SPECIFIC DIRECTIONS IN THE CASE BEFORE THE TRIBUNAL THE TRIBUNAL S FINAL ORDER HAD IN TER ALIA CONCLUDED AS FOLLOW .WHILE GIVING EFFECT TO THE OPINIO N OF THIRD MEMBER U/S.255(4) OF THE ACT WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOV E DISCUSSION FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YE ARS. 9. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT ASSUME THE ENTREPRENEURSHIP RISKS OF THE HOUSING PROJECT. THE FORMAT OF ARRANGEMENTS FOR TRANSFER OF BUILT UP UNIT AND BUSINESS MODEL OF THE ASSESSEE FOR THAT PURPOSE IS NOT DECISIVE FACTOR FOR DETERMINING ELIGIBILITY OF DEDUCTION UNDER SECTION 80 IB (10) BUT THAT IS ALL THAT THE AUTHORITIES BELOW HAVE FOUND FAULT WITH. THE OBJECTIONS OF THE AUTHORITIES BELOW ARE THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. IN VIEW OF THE A BOVE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE AUTHORITIES BELOW IN DECLINING DEDUCTION UNDER SECTION 80IB (10) AND ON THE FACTS OF THIS CASE IS INCORRECT. WE VACATE THE SAME AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 5. WE HAVE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US AS EXTRACTED ABOVE. I.T.A. NO. 2541/AHD/12 ASSESSMENT YEAR 2009 - 10 PAGE 5 OF 5 6. RESPECTFULLY FOLLOWING THE AFORESAID DECISION WE HOLD THAT IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES AS A RESULT OF EXECUTION OF PROJECT AS SUCH BELONG PREDOMINANTLY TO THE ASSESSEE THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS ACCORDINGLY ELIGIBLE FOR DEDU CTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF SUCH AN ENTREPRENEURSHIP RISK IS NOT DEPE NDENT ON OWNERSHIP OF THE LAND AND IN THE PRESENT CASE IT IS NOT EVEN IN DISPUTE THAT ENTREPRENEURSHIP RISK WAS NOT ASSUMED BY THE ASSESSEE. AC CORDINGLY THE CIT(A) WAS JUSTIFIED IN GRANTING THE IMPUGNED RELIEF. WE UPHOLD HIS ACTION AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 6 TH DAY OF OCTOBER 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDI CIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 6 TH DAY OF OCTOBER 2016 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) ( 5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES AHMEDABAD