The ITO, Ward-1,, Bharuch v. M/s. Vedant Enterprise,, Bharuch

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' (BEFORE S/SHRI BHAVNESH SAINI JUDICIAL MEMBER AND A.N. PAHUJA ACCOUNTANT MEMBER) ITA NO.3696/AHD/2007 ASSESSMENT YEAR :2004-05 DATE OF HEARING: 24.12.08 DRAFTED:24.12 .08 INCOME-TAX OFFICER WARD-1 BANK OF BARODA BUILDING STATION ROAD BHARUCH V/S . M/S. VEDANT ENTERPISE BHAMWALAS GHEE KUDIA OPPOSITE PATEL SQUARE MARKET BHARUCH [PAN :.AAEFV7057Q] (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- NONE REVENUE BY:- SHRI C.K.MISHRA DR O R D E R A.N. PAHUJA :THIS APPEAL BY THE REVENUE DIRECTED AGAINST AN ORDER DATED 31-7- 2007 OF THE LD. CIT(A)-VI BARODA RAISES GROUN D NOS.1 TO 6 RELATING TO DEDUCTION OF RS. 31 80 225/- U/S 80IB(10) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] . 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING NIL INCOME FILED BY THE ASSESSEE ON 26-10-2004 WAS PROCESSED U/S.143(1) OF THE ACT ON 3.1.2005. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY WITH THE ISSUE O F NOTICE U/S 143(2) OF THE ACT ON 9.3.2005. THE ASSESSEE FIRM IS STATED TO BE IN THE BUSINESS O F LAND DEVELOPMENT & CONSTRUCTION OF HOUSING PROJECT. FOR THE ASSESSMENT YEAR UNDER CONS IDERATION THE ASSESSEE CLAIMED DEDUCTION OF RS.31 80 225/- U/S. 80IB(10) OF THE A CT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NO TICED THAT THE THE ASSESSEE ENTERED IN TO A DEVELOPMENT AGREEMENT WITH THE PARTNERS OF TH E FIRM SHRI YUNUS UMARJI MUSA PATEL SHRI IBRAHIM UMARJI MUSA PATEL & SHRI ABDUL H AMID UMARJI MUSA PATEL WHO WERE THE OWNERS OF THE LAND. THESE THREE PARTNERS HAD BR OUGHT THE LAND IN TO THE FIRM BY WAY OF CAPITAL CONTRIBUTION. ACCORDING TO THE AO THE ASSE SSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT AS THE APPROVAL OF THE SARP ANCH UMRAJ GRAM PANCHAYAT DISTRICT BHARUCH FOR DEVELOPMENT OF THE HOUSING PROJECT GRA NTED ON 28.11.2003 WAS IN THE NAME OF ITA NO.3696/AHD/2007 PAGE 2 OWNERS OF THE LAND. APPARENTLY THE LAND ON WHICH H OUSING PROJECT WAS CONSTRUCTED WAS NOT OWNED BY THE ASSESSEE. ACCORDING TO THE AO THE ASS ESSEE COULD NOT BE REGARDED AS A BUILDER AND DEVELOPER WITHIN THE MEANING OF PROVISI ONS OF SEC. 80(IB)(10) OF THE ACT. ON PERUSAL OF COPY OF THE APPROVED PLAN THE AO NOTICE D THAT THE TOTAL PERMISSIBLE FSI AVAILABLE WAS 18054SQ. METRES IN RESPECT OF PLOT OF 15 045 SQ .METRES WHILE THE ASSESSEE UTILIZED FSI OF 6332.42SQ. METRES LEAVING REMAINING FSI UNUTILI ZED. THE UNUTILIZED FSI WAS DISPOSED OF BY THE ASSESSEE ALONG WITH TENEMENTS TO THE PROSPEC TIVE BUYERS AND THUS THE ASSESSEE EARNED PROFIT IN ADDITION TO PROFIT DERIVED FROM T HE BUSINESS OF CONSTRUCTION AND DEVELOPMENT. SINCE THE ASSESSEE WAS NOT OWNER OF T HE LAND NOR APPROVAL OF THE COMPETENT AUTHORITY WAS IN THE NAME OF THE ASSESSEE AND THE ASSESSEE HAD NOT UNDERTAKEN THE COMPLETION OF PROJECT IN ITS ENTIRET Y WHILE PROFIT ON SALE OF UNUTILIZED FSI DID NOT COME WITHIN THE PURVIEW OF SEC. 80IB(10) OF THE ACT THE AO THE DISALLOWED THE CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT . 3. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM FOR DEDUCTION U/S 80IB(10) OF THE ACT FOLLOWING THE DECISION DATED 29.6.2007 OF THE ITAT IN THE CASE OF RADHE DVELOPERS & OTHERS IN ITA NO. 2482/AHD./2006. 4. THE REVENUE IS NOW IN APPEAL BEFORE US. THE LD. DR RELIED UPON THE ORDER OF THE AO WHILE NONE APPEARED ON BEHALF OF THE ASSESSEE DESPI TE SERVICE OF NOTICE OF HEARING . THE LD. DR SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR RE-EXAMINATION IN THE LIGHT OF DECISIONS OF THE ITAT IN CASE OF M/S S HAKTI CORPORATION & OTHERS IN ITA NOS. 1503 /AHD./2008 AND M/S RADHE DEVELOPERS & OTHERS IN ITA NO. 2482/AHD/2006. IN THEIR WRITTEN SUBMISSIONS FILED ON 24.5.2010 IT HAS BEEN CONTENDED ON BEHALF OF THE ASSESSEE THAT IT WAS NOT NECESSARY FOR THE ASSESSEE TO OW N THE LAND FOR CLAIMING DEDUCTION U/S 80IB(10) OF THE ACT NOR IT WAS MANDATORY TO UTILIZE THE PERMISSIBLE FSI FULLY. WHILE REFERRING TO DECISION OF THE ITAT IN RADHE DEVELOPERS(SUPRA) AND IN THEIR OWN CASE FOR THE SUBSEQUENT AY 2005-06 THE ASSESSEE SUBMITTED THAT APPEAL OF THE REVENUE MAY BE DISMISSED. 5. WE HAVE HEARD THE LD. DR AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED IN A DECISION DATED 7 .11.2008 OF THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NOS. 1503 /AHD./ 2008 WHEREIN AFTER ANALYZING THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF FAKI RCHAND GULATI VS. UPPAL AGENCY PVT. ITA NO.3696/AHD/2007 PAGE 3 LTD. IN CIVIL APPEAL NO. 3302/2005 AND DECISION OF THE ITAT AHMEDABAD BENCH IN ITA NO. 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 DEVELOPERS (SUPRA) AND A CCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE HAS ACQUIRED THE DOMINANT OV ER THE LAND AND HAS DEVELOPED THE HOUSING PROJECT BY INCURRING ALL THE EXPENSES AND TAKING ALL THE RISKS INVOLVED THEREIN. WE MAY MENTION HERE THA T IN OUR OPINION THE DECISION IN THE CASE OF RADHE DEVELOPERS (SUPRA) WI LL NOT APPLY IN A CASE WHERE THE ASSESSEE HAS ENTERED INTO THE AGREEMENT F OR A FIXED REMUNERATION MERELY AS A CONTRACTOR TO CONSTRUCT OR DEVELOP THE HOUSING PROJECT ON BEHALF OF THE LANDOWNER. THE AGREEMENT ENTERED INTO IN THA T CASE WILL NOT ENTITLE THE DEVELOPER TO HAVE THE DOMINANT CONTROL OVER THE PRO JECT AND ALL THE RISKS INVOLVED THEREIN WILL VEST WITH THE LANDOWNER ONLY. THE INTEREST OF THE DEVELOPER WILL BE RESTRICTED ONLY FOR THE FIXED REM UNERATION FOR WHICH HE WOULD BE RENDERING THE SERVICES. THE DECISION IN TH E CASE OF RADHE DEVELOPERS (SUPRA) HAS NOT DEALT WITH SUCH SITUATIO N. THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RADHE DEVELOPERS CANNOT BE APPLIED UNIVERSALLY WITHOUT LOOKING INTO THE DEVELOPMENT AGREEMENT ENTE RED INTO BY THE DEVELOPER ALONG WITH THE LANDOWNER. IN THE CASE OF SHAKTI CORPORATION SINCE THE ASSESSEE HAS FILED COPY OF THE DEVELOPMENT AGRE EMENT AND CRUX OF THE AGREEMENT IS THAT THE ASSESSEE HAS PURCHASED THE LA ND AND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN THEREFORE WE ARE O F THE VIEW THAT THE ASSESSEE WILL BE ENTITLED FOR THE DEDUCTION U/S 80I B(10). THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF FAQIR CHAND GU LATI (SUPRA) WILL NOT ASSIST THE REVENUE AS THE AGREEMENT IS NOT FOR SHA RING OF THE CONSTRUCTED AREA. IN OTHER CASES THE COPY OF AGREEMENT SINCE HA S NOT BEEN SUBMITTED BEFORE US IF SUBMITTED THE TERMS AND CONDITIONS OF THE AGREEMENT WERE NOT SPECIFICALLY ARGUED BEFORE AND PLACED BEFORE US WE THEREFORE IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET AS IDE THE ORDER OF THE CIT(A) AND RESTORE ALL OTHER APPEALS TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL LOOK INTO THE AGREEMENT ENTERED INTO BY EA CH OF THE ASSESSEES WITH THE LANDOWNER AND DECIDE WHETHER THE ASSESSEE HAS I N FACT PURCHASED THE LAND FOR A FIXED CONSIDERATION FROM THE LANDOWNER A ND HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS INVOLVED IN THE PROJECT. IN CASE THE AO FINDS THAT PRACTICALLY THE LAND HAS BEEN BOUGHT BY THE DEVELOPER AND DEVELOPER HAS ALL DOMINANT CONTROL OVER THE PROJECT AND HAS DEVELOPED THE LAND AT HIS OWN COST AND RISKS THE AO SHOULD ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10). IN CASE THE AO FINDS THAT TH E DEVELOPER HAS ACTED ON BEHALF OF THE LANDOWNER AND HAS GOT THE FIXED CONSI DERATION FROM THE LANDOWNER FOR THE DEVELOPMENT OF THE HOUSING PROJEC TS THE ASSESSEE SHOULD NOT BE ALLOWED DEDUCTION U/S 80IB(10). 6. IN THE LIGHT OF AFORESAID FINDINGS OF THE ITAT RENDERED AFTER CONSIDERING THE DECISION IN THE CASE OF RADHE DEVELOPERS(SUPRA) RELIANCE BY TH E ASSESSEE ON THE SAID DECISION OR DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY 2005-06 FOLLOWING THE DECISION ITA NO.3696/AHD/2007 PAGE 4 OF RADHE DEVELOPERS IS MISPLACED. SINCE A COPY OF T HE RELEVANT DEVELOPMENT AGREEMENT HAS NOT BEEN PLACED BEFORE US WHILE THE LD. DR SUB MITTED THAT THE MATTER NEEDS TO BE RECONSIDERED IN THE LIGHT OF AFORESAID DECISIONS O F THE ITAT IN THE CASE OF M/S SHAKTI CORPORATION & OTHERS IN ITA NOS. 1503 /AHD./2008 A ND M/S RADHE DEVELOPERS & OTHERS IN ITA NO. 2482/AHD/2006 IN THE INTEREST OF JUSTICE WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF TH E AO WITH THE DIRECTIONS TO ANALYSE THE RELEVANT DEVELOPMENT AGREEMENT ENTERED INTO BY THE UNDERTAKING OF THE ASSESSEE WITH THE LANDOWNERS IN THE LIGHT OF FACTS OBTAINING IN THE BOOKS OF ACCOUNTS MAINTAINED FOR THE SAID UNDERTAK ING BY THE ASSESSEE AND OTHER RELEVANT DOCUMENTS KEEPING IN VIEW THE AFOR ESAID DECISIONS OF THE ITAT AS ALSO AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND THEREAFTER DECIDE AS TO WHETHER THE UNDERTAKING OF THE ASSESSEE HAS DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND R ISKS INVOLVED IN THE PROJECT. IN THE EVENT THE AO FINDS THAT THE UNDER TAKING OF THE ASSESSEE HAS ALL THE DOMINANT CONTROL OVER THE PROJECT AND DEVEL OPED THE LAND AT ITS OWN COST AND RISKS THE AO SHOULD ALLOW THE DEDUCTION U /S 80IB(10)OF THE ACT IN ACCORDANCE WITH LAW. IN CASE THE AO FINDS THAT THE UNDERTAKING OF THE ASSESSEE HAS ACTED ON BEHALF OF THE LANDOWNER AND H AS GOT ONLY THE FIXED CONSIDERATION FROM THE LANDOWNER FOR THE DEVELOPMEN T OF THE HOUSING PROJECT THE ASSESSEE WOULD NOT BE ENTITLED TO ANY DEDUCTION U/S 80IB(10) OF THE ACT. WITH THESE DIRECTIONS GROUND NOS. 1 TO 6 IN THE A PPEAL ARE DISPOSED OF AS INDICATED HEREINBEFORE. 7. IN THE RESULT APPEAL IS ALLOWED BUT FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 25 TH MAY 2010 SD/- SD/- (BHAVNESH SAINI) (A.N.PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD DATED : 25 TH MAY 2010 COPY OF THE ORDER FORWARDED TO :- 1. INCOME-TAX OFFICER WARD-1 BANK OF BARODA BUIL DING STATION ROAD BHARUCH 2. THE ASSESSEE-RESPONDENT. 3. THE CIT(A)-VI BARODA ITA NO.3696/AHD/2007 PAGE 5 4. THE CIT CONCERNED . 5. THE DR A BENCHITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD