The ACIT, 3(1), Indore v. M/s Sundaram Builders & Developers, Indore

ITA 86/IND/2013 | 2008-2009
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 8622714 RSA 2013
Assessee PAN REAOF1000S
Bench Indore
Appeal Number ITA 86/IND/2013
Duration Of Justice 2 year(s) 5 month(s) 24 day(s)
Appellant The ACIT, 3(1), Indore
Respondent M/s Sundaram Builders & Developers, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-07-2015
Assessment Year 2008-2009
Appeal Filed On 06-02-2013
Judgment Text
M/S SUNDARAM BUILDERS & DEVELOPERS 1 IN THE INCOME TAX APPELLATE TRIBUNA L INDORE BENCH INDORE BEFORE SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA HONBLE ACCOUNTANT MEMBER ITA NOS. 86 & 640/IND/2013 A.YS. 2008-09 & 2009-10 ACIT 3(1) INDORE ::: APPELLANT VS M/S SUNDARAM BUILDERS & DEVELOPERS INDORE ::: RESPONDENT APPELLANT BY SHRI ASHISH GOYAL AND SHRI N.D. PATWA RESPONDENT BY SHRI V.I.MEHTA DATE OF HEARING1 15.6.2015 DATE OF PRONOUNCEMENT 3 1 . 7.2015 O R D E R PER BENCH THESE APPEALS FILED BY THE REVENUE EMANATE FROM THE ORDERS OF THE LEARNED CIT(A)-I INDORE DATED12.1 1.2012 AND 19.8.2013. IN BOTH THESE APPEALS THE ONLY ISSUE R AISED M/S SUNDARAM BUILDERS & DEVELOPERS 2 BY THE REVENUE IS AGAINST TRADING OF THE ASSESSEE AS DEVELOPER. IN ITA NO. 86/IND/2013 THE GROUNDS OF AP PEAL ARE AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN FOLLOWING GROUNDS :- (I) THE LD. CIT(A)-I INDORE ERRED IN LAW AND FACT IN NOT APPRECIATING THE FACT THAT THE AGREEMENT BETWEEN SOCIETY MAHA SHAKTI GRAH NIRMAN SAHAKARI MARYADIT AND ASSESSEE CONFERRED STATUS OF CONTRACTOR TO THE ASSESSEE. (II) THE LD. CIT(A)-I INDORE ERRED IN LAW BY TREATING THE ASSESSEE AS A DEVELOPER HOWEVER ASSESSEE IS A CONTRACTOR AND DEDUCTION U/S 80IB(10) IS NOT APPLICABLE IN THIS CASE AS PER THE EXPLANATION OF SECTION 80IB(10) INSERTED BY THE FINANCE (NO. 2) ACT 2009 WHICH IS RETROSPECTIVE EFFECT FROM 1.4.2001 IS PRODUCED AS UNDER : M/S SUNDARAM BUILDERS & DEVELOPERS 3 FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORK CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). (III) THE LD. CIT(A)-I INDORE ERRED IN LAW AND FACT WHILE TREATING ASSESSEE AS BUILDER AND DEVELOPER WHILE ASSESSEE WAS NOT HAVING ANY REQUISITE APPROVAL. SIMILAR GROUNDS ARE TAKEN IN ITA NO. 640/IND/2013. 2. THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY TREATING THE ASSESSEE AS DEVELOPER IN PARAS 4.1.4. FOR T HE ASSESSMENT YEAR 2008-09 AND PARAS 4.1.8 FOR THE ASSESSMENT YEAR 2009-10. THE LEARNED CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY TREATING THE ASS ESSEE AS DEVELOPER. IN THE ASSESSMENT YEAR 2009-10 THE LEAR NED M/S SUNDARAM BUILDERS & DEVELOPERS 4 CIT(A) GRANTED RELIEF TO THE ASSESSEE ON THE BASIS OF RELIEF GRANTED IN THE ASSESSMENT YEAR 2008-09. THE RELEVANT PAR A OF THE ORDER OF LEARNED CIT(A) FOR ASSESSMENT YEAR 200 8-09 IS REPRODUCED HEREUNDER :- 4.1.3 THUS FROM THE FACTS OF THE CASE IT EMERGES THAT THE SOCIETY HAS ALLOTTED PLOTS TO ITS MEMBERS FOR WHICH THE ASSESSEE FIRM HAS ALSO CONTRIBUTED IN SEARCHING THE INDIVIDUAL TO BECOME THE MEMBER OF THE SOCIETY; THE SOCIETY HAS GOT REGISTERED THE INDIVIDUAL PLOT IN THE NAME OF ITS MEMBER AND THE ASSESSEE FIRM HAD ENTERED INTO SEPARATE AGREEMENTS FOR CONSTRUCTION OF THE HOUSE WITH THE INDIVIDUAL MEMBER IN ACCORDANCE WITH INITIAL AGREEMENT DATED 29.05.2002 ASSESSEE FIRM HAD FULL RIGHT TO NEGOTIATE THE PRICE OF THE HOUSE WITH THE MEMBERS AND SOCIETY HAS NOTHING TO SAY IN IT. M/S SUNDARAM BUILDERS & DEVELOPERS 5 FURTHER AS PER THE TERMS OF THE AGREEMENT WITH THE SOCIETY A MEMBER HAD AN OPTION TO GET HIS HOUSE CONSTRUCTED EITHER BY THE ASSESSEE FIRM OR ANY OTHER PERSON ON THE PLOT DEVELOPED BY THE ASSESSEE FIRM. THERE WAS NO PAYMENT BY SOCIETY TO THE ASSESSEE FIRM. THE ENTIRE PROJECT WAS DEVELOPED BY THE ASSESSEE FIRM BY INCURRING THE COST OF BASIC AMENITIES AS STATED EARLIER. THE ASSESSEE FIRM ALSO PAID THE COST FOR GETTING REQUISITION PERMISSION FROM THE MUNICIPAL CORPORATION OF INDORE INCLUDING WATER SUPPLY CHARGES TO NARMADA DEVELOPMENT FUND FOR THE ENTIRE PROJECT. ASSESSEE FIRM WAS ALSO RESPONSIBLE FOR APPOINTMENT OF ITS OWN ENGINEERS LABOURS. FURTHER EVEN FOR ANY ACCIDENTOR ANY OTHER M/S SUNDARAM BUILDERS & DEVELOPERS 6 INJURY TO ANY ONE ONLY ASSESSEE FIRM WAS RESPONSIBLE. 4.1.4 AS FAR AS THE DEVELOPMENT OF LAND INTO PLOTS ARE CONCERNED THERE IS NO DISPUTE IN TREATING THE ASSESSEE FIRM AS DEVELOPER. BUT FOR THAT ALONE THE DEDUCTION U/S 80IB(10) OF THE ACT IS NOT ADMISSIBLE. THE DEDUCTION UNDER THE SAID PROVISION/CLAUSE IS AVAILABLE ONLY FOR HOUSING PROJECTS AND THUS CONSTRUCTION OF RESIDENTIAL UNITS ARE ESSENTIAL. IN THE PRESENT CASE THE ASSESSEE HAS CARRIED OUT ALL THE FUNCTIONS OF A DEVELOPER. MERELY BECAUSE ON DEVELOPMENT OF LAND THE SALE DEED OF THOSE PLOTS WERE EXECUTED BETWEEN THE INDIVIDUAL MEMBER & THE SOCIETY AND THEREAFTER AS PER THE AGREEMENT WITH SOCIETY AND THE ASSESSEE FIRM THE MEMBERS WERE GIVEN AN OPTION TO EITHER M/S SUNDARAM BUILDERS & DEVELOPERS 7 PURCHASE A PLOT OR TO PURCHASE A PLOT AND GET THE CONSTRUCTION OF THE HOUSE THEREON MORE SO WHEN THE REQUIRED SANCTIONS WERE OBTAINED AND THE DESIGNS OF THE HOUSES WERE GOT APPROVED BY THE ASSESSEE FIRM CAN A VIEW BE TAKEN THAT THE ASSESSEE WAS NOT A DEVELOPER AND WAS RATHER A CONTRACTOR. IN MY CONSIDERED VIEW NO. IT WAS EXPLAINED TO ME THAT THE REGISTRY OF THE PLOT OF LAND IN THE NAME OF ITS MEMBER WAS GOT DONE BY THE SOCIETY FIRST WITH A VIEW TO SIMPLY FACILITATE ITS MEMBER TO HAVE LEGAL OWNERSHIP AND SOMETIMES TO HAVE SOME FINANCE AVAILABLE FOR THE CONSTRUCTION OF HOUSE BY MORTGAGING SUCH PLOT. THE OPTION GIVEN BY THE SOCIETY TO ITS MEMBERS FOR EITHER TO GET CONSTRUCTED HOUSE OR TO GET SIMPLY A PLOT HAS TO BE SEEN SIMPLY AS A BENEFICIAL MEASURE FOR THE M/S SUNDARAM BUILDERS & DEVELOPERS 8 MEMBERS AS EVERY ONE MAY NOT REQUIRE THE HOUSE IMMEDIATELY OR MAY NOT HAVE SUFFICIENT FINANCES TO CONSTRUCT THE HOUSE AT THE TIME OF ALLOTMENT. EVEN THEN SUBSTANTIAL NUMBERS (I.E. 181 MEMBERS) HAD OPTED TO GET THE HOUSE CONSTRUCTED THEN ITSELF THROUGH THE ASSESSEE DEVELOPER APPOINTED BY THE SOCIETY. THE CONDITION OF MINIMUM AREA OF HOUSING PROJECT ON ONE ACRE IS ALSO MET ON STAND ALONE BASIS (FOR ACTUAL CONSTRUCTION OF 175 HOUSES) ALSO. IT IS TO BE KEPT IN MIND THAT SOCIETY IS BASICALLY OF THE MEMBERS AND ITS ACTIVITIES ARE GOVERNED BY THE GENERAL BODY CONSISTING OF THEM (ALL THE MEMBERS) AND ALSO THROUGH THE ELECTED EXECUTIVE. THE SOCIETY WAS INCORPORATED WITH AN OBJECT TO PROVIDE HOUSES TO ITS MEMBERS. IT HAD MADE INITIAL INVESTMENT IN PURCHASE OF M/S SUNDARAM BUILDERS & DEVELOPERS 9 LAND BUT DID NOT HAVE RESOURCES & EXPERTISE TO DEVELOP THE PLOT AND CONSTRUCT THE HOUSES THEREON ON THEIR OWN. FOR THAT THERE COULD BE TWO OPTIONS ONE TO GET THE WORK DONE THROUGH A CONTRACTOR OR THE OTHER BY ENTRUSTING THE TASK TO THE DEVELOPER (IN THE CASE OF CONTRACTORS GENERALLY THE RATES (FOR DEVELOPMENT OR CONSTRUCTION) ARE PRE-DECIDED AND AGREED UPON. THE COST IS BORNE BY THE OWNERS. THE CONTRACTOR RECEIVES THE PAYMENT THROUGH RUNNING BILLS. BUT THAT IS NOT THE CASE HERE. IN THE PRESENT CASE THE ASSESSEE WAS ENTRUSTED THE DEVELOPMENT WORK OF THE LAND. THE AGREEMENT WAS MADE BETWEEN THE SOCIETY (THOUGH ITS PRESIDENT) AND THE ASSESSEE FIRM. THE MEMBERS OF THE SOCIETY ARE NOT TO BE TAKEN ALTOGETHER A THIRD PARTY. IN THAT AGREEMENT THEY ARE REPRESENTED THROUGH M/S SUNDARAM BUILDERS & DEVELOPERS 10 THE ELECTED PRESIDENT OF THE SOCIETY WHO IN TURN HAS ACTED AS PER THE RESOLUTION OF THE GENERAL BODY OF THE SOCIETY. IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE FIRM HAD TO POOL ITS ENTIRE RESOURCES AND HAD TO BEAR RISKS AND REWARDS ASSOCIATED WITH THE PROJECT. THE VARIOUS DEVELOPMENT ACTIVITIES SUCH AS CONSTRUCTION OF INTERNAL CIRCULATION ROAD; PROVISION OF SEWERAGE SYSTEM DRAINAGE STP; ELECTRIFICATION OF THE RESIDENTIAL TOWNSHIP AND PROVISION FO STREET LIGHTS; PROVISIONS OF WATER SUPPLY SYSTEM AND PROVISION OF PARKS WERE UNDERTAKEN BY THE ASSESSEE. THE ASSESSEE HAD TO OBTAIN NECESSARY APPROVALS FROM THE MUNICIPAL CORPORATION. THUS IN THE FACTS OF THE CASE THE ASSESSEE FIRM CANNOT BE CONSIDERED AS A CONTRACTOR IN EXECUTING THE HOUSING PROJECT. IT M/S SUNDARAM BUILDERS & DEVELOPERS 11 IS ALSO NOTED THAT OWNERSHIP OVER THE LAND BY THE DEVELOPER IS NOT A REQUISITE CONDITION FOR CLAIMING DEDUCTION U/S 80IB. IT IS TO BE NOTED THAT THE PROVISION FOR DEDUCTION U/S 80IB(10) IS IN THE FORM OF AN INCENTIVE AND HAS BEEN BROUGHT WITH A VIEW TO SOLVE THE HOUSING PROBLEM FOR THE PEOPLE OF MIDDLE AND LOWER INCOME GROUP. IT IS FOR THIS REASON VARIOUS CONDITIONS FOR MINIMUM BUILT UP AREA AND COMMERCIAL AREA HAVE BEEN PROVIDED WHICH HAS BEEN FULFILLED BY THE ASSESSEE FIRM. THE SOCIETY THOUGH A SEPARATE ENTITY HAS BEEN NOTHING BUT A VEHICLE TO FULFIL THE GROUPS. MOREOVER THE SOCIETY HAS DONE NOTHING ELSE THAN PROVIDING A PLATFORM BY ACQUIRING LAND FOR AND ON BEHALF OF ITS MEMBERS AND HAS FURTHER APPOINTED ASSESSEE FIRM NOT ONLY TO DEVELOP THE M/S SUNDARAM BUILDERS & DEVELOPERS 12 COLONY BY CONSTRUCTING BASIC AMENITIES LIKE BOUNDARY WALL DRAINAGE LIGHTING WATER TANKS BUT ALSO TO CONSTRUCT HOUSES FOR ITS MEMBERS. THUS FROM ABOVE I AM OF THE VIEW THAT ASSESSEE FIRM HAS ACTED AS DEVELOPERS AND NOT AS CONTRACTORS AS CONSIDERED BY THE A.O. 3. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED ON BY BOTH THE SIDES. IN THIS CASE THE ASSESSMENT YEAR 2008-09 WAS THE FOURTH YEAR OF DEDUCTION CLAIMED U/S 80IB(10) OF THE ACT TREATING T HE ASSESSEE AS A DEVELOPER. MAHASHAKTI GRAH NIRMAN SAHKARI SANSTHA MARYADIT (HEREINAFTER CALLED SOCIETY) WAS THE OWNER OF 4.242 HECTARES OF LAND. THE SOCIETY GOT NECE SSARY SANCTION FOR DEVELOPMENT AND CONSTRUCTION OF THIS LAND ON 27.7.2002 FROM THE COURT OF SDO (REVENUE) INDORE. THE SOCIETY ALSO GOT LAY OUT PLANS SANCTIONED FROM THE OFF ICE OF TOWN & COUNTRY PLANNING INDORE ON 21.11.2001. THE M/S SUNDARAM BUILDERS & DEVELOPERS 13 OWNER OF THE SOCIETY ENTERED INTO DEVELOPMENT AGREEM ENT WITH THE ASSESSEE AS ON 29.5.2002 FOR DEVELOPING 4.24 2 HECTARES OF LAND BELONGING TO IT LOCATED AT KHASRA NO. 43 (2.992 HECTARES) AND KHASRA NO. 45 SITUATED AT KABITKHEDI INDORE. THE ASSESSEE WAS TO DEVELOP/CONSTRUCT ON 243 PLOTS WHICH WERE SUBSEQUENTLY RE-NUMBERED AND INCREASE D TO 251. THE ASSESSEE OBTAINED DEVELOPMENT PERMISSION FROM THE LOCAL AUTHORITY ON 20.6.2003 IN THE NAME OF T HE SOCIETY AS PER THE AGREEMENT. AS PER THE AGREEMENT TH E ASSESSEE AGREED TO BEAR ENTIRE COST OF CONSTRUCTION OF 145 UNITS ON PLOT AREA OF 1000 SQ.FT. EACH AND THE CONSTRUC TION OF RESIDENTIAL UNIT APPROXIMATELY 1400 SQ. FT. EACH. IN LIEU OF THE CONSTRUCTION OF 145 UNITS THE ASSESSEE WAS EN TITLED TO RECEIVE SALE CONSIDERATION OF 91 UNITS AND THE ASSES SEE HAS FUNCTIONED AS DEVELOPER/BUILDER OF THE HOUSING PR OJECT WITHIN THE MEANING OF SECTION 80IB(10) OF THE ACT W HICH IN VIEW OF THE DECISION OF THE HON'BLE ITAT AHMEDABAD M/S SUNDARAM BUILDERS & DEVELOPERS 14 BENCH IN THE CASE OF RADHE DEVELOPER & BUILDER; 113 T TJ (AHD) 310 THE DEDUCTION U/S 80IB(10) WILL BE AVAILABL E TO AN UNDERTAKING WHO IS DEVELOPING THE LAND AND BUILDING HOUSING PROJECTS. MERE BECOMING THE OWNER OF THE LAN D SHALL NOT BE ENOUGH FOR CLAIMING DEDUCTION. ONCE THE OWNER OF THE LAND I.E. SOCIETY ENTERED INTO AGREEMEN T WITH THE ASSESSEE FOR DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECTS THE ASSESSEE SHALL NOT BE TERMED AS CONTRACTOR ONLY BUT THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION U/S 80IB(10). THE OWNERSHIP OF THE LAND IS NOT A CONDITION PRECEDENT FOR CLAIMING BENEFIT U/S 80IB(10 ) OF THE ACT. FURTHER THE APPROVAL GRANTED BY THE LOCAL AUTHORIT Y IN THE NAME OF THE OWNER OF THE LAND AND WHEN THE AGREEMEN T BETWEEN THE OWNER OF THE LAND THE DEVELOPER MAKES IT CLEAR THAT THE OWNER HAS AGREED TO GET HIS/HER LAND DEVELOPE D FROM THE ASSESSEE FOR CONSTRUCTION OF THE HOUSING PR OJECT THE ASSESSEE SHALL BE ENTITLED TO CLAIM DEDU/S 80IB(10 ) OF M/S SUNDARAM BUILDERS & DEVELOPERS 15 THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF MYSORE MINERALS (1999) 156 CTR 1 HAS HELD THAT WHEN SECTION 32 OF THE INCOME TAX ACT CONFERS THE BENEFIT ON THE ASS ESSEE THE PROVISION SHOULD BE SO INTERPRETED AND WHAT IS US ED THEREIN SHOULD BE ASSIGNED SUCH A MEANING WOULD ENABLE THE ASSESSEE SECURING THE BENEFIT INTENDED TO BE GIV EN BY THE LEGISLATURE TO THE ASSESSEE. IT IS ALSO A WELL SETT LED LAW THAT WHEN THERE ARE TWO POSSIBLE INTERPRETATIONS OF TA XING PROVISION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED. SIMILAR VIEW HAS BEEN EXPRESSED IN VARIOUS OTHER ITAT DECISIONS. THE FACTUAL POSITION OF THE ASSESSEE SHOWS THAT THE ASSESSEE WAS INTERESTED IN THE WORK OF DEVELOPING THE LAND AND THE HOUSING PROJECT AN D NOT ONLY THE CONSTRUCTION OF RESIDENTIAL UNITS. CONS IDERING VARIOUS CASE LAWS ON THIS ISSUE AND WHEN THE REVENUE H AS FAILED TO CONTROVERT THE FINDINGS OF THE LEARNED CIT (A) WE FIND NO MERIT IN THESE APPEALS OF THE REVENUE. M/S SUNDARAM BUILDERS & DEVELOPERS 16 ITA 86 & 640/IND/13 4. IN THE RESULT BOTH THE APPEALS OF THE REVENUE STAN D DISMISSED. PRONOUNCED IN OPEN COURT ON 31ST JULY 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 31 ST JULY 2015 DN/-