, `',
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
.., ,
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
./I.T.A.No.1797/Ahd /2011
( / Assess ment Year : 2008-09)
The ACIT (OSD) / M/s.Shree Parshwanath
Circle-9 Vs. Construction Corporation
Ahmedabad 50, Harsiddh Chambers
3 rd Floor, Ashram Road
Ah medabad
. / . / PAN/GIR No. : AARFS 1767 P
( /Appellant) .. ( / Respondent)
/ Appellant by : Shri Dinesh Singh, Sr.DR
/Respondent by : Shri M.G. Patel, A.R.
/ Da te o f He a ring 17/09/2014
/Da te o f Pr o no unceme nt 10/10/2014
/ O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Revenue is directed against the order of the
Ld.Commissioner of Income Tax(Appeals)-XV, Ahmedabad (`CIT(A)'
in short) dated 26/05/2011 pertaining to Assessment Year (AY) 2008-09.
The Revenue has raised the following grounds of appeal:-
1) The ld.Commissioner of Income-tax(A)-XV, Ahmedabad has erred
in law and on facts in deleting the disallowance amounting to
Rs.1,42,90,342/- made by the Assessing Officer u/s.80-IB(10) of the
Act.
2) The ld.Commissioner of Income-tax(A)-XV, Ahmedabad has erred in
holding that the assessee fulfills the conditions laid down for
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-2-
claiming deduction u/s.80IB(10) even when the land was in the name
of New Amar Park Co-operative housing Society Ltd., which is a
separate legal entity in the eye of law and the assessee entered into
the project by a development agreement with the Society. The entire
responsibility to execute the housing project and abide by the terms
and conditions of its approval right from the inception of the project
till its completion rests with the Society. Assessee was just a
contractor of the land owners constructing 128 residential flats AND
not a developer.
3) On the facts and in the circumstances of the case, the
Ld.Commissioner of Income-Tax (A)-XV, Ahmedabad ought to have
upheld the order of the Assessing Officer.
4) It is therefore, prayed that the order f the Ld.Commissioner of
Income-tax(A)-XV, Ahmedabad may be set-aside and that of the
Assessing Officer be restored.
2. Briefly stated facts are that the case of the assessee was picked up
for scrutiny assessment and the assessment u/s.143(3) of the Income Tax
Act,1961 (hereinafter referred to as "the Act") was framed vide order
dated 29/11/2010, thereby the Assessing Officer (AO in short)
disallowed the claim of the assessee for deduction u/s.80IB(10) of the
Act. Against this, assessee filed an appeal before the ld.CIT(A), who
after following the decision of this Tribunal (ITAT Bench `A'
Ahmedabad) rendered in the case of M/s.Shakti Corporation, Baroda in
ITA No.1503/Ahd/2008 in AY 2005-06 allowed the appeal of the
assessee. Now, the Revenue is in appeal before us.
3. The ld.Sr.DR Shri Dinesh Singh vehemently argued that the order
of the ld.CIT(A) is not justified in deleting the disallowance claimed
u/s.80IB(10) of the Act. He supported the order of the AO and submitted
that the assessee is merely a work contractor, therefore assessee is not
eligible for deduction u/s.80-IB(10) of the Act.
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-3-
3.1. On the contrary, ld.counsel for the assessee supported the order of
the ld.CIT(A) and submitted that the issue is squarely covered by the
judgement rendered in the case of CIT vs. Radhe Developers reported at
(2012) 341 ITR 403 :: 204 Taxman 543:: 17 taxmann.com 156 (Guj.) and
followed in other judgements of the Hon'ble Gujarat High Court in the
case of CIT vs. Mahadev Delopers reported at (2013) 214 Taxman 130
(Guj.) and CIT vs. Prathama Developers reported at (2013) 214 Taxman
131 (Guj.). Further, the ld.counsel for the assessee relied on the
following judgements:
1. CIT vs. Vishal Construction Co. reported at (2013) 217
Taxman 96 (Guj.).
2. CIT vs. Shree Ram Construction reported at (2013) 215
Taxman 17 (Guj.)
3. CIT vs. Nikhil Associates reported at (2014) 45
taxmann.com 278 (Guj.).
3.2. The ld.counsel for the assessee drew our attention towards to
clauses, 13, 15, 18, 22 and 23 of the Development Agreement. He
submitted that a bare perusal of the agreement would demonstrate that all
risks and consequences thereof arising from the project was borne by the
assessee. He submitted that the issue is squarely covered by the
judgement of Hon'ble Gujarat High Court rendered in the case of Radhe
Developers (supra).
4. We have heard rival submissions, perused the material available on
record and gone through the orders of the authorities below. We find
that the AO disallowed the claim of deduction on the basis that the
assessee is not a developer and builder as envisaged u/s.80IB(10) of the
Act because the assessee did not conceptualize and own the project in as
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-4-
much as the assessee is not the owner of the land and the approval was
not issued to it by the local authority. The project was undertaken by the
assessee on the request of the Society. The assessee is merely confirming
party to the sale-deed and, therefore, the assessee is merely a work
contractor in terms of the amendment in the provisions of section
80IB(10) of the Act. However, the ld.CIT(A) deleted the addition by
observing as under:-
"5. It is seen that the AO has not disputed that the appellant did
not fulfill any of the conditions specified in section 80IB(10) from
clause (a) to (d) with respect to the approvals from the local
authority, completion of project within the specified time limits,
one acre of land condition, 1500 sq.ft. built up area condition of
each unit in the project and that of percentage of construction for
commercial use. His objection is that the appellant is not the
owner of the land. This objection of the AO has to be seen in the
light of the tests laid down by Hon'ble ITAT Bench A Ahmedabad
decision in the case of M/s.Shakti Corporation, Baroda in ITA
No.1503/Ahd/2008 in AY 2005-06 wherein Hon'ble ITAT has held
that where the appellant is found having practically purchased the
land and has borne the risk of development deduction should be
allowed. Here the appellant has been found fulfilling the
conditions laid down in section 80IB(10) of the Income Tax Act
and has also been found meeting the tests laid down in Hon'ble
ITAT Bench A Ahmedabad decision in the case of M/s.Shakti
Corporation, Baroda in ITA No.1503/Ahd/2008 in AY 2005-06 as
it had practically purchased the land as clear from the P&L
account where Rs.73,97,426 has been debited as land cost and
cheque payments made to New Amar Park Cooperative Housing
Society from its bank account and it had borne the entire cost and
risk of developing the project as clear from Clause 15 of the
Development Agreement, which clearly states that the profit was to
be of the appellant, therefore in my view it is eligible for deduction
u/s.80IB(10) and the AO is directed to allow the same."
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-5-
4.1. In the present case, the AO has disallowed the claim of deduction
on the basis that the assessee was not the owner of the land and the
approval was in the name of the Society. Moreover, in the sale-deed
executed, the assessee is only a confirming party. As per clause 13 of
the Development Agreement, the assessee was entitled to enter into an
agreement of booking/allotment with the prospective members, of the
tenements, flat & shops to be constructed, on such terms and conditions
as the developer/builder may deem fit and proper. Further, as per clause
15 of the Development Agreement, the assessee was entitled to the
surplus between:
(i) The gross amounts received from the members/purchasers
towards allotment of the tenements, flats & shops with
facilities, amenities and services for the exclusive or general
use, occupation and enjoyment (being the premises of every
description whatsoever like open land, constructed premises,
terraces, margin lands parking spaces (constructed, covered
or open), other amenities, facilities and services or any
other).
and
(ii) The total cost consisting of :
a) All cost and expenses for the acquisition of the said land
incurred by the society including the payment towards
stamp duty, legal fees and other charges and expenses
paid or incurred to be paid for purchase or acquisition
thereof and also including the interest paid and/or to be
paid on amount borrowed for the said purposes and/or
late payment to land owners for the purchase of the said
land.
b) The cost to be incurred for construction, which shall
include for labour, material, erection, installation or
construction of infrastructures, common amenities
facilities and services.
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-6-
c) Cost and expenses to be incurred for making arrangement
for water supply, drainage, electricity and other facilities
and services to be provided in the scheme, which shall
include the laying of cables, pipe-lines, other installation
charges, security deposits, scrutiny fees or any other
amount to be paid or expenses to be incurred in any form
whatsoever.
d) Cost and expenses of every discretion whatsoever to be
incurred or paid for obtaining approvals or sanction to
the layout plans, construction plans, revised plans from
Taluka Panchayat or from any other concerned authority
or authorities.
e) Cost and expenses to be incurred for obtaining all and
every permissions, certificates, approvals, sanctions as
may be necessary to be obtained from any authority or
authorities whatsoever in any of the matters of evolving,
implementing and carrying out the scheme or generally
under this agreement.
f) The interest and other charges required to be paid upon
finance that may be raised or arranged from any source
whatsoever including that raised by the
Developer/Builder itself, as also upon any investments
already made for timely completion of the Project.
g) Remuneration or charge to be payable to the consultants
like Architects, Engineers, Structural Engineers,
Contractors, Supervisors, Drainage Consultants,
Electrical Consultants, Project Consultants etc. in any
form whatsoever.
h) All costs, charges and expenses of every discretion
whatsoever to be paid or incurred in any of the matters
relating to the scheme not specifically provided herein or
bear the deficit if any in case total cost as per clause.
(ii) above exceeds the gross receipts from members / purchasers
as per clause (i) above.
4.2. Clauses 16, 17, 18, 19, 20, 22, 22 & 23 are as under:-
16. The Developer/Builder shall be entitled to advertise the
scheme of construction of residential & commercial complexes on
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-7-
the said property and shall be entitled to display sign-boards, neon
signs and such advertisements on the said property.
17. All the capital investments like construction equipments etc.
shall be made by the Developer/Builder only and the same shall be
maintained by the Developer/Builder at its own cost.
18. The construction that may be raised as a part of the
development of the said property shall be the absolute property of
the Developer/Builder herein and the Developer/Builder shall
further be entitled to booking/allotment/disposal of the same in a
manner as it may be deemed fit and proper.
19. It has been agreed that all outgoing and Municipal taxes in
respect of the said property authorized to be developed herein and
in respect of the construction that may be raised thereon shall be
borne and paid by the Developer/Builder herein only.
20. It has been agreed that the person...... be member and at
the recommendation of the Developer/Builder herein, the Society
shall recognize all such persons as members of the Society to/for
whom the tenements, flats & shops to be constructed by the
Developer/Builder are allotted/booked.
21. It is hereby agreed that the Developer/Builder shall covenant
as follows, with the person/s to/for whom the tenements, flats &
shops to be constructed on the said property are allotted/booked.
a) That such person shall become member of the Society on the
recommendation of the Developer/Builder herein.
b) That such person shall be liable to observe and perform the
bye-laws, rules and regulations of the Society and shall be
bound by the same.
c) That such persons shall be enrolled as member of the Society
only after full payment is made and the scheme is completed.
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-8-
22.The Society hereby grant to the Developer/Builder exclusive
right to book/allot for/to any person, firms or companies for
such consideration as the Developer/Builder may think fit and
proper any tenement, flat & shop to be constructed on the said
property and the Developer/Builder shall be entitled to receive
from them the amount of price/value of construction,
contribution towards land price, Legal expenses, maintenance
deposit and other expenses.
23. It has been specifically agreed by and between the parties that
in view of the fact that all necessary finance for
development/construction of the said property has been agreed
to be arranged by the Developer/Builder and therefore, under
no circumstance, this Agreement shall be cancelled and/or shall
liable to be cancelled and shall remain in force for the sole
benefit of the Developer/Builder for the Development of the
said property.
4.3. From the aforesaid terms and conditions, it is clear that as per
Development Agreement, the assessee had to incur and bear all expenses
of the development of the land, and it had right to allot possession of
constructed units to members of housing project after developing housing
project. Therefore, in our considered view, the issue is squarely covered
by the judgement of Hon 'ble Gujarat High Court rendered in the case of
CIT vs. Radhe Developers reported at (2012) 341 ITR 403. The
jdugement of Hon 'ble Gujarat High Court was followed by the
subsequent judgement of Hon'ble Gujarat High Court rendered in the
case of Cit vs. Shree Ram Construction reported at (2013) 215 Taxman
17 (Guj.), wherein the High Court has observed as under:-
"2. Having perused the orders on record with the assistance of
learned counsel for the Revenue, we notice that the issue pertains
to deduction under section 80IB(10) of the Act. The assessee had
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
-9-
claimed to have developed housing project and claimed such
deduction. Revenue however, held belief that assessee was not the
owner of the land and had developed the housing project for and
on behalf of some other person. Tribunal relied on its own
previous decision in case of Radhe Developers vs. ITO (2008) 23
SOT 420 (Ahd.) and ruled in favour of the assessee. Such decision
of the Tribunal was challenged by the Revenue before this Court.
In the judgement in case of CIT vs. Radhe Developers (2012) 341
ITR 403/204 Taxman 543/17 taxmann.com 156(Guj.), the High
Court had rejected the Revenue's appeals making following
observations:
"36. We have noted at some length, the relevant terms and
conditions of the development agreements between the
assessees and the land owners in case of Radhe Developers.
We also noted the terms of the agreement of sale entered
into between the parties. Such conditions would
immediately reveal that the owner fo the land had received
part of sale consideration. In lieu thereof he had granted
development permission to the assessee. He had also parted
with the possession of the land. The development of the land
was to be done entirely by the assessee by constructing
residential units thereon as per the plans approved by the
local authority. It was specified that the assessee would
bring in technical knowledge and skill required for
execution of such project. The assessee had to pay the fees
to the Architects and Engineers. Additionally, assessee was
also authorized to appoint any other Architect or Engineer,
legal adviser and other professionals. He would appoint
Sub-contractor or labour contractor for execution of the
work. The assessee was authorized to admit the persons
willing to join the scheme. The assessee was authorized to
receive the contributions and other deposits and also raise
demands from the members for dues and execute such
demands through legal procedure. In case, for some reason,
the member already admitted is deleted, the a would have
the full right to include new member in place of outgoing
member. He had to make necessary financial arrangements
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
- 10 -
for which purpose he could raise funds from the financial
institutions, banks, etc. The land owners agreed to give
necessary signatures, agreements, and even power of
attorney to facilitate the work of the developer. In short, the
assessee had undertaken the entire task of development,
construction and sale of the housing units to be located on
the land belonging to the original land owners. It was also
agreed between the parties that the assessee would be
entitled to use the the full FSI as per the existing rules and
regulations. However, in future, rules be amended and
additional FSI be available, the assessee would have the full
right to use the same also. The sale proceeds of the units
allotted by the assessee in favour of the members enrolled
would be appropriated towards the land price. Eventually
after paying off the land owner and the erstwhile proposed
purchasers, the surplus amount would remain with the
assessee. Such terms and conditions under which the
assessee undertook the development project and took over
the possession of the land from the original owner, leaves
little doubt in our mind that the assessee had total and
complete control over the land in question. The assessee
could put the land to use as agreed between the parties. The
assessee had full authority and also responsibility to develop
the housing project by not only putting up the construction
but by carrying out various other activities including
enrolling members, accepting members, carrying out
modifications engaging professional agencies and so on.
Most significantly, the risk element was entirely that of the
assessee. The land owner agreed to accept only a fixed
price for the land in question. The assessee agreed to pay
off the land owner first before appropriating any part of the
sale consideration of the housing units for his benefit. In
short, assessee took the full risk of executing the housing
project and thereby making profit or loss as the case may
be. The assessee invested its own funds in the cost of
construction and engagement of several agencies. Land
owner would receive a fix predetermined amount towards
the price of land and was thus insulated against any risk.
ITA No.1797/Ahd/2011
The ACIT vs.M/s.Shree Parshwanath Construction Corpn.
Asst.Year 2008-09
- 11 -
3. We are informed that such decision of this Court was
challenged before the Supreme Court in case of ITO v. Shree
Gokul Corporation and SLP came to be dismissed by order dated
27.7.2012.
4. Under the circumstances, this Tax Appeal is also dismissed."
4.4. Therefore, respectfully following the judgement of Hon'ble
Gujarat High Court in the case of CIT vs. Radhe Developers(supra), we
do not find any infirmity in the order of the ld.CIT(A), same is hereby
upheld. Thus, grounds raised by the Revenue are rejected.
5. In the result, the appeal of the Revenue is dismissed.
Order pronounced in Court on the date mentioned hereinabove at caption page
Sd/- Sd/-
(..) ( )
( N.S. SAINI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 10 /10/2014
.., . ../T.C. NAIR, Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. / Concerned CIT
4. () / The CIT(A)-XV, Ahmedabad
5. , , / DR, ITAT, Ahmedabad
6. / Guard file.
/ BY ORDER,
//True Copy//
/ (Dy./Asstt.Registrar)
, / ITAT, Ahmedabad
|
