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TMI Blog2015 (2) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... n area of 4 acres of which 2 acres 23.85 guntas was owned by the assessee while the balance 1 acre 16.15 guntas was given by M/s. Sai Builders. The approvals of the project had been applied for and were granted to M/s. Sai Builders. The project was being developed under a joint development agreement with M/s. Sai Builders under which the entire land was to be developed as one housing project with constructed area of 95,775 square feet (sft) in Phase-I of which 27,775 sft pertained to the share of M/s. Sai Builders and the balance to the assessee. As per the agreement the assessee had been assigned the role of project leader entrusted with development of the entire project including the share of M/s. Sai Builders for which M/s. Sai Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the rate of Rs. 300/- had been fixed after due deliberations on the basis of the conditions at that time and the subsequent events leading to escalation in the actual cost cannot be a ground to treat the joint development agreement as a device to minimize the tax liability. The AR also submitted that the rate of Rs. 300/- per sft may at best be taken as a bad business decision but not with a view to incur loss. The AR further submitted that despite the loss on account of the rate of Rs. 300/- per sft charged from M/s. Sri Sai Builders, the assessee had returned gross profit of 25% and net profit of 19%. The AR also disputed the rate of Rs. 849.42 per sft which included the estimated profits declared in earlier years during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that no similar circumstances have been brought on record in the assessee's case. He further held that there is no suggestion or evidence, that the agreement of the assessee with M/s Sai Builders is not genuine or that there existed some commonality of partners or their family members or some close connection between the two parties or that the assessee had been paid any amount over and above what had been recorded in the books of the assessee. He pointed out that merely because the transaction has resulted in a loss to the assessee cannot be a ground to disallow that loss. Under the circumstances, the addition of the sum of Rs. 1,47,10,720/- to the income of the assessee was directed to be deleted. Aggrieved the Department is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent between the two parties is a tax planning device and the assessee has knowingly incurred loss in this project. 11. The learned counsel for the assessee submitted that the assessee firm had gained adequate expertise in undertaking large housing projects and an agreement had been reached between the parties viz., M/s. Sri Sai Buildings and M/s. Modi Ventures for a fixed price contract @ Rs. 300 per sft ad such fixed price contract was at the fair market rate then prevailing for such type of construction. He further submitted that the Assessing Officer has not brought on record any evidence to come to the conclusion that the construction receipt to the extent of Ra. 1,47,10,720 had been suppressed and, therefore, is to be taxed. The addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sft payable by M/s. Sri Sai Builders is very low when compared to the cost of construction at Rs. 849.42 per sft. Further in this project as a whole a gross profit of 25% and net profit of 19% was earned and had been declared. These profits were computed after absorbing the entire loss incurred on construction receipts from M/s. Sri Sai Builders. The person running the business has viewed the entire project instead of taking construction contract of a single stand alone transaction and that is why at the end of the project, the assessee firm made the net profit about 19%. In these circumstances, we confirm the order of the CIT(A) and dismiss the Departmental appeal on this issue. 13. With respect to the next issue relating to the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;approved by a local authority' i.e., the approval is given to the project and not to the persons involved. The CIT(A) held that the fact that the approvals had been given to M/s. Sai Builders while the development of the project was undertaken by the assessee is of no consequence and relying on the decision in the case of CIT vs. Radhe Developers (341 ITR 403) (Guj) held that the assessee was entitled to benefit u/s. 80IB(10) of the Act, even in the case where development permissions have been obtained in the name of M/s. Sai Builders. Aggrieved, the Revenue is in appeal before us. 16. We find no infirmity in the order of the CIT(A) as the provisions of section 80IB(10) inter alia provide that 100% of the profit derived by an under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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