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Income-tax Officer, Ward-9 (2) , Ahmedabad Versus Shri Ambalal Nandas Patel

2015 (7) TMI 293 - ITAT AHMEDABAD

Eligibility for deduction u/s 80IB(10) - CIT(A) observed that AO failed to consider and appreciate the detailed explanation given by the assessee during the course of assessment proceedings highlighting the facts that he fulfilled all the requisite conditions for eligibility of claim u/s 80IB(10) and allowed claim - Held that:- The terms and conditions entered into between the assessee and the society as per the development agreements provided all the dominant control and rights over the land to .....

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ructed the housing project as per the development agreements by incurring total expenditure and received the sale consideration. The assessee satisfied the requirements of provisions of section 80(IB)(10). Moreover once plan is approved by AUDA on papers submitted by assessee and others, it would be deemed approval of construction of housing units in favour of the assessee, more so, when assessee entered into agreements for developing the whole of the property. In view of the above, CIT(A) was j .....

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n of the Tribunal in the case of Kanubhai Ramjibhai Makwana (2010 (12) TMI 172 - ITAT, AHMEDABAD) wherein it has been held that in case TDS has been deposited on or before due date of filing of return, the same is allowable. - Decided against revenue. - ITA No. 1744/Ahd/2013,ITA No.1943/Ahd/2011,ITA No.2235/Ahd/2012 - Dated:- 30-6-2015 - Shri Shailendra Kumar Yadav and Shri Anil Chaturvedi, JJ. For the Petitioner : Shri Narendra Singh, Sr.DR For the Respondent : Shri Pritesh Shah, AR ORDER PER B .....

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he Assessee s claim for deduction of ₹ 1,14,75,237/- u/s 80IB(10) of the I.T. Act. 1b) The ld. CIT(A)-XV, Ahmedabad has erred in law and on facts in not adhering to the Guidelines in its full spirit laid down by the Hon ble Gujarat High Court in the case of Radhe Developers as extracted by the Hon ble ITAT. 1c) The ld. CIT(A)-XV, Ahmedabad has erred in law and on facts that all the expenses were borne by the Builder on behalf of the Dhanvihar Co-op. Housing Society Ltd. 1d) The ld. CIT(A)- .....

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Bhikhiben Ambalal Patel, (iii) Shri Dineshkumar Ambalal Patel and (iv) Shri Pankajkumar Ambalal Patel, whereas deduction u/s 80IB (10) of the Act, was claimed by only Shri Ambalal Nandas Patel. 1f) The ld. CIT(A)XV, Ahmedabad has erred in law and on facts that development agreement is silent on the point that who has given authority to fixing the price of land/unit as all the expenses were borne by the Builder on behalf of the Society. 2) On the facts and circumstances of the case, the ld. CIT( .....

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2. The ld. CIT(A) XV, Ahmedabad has erred in holding that the assessee fulfills the conditions laid down for claiming deduction u/s 80IB(10) even when the land was in the name of Dhan Vihar Co-op. 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 .....

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aside and that of the Assessing Officer be restored. 3. ITA No.2235/Ahd/2012 Asst. Year 2009-10 The following grounds have been raised in this appeal :- 1a) The ld. CIT(A) -XV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the Assessee s claim for deduction of ₹ 2,47,27,448/- u/s 80IB(10) of the IT Act. 1b) The ld. CIT(A)-XV, Ahmedabad has decided the issue No.1 on the ground in holding that the Assessee fulfills the conditions laid down for claiming d .....

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society. Assessing was just a contractor of the land owners constructing residential units and not a developer. 2) On the facts and in the circumstances of the case, the ld. CIT(A) XV, Ahmedabad ought to have upheld the order of the Assessing Officer. 3) It is therefore prayed that the order of the ld. CIT(A) XV, Ahmedabad may be set aside and that of the Assessing Officer be restored. 4. First we take up ITA No.1744/Ahd/2013 Asst. Year 2007- 08.. The Assessing Officer made disallowance of S .....

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carries on the business of development and construction of residential flats/houses. During the year under consideration, the assessee has undertaken the construction work of a housing project known as Dhan Vihar Co. Op. Housing Society Ltd. During the year under account, the assessee has shown total receipt of ₹ 2,47,50,000/-on which the assessee has declared net profit of ₹ 1,14,73,237/-which in terms of percentage works out 46.36%." (b) (i) "During the year under assess .....

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d the assessee was asked to substantiate its eligibility for the deduction with reference to the conditions to be satisfied under the section 80IB vide notice dated 22/09/2009. The assessee filed its reply along with copy of (i) approved plan (ii) the audit report in Form 10CCB (iii) Permission for development/Raja Chitti (iv) the BU permission issued by the Local Authority and (v) the Development Agreement entered by it with the Society for the construction of the housing project." (iii) & .....

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opment Agreement with the Dhan Vihar Co. Op. Housing Society Ltd. on 15/02/2006. As per the terms of the agreement, (i) the assessee was given free access of the land for construction of the housing units as per the plan, (ii) the assessee was allowed to join the prospective buyers as the members on behalf of the society, (iii) the assessee was allowed to collect the consideration for land as well as super-structure from the buyers on behalf of the society, (iv) the assessee was allowed to retai .....

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erification of the land documents reveal that the assessee was not the owner of the said land, but the owners were the Dhan Vihar Co. Op. Housing Society Ltd. who were permitted to develop the land by way of constructing the housing project. The name of the assessee appears neither in the application nor on the permission given by the Local Authority for the housing project." (vi) "On perusal of the documents filed by the assessee in support of the claim, it was observed that permissio .....

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ntrol Regulation etc." (vii) "From the above facts it is clear that the assessee did not own the land and the approval for the project was also not received in the name of the assessee. The documents clearly state that the local authority permitted the owner of the land viz the Dhan Vihar co. Op. Housing Society Ltd. to develop the housing scheme. The assessee came in to the project by the 'Development Agreement' entered by it with the land owner. Accordingly, one of the fundam .....

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ownership I and my family members are land owners since long. a) The copy of 7/12 utara enclosed here with. Which show our ownership. b) In fact the assessee himself is a landowner and he himself has started project.The following evidences also proved the facts, (i) The NA. copy of show the name of applicant Mr. Ambalal N. Patel. The N.A. orders are dated: 31/3/2006 submitted here with. At this point there were no society in existence. (ii) The original plan dated: 10/4/2006 also submitted here .....

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sale consideration also outstanding and to be received by us as out of sale proceed fund available from project. (4) The society has no fund at all. c) The society "Dhan vihar co. op. housing society .Ltd" registered at my residence house address on Date:17/5/2006. But before registration of society I have entered M.O.U./ development Agreement with other co owner (family members) dt.. 15/2/06. Therefore before registration of society. I become developer to develop the scheme. The terms .....

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are myself and others three my blood related family members. b) The scheme to be developed by me as developer to claim deduction under section 80IB(10) of the Act. And the proposed society is to be registered only for limited Purpose of maintenances for behalf of future members. c) The proposed society has at present no land / no actual members/ no fund and all work on behalf of proposed society is to be handle only by land owner/ myself as developer. Therefore society has no authority. d) The a .....

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een made by me as a developer and as per conditions of M.O.U. g) The society has no right / title in land / property. All liabilities which are composite in nature and to be discharged by me as a developer. h) The developer (myself) is authorized to registered the society for limited purpose of maintenance after completion of scheme only. i) All profit and losses are profit / losses of developer i. e. mine (Mayur Estate developer). The society has no any rights. j) The developer (myself) is also .....

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developer as developer under section 801B(10) of the Act and not to be consider merely as work contractor. (4) As regard work contractor: The definition of work contractor has very limited scence/scop. The work contractor have no any rights of ownership / booking / planning / advertisement / collection from members /allotment of flats/units/ to solve loan problems of members/to help the members for their requirement etc all work relating to project. In my case being a developer I am fully autho .....

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fore the sale deed of land. Therefore registration of society and then after sale deed are part of project work in advance. . ' The society has not purchased land but developer /land lord himself has made future plan to complete the project easily. There were no work contract at all after formation of society. Ever thing is completed oh or before registration of society. (6) As para -16 of recent judgment of I.T.A.T. Ahmedabad in case of M/s Shakti corporation No. (2009) 032 SOT 0438 (Ahmeda .....

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only be built but also to be developed by the assessee. This is a special condition that eligible enterprise must be not only a builder but also a developer. At para 3.13 to 3.14 of the impugned order the AO examined some of the submission made by the assessee including reliance placed on Hon'ble ITAT decisions in the case of Radhe Developers and in the case of Shakti Corporation. The AO emphasized that these decisions were not accepted by the department and pending at that time before the .....

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. order and held that the assessee because of its expertise in construction had come forward to construct the housing project in accordance with to the approval received by society. At para 3.17 of the asstt. order, the AO considered the various terms and conditions of the development agreement and held that though this agreement called a Development Agreement, but it is in essence an agreement for construction. The AO thereafter relied on the Supreme Court judgment in the* case of K. Raheja Dev .....

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y the Principal according to the terms of the tender document/agreement or a work order and there the so called development agreement is a contract for construction. The AO at para 3,20 of asstt.order observed that the creation of society and fund arrangement by the assessee is to save the registration fees payable to state government since the same is not chargeable from such society. This is further held as inconsistent st^nd to save stamp duty on one hand while income tax on other hand on acc .....

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) 1 SCC 613. The entire discussion from para 3.9 of the impugned order to para 3.21 was summarized at para 3.22 of the impugned order. On the basis of this the AO at para 3.23 of the impugned order held that the assessee is not eligible for deduction u/s.80IB (10) of the Act for the following reasons: 1. The Assessee is not both developer and builder as required by the provisions of section 80IB (10). Assessee is not a developer because the assessee ;did not conceptualize and own the project in .....

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le deeds as a seller. This also proves that the assessee was merely a contractor/ agent of the society. 4. As per the Amendment to section 80IB by the Finance Act 2009, a works contractor who executes the work awarded by any person is not eligible for the deduction u/s 80IB. Any person includes the Dhanvihar Co. Op. Hsg. Society Ltd. Which is a legal entity. 5. Apart from the above, the assessee's contention that the land is owned by himself and his family members since long is found to be b .....

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77; 1,17,89,230/-. The Id. CIT(A) XV, Ahmedabad vide her order dt. 30/11/2010 in appeal no. CIT(A)XV/ITO 9(2)/180/09-10 against the asstt. order dt. 18/12/2009 at para 6 of the said order held that- "It is seen that the objection of the AO for disallowance of 80IB(10) deduction 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 dated 7.11.2008 in the case of M/s.Shakti .....

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cost to the owners the developer is entitled to get profit or loss. The total responsibility of the profit or loss will be of the party of the third part known as Mayur Estate Developer" As the AO has not challenged that the appellant violated any of the conditions stipulated from clause (a) to clause(d) of section 80IB(10) and the appellant as per the terms and conditions of the Development Agreement has to pay the land cost and also to develop the project at his own cost and risk and enj .....

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ion only on the issue of ownership of the land based on the development agreement and has unjustly allowed the claim of the assessee. The learned AO has stated various reasons for disallowing the claim u/s 80 IB of the Act as extracted herein above. For granting deduction u/s 80 IB (1) of the Act the Hon'ble Gujarat High Court in the case of Radhe Developers reported in 341ITR 403 (Guj.) has laid down the following guidelines to be adhered to in granting deduction u/s 80 IB (10) of the Act: .....

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ct. (d) Whether under the agreement the assessee had been given full authority to develop the land and to construct residential units. The AO has to examine the fact in respect of engagement of professionals, such as, architect for designing and architectural work. (e) The AO has to examine the responsibility of enrolment of members and collection of charges required toie made from the buyers of the residential units. (f) The AO has to examine about the "profit" or "loss" ari .....

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e said project in lieu of granting permission to construct the residential units or to earn profit as a project developer. (i) The AO has to ascertain the position of the possession over the land during the construction period. (j) For the purpose of construction the AO has to examine the financial arrangements. (k) The AO has to examine the procedure for raising of funds either by private placement or by financial institutions. .; . . (I) The risk element connected with the said housing project .....

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A) and remit back the case to the file of ht e learned CIT(A) to pass appropriate order as per law and on merits after considering the guidelines rendered by the Hori'ble Gujarat High Court in the case of Radhe Developers as extracted herein above and after affording sufficient reasonable opportunity of being heard to the assessee. It is ordered accordingly." 4.2 In setting aside issue the CIT(A) allowed the claim of assessee and the same has been opposed before us on behalf of the Reve .....

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A). 4.3 The issue before us is with regard to disallowance of ₹ 1,14,75,237/- u/s 80IB(10) in the year under consideration. The CIT(A) observed that Assessing Officer failed to consider and appreciate the detailed explanation given by the assessee during the course of assessment proceedings highlighting the facts that he fulfilled all the requisite conditions for eligibility of claim u/s 80IB(10) of the Act. The involvement of assessee s fund thereby risk undertaken by assessee for develop .....

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The CIT(A) following the ratio of the decision of Hon ble Gujarat High Court in the case of Radhe Developers & Ors. Observed that all details and explanations were verifiable from the details and submissions made by assessee before Assessing Officer. The analysis reflects that assessee fulfilled all the eligible conditions for claim of deduction u/s 80IB(10). There is no provisions of section 80IB(10) regarding the ownership of land and it is not stipulated in any sub-section that approval o .....

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the requirements of section 80IB(10) of the Act. The CIT(A) observed that assessee has acquired all substantive development rights. Development agreements entered into by the assessee was over and above the agreement to sell to acquire the rights and domain over the project including land in question. The assessee is entitled to receive the sale consideration and shall accept all the payments from the buyers, the details of the same are placed on record which is not disputed on behalf of the Rev .....

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. Concern name. When permission for development and Building Use certificates are considered in the light of the development agreements, it would clarify that the property numbers are same as has been mentioned by AUDA and there is no objection from the side of the society. Therefore it was found that the building plans have been sanctioned in respect of the land developed by the assessee through the agreement to sell and the development agreements in question. The details on record supports the .....

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om the buyers have been mentioned in the total sale proceeds in the books of accounts of the assessee. It establishes that assessee entered into development agreements and agreement to sell with the purchaser for consideration. All responsibilities for carrying out construction, permission and development of the project lie with the assessee. The real owner of the land i.e. the society was only to co-operate with the assessee in carrying out the development and to execute necessary documents whe .....

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ht fit. The terms and conditions entered into between the assessee and the society as per the development agreements provided all the dominant control and rights over the land to the assessee and the assessee developed and constructed the housing project at its own cost and would remain owner of the building without any interference from the society. The development agreements in question did not provide that the assessee would be working as a contractor or agent on behalf of the society. The as .....

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nstruction of housing units in favour of the assessee, more so, when assessee entered into agreements for developing the whole of the property. In view of the above, CIT(A) was justified in granting deduction because assessee has acquired right of developing housing project, incurring total expenditure and taking all risks thereof. There is no infirmity in the order of CIT(A). So we are inclined to uphold the same. 5. In Assessment Years 2008-09 and 2009-10, in first issue the facts & circum .....

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; 27,44,214/- paid to 18 different parties in January 2008 and February, 2008 was deposited in government account not by 31.3.2008 (which the statute requires) but 4.4.2008. Thus the AO added the amount u/s 40(a)(ia) of the Act. 6.1 On appeal before first appellate authority, the assessee vide written submission dated 6.6.2011 stated that copies of all a/cs and TDS return/challans also were submitted. ITAT Ahmedabad in the case of Kanubhai Ramjibhai Makwana vs. ITO reported in 135 TTJ 364 (Ahd) .....

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