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Mahendra Builders & Developers Versus Asstt. Commissioner of Income Tax, 1 (1) , Indore

2015 (9) TMI 495 - ITAT INDORE

Reopening of assessment - assessee has not fulfilled the required conditions of section 80IB(10) - Held that:- While framing the assessment for the assessment year 2006-07 the Assessing Officer found that the assessee has not fulfilled the required conditions of section 80IB(10) of the Act and the Assessing Officer recorded certain failure on the part of the assessee for not fulfilling the conditions as narrated u/s 80IB(10) of the Act which also include the built up area and amended provisions .....

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was not a mere work contractor but it was a developer of the project. In none of the projects, the assessee has acted for fixed price for executing the work as in the case of works contract the work is awarded at a fixed consideration. Thus, the assessee cannot be held to be a mere contractor. Further, the assessee has not only constructed the houses but it has developed the roads, electrical work and also water connection system in whole of the project. There is no requirement that the project .....

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Nos.371 to 374/Ind/2012 emanate from the common order of the learned CIT(A), Raipur, Camp at Bhopal, dated 30.3.2012. ITA No. 435/Ind/Ind/2010 emanates from the order of the learned CIT(A) Bhopal, dated 9.3.2010 and ITA No. 365/Ind/2013 emanates from the order of the learned CIT(A)-I, Bhopal, dated 28.2.2013. In all these appeals there are common issues and, therefore, the same are being disposed of by this consolidated order for the sake of convenience. 2. In ITA Nos. 371 & 372/Ind/2012 gro .....

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hese six appeals there is a common ground relating to deduction u/s 80IB(10) of the Act but since in ITA Nos. 371 and 372/Ind/2012 the validity of reassessment proceedings has been challenged, therefore, we are deciding this issue first and thereafter we shall take the issue of deduction u/s 80IB(10) of the Act. 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of civil construction, developing building and housing projects. During the relevant period .....

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based on change of opinion. The learned counsel for the assessee submitted that the claim of the Assessing Officer that the amendment made by Finance (No. 2) Act of 2005 was applicable even to the assessment year 2003-04 even when the assessee has not booked any income during that period. He submitted that the issue was a debatable one and, therefore, the reopening was based on mere change of opinion and should not be sustained in view of CIT vs. Kelvinator of India (2010) 320 ITR 561 (SC). 5. O .....

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was not based on change of opinion but based on new material came into knowledge of the Assessing Officer during the assessment proceedings for the assessment year 2006-07. Considering all these aspects, we hold that the Assessing Officer was having sufficient material to make a belief for reopening of the assessment proceedings. Therefore, we dismiss this ground of the assessee. 7. Now we will decide the issue of claim of deduction u/s 80IB(10) of the Act. From a perusal of various orders for .....

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under :- Name of colony Mahendra Township Phase I Mahendra Township Phase II Mahendra City Mahendra Greenwood Area and Khasra Bawadiya Kalan Bawadiya Kalan Jatkhedi, Hoshangabad Road Jatkhedi, Hoshangabad Rioad Owner of land Sarvottam Grih Nirman Sahkari Samiti Sarvottam Grih Nirman Sahkari Samiti Sarvottam Grih Nirman Sahkari Samiti Assessee firm Joint Development Agreement 01.07.2002 07.06.2002 06.01.2006 14.02.2007 Approval 07.06.2002 07.06.2002 06.01.2006 14.02.2007 Income offered in A.Y. Al .....

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of the Hon'ble Gujarat High Court in the case of CIT vs. Radhe Developers; 341 ITR 402 (Guj.) wherein it was held - "The assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of s. 2(47)(v) and s. 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of IT Act deemed to have been tr .....

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ee could be considered as the owner of the land in question. For the limited purpose of deduction u/s 80IB(10), the assessee had satisfied the condition of ownership also, even if it was necessary. The Tribunal committed no error in holding that the assesses were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessee and in some case, the development permissions may also have been obtained in the name of the original land owners. It is not even t .....

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hile interpreting a statute, particularly, a taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of section 80IB(10) of the Act, namely, that of owning the land, which the assessee devesops, cannot be supplied by any purported legislative intent. There is nothing under section 80IB(10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondl .....

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(ii) CIT vs. Nikhil Associates; 224 Taxman 219 (Guj) (iii) C.I. Builders Pvt. Ltd.; 20 ITJ 495 (Indore) (iv) CIT vs. Shajanand Associates; 44 taxman.com 458(Guj) (v) CIT vs. Moon Star Developers; 269 CTR 259 (Guj.) 10. This issue is considered by the Hon'ble Supreme Court in the case of CIT vs. Sarkar Builders dated 15.5.2015 wherein Hon'ble Supreme Court held as under :- "(g) From this provision, therefor, it is clear that the housing project contemplated under sub-section (10) of .....

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ioned and commenced prior to 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005. 21. These aspects are dealt with by various High Courts elaborately and convincingly in their judgments. It is not necessary to go into the detailed reasoning given by these High Courts. However, we would like to extract the following discussion from the judgment dated 25.07.2014 of the Bombay High Court in ITA Nos. 201 and 308 of 2012 where this very aspect is answered .....

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2005 and complying with all the conditions of section 80IB(10) as it stood then, the assessee would be disentitled to the entire deduction claimed in respect of such housing project merely because he offered his profits to tax in the A.Y. 2005-06 and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction under section 80IB(10) available to a particular assessee would be determined on the basis of the accounting method follow .....

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er Ist April, 2005 or that the profits were offered to tax after Ist April, 2005 i.e. in A.Y. 2005-06 or thereafter. We therefore find no substance in the argument of the revenue that notwithstanding the fact that the housing project was approved prior to 31st March 2005, if the construction was completed on or after Ist April, 2005 or if the profits are brought to tax in the A.Y. 2005-06 or thereafter, the said housing project would have to comply with the provisions of clause (d of section 80I .....

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profits are brought to tax by the assessee. We have come to this conclusion only because we find that clause (d) of section 80IB(10) is inextricably linked to the date of the approval of the housing project and the subsequent development/ construction of the same and has nothing to do with the profits derived therefrom. We may hasten to add that if a particular condition si not inseparably linked to the date of approvfal of the housing project, different considerations would arise. However, we a .....

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quote the following passage from Commissioner of Income Tax, U.P. vs. M/s Shah Sadiq and Sons (1987) 3 Hon'ble Supreme Court 516 : "14. Under the Income Tax Act of 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses against profits made from that business in future years. The right of carrying forward and set off accrued to the assessee under the Act of 1922. A right which had accrued and had become vested continued to be capab .....

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by the 'savings' provision stand saves. But that does not mean that rights which are not saved by the 'savings' provision are exginguished or stand ipso facto terminated by the mere fact that a new statute repealing the old statute is enacted. Rights which have accrued are saved unless they are taken away expressly. This is the principle behind Section 6© of the General Clauses Act, 1897. The right to carry forward losses which had accrued under the repealed Income Tax Act .....

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these appeals, take correct view that the assesses were entitled to the benefit of section 80IB(10). As a result, these appeals fail and are hereby dismissed." 11. With reference to the condition of completion certificate from the Municipal Corporation, Bhopal, it was submitted before us that the provisions of section 80IB(10) of the Act are incentives for the benefit of persons of lower and middle income group. The IT Act does not specifically mandates or lays down any enforceable complian .....

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ore the completion certificate is obtained from the Municipal Corporation, as desired under this section. However, there is a provision that when the Commissioner has failed for 15 days after the receipt of the notice of completion to intimate his refusal to grant permission then the person can occupy such building. In such a situation, M.P. Municipal Corporation Act has to be read with the Income Tax Act. In the case of Surana Steel Private Limited vs. DCIT; 237 ITR 777, the Hon'ble Supreme .....

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er submitted that obtaining the completion certificate from the Municipal Corporation is beyond the control of the assessee. For this proposition, he relied on the decision of the Hon'ble ITAT, G-Bench in the case of ACIT vs. Surendra Developers. He submitted that asking for completion certificate when there is no mandate in the Income Tax provisions to enforce such compliance from the local authority then it is impossibility which has been put on the assessee. Therefore, the assessee cannot .....

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3) 84 DTR 383 (Pune) He also submitted that the date of completion of the housing project to be taken the date on which the completion certificate in respect of the housing project issued by the local authority, then it will lead to the absurdity. Since the assessee was allowed to complete the building by 31st March and if the assessee applies to the Municipal authority on 31st March itself then as per the provisions of Municipal Corporation Act, at least 15 days time is required for inspection .....

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project in all respects and applied for completion certificate and if the completion certificate is not issued by the competent authority then the assessee should not be penalized for his no fault. He relied on the following decisions :- (i) CIT Vs. Tarnetar Corporation (2012) 26 Taxman.com (ii) ACIT vs. Surendra Developers in ITA No.2743 to 2745/Del/2010 (iii) Hindustan Samuha Awaas Ltd. vs. ITO; ITA No. 945 to 950/PN/2010 (iv) ACIT vs. Girija Colonisers; 2417 to 2422/Del/2011 (v) M/s Vishnu Bu .....

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ation, it is the impossibility which the assessee cannot fulfill. Similarly, this aspect is beyond the control of the assessee. Therefore, considering various decision of the Hon'ble ITAT and High Courts, we decide this issue in favour of the assessee. 13. In the case of CHD Developers Ltd. vs. ACIT, Circle 3(1), New Delhi, wherein Hon'ble Delhi High Court has held as under :- "The assessee is expected to complete the project as per the approved plan at a particular point of time an .....

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ssee should not be penalized for the same unless and until some contrary facts are brought on record evidencing that the assessee contravened the conditions contained in the approval granted by such Competent Authority. As per sub-section (10) of section 80IB(10), the benefit will be hundred percent subject to fulfillment of certain conditions. However, this condition was substituted by the Finance (No. 2) Act of 2009 with effect from 01.04.2009 which has been further explained by sub-clause (ii .....

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d completed the construction well before 31st March, 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause (a) to section 88IB(10) links the completion of the construction to the BU permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial completion thereof is established on record, in a given case, .....

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legal. In ACIT vs. Surendra Developers in ITA Nos. 2743 to 2745/Del/2010 it was held as under :- "The ld. CIT(A), it is seen, has granted relief to the appellant on the basis of the fact that though the appellant had applied for completion certificate before the local authority6 in time, the said certificate was not issued in time by the local authority. Such issuance of completion certificate has been held and in our opinion, correctly so, to be beyond the control of the assessee." In .....

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local authority without any amendments or objects. Local authority has not raised any queries on the quality construction of the building or the completion of the same as per the plans approved by such authority. In such circumstances, in our opinion, the delay in obtaining the completion certificate on 10.10.2008 is certainly not attributable to the appellant and obtaining the said certificate before 31.03.2008 is beyond the control of the appellant. The appellant's job includes the comple .....

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2008. Therefore, the delay in grant of the said certificate is certainly not attributable to the appellant. Therefore, in our opinion, the appellant is not defaulter on this account and thus the A.O. has erred in denying the deduction u/s 80IB(10) of the Act. Accordingly, the order of the CIT(A) has to be reversed. Thus, the grounds raised in the appeal are allowed." Hon'ble ITAT, Delhi Bcnch in the case of M/s Girija Colonisers in ITA Nos. 2417 to 2422/Del/2011 has held as under :- &qu .....

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rojects were materialized on or before 31.03.2008. The Municipal authority has not pointed out any defect and irregularity in the appellant's application dated 26.11.2007 submitted for issuance of completion certificate of all the said projects. Therefore, in the light of facts found by the ld. CIT(A) and reasons given by him and respectfully following the aforesaid decision of ITAT, Pune Bench "B" in the case Hindustan Samuha Awas Limited (supra), we do not find any reason to take .....

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ject was completed before September, 2008 was filed. Since there was no practice of issuing the project completion certificate, therefore, it was held that it was not a condition precedent of filing the completion certificate for allowing deduction u/s 80IB(10) of the Act. 14. With regard to Developer vs. mere works contractor, we hold that the Finance (No. 2) Act, 2009 has introduced Explanation to section 80IB(10) with effect from 1.4.2001 wherein it has been provided as under :- "Explana .....

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contract the work is awarded at a fixed consideration. Thus, the assessee cannot be held to be a mere contractor. Further, the assessee has not only constructed the houses but it has developed the roads, electrical work and also water connection system in whole of the project. With regard to the agreement of construction of the houses and registry of land, we hold that the ITAT, Indore Bench, in the case of Paras Housing Private Limited; 22 ITJ 273, Indore Trib. has held as under :- "7. As .....

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cation of amount of plot and amount of finished work has been mentioned. We also found that builders are asking the buyers to pay the total amount of flat at different stages based on the progress of the project. It is evident from the agreements submitted before the Assessing Officer that entire cost of flat and other charges were demanded from the buyers within a period of two months which further indicate that the flats were already completed and the possession was handed over to the buyers i .....

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