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2015 (9) TMI 606 - ITAT AHMEDABAD

2015 (9) TMI 606 - ITAT AHMEDABAD - TMI - Eligibility of deduction u/s 80IB(10) - CIT(A) confirmed the action of the AO by observing that the society, Punit (Motera) Cooperative Hsg. Society Ltd., Ahmedabad was the sole owner of the land and the assessee has not incurred expenses on purchases of cement, steel etc. and that the assessee constructed and sold shops in the scheme, the built up area of which exceeds limit of 2000 sq.ft prescribed in clause (d) of section 80IB(10) with respect to shop .....

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ent, the assessee was entitled to receive all the expenditure incurred for materials and 25% above that amount, apart from labour charges at ₹ 700/- per square feet. Thus, the agreement for development was cost-plus-method. The assessee instead of debiting the cost of material in the profit & loss account and crediting the profit & account with cost, and 25% thereof has credited the profit & loss account with only 25% of the cost of material and set off the expenses incurred for cost of ma .....

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the project was approved by the Ahmedabad Urban Development Authority vide permission dated 11.6.1999, which was before the date of amendment to section 80IB(10) w.e.f. 1.4.2005. Therefore, this amendment is not applicable to the project under consideration, in view of the above quoted decision of the Hon'ble Gujarat High Court. Therefore, we hold that for the above cited reasons, the AO was not justified in not allowing deduction under section 80IB(10) to the assessee for the assessment years .....

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ders of the CIT(A)-XV, Ahmedabad dated 31.1.2011 and 20.6.2011. Since issue involved in these appeals is identical in all these assessment years under appeals, we proceed to dispose of all these appeals by this consolidated order. 2. In these appeals, the common ground taken by the assessee reads as under: "1. The ld.CIT(A) erred on facts in determining the land had not been practically purchased by the appellant, where the appellant had submitted the land investment deed and nexus of land .....

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nder section 80IB for the assessment years 2000-01, 2001-02, 2002-03 and Asstt.Year 2006-07 of ₹ 11,24,990/- each and for the Asstt.Year 2003-04 & 2004-05 of ₹ 21,86,870/- each, on the ground that the assessee has received development charges at the rate of 25% of the total receipts from the members and labour charges at the rate of ₹ 700/- per sq.yard. According to the AO, deduction under section 80IB is allowable to the assessee to carry on the business of development and .....

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e sole owner of the land and the assessee has not incurred expenses on purchases of cement, steel etc. and that the assessee constructed and sold shops in the scheme, the built up area of which exceeds limit of 2000 sq.ft prescribed in clause (d) of section 80IB(10) with respect to shops constructed. 5. Before us, the AR of the assessee submitted that the issue was squarely covered by the decision of this Bench of the Tribunal in the case of sister concern of the assessee, M/s. Skyland Developer .....

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Further clause no.(3) provides that the assessee will collect the land amount, construction amount from the booked members as fixed by the assessee, and on receipt of full amount, possession of constructed unit is to be handed over to the members by the assessee. Where the amount of land and construction was not received, the assessee had the right to hold the possession of the property and construction on it, and that the society will not interfere in it. Further, it also provides that the soc .....

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e to be constructed on the said land for members, and they have to pay amount of land and construction as decided by the assessee from time to time. The Society was to give additional amount to the assessee for obtaining electricity connection from AEC, cost of installation of line, legal charges etc. Further clause (6) of the agreement provides that the assessee was to appoint engineer for the scheme, and enter into agreement with the engineer. It further provides that for the purchase of land, .....

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all have right of construction, total scheme book, development, organization of the said scheme, to place a revised plan or to revise the plan for additional construction to be made in future on receipt of the FSI. The assessee was to give receipts for payment, to give allotment letter and to give possession to members, and also have to remove defaulting members, and cancel their allotment. Further, clause (16) provides for payment of development charges to the assessee on the basis of units boo .....

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uthorities. 7 We find that a similar issue had come up before this Bench of the Tribunal in the case of M/s.Skyland Developers (supra) wherein the Tribunal held as under: "4. The Authorized Representative of the assessee filed before us a copy of the consolidated order of this Bench of the Tribunal passed in the case of the assessee itself in ITA Nos. 1086 & 1087/Ahd/2007 in the Assessment Year 2002-03 and 2003-04 dated 11.03.2008 and submitted that the disallowance of deduction u/s. 80 .....

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urther submitted that the Revenue has not filed any further appeal to the High Court against the order of the Tribunal for Assessment Year 2002-03 and 2003-04. Thus, the issue has attained finality and therefore, following the order of the Tribunal in the present years of the appeal also, deduction u/s. 80IB(10) should be allowed to the assessee. 5. The Departmental Representative could not controvert the above submissions of the Authorized Representative of the assessee. 6. We find that the Tri .....

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cumstances as taken into consideration by his predecessor in 2000-01 assessment year in his order dated 27.1.2006 needs to be followed. Being also of the view that the deduction u/s 80IB(10) which has been claimed in continuity with the earlier years, the facts and circumstances continued to be the same, he directed the A.O. to allow the deduction u/s 80IB for the assessment year under consideration also. For ready reference, we reproduce the specific finding addressing the facts and circumstanc .....

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During the year in appeal the appellant has carried out labour contract work and supervision work for construction of flats for the three Co. Op. Housing societies i.e. Pink City (Ranip) Co. Op. Housing Society Ltd., Kailasnath (Ranip) Co. Op. Housing Society Ltd. and Prakarsh (Ranip) Co. Op. Housing Society Ltd. I find that the appellant has satisfied all the three conditions required for deduction u/s. 80IB of the I. T. Act. The appellant has provided the funds to the societies for acquiring .....

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velopment and construction of the scheme as per the approved plan. The appellant had also given advertisement in local newspapers to attract the members for booking. The appellant had prepared ground water tank, approach road and construction lift at the site of housing project. The appellant had appointed the RCC contractors and other labor contractor and experts to carry out the construction and development works. The appellant had also purchased the building materials and made payments to the .....

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t the work of construction. I agree with the contentions of the Authorised Representative that in a normal course of construction business, for erecting the building as per plan, the society has to entrust such very difficult task to experienced contractor/developer, as the members of society do not have any knowledge or expertise in construction and development work and for effective and timely completion of scheme such society engaged reliable and experienced developer/contractor and labour co .....

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s also purchased by the society. Hence for such work, development charges have been fixed at the rate of 23% in addition to ₹ 700/- for labour charges, which has been fixed in the guise of profit and such type of agreements are common in the construction business. Further the profit declared by the appellant is substantially higher than the presumptive profit as per section 44 AD of the Income-tax Act. If members could not be booked for the vacant premises, then such vacant premises are to .....

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er. On a consideration of the totality of facts, I arrive at the conclusion that the appellant has actually carried out the work of development and construction, as there was no other person who has done the work, and therefore, the appellant is entitled to deduction u/s. 801B of the I.T. Act. Further it has been held by ITAT, Mumbai in the case of Patel Engineering Ltd. vs. DCIT (2004) reported in 84 TTJ (Mum.) 646/94 ITD 411 ™ that merely because State Government paid for development of .....

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er is directed to allow deduction u/s. 80IB(10) to the appellant." 7. In the light of the above facts both the parties have been heard although the Ld. D.R. placed reliance on the assessment order, however, confronted with the order of the Tribunal in the case of Radhe Developers which has consistently been followed by the Ahmedabad Bench in the case of contractors who have been held to be entitled to deduction u/s 80IB which has been denied solely on the ground that the land was not owned .....

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e departmental appeal in the light of the above facts and circumstances and position of law. Thus, since the facts and circumstances remain identical and no distinguishing fact despite specific opportunities could be pointed out by the Department, respectfully following the order of the Ahmedabad Bench, we dismiss the departmental appeal." 8. In the result, appeal in ITA No. 1086/ Ahd / 2007 by the Department is dismissed." 7. Keeping in view the facts and circumstances of the case, as .....

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u/s. 80IB(10) to the assessee for ₹ 17,48,939/- in Assessment Year 2000-01, ₹ 35,53,660/- in Assessment Year 2001-02 and ₹ 9,56,170/- in Assessment Year 2006-07." 8 We, thus, find that the facts in the present appeal are similar as were in the case of M/s.Skyland Developers (supra) except that in the instant case, it has also been alleged by the Revenue that the assessee has not debited purchase of cement, steel etc. in the profit & loss account. Thus, we find that it .....

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t & account with cost, and 25% thereof has credited the profit & loss account with only 25% of the cost of material and set off the expenses incurred for cost of material with corresponding receipts. In our considered view, simply because of the above presentation of account, which may not be fully correct, the assessee cannot be denied deduction under section 80IB, if the assessee is otherwise eligible for the same. As we find that apart from the above, other facts involved in the insta .....

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ng project or 2000 sq.feet, whichever is higher. The issue now stands decided by the Hon'ble Gujarat High Court in the case of Manan Corporation Vs. ACIT, (2013) 356 ITR 44 (Guj) wherein it was held as under: The object of section 80-IB(10) of the Income-tax Act, 1961, was essentially to provide incentive to undertakings in developing and building housing projects. Section 80-IB(10) originally indicated 100 per cent. deduction on the profits derived from housing projects approved by a local .....

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ousing project should not exceed 3 per cent. (with effect from April 1, 2005) of the aggregate built up area of housing project or 5,000 sq. ft., whichever is higher or 2000 sq. ft., whichever is less from April 1, 2010. The amendment could not be held to be retrospective as there was no explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of argument that it is to be read by implication that does not appear to be reasonable. A taxing statute granting i .....

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e deduction in respect of section 80-IB(10) of the Act would be available on year to year basis where the assessee showing profits on partial completion or on the year of completion of the project. From a reading of the instruction, it can be also said that the Government being aware of both the accounting methods has expected either of them to be followed in cases of individual assessees. However, in the post-amendment period, strict adherence to the completion period of four years is insisted .....

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nd completed prior to the insertion of the amended provision of section 80-IB(10) of the Act with effect from April 1, 2005. The Assessing Officer denied the deduction on two counts, namely, that the assessee failed to carry out its obligation necessary for claiming such deduction and that the assessee violated the condition laid down under the provision. The principal objection was of non-fulfilment of the condition of limitation of built up area being more than 1,500 sq. ft and its ratio to co .....

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