TMI Blog2011 (5) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... p area of residential unit for the purpose of section 80IB (10) includes open terrace. 4. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) erred in observing that appellant firm has developed and constructed residential project on lands having survey numbers which do not form part of the development agreement. The Ld. CIT(A) ought to have appreciated that entire development of housing project was carried out strictly and exclusively on the survey numbers which form part of relevant agreement with societies. 2. The facts noted in the impugned order are that the assessee firm is engaged in the business of construction and consist of the following partners: (i) Safal Infrastructure Pvt. Ltd. 50% (ii) Safal Constructions Pvt. Ltd. 25% (iii) Rajesh Brahmbhatt 12.5% (iv) Rupesh Brahmbhatt 12.5% It was informed that this was the first year of claim of deduction u/s 80 IB(10)of the IT Act. It was stated that the deduction had been claimed on the project named Safal Parivesh , s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and findings together in Para 5 to Para 28 in the impugned order are reproduced as under: 5. Ground No.2 pertains to the disallowance of deduction of ₹ 9,73,02,426 u/s. 80IB (10). Perusal of the assessment order shows that as per reasons summarized in Para 3.37 of the assessment order the AO denied the deduction on the ground that the appellant was not both a developer and a builder. That it was not the owner of the land as approvals for construction etc. were not granted by AUDA to it. That it was merely a contractor who did construction work as per the agreements with the land owners - the societies. That the assessee had not sold any unit to the purchaser but the Societies had executed the sale deeds. That the assessee was merely a works contractor. In support of disallowance on the ground that the assessee is a works contractor the AO has relied upon Hon'ble Supreme Court decisions mentioned below: 1. HAL Ltd. vs. State of Orissa (SC) 55 STC 327 2. Tamilnadu vs. Anandam Vishwanatham 1 SCC 613 Most importantly the first reason which has been mentioned for disallowance by the AO is that the assessee exceeded 1500 sq. ft. built-up area limit for which ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the name of Vaishnodevi Cooperative Housing Society Ltd. Vibhag -6. He has stated that no proof of permission in the name of Sherin Cooperative Housing Society Ltd. was furnished in the appellate proceedings when asked the ld. ARs stated that the word used in the Development Permission is Jai Vaishnodevi Cooperative Housing Society Ltd. Vibhag-6 and other. According to them this word other included Sherin Cooperative Housing Society Ltd. In my opinion this explanation does not suffice specially when the original Jai Vaishnodevi Cooperative Housing Society Ltd. had been sub-divided into several parts and it is with part 6 that the appellant is dealing (please refer to the comments in para 3.3 of the assessment order. There is part-7 also. Sherin Cooperative Housing Society Ltd. is an independent society the whereabouts of which had not been explained. The Development permission is not in Sherin s name, and common sense interpretation of this word other in the permissions is that it might include the other parts of Jai Vaishnodevi Cooperative Housing Society Ltd. The point is should the development agreement entered with Sherin Cooperative Housing Society Ltd. be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 14.5.2008 given to Chairman, Shri Jai Vaishnodevi Cooperative Housing Society Ltd. Vibhag-6 mentions the following Revenue Survey Numbers: 937 / 5 paiki, (though development permission had been taken not for 1/5th part of this land but for full 937) 938 794/1, 779, 896, 885 /1, 935, 807, 817, 895, 794/2 803 /1/3, and 957 /1 . 11. Though Development permission shows revenue survey number 933 but no BU permission has been given with respect to construction on this 933. Development permission is for 937 but BU permission is for 1/5th part of 937 only. 12. From para 8 and 9 above it is clear that revenue survey numbers of land which had been entered into by the appellant through two Development agreements do not mention following survey numbers of land on which the appellant had constructed residential units and has claimed 801B deduction: 1 There is no Development Agreement with respect to land Survey No, 896. 2 There is no Development Agreement with respect to land Survey No.885 /1. 3 There is no Development Agreement with respect to land Survey Number 935, 4 There is no Development Agreement with respect to land Surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the purchase of the survey numbers 885/1, 935, 807, 895, 79412 and carried out construction without owning the land, without funding the cost , without authority from the cooperative housing society as they do not find mention even in the two development agreements. (This point has been elaborated from para 25 to 28 below). 17. Now let us see whether the condition stipulated in clause (c) of Section 80IB(10) is fulfilled by the appellant. Clause (c) states that the residential unit should have a maximum built-up area of 1500 sq.ft. This section was introduced for the benefit of lower income group to facilitate them to own small houses / flats which they could afford. 18. The AO has observed in para 3.8 of the assessment order that the assessee has violated this condition - 80lB(10)(c) - because on 12th floor in Block numbers A, B, C D flat numbers 1201 in each block had additional space in the form of independent terrace. The AO noted that the assessee has sold exclusive terrace rights to the members through the sale deeds. According to the AO the additional space provided was actually in the nature of balconies for exclusive use of the buyers of the flat number 1201 in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the additions / alterations were made by the buyers of the units only which was confirmed by them to the DVO. 22. After getting verifications made by the DVO of the private terraces attached to the flats in the project it is clear that flat numbers 1201 in various blocks (A, B, C and D) exceeded 1500 sq.ft. built-up area limit. The measurements in square feet lifted from the DVO's annexure enclosed as Annexure 3 of this order are reproduced below: AREA STATAMENT OF PRIVATE TERRACES ATTACHED TO THE FUVT NO. 1201 ( SAFAL PARIVESH AHMEDABAD) Built-up area of flat No. 1201 in sq.ft. as per measurement s. No Flat No. Biock No. Floor Level Flat area Additional extended Private open terrace Total area (surrounded by 3 feet high parapet wall and 6 inch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reements entered by it with the two cooperative housing societies. Even as per Statement of facts (page 6) filed with the appeal the funds were provided by the appellant to the two societies for only following survey numbers: Survey No. of Lands Amount Rs. SHERIN 803/1/3 779 888 1,02,08,853 817 937 JVC 938 957/P 794/1 30,76,675 Page 5 of the Statement of facts states that the appellant's partners funded the two societies for purchase of additional land as under: Survey No. of Lands Amount Rs. JVC 938 24,67,640 957 IP 6,76,210 SHERIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocieties. Not just this the appellant did not have any BU permission for land revenue survey number 933 on which it had carried out construction and claimed deduction and is thus found violating the condition stipulated in clause(a) of section 80IB(10) as clarified in para 16 above. Also because certain flats as mentioned in para 22 above have been found exceeding 1500 sq.ft. built-up area limit for which the appellant is found violating the condition stipulated in clause (c) of section 80IB(10). 4. The learned Counsel for the assessee reiterated the submissions made before the authorities below. He has submitted that the assessee has entered into development agreements with Jai Vaishnodevi Cooperative Housing Society Ltd. (in short JVCHSL) PB- 80 to 91 on dated 27-5-2006 and also with Sherin Cooperative Housing Society Ltd. (in short SCHSL) on dated 27-5-2006 PB 93 to 104 of the paper book for development and construction of residential project known as Safal Parivesh and under such agreements, the assessee has purchased substantive development rights which includes all other rights for ₹ 30,76,675/- and ₹ 1,02,08,853/- respectively and the same is nothing but land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other person. The assessee as a developer shall get the permission for construction and the societies shall join the developer for such applications and approval shall be obtained from AUDA. The assessee would be entitled as a developer of the sale proceeds on sale of the residential units in the property in question. The schedule of the land bearing the survey numbers have been mentioned at the end of the development agreements. Thus, the assessee has incurred all the expenditure for common facilities and common development like light, water sewerage, bore well roads etc. The assessee has also received on its rights the sale proceeds from the persons to whom housing units are sold. Copies of the building plan sanctioned by AUDA are filed at PB-121 to 136 through which sanction is granted to construct 324 residential units. The same is dated 18-7-2006. He has submitted that in the permission for development by AUDA the name of one of the societies and others along with the name of the assessee is mentioned and address of the society is also mentioned. He has submitted that the word others along with the name of JVCHSL along with address of the assessee is mentioned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he flat occupants might have made additions which are also confirmed by the DVO in his report PB-293 and for that matter the assessee is not responsible. Even, the owners of the flats have given confirmation with regard to the fact that additional constructions have been made by them after receiving possession from the assessee copies of which are filed at PB -300 to 306. Therefore, additional construction carried on by the occupants cannot be taken against the assessee. Even the area of open terrace cannot be included in built-up area which is also decided by the ITAT Ahmedabad Bench in the case of M/s. Amaltas Associates (supra). He has submitted that the name of the assessee is mentioned as seller with the societies in the sale deeds copies of which are filed at PB-181 onwards in which complete details and history of development made by the assessee have been mentioned and in the sale deeds also the area of residential units has been mentioned and that price has been made to the assessee as a developer. The learned Counsel for the assessee, therefore, submitted that since the residential units have been constructed as per building plan sanctioned and the built-up area was less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out of total land of 32550 sq. m., the assessee intended to develop only land measuring 17938 sq. m. (11704.22 sq. m. plus 6233.78 sq. m) of the land only and rest of the land belonged to some other parties. The details of land developed by the assessee and others is also mentioned in the written synopsis clarifying the point raised by the learned CIT(A). He has, therefore submitted that there is no discrepancy as is noted by the learned CIT(A). He has submitted that since the assessee claimed deduction of the housing project constructed on the land measuring 17938 sq. m. which is also mentioned in the sale deeds, therefore, there is no discrepancy at all. He has, therefore, submitted that since the assessee satisfied all the conditions laid down u/s 80 IB (10) of the IT Act, therefore, the issue is squarely covered by the decision in the case of M/s. Amaltas Associates (supra). He has further submitted that since the assessee claimed deduction which is beneficial provision provided under the IT Act for development of housing units, therefore, liberal approach has to be adopted while considering the above issue. He has relied upon the decisions of the Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than infrastructure development undertakings.--(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections 3(3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. xxxx xxxx xxxx xxxx (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent. of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other residential units. Before proceeding further, it would be relevant to mention the facts considered in the case of Radhe Developers and Shakti Corporation (supra) decided by the ITAT, Ahmedabad Benches. In the case of Radhe Developers (supra), the assessee claimed deduction under Section 80IB(10). However, the AO disallowed the claim on the ground that (i) the assessee was not the owner of the land, and (ii) each approval was also not in the name of the assessee and it had acted merely as an agent/contractor for construction of residential house. The claim was denied to the assessee. The Tribunal considered the averments and material on record and held as under: 27. A bare reading of these provisions of s. 80- IB(10), as they stood in the years under consideration, the requirements for claiming deduction for housing projects are that (i) there must be an undertaking developing and building housing project; (ii) such housing project is approved by the local authority; (iii) the development and construction of housing project has commenced on or after 1st Oct., 1998; (iv) the housing project is on a size of a plot of land which has minimum area of one acre; and (v) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement has been entered into for development and building housing project; or be the assessee a contractor for developing and building housing project or an owner of the land. The word development means the realization of potentialities of land or territory by building or mining. Accordingly, it can be safely said that a person who undertakes to develop real estate by developing and constructing a housing project is an eligible undertaking; developing and building of housing projects within the meaning of s. 80-IB(10) of the Act. In the present case in hand, the landowner has not made any conscious attempt to develop the property except ensuring their rights as landowner so that the sale value of the land could be realized to them as per the terms of Agreement to Sale and the Development Agreement . The landowners, no doubt, have not thrown themselves into development of property. It is only the assessee who is developing the property. Throwing itself into the business of development and building of housing projects by taking all risks associated with the business by engaging architects, structural consultants, designing and planning of the housing schemes, payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case there was, definitely, a dominion of the developer over the land to the exclusion of others inasmuch as possession of the land is given to the developer by the land owners to carry out the construction activity of the housing project. The assessee developer has complied with all the conditions as provided under s. 80-IB(10) of the Act, so as to claim deduction. The assessee has also passed on the part consideration for acquiring the land through an Agreement to sale and in view of the provisions of s. 2(47) r/w s. 53A of the Transfer of Property Act, 1882, the assessee has completely performed his part of the contract and developed the housing project and transferred the flats/tenements to the buyers in view of Agreement to sale as well as Development agreement . It shows that the assessee was in full possession of the land for the development of housing project and has carried out all the activities of a complete housing project by taking all risks associated with this business. The assessee is engaged in complete infrastructure including engaging architects, structural consultants, designing and planning of the housing schemes, payment of development charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e development and also to execute the documents whenever it is required by the developer. The assessee has also handed over the physical possession to the builder for carrying out the development of the project. The landowner does not have any right, interest, title in the development so carried out except to the extent he has to receive the consideration from the assessee. The assessee is entitled to publicize the project, print brochures, etc., and can sell the project at its own right. All the expenses have to be incurred by the assessee for carrying out the construction, etc. The landowner has to do nothing except to the extent he has to receive consideration from the assessee. His motive is not to develop, construct or carry on the business as a builder or developer. Practically no right in the land remains with the owner. For whole practical purpose the assessee acquired dominant right over the land and he can deal with the land in the manner in which he may like. Thus, the terms and conditions entered into, in our opinion, give all dominant control and rights over the land to the assessee. The assessee, in our opinion, will be constructing the building at its own cost and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement shall have to be done by the assessee in respect of the development of the property in question. It is further provided that the assessee shall provide parties/members to whom sale is to be made by enrolling the members. The assessee shall accept all the payments from the members/buyers. The learned counsel for the assessee filed details of the sale proceeds received from the parties of 110 units in the assessment year 2005-2006 and 2006-2007. It would support the case of the assessee that the assessee received entire sale consideration from the members/buyers after completion of the development and building housing project. Agreement further provides that the assessee shall provide payment for construction, engage architect, engineers/site supervisors and shall also obtain all permission from the AUDA. The assessee shall make all financial arrangements for the purpose of implementing housing project and shall execute all deeds in this behalf. The agreement further provides that the assessee shall recommend the names of the members for allotment and land shall remain open for construction for the assessee and the assessee shall have all rights for using of all the terrace a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The assessee was entitled to enroll the members for selling the units within its own rights. All the expenses have to be incurred by the assessee for carrying out the construction etc. The motive of the real owner was not to develop, construct or carrying out any business as a builder or developer and practically no right in the hands of the real owner in this behalf. With all intents and purposes, the assessee has acquired dominant right over the land and the assessee could deal with the land in the manner in which the assessee might have liked. The terms and conditions entered into between the assessee and the society as per the development agreement and agreement to sell provided all dominant control and rights over the land to the assessee and the assessee would be developing and constructing the housing project at its own cost and would remain owner of the building without any interference from the land owner. The agreement in question did not provide that the assessee would be working as a contractor or agent on behalf of the land owner. The agreement in question would not be regarded to be the joint-venture or collaboration agreement. It was the agreement for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. The learned counsel for the assessee provided from different dictionaries the definition of balcony which reads as under: 1. (Arch.) A platform projecting from the wall of a building, usually resting on brackets or consoles, and inclosed by a parapet; as a balcony in front of a window. Also, a projecting gallery in places of amusements; as, the balcony in a theater. [1913 Webester] 2. 1): an upper floor projecting from the rear over the main floor in an auditorium 2): a plotform projecting from the wall of a building and surrounded by a balustrade or railing or parapet. Source : Word Net (r) 2.0 3. 1(Arch.) A platform projecting from the wall of a building, usually resting on brackets or consoles, and inclosed by a parapet; as a balcony in front of a window. Also, a projecting gallery in places of amusements; as, the balcony in a theater. Sources: Webster s Revised Unabridged Dictionary (1913). 11. When the above meaning of balcony is taken into consideration with the definition of built-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the assessee for refusing relief under Section 80IB(10) by the authorities below. Since we have held above that the open terrace is not part of balcony/varandh therefore according to the submissions of the assessee, the built up area of the assessee was within the prescribed limit. Therefore, there is no need to give further finding with regard to alternate claim of the assessee. Considering the facts of the case, in the light of the above decisions, we are of the view that the assessee fulfilled the conditions and requirement of the Section 80IB(10) of the Act, therefore, the claim of the assessee for deduction should not have been denied by the authorities below. We accordingly, set aside the orders of the authorities below and direct the AO to grant deduction to the assessee under Section 80IB(10) of the Act as claimed by the assessee. 12. In result, the assessee s appeal is allowed. 7. We have examined the facts of the present case in the light of the decision in the case of M/s. Amaltas Associates (supra) and find that the assessee has satisfied all the requirements of section 80 IB (10) of the IT Act in the matter. The learned Counsel for the assessee referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one of the societies as per the terms of the permission for development for the same area and for the same number of residential units. When the 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 that there is no objection from the side of the societies. Therefore, it is clear that the building plans have been sanctioned in respect of the land acquired by the assessee through the agreement to sell and the development agreements in question. The details on record supports the case of the assessee that the assessee has undertaken the entire development of the housing project for which the plans were approved and permission to use was obtained in respect of the same property in question, the assessee incurred all the expenditure for development of the housing project and received the entire sale consideration from the buyers. It would, therefore, prove that the assessee undertaken to develop the building housing project in question. These facts would show and prove that the assessee made the payments of sale consideration of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of 4 sale deeds at PB- 181 to 269 of the paper book in which the constructed area by the assessee was below 1500 sq. ft. which is supported by possession-um-declaration letters of the developers filed at PB-295 to 298 of the paper book. According to the assessee the entire construction of the units referred to are made by the developer as per approved plan and only on that basis Building Use permission has been granted which was below 1500 sq. ft. After giving possession on sale to the occupants, the occupants might have made some additions which are also confirmed by the DVO in his report PB-293. Therefore, the assessee would not be responsible for the later development after receipt of sale consideration. Even, the owners of the flats who have purchased the residential units from the assessee have given confirmation for raising additional construction after receiving the sale consideration by the assessee. Copies of the confirmations are also filed in the paper book. Therefore, additional construction carried out by the subsequent flat owners cannot be taken into consideration against the assessee for not complying with the provisions of law. With regard to issue of inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the owner of the land if their lands have been encroached by the assessee. However, the AO has not made out any such case against the assessee. Moreover, requirement of section 80 IB (10) of the IT Act is that the assessee had undertaken development and building housing project which is approved by the local authorities and that construction commenced and completed within the stipulated period within the prescribed area. The points raised by the authorities below are irrelevant as against specific requirement of section 80 IB (10) of the IT Act. The claim of the assessee for deduction has been disallowed on irrelevant consideration which has not been provided under the above provisions. The learned Counsel for the assessee has been able to explain the discrepancy if any noted by the authorities below with regard to the survey numbers. It is not in dispute that the assessee being a developer constructed the housing project as per the development agreements by incurring total expenditure and received the sale consideration. Therefore, the assessee is able to satisfy the requirement of section 80 IB (10) of the IT Act. We may also note that once plan is approved by AUDA on p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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