TMI Blog2016 (3) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... er person and assumed all risks that are assumed by a developer, then the assessee was entitled to deduction under sec.80IB of the Act. - Decided in favour of assessee. - ITA Nos. 1109 & 1113/Mds/2014 - - - Dated:- 5-2-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri A.S.Sriraman, Advocate For The Respondent : Shri A.V.Sreekanth, JCIT PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by different assessees are directed against different orders of the C.I.T.(Appeals) dated 25.2.2014 for the assessment years 2009-10 and 2010-11. Since, common issues are involved in these appeals, these are clubbed together, heard together and disposed off by this common order for the sake of convenience. 2. First, we take up the appeals in ITA Nos.1109 1113/Mds/14 in the case of Malles Rajarajeshwari. The facts of the case as narrated in ITA No.1109/Mds/14 are that the assessee claimed deduction u/s.80IB(10) of the Act on its profits from the business, which is denied by the AO as under: 3(a) Shri U.Chandraprakasam Smt. U. Nagamalleswari wlo Sri U Chandraprakasam, have purchased the piece and parcel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or buying the plot of land in the layout -A V GARDENS (Phase I) from the owners of plots Shri U.Chandraprakasam Smt.U.Nagamalleswari. The construction agreement is for semi Independent Duplex House comprised of Ground floor with super built up area which varies according to the extent of plot of land bought by the buyers. To some buyers to whom the whole plot is sold instead of half plot and it constructs an independent house instead of semi independent duplex house. In those cases the built up area exceeds 1500 sq.ft. 3 (f) The assessee was requested to file a copy of approval granted by the concerned authority for the project and completion certificate of the project. In response the assessee filed a copy of approval obtained for a residential house in a plot No.26 /5.No3/2B3 3/284. The same was obtained on 07/3/2007. The assessee further informed that he has obtained as much building plan approvals as the number of plots Sold. As far as the completion certificate, the assessee informed that the project is ordinary building category with Ground Floor plus 1 for which completion certificate is not mandatory. 3(g) The intention of the assessee firm as per its own ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing projects and the financial risk. Thus, he opined that the activity carried out by the assessee will be that of a works contract and thereby confirmed the finding of the A.O. Against this, the assessee is in appeal before us. 4. The ld. AR submitted that the assessee is a partnership firm engaged in the business of property development and for the Assessment Year under consideration, the assessee had claimed deduction u/s 80 IB (10) of the Act in the original return of income amounting to ₹ 40,11,676/- which return of income was revised later in restricting the claim of the said deduction at ₹ 32,91,580/-. According to the ld. AR, the finding of the Assessing Officer to reject the claim of deduction is on the method of execution of the project under consideration and on the analysis of the facts of the case. Further, the ld. AR submitted that the Assessing Officer wrongly concluded that the assessee had not developed a housing project as understood in the provisions granting the relief under the Act. 4.1 The ld. AR. also submitted that the partners of the assessee after purchase of the land as well as after getting the approval for developing a housing projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a VAO or a Dy. Director of Town Planning is not a local authority. Hence the question now boils down to whether the approval obtained by the assessee was for a housing project. AO himself has admitted that assessee had produced a certificate Dt. 2nd Feb., 2005 from the VAO, but he rejected it on the reasoning that VAO was not an authority for issuing a certificate of approval. In any case paras reproduced above, from the letter of Dy. Director, Town Planning would show that such approval was for construction in the plots. 4.6 It is also submitted that applicant got sanction for building from local panchayat. Pursuant to this, the individual owners to whom plots were given had obtained sanction for constructing the units, and constructions carried out by the assessee. The approved layout shows the bifurcation of the site to various plots, areas earmarked for shops and houses. All these would lead to an irresistible conclusion that the project had the approval of a local authority, and each individual house was only part of a whole. The ld. AR also relied on another decision of its Coordinate Bench in the case of Deputy CIT vs. S.Ravi in I.T.A.Nos, 1784 to 1786/MDS/MAD/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in its writ order has dealt with only the writ application filed by the assessee against the order of the Tribunal dismissing the Miscellaneous Petition filed by the assessee. The Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the High Court in the said case was that writ petition against order under s. 254(2) cannot be rejected on the ground of availability of alternate remedy. The Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under s. 80-IB(10) or not. The Court clarified that it was still open for the assessee to appeal against the finding of the Tribunal on merits of the issue in appeal before the High Court permitted under s. 260A. Therefore, it is premature to hold that the order of the Tribunal, Chennai Bench in the case of Asstt. CIT vs. Viswas Promotors (P) Ltd. has been upheld by the Jurisdictional High Court. Where the Jurisdictional High Court has dismissed the appeal against the order of the Tribunal holding that no substantial question of law arises, the said de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(10) of the Act was rejected on the reason that the assessee has undertaken the works contract and developed the housing project. According to ld. DR, the land is not owned by the assessee-firm. It is seen from the facts that Shri U. Chandraprakasam Smt. U. Nagamalleswari formed partnership on 28.3.2007 under the name and style of M/s. Malles Rajarajaeswari . Before the formation of this firm, the above two partners purchased the vacant land measuring 44627 sq.ft. on 28.2.2007 situated at Plot Nos.1-6, 19/24, 25-33 and 36 to 43 in Survey Nos.33/283 and 3/284 1 50 24 in AV Gardens Mugalivakkam, Chennai 116, forming part of the approved lay out. Shri U.Chandraprakasam Smt.U.Nagamalleswari, in individual capacity sells half the undivided share of a plot/ or entire plot in the already approved layout ranging from a minimum of 750 sq.ft. to 1590 sq.ft. and also undivided share in common area to the extent of 140 sq.ft. to 161 sq.ft. together with share of luxury amenities to the extent of 50 sq.ft. to number of buyers. The luxury amenities such as swimming pool, community hall etc, are common to the layout owned by M/s. Malees Rajarajeswari and other separate adjacent layout own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he buyers of the plots. There was registration of sale of plots of land and there was no registration of sale of house in favour of the buyers. The houses were constructed as per the construction agreements signed by the buyers of the plots and were handed over to them on completion certificate. For that there was no approval from the local authority for the project as a whole i.e development of residential plots and construction of houses thereon. 6.6 On perusal of the copies of sale deeds of the plots of land and the construction agreements signed by the buyers of the plots of land, it is seen that the partners of the firm sold the plots separately and thereafter, the assessee firm undertaken construction of the houses in those plots after obtaining building plan approved in the name of individual plot owners. 6.7 Thus, the landed property, in this case is owned by the partners of M/s. Malles Rajarajeswari, and there was duly approved lay out in their names. After formation of the firm, the firm entered into an construction agreement with prospective buyers to construct the houses as approved plan. Now, the question is whether any works contract is involved. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter into construction of flat also. The contention of the State Government was that when the builders sold the fully constructed flats then stamp duty has to be paid for the land as well as the flat. And to avoid stamp duty on the value of the building, the individuals, who purchased the flat entered into an agreement of sale of undivided share of land and simultaneously entered into an agreement for construction of flat for him. Therefore, it was contended before the Kerala High Court that it was a works contract. The Kerala High Court, after considering an identical agreement as entered into in the case before us found that it is not a works contract. The Kerala High Court further found that the agreements were so made to appear the transaction is one of works contract, but in fact it is not a works contract. 6.8 In the case before us, the assessee entered into construction agreement with the prospective buyers, who has no choice of giving the construction to another builder and thereafter, the assessee constructed the building as per the approved plan and provided various amenities common to all people. Therefore, looking into the entire transaction, as such, it is a developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilt-up area for the sale of undivided share of land transferred to the buyer. The said clause also fixes the ceiling as to the consideration, which would be paid to the owner, namely, at ₹ 11,51,94,000. The clause in the agreement further pointed out that the builder has to enter into a builder agreement with the proposed purchaser and it is open to the builder to fix such rate per square foot for construction of the area as it deems fit, over which the owner has no claim at all. The builder has to pay the specified cost of the land on the undivided share of sale in favour of the purchaser to the owner, pro rata to the built-up area. A reading of the agreement of sale with the purchasers further points out that the builder's agreement was entered on the very same day with the assessee. Thus, seen in the background of the data available as regards the date of sale, the clause in the agreement between the owner of the land and the assessee and the sale agreement with the prospective purchasers, it is evident that what the assessee had undertaken is not a mere construction, but developing and constructing of a project, which qualifies for a deduction under section 80IB. As ..... 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