TMI Blog2011 (5) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The only issue involved in the present appeal is regarding deduction claimed u/s 80 IB (10) of the IT Act. The AO disallowed the claim of the assessee on the following grounds: (1) The assessee is not owner of the land. The land was purchased by the Cooperative Housing Society. (2) The assessee had not taken the approval of housing project from the local authorities. The approval vide letters dated 30th December, 2002 and 31st December, 2002 were issued by Ahmedabad Municipal Corporation (in short AMC) to the society (i.e. Uthkantheswar Cooperative Housing Society Ltd.). (3) The term developer and builder would mean that the person who is eligible for the tax benefit would be the person who is involved in the project from purchase of the land to the sale of final products i.e. house/flats. (4) The assessee firm has acted merely as an agent and a contractor as it has entered into construction agreement with the land owner. (5) No assessee can carry on business of undertaking development and building housing project without owning land. The land is an integral part of a housing project. A person who does not have land cannot be treated as a developer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The AO denied deduction u/s 80 IB (10) of the IT Act on the ground that date of completion of the housing project was 19th March, 2009 though the certificate which is building use certificate should have been obtained by the assessee by 31-03-2008. It was explained that the assessee firm applied for BU permission within time but due to technical internal problem the local authority failed to issue the same before that date. The assessee firm completed the project in July, 2006 as is proved by the application dated 15-02-2006 moved before the AMC for obtaining BU permission which was rejected by letter dated 01-07-2006 by AMC, copy attached with the impugned order as Annexure- 1 to show that work was completed and user was started before 31-03-2008. Annexure- 2 to the impugned order is letter dated 16-03-2009 which proves that building was started using from 01-07-2006 without permission for which the assessee paid penalty. It was, therefore, submitted that building was in use prior to the prescribed date and several tenements have been sold for which claim was made u/s 80 IB (10) of the IT Act. It was further submitted that the project was completed within 4 years and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it is stated that the assessee entered into development agreement with the society and that the development permission is granted by AMC on the area of the land which was more than 1 Acre. The learned CIT(A) considering the total area of the land, permission granted by AMC held that the total land area is 10725 Sq. Mtrs. which is more than 1 Acre on which housing project is approved by the local authorities, therefore, the assessee satisfied this condition also for deduction. 6. The learned CIT(A) also considered another condition whether residential units have maximum area of 1500 Sq. Ft. In order to confirm this condition, the matter was referred to the DVO who in his report (Annexur-3 to the impugned order) offered his comments that FSI of each flat constructed is less than the permissible limit but the individual buyer of the flats can add to the build up area or can use construction in the open terrace or later on construction can be made. The learned CIT(A), therefore, noted that there is no serious objection in this regard because the DVO in his inspection also noted that there is no violation of 1500 Sq. Ft. limit and that the DVO merely presumed that further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or before the 31st day of March, 2008 ; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 residential unit developed and built has a built up area of 1,000 sq. ft. if it is situated in Delhi and Mumbai or within 25 kms of municipal limit of these cities and 1,500 sq. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 development charges, obtaining necessary permissions, approving plans, hiring machinery and equipments, hiring engineers, appointing contractors, etc. No doubt, the permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, obtaining necessary permissions, on behalf of the landowners, got the plans approved, hiring of machinery and equipments, hiring engineers, appointing contractors, etc. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying 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 will remain the owner of the building at its own without any interference from the landowner. The landowner does not have any right to share the buildings. The agreement do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and open space in any manner. The agreement further provides that after implementation and completion of the project, whatever profit/surplus or loss/deficit to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 sale of the land for determined consideration under which the assessee was entitled to develop the housing project on the said land in its own cost and in the manner in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 enclosed 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 platform 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 enclosed 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-up area as provided in the Act, it is clear that finding of the authorities below are not sustainable in law. It is an admitted fact that the open terrace in front ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dh 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. 11. The substantial objections of the AO have been considered in the above case with regard to the ownership of the assessee builder and the approval in the name of the society. We find that the learned CIT(A) on detailed consideration of the evidences and material on record rightly held that the assessee incurred expenses towards cost of the land and acquired dominant control over the land and developed the project at its own risk. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 31-03-2008. This provision would show that the assessee complied with the provisions of the law because in this case approval by the local authorities was granted before 01-04-2004 and the assessee completed construction before 31-03-2008 and the same is evident from the letters of AMC attached with the impugned order. The claim of the assessee was however, rejected by considering the explanation in which it was provided that date of completion of the construction of the housing project shall be taken to be the date on which completion certificate is issued by the local authorities. The assessee however, explained the reasons which were mainly attributable to AMC for not issuing the certificate on time. The assessee later on obtained the BU permission and produced the same before the learned CIT(A). The learned CIT(A), therefore, on proper appreciation of the facts rightly noted that construction of building was completed in this case and was put to use also prior to 31-03-2008. The decision of the Hon ble Gujarat High Court in the case of Gujarat Oil and Allied India (supra) was rightly relied upon in support of the findings of the learned CIT(A). The Hon ble Supreme Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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