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2016 (4) TMI 588 - ITAT PUNE

2016 (4) TMI 588 - ITAT PUNE - TMI - Eligibility of deduction u/s.80IB(10) - denial of claim in the hands of the AOP - Held that:- Since in their own action the revenue in A.Yrs. 2011-12 and 2012-13 has accepted the status of the assessee as AOP and allowed the claim of deduction u/s.80IB(10), therefore, we do not find any reason as to why the claim of the assessee that the agreement between Darode Jog and Associates and Lagad Brothers Developers constitutes an AOP should not be allowed. In view .....

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Jog and Associates and Lagad Brothers Developers constitute an AOP and not a Development Agreement. Once it is held that the agreement constitutes AOP any amount drawn from the AOP cannot be taxed in the hands of the assessee member. It is only the Joint Venture that has to pay the tax and the assessee is not liable to pay any tax on the amount withdrawn from the Joint Venture. The assessee is also not entitled for any deduction u/s. 80IB(10) and it is the joint venture that is eligible for the .....

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Central Pune relating to Assessment Years 2007-08 to 2010-11 respectively. ITA Nos. 310 to 312/PN/2014 filed by the assessee are directed against the order dated 24-12-2013 of the CIT(A) Central, Pune relating to Assessment Years 2007-08 to 2009-10 respectively. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order. ITA No.2038/PN/2013 ( A.Y. 2007-08) : 2. Facts of the case, in brief, are that a search u/s.132 of the I.T. Act in the ca .....

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& Associates (Pages 1 to 37 of Bundle No.30 seized from the business premises of DJBPL. (ii) Statement of payment made to M/s. Lagad Brothers Developers as a deposit and as a drawing made from Darode Jog Lagad ventures. Total payment made from 28.12.2006 to 26.02.2009 is at , 12,13,14,597/-. (Page No. 55 of Bundle No. 20 Seized from the business premises of DJBPL) (iii) Statements drawn on 31.10.2008 showing the details of sold flats, unsold flats, payable to Lagad Brothers Developers, Promo .....

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reement value receipts of sold flats at ₹ 63.48 Crores. (Page No. 44 to 45 of Bundle No.030 Seized from the business premises of DJBPL ) (iv) The ledger extract of Lagad Brothers Developers Capital A/c in the books of Darode Jog Lagad Ventures for the period 01.04.2006 to 29.04.2009. (Page No. 57 of Bundle No.28 Seized from the business premises of DJBPL). 03. Vide letter dated 4/5/2011, the assessee has confirmed the ownership of the papers 04. These papers were examined vis-a-vis Joint V .....

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ssociates with the landlord Shri Baban Genu Kumbharkar it is noticed that the land in question in this joint venture is highly undervalued. 07. Both these land (i.e claimed to be owned by the assessee and the one as mentioned in para 6) are adjacent land forming part of greater piece of land of Survey No. 25 and the transaction have been executed on almost similar dates. The development agreement between M/s. Lagad Brothers Developers and Darode Jog Associates was entered on 29.12.2006 and the d .....

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r documents seized belongs to the assessee. 09. I am therefore satisfied that the case is fit for issue of notice u/s. 153C of the IT. Act. 3. In response to notice u/s.153C the assessee filed return of income on 10-08-2011 declaring loss of ₹ 32,797/- which was the same figure in the return filed by it earlier on 31-07-2007. During the course of assessment proceedings the AO asked the assessee to justify as to why the joint venture agreement should not be considered as a development agree .....

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have referred to the joint venture agreement and in clause 3, the mode of sharing the profits of the joint venture is given. As per this clause, the assessee was to get profit of 40% and The balance 60% will be to the account of the developer. It is further mentioned that this 40% of the sale proceeds will be reduced by the cost of the development rights paid by the joint venture to the assessee i.e. ₹ 2 Crs. Thus, in this agreement, the profit sharing ratio of the two members of the AOP w .....

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r into the supplementary agreement are mentioned therein itself. Accordingly, it is submitted that question of treating the Joint Venture agreement as development agreement does not arise. 2. At the outset, the supplementary agreement clarifies in no uncertain terms that the assessee would receive a share in the profits I losses of the JV and the amount of withdrawal made by the assessee would be adjusted against its share in profits and the other dues from the JV. 3. It is submitted that you ha .....

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the issue of considering the JV Agreement as Development Agreement. 4. The Joint Venture agreement entered into by the parties is for the improvement of property so 'that fruits of the venture can be enjoyed by both the parties. In view of above, it is submitted that your proposal to consider JV agreement as development agreement is unjustifiable and not correct. 5. However, the AO was not satisfied with the explanation given by the assessee for the following reasons : 6.1 The contents of t .....

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handed over possession to the developer. It is in consideration of this handing over of the land that the land owners have been promised to be given percentage of sales which was later on stated to be given in the form of 80% of the net profit which clearly means the land owners under the nomenclature of joint venture agreement have in fact entered into development agreement. 6.3 The reference of supplementary agreement and the copy of which submitted before me, from the perusal of the same it .....

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ate component rights such as the right of possession, the right of enjoying the usufruct of the land and so on. Thus if these principles are applied to the present case, the possession of the land being one of the interest of the property has been transferred to the developer. The Clause 5 of the Joint Venture agreement clearly spells out that the land owners has given irrevocable permission to develop the said land and authorizes the developer to enter into said land and commence the developmen .....

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thus this joint venture agreement is nothing but the development agreement. 6.6 The contention of the essessee that enjoyment would be in the form of enhanced value is quite hypothetical and not worthy any serious consideration. 6.7 In view of the above discussion, I am of the opinion that this joint venture agreement entered into by the parties is nothing but a development agreement. 07. Without prejudice to whatever discussed above, since the assessee has filed the return of income disclosing .....

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wners. He held that the effect to increase in WIP will not be granted and will be considered subsequently after the issue of land cost gets finalized in the case of Lagad Brothers Developers where notice u/s.148 has been issued and the assessment proceedings are in progress. The AO accordingly determined the income of the assessee in the order passed u/s. 143(3) read with section 153C at (-)Rs.32,797/-. 7. Similar view was taken by the AO for A.Y. 2008-09 wherein the income returned at Nil was a .....

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ated to be given in the form of 80% of net profit which means the land owners under the nomenclature of Joint Venture Agreement have infact entered into development agreement. It was submitted that the assessee has a valid PAN and registration under the MVAT 2002 and Central Sales Act, 1957 and discharged the liability as Association of Persons under both the Act. The Income Tax Act does not define what constitutes an AOP which u/s.2(31) (v) of the I.T. Act is an entity or unit of assessment. In .....

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must be pursuant to the combined will of the person constituting the association. It was submitted that Explanation has been inserted by the Finance Act 2002 in section 2(31) w.e.f. 01-04-2002 which provides that for the purpose of this clause, an AOP or a body of individual or an Artificial Judicial person shall be deemed to be a person, whether or not such person or body, authority or judicial person was formed or established or incorporated, with the object of deriving of income, profits or g .....

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the AO has erroneously concluded that the agreement is development agreement. It was submitted that the reason why the parties had to enter into supplementary agreement was also given. The supplementary agreement clarifies in no uncertain terms that the parties to the joint venture would receive a share in the profits/losses of the joint venture and the amount withdrawn by the parties will be adjusted against their share in profits/losses. Therefore, the question of treating the joint venture a .....

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ct of the joint venture is to produce income. (e) they have formed the joint venture for the purpose of completing the development of the land and completing the project on the said land which means the joint venture agreement is in pursuant of the combine WILL of both the parties and there is a meeting of the minds which has a main dominant objective to produce income for both of them. (d) The joint venture agreement entered into by the parties is for the improvement of property so that fruits .....

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rs Developers and Darode Jog and Associates was clearly a Joint Development Agreement though it is titled as joint venture development agreement. The relevant observation of the CIT(A) from para 6.3 to 6.5 of the order read as under : 6.3 I have given careful consideration to the facts of the case and to the arguments and contentions of the appellant on this ground of appeal. At the outset it is observed .that the appellant has made very elaborate submissions on the issue of its status at the re .....

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ion is necessary in my view on the appellant's submissions with regard to its status. Coming now to the nature of the agreement, I have carefully perused the contents of the 'Joint Venture Development Agreement' dated 29/12/2006 and also the 'Supplementary Agreement' dated 2/5/2010 with M/s.Lagad Brothers Developers and have also considered carefully the arguments and contentions of the appellant which have been extracted above. Upon careful reading of the two documents menti .....

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nd on which the project was to be developed, not to cause any hindrance to the development activity, and to cooperate in the execution of the requisite documents for conveying the units when ready, to the ultimate buyers. v. That the land owners irrevocably permitted and authorized the Second Party to enter upon the, land and commence the development work and surrendered their rights unconditionally to interfere in any manner with the development work to be undertaken by the second party. vi. Th .....

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ready been decided in the original agreement, at ₹ 2 crore. Notably, as per the original agreement, this amount of ₹ 2 crore was to be a refundable interest free security deposit. 6.4 Considering the above facts, I am of the considered view that the agreement between M/s. Lagad Brothers Developers on the one hand and Darode Jog & Associates on the other, was clearly a joint development agreement though titled a Joint Venture Development Agreement . 6.5 For the reasons discussed n .....

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t between Darode Jog and Associates and Lagad Brothers Developers did not constitute Association of Person but it constituted only a development agreement. 3. The learned CIT(A) failed to appreciate that having accepted that the above two parties constituted joint venture and the status of the appellant was rightly claimed as AOP, it could not be held that the agreement between the two parties constituted a development agreement and not a joint venture (AOP) agreement. 4. The appellant craves le .....

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ntion of the Bench to the various clauses of the joint venture development agreement dated 29-12-2006. He submitted that on 02-05-2010 Lagad Brothers Developers and Darode Jog and Associates made a supplementary agreement to the original joint venture agreement, a copy of which is placed at pages 36 to 43 of the paper book. He submitted that in the original agreement the clause regarding the division of profits of the joint venture was not clear. At one place it was stated 40% profit whereas in .....

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and construction expenses. Similarly, in clause (4) (page 41 of the paper book) the shares of the 2 parties in profits/losses of the AOP were stated. He submitted that in this agreement the shares in the profit of the individual parties were not linked to the sale proceeds but they were depending on the actual profits/losses of the AOP. 14. Referring to pages 63 and 64 of the paper book the Ld. Counsel for the assessee submitted that joint venture is registered under MVAT Act, 2002 and the tax p .....

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ment the flat would be sold by the developer and not by both the parties together. He referred to a sample sale deed and submitted that the seller in the instant case is the joint venture and not Darode only. The joint venture is the seller and not Darode alone. This according to the Ld. Counsel for the assessee proves that the agreement is not a development agreement but a joint venture agreement. 15. Referring to page 77 to 81 of the paper book the Ld. Counsel for the assessee drew the attenti .....

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The only stand taken by the AO is that the cost of the land is understated. The AO while considering the provisions of section 80IA(10) r.w.s. 80IB(10) has concluded that the market value of the land is higher than the value in the joint venture agreement and therefore he reduced higher value of the land from the profits and reduced the profit eligible for deduction u/s.80IB(10). However, the AO has assessed the profit in the hands of the AOP and deduction u/s.80IB(10) has also been allowed to t .....

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ge to the supplementary agreement. 16. Referring to the order of the AO for A.Y.2007-08 the Ld. Counsel for the assessee drew the attention of the Bench to para 6.3 wherein the AO has stated that the said supplementary agreement is an after though given for correcting the original joint venture agreement which in real sense is a development agreement. The CIT(A) does not give any opinion on the supplementary agreement. He submitted that there was an ambiguity in the original agreement. In that c .....

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there is no bar in the contract Act that an agreement once made cannot be revised. Therefore it is not understood as to why the AO rejected the supplementary agreement. 17. Referring to the decision of the Hon ble Supreme Court in the case of Wallfort Securities reported in 326 ITR 1 he submitted that the Hon ble Supreme Court in the said decision has held that even if the transaction is preplanned but there is nothing to impeach the genuineness of the transaction the same should be accepted by .....

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t the AO and the CIT(A) should have accepted the supplementary agreement as a genuine document. He submitted that the profits from the housing project have been divided by the 2 parties on the basis of the profit sharing ratio in the supplementary agreement. 18. Referring to page 196 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the capital account of the 2 partners to the joint venture in which the profits are shared by the 2 parties as per the supplement .....

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tus of the assessee as an AOP. But thereafter he held that the agreement is not a joint venture agreement but a development agreement. He submitted that the when the AO and the CIT(A) has accepted that the transaction constituted AOP, the profit should be taxed in the hands of the AOP. Referring to the decision of Hon ble Bombay High Court in the case of Messrs. Jerkison Tribhuvandas, Bombay Vs. CIT reported in 31 ITR 376 he submitted that the Hon ble High Court in the said decision has held tha .....

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r in carrying out any business, they constitute an AOP. In the present case, the two parties namely Lagad and Darode have joined together for developing the housing project and they have shared the responsibilities and duties as per the agreement. Lagad has to ensure that the land is free from any defect and got it converted into NA and Darode has to construct the project. Therefore, the transaction constitutes an AOP in view of the above decision of the Hon ble Supreme Court. Further, since the .....

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e has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the revenue to challenge its correctness in the case of other assessees without just cause. Referring to the decision of Hon ble Supreme Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) he submitted that the Hon ble Supreme Court in the said has held that strictly speaking the principle of res judicata does not apply to income .....

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allowed. He also relied on the following decisions : 1. CIT Vs. Shravanee Constructions reported in 209 Taxman 6 2. Shri Abdul Khader Vs. ACIT - ITA No.57/Bang/2011 3. ACIT Vs. Bombay Real Estate Development Co. Pvt. Ltd. - ITA No. 4728/Mum/2007 20. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that it is Joint Development Agreement and not a Joint Venture. Referring to para 6.3 of the order of the CIT(A) he submitted that the Ld.CI .....

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, therefore, the agreement between M/s. Lagad Brothers Developers and Darode Jog and Associates is only a Development Agreement and cannot be considered as a Joint Venture. He accordingly submitted that the grounds raised by the assessee should be dismissed. 21. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the inst .....

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s as per the original return filed on 31-07-2007 for the A.Y. 2007-08. Although the assessee has filed the return as an AOP treating the said Joint Development Agreement as a Joint Venture Agreement the AO asked the assessee to explain as to why the same should not be considered as a Joint Development Agreement and not a Joint Venture Agreement in view of various clauses of the said agreement. We find rejecting the various explanations given by the assessee the AO considered the joint Venture Ag .....

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ot available to Lagad and the arrangement between the 2 parties is not a Joint Venture (AOP) and it cannot be assessed as AOP. It was accordingly held by the AO that the profits cannot be assessed in the hands of the AOP but in the hands of the 2 parties separately and therefore deduction u/s.80IB(10) cannot be allowed to Lagad who was a mere owner of the land. The AO accordingly passed the assessment order holding that this is merely a development agreement and therefore the claim of deduction .....

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order dated 30-03-2015 has considered the status of the assessee as AOP and the claim of deduction u/s.80IB(10) has been accepted. Similarly, for A.Y. 2012-13 the AO in the order passed u/s.143(3) has allowed the status of the assessee as AOP and allowed the claim of deduction u/s.80IB(10). It is also the submission of the Ld. Counsel for the assessee that the Ld.CIT(A) at para 6.3 of his order has accepted that the controversy as to whether it is an AOP or not does not survive as the AO himself .....

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that the AO has assessed the assessee in the status of AOP which indicates that the status of AOP has been accepted. We find the AO in the order passed u/s.143(3) r.w.s.147 vide letter dated 30-03-2015 for A.Y. 2011-12 has recorded the following reasons for issue of notice u/s.147 : "The assessee is a Joint Venture between Darode Jog Associates & M/ s Lagad Brothers Developers. M/s Lagad Brothers Developers a firm. purchased a land from fanners through a registered agreement for ₹ .....

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₹ 1000/- per sq. meter. The joint Venture partner M/ s Darode Jog Associates purchased the land behind the project of the Joint Venture at the rate of ₹ 7,558/ - per sq. meter from Baban Genu Kumbharkar. The consideration paid to Shri. B. G. Kumbharkar which was in accordance with the stamp duty valuation. Purchase of land from Kumbharkar was within 3 months from the date of purchase of developments rights by the joint venture from M/s Lagad Brothers Developers. Thus it was obvious t .....

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n which deduction u/s 80IB is claimed). As the land has been purchased from the Joint Venture partner, provisions of section 80IA(10) are squarely applicable. On the facts it is clear that there is an inflation of exempt income by suppressing the land cost. During the year the assessee has claimed a deduction u/s 80IB of ₹ 15,93,67,320/-. If land cost was claimed based on the market value or on the basis of actual payment the claim of deduction u/s 80IB would have been much lower than one .....

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t Venture M/s Darode Jog Lagad Venture for the year under consideration. In view of this, the case of the assessee is a fit case for issue of notice u/ s 148 of Income Tax Act, 1961." 24. After recording the above reason, the AO in the order passed u/s.143(3) r.w.s.147 has accepted the status of the assessee as AOP and thereafter allowed the claim of deduction u/s.80IB(10) to the extent of ₹ 2,66,30,721/- to the AOP. Similarly, the AO in the order passed u/s.143(3) vide order dated 31 .....

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Registration has been allotted to it, a copy of which is placed at page 63 of the paper book and the tax payer identification No. 27370925367V. The constitution of the assessee has been stated as Joint Venture. Similarly, the assessee has been registered under the Central Sales Tax (Registration in turnover) Rules, 1957. We find before the AO the assessee vide dated 04-05-2011 had categorically stated that the seized documents belonging to Darode Jog Lagad Ventures which is a Joint Venture betw .....

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rothers Developers. Although the supplementary deed was filed during the course of assessment proceedings as well as appeal proceedings explaining that the same was necessary as there were certain ambiguity in the original agreement regarding sharing of profit by the 2 parties for which the supplementary agreement was made for bringing clarity, we find the lower authorities have ignored the same as an afterthought. We find force in the submission of the Ld. Counsel for the assessee that there is .....

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lanning, without any motive to evade tax through colourable devices is not found open even by the judgement of this court in Mc.dowell Co. Limited s case. 27. We find the Hon ble Supreme Court in the case of CIT Vs. Indira Balakrishna reported in 39 ITR 546 has held as under : 18. The aforesaid discussion would show that once the transaction is genuine merely because it has been entered into with a motive to avoid tax, it would not become a colourable device and consequently earn any disqualific .....

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his Court rendered in the case of Satya Nand Munjal (2002) 256 ITR 516 (P&H) and the Division Bench judgment of the Orissa High Court in the case of Industrial Development Corporation of Orissa Ltd. Vs. CIT (2004) 268 ITR 130 (Orissa) and various other judgements of Delhi and Madras High Courts. 28. We find the Hon ble Karnataka High Court in the case of CIT Vs. Shravanee Constructions reported in 81 CCH 253 has held as under (Short notes) : Deduction u/s 80IB(10)-Allowability-Assessee, enga .....

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bove land-As per the agreement, the promoters were to pay a consideration of ₹ 45,00,000/- and to deliver 22% of the super built area to the consenting witness, namely the assessee-As a consequence of the agreement, the assessee got the land converted into non-agricultural land and got the work commencement from the Municipal Corporation-Out of the total 211 flats that were to be constructed as per the projects, 40 flats in different blocks were allotted to the assessee-Assessee sold some .....

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assessee are listed-As is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the builder- Therefore, in respect of the residential units numbering 211 in all, the persons who undertook this undertaking are entitled to the benefit of Section 80IB(10) of the Act in proportion to the share to which they are entitled to in the built up area. 29. We find the Bangalore Bench of the Tribunal in the case of Ab .....

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agreement with M/s Reddy Structures Pvt. Ltd., for development of housing project situated at survey No.26/1, Volagerahalli, Kengeri Hobli, Bangalore South Taluk, measuring 1 acre and 31 guntas. The assessee got 24% share in the said project and sold 49 flats as mentioned in page No.6 of the assessee s compilation, which is the copy of the bill and sale of flat during the financial year 2005-06. The assessee also incurred certain expense for electricity and water connection connected with the pr .....

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re the Special Deputy Commissioner Bangalore District and the same was allowed by its order vide No.BDS. ALN.SR(s) 26/2002-2003 dated 28- 12-2002. AND WHEREAS the first party is developing the schedule property by putting up a residential housing enclave and the first party has entered into this agreement with the second party to undertakes the work of development of the schedule property jointly. 10. From the above, it is clear that the assessee was engaged in the property development and this .....

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evelopment & construction and the second party shall make investment on schedule property for joint development and construction. First party shall make investment for all statutory approvals including BWSSB, KEB, plan sanction etc., the first party shall retain 24% of the built up area in the schedule property along with 24% car parking. Both the parties to this agreement shall be entitled to all common rights and facilities in the common areas of the building proportionally as per their re .....

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ch type of cases, the approval and plan sanction is the first and initial stage which was to be taken by the assessee and for that purpose the assessee was required to make investments. So, it cannot be said that the assessee did not make any investment for the project under consideration. 12. In the present case, the AO denied the deduction to the assessee by stating that the assessee only contributed the land and had not carried out any construction activities. Now, we have to analyze the prov .....

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e (No.2) Act 2009. The said explanation read as under : For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 14. On a joint reading of sub. sec (10) of sec. 80IB and explanation thereto it is clear that deduction as is allowable to an undertaking developing and building housing project approved, it is nowhe .....

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ndertaking is developing and building, housing projects approved by a local authority. In the present case, it is not the case of the Department that the project was not approved or developed and built by the assessee. The only reason for denying the deduction u/s 80IB(10) of the Act to the assessee was that the assessee had not carried out any construction activity, in our opinion that reason is not sufficient to deny deduction u/s 80IB(10) of the Act. In the present case, the assessee made the .....

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cultural purpose and getting plan sanctioned. On a similar issue, their lordships of Hon ble Jurisdictional High Court in the case of CIT Vs. M/s Shravanee Construction (cited Supra) at para 8 of the judgment dated 28th Feb, 2012 in ITA No.421 and 422 of 2009 observed as under: In terms of the agreement, which are not in dispute, the assessee not only undertook the aforesaid development activities on the land in question, but in fact, he entered into an agreement of sale with the owners of the l .....

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he builder has invested the money in the construction. It is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of sec. 80IB(10), the assessee is claiming deduction. As is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the builder. Therefore, in respect of the residential units numbering 211 .....

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onditions which have to be fulfilled before claiming the benefit u/s 80IB(10) of the Act. In the present case, it was agreed that after completion of the building in terms of the agreement, the assessee was given 24% of the share of the building area which he was entitled to sell to various persons, it was also clear from the joint development agreement that the undertaking of developing and building housing project was jointly undertaken by the assessee and M/s Reddy Structures Pvt. Ltd., there .....

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milar view has been taken by the Mumbai Bench of the Tribunal in the case of ACIT Vs. Bombay Real Estate Development Company Pvt. Ltd. reported in 64 DTR (Tribunal) 137 where it has been held as under : Assessee having entered into an agreement with another company for jointly developing a housing project on its land, undertaking the responsibility of obtaining all statutory clearances, permissions, etc. for putting up the housing project on the land as well as the responsibility to remove all s .....

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uction u/s.80IB(10), therefore, we do not find any reason as to why the claim of the assessee that the agreement between Darode Jog and Associates and Lagad Brothers Developers constitutes an AOP should not be allowed. In view of our above discussion we hold that the agreement between Darode Jog and Associates and Lagad Brothers Developers did constitute an AOP and not a mere Development Agreement. Therefore, the assessee has rightly claimed the status of the assessee as AOP. In view of the abov .....

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ordingly, the grounds of appeal No.1 challenging the validity of the assessment u/s.143(3) r.w.s.153C is dismissed. The above appeals filed by the assessee are accordingly partly allowed. ITA No.310 to 312/PN/2014 (A.Y. 2007-08 to 2009-10) : 34. Grounds raised by the assesseein the above appeals are as under: Grounds in ITA No.310/PN/2014 (A.Y. 2007-08) : 1. The Ld. CIT(A) erred in upholding the action of the AO of taxing ₹ 82,15,910/- as taxable in the year 2006-07 without appreciating th .....

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housing project. 3. The Ld.CIT(A) has failed to appreciate that the appellant ultimately is to receive 80% of the profit as per the supplementary deed and the amount received towards land is the part of 80% of the profit. 4. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. Grounds in ITA No.311/PN/2014 (A.Y. 2008-09) : The following grounds are taken without prejudice to each other- On facts and in law, 1. The learned CIT(A) erred in confirming the a .....

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or not allowing deduction u/s 80IB(10) on the ground that appellant is not developer of the project. 4. The learned CIT(A) has failed to appreciate that the appellant ultimately is to receive 80% of the profit as per supplementary deed and the amount received towards land is the part of 80% of the profit. 5. The learned CIT(A) has erred in confirming the conclusion drawn by the AO that the appellant has given the property for development and execution of supplementary agreement is a device to av .....

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ppreciate that the true essence of the agreement, which refers to an agreed sharing of net profit computed on the basis of certain percentage of gross revenue after making certain adjustment is very much permissible under the provisions of law. 3. The learned CIT(A) has erred in confirming the action of the AO for not allowing deduction u/s 80IB(10) on the ground that appellant is not developer of the project. 4. The learned CIT(A) has failed to appreciate that the appellant ultimately is to rec .....

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Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of activities related to real estate. A search action u/s.132 of the I.T. Act was conducted in the case of Darode Jog and Associates group on 29-04-2009. During the said search action a Joint Venture agreement between the assessee and Darode Jog and Associates was siezed. In response to notice u/s.148 the assessee requested to treat the return of income filed originally on 18-08-2008 as return in re .....

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on of ₹ 1,15,00,000/-. The transaction was registered in the office of Sub-Registrar Haveli No. 16 at S. No. 9286 on 29/12/2006. In pursuance of this agreement the land owners have executed a power of attorney which is also registered at S.No. 9287 on 30/12/2006. In the power of attorney the land owners have appointed two partners of the firm M/s. Lagad Brothers Developers as their constituted attorney. As per this power of attorney the firm gets absolute authority & right to develop t .....

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Darode Jog Associates is also supposed to pay a security Deposit of ₹ 2,00,00,000/-. For the purpose of Joint Venture the assessee has determined the value of land at ₹ 2,00,00,000/- and it was presumed to have been received by the assessee out of 40% gross sales proceeds to be received by it. The assessee M/s. Lagad Brothers Developers is not liable to suffer any loss. All the facts brought out above have been reduced in writing in the Joint Venture agreement seized during the cours .....

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e assessee firm received the same from time to time. The total receipts received by the assessee from the Joint Venture over a period of years on account of development rights is at ₹ 30,20,41,133/-. 38. On the basis of the above the AO noted that the assessee has purchased the development rights on 29-12-2006 and has transferred the same to the Joint Venture for a consideration which is much higher than the cost. He noted that the cost of purchase of development rights is ₹ 1,15,00, .....

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ceeds of the project developed by the Joint Venture wherein the assessee is the partner. As per the J.V. Agreement the other Joint Venture partner i.e. Darode Jog Associates is supposed to receive 60% of the sale proceeds of the project developed by it & is supposed to develop the project out of its share of receipt of 60%. In view of these facts the assessee was asked to clarify as to why ₹ 85,00,000 (Rs. 200,00,000/-Rs. 1,15,00,000/-) should not be taxed as its income on account of t .....

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re is a difference of opinion on the issue of year of taxability. 39. In view of the above, the AO held that there is adventure in the nature of trade for profit in the case of the assessee firm during the year under consideration. Therefore, issues like getting N.A. at a later stage is irrelevant. He accordingly held that the profit on account of transfer of development rights needs to be taxed as income of the year under consideration. 40. Before CIT(A) the assessee submitted that under the JV .....

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ept for the payment of development charges and bhoomi pooja expenses. Mere incurring of expenses on bhoomi pooja, boundary wall etc., did not amount to commencement of construction activity. For this proposition, the assessee had relied upon the decision in the case of Nirmitee Developers 95 TTJ 1117. Based on these facts, the assessee contended that there was no extinguishment of rights or receipt of consideration and the assessee had also not performed its obligations as envisaged under sectio .....

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hich was received only on 14/05/2007. It was also contended that the AO has made the addition only because the assessee entered into the JV on 29/12/2006 but merely because the assessee entered into the said JV on that date without performing the duties it could not be treated as 'transfer' within the meaning of section 53A of the Transfer of Property Act. It was also contended that the co-venturer M/s Darode Jog Associates was not a transferee. Clause 9 of the JV agreement clearly menti .....

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ll these reasons section 53A of the Transfer of Property Act were not attracted and it could not be said that there was a transfer or an adventure in the nature of trade. In support of this contention, the assessee relied upon the decision of ITAT Hyderabad in S. Ranjith Reddy reported in 95 DTR 283. 41. However, the CIT(A) was also not satisfied with the explanation given by the assessee and upheld the action of the AO. The alternate claim for allowing deduction u/s.80IB(10) on the amount to be .....

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ny tax. It is only the profit that can be taxed and not the withdrawal. In his alternate contention he submitted that deduction u/s.80IB(10) should be allowed to the assessee. 44. The Ld. Departmental Representative on the other hand while supporting the order of the AO and the CIT(A) submitted that the firm came into existence on 15-12-2006, acquired development rights on 29-12-2006 and entered into Joint Venture Agreement on the same day thereof giving Darode Jog and Associates the right to de .....

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ion only. Under these circumstances the adventure was in the nature of trade and gains accrued to the assessee immediately. For the above proposition, the Ld. Departmental Representative relied on the decision of the Hon ble Supreme Court in the case of G.Venkataswami Naidu & Company Vs. CIT reported in 35 ITR 594 (SC), CIT Vs. Prabhu Dayal reported in 82 ITR 804 (SC) and S.P. Balasubramiam reported in 250 ITR 127 (Mad) and Smt. Parvathi Devi & others Vs. CIT reported in 164 ITR 675 (AP) .....

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oreover, even the procedural requirement of filing the audit report in Form No.10CCB which was required to be filed along with return of income is clearly not fulfilled. Further, Darode Jog and Associates undertook the entire responsibility for the construction work. The assessee was not liable for any loss suffered in the building project and the assessee has nothing to do with the development of the housing project. The assessee was supposed to get 40% of sale proceeds for transferring the dev .....

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ntative submitted that the Joint Venture Agreement dated 29-12-2006 clearly states that the assessee would be entitled to 40% of the receipts on account of flat sales. Further actions also support the same. The said amount of ₹ 2,78,87,850 that was paid to the assessee was exactly 40% of the receipts on account of flat sales during the year as per the agreement vide which the property in question was transferred to the Joint Venture. 47. The Ld. Departmental Representative submitted that t .....

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s entered into only on 2-5-2010 i.e. well after the period relevant to appealed assessment years. Even after the execution of supplementary deed it remained a paper agreement which never intended to be acted upon and was merely for the purpose of tax evasion. Furthermore most importantly it is to be examined what is the supplementary agreement. Assessee firm and Darode Jog and Associates will share profits of AOP in the ratio of 80% and 20 % respectively. Now the question is why the assess firm .....

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ghts were sold for once and all, then profit sharing makes no sense, Business is the risk taking capacity of a person. In the present case it is not understandable as to what is the risk of the assessee involved. There is no locus standi of the assessee in the AOP. These transactions are fit in the principle of corporate veil. The AOP is just for the namesake. Actually the assessee has sold his development rights and received consideration and those receipts are given the name of withdrawal from .....

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different amounts from time to time from the AOP. That amount is exactly 40% of the sale value. The Assessing Officer has brought out on record that comparable sale instances are at much higher rate. He accordingly submitted that the transaction in question is a business transaction and the assessee is not eligible for any deduction u/s.80IB(10) and the AO has rightly taxed amount of ₹ 2 crore and also in excess of ₹ 2 crore in the hands of the assessee. He accordingly submitted tha .....

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