TMI Blog2016 (5) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the Assessing Officer to allow the Assessee's claim for deduction of ₹ 95,56,580/- u/s. 80IB(10) of the l.T. Act. 2). The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in holding that the Assessee fulfills the conditions laid down for claiming deduction u/s.80IB(10) even when the land was in the name of Parth Bunglows (nana chiloda) Co-op. Housing Society Ltd., which is a seperate legal entity in the eye of law and the Assessee entered into the project by a development agreement with the Society. The entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the Society. The local Authority had granted permission for development to the Society. Assessee was just a contractor of the land owners constructing 81 residential units of the scheme titled ' Parth Bunglows ' and not a developer. 3). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer. 4). It is therefore, prayed that the order of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and allowed the deduction u/s 80IB(10) to the assessee at ₹ 95,56,579/-. 4. Aggrieved, Revenue is now in appeal before the Tribunal. 5. Ld. DR supported the order of Assessing Officer. 6. On the other hand, ld. AR submitted that assessee firm acted in the capacity of a developer and not a mere contractor as the partners of the assessee firm took initiative to design and conceive the housing project and also formed co-operative housing society for smooth administration post completion of housing project. Investment in the land, NOC. Charges, plan passing expenses and all other incidental expenses of the housing project were borne by the assessee firm and worked as deemed owner by virtue of right of possession over the land and structure developed on it as per development agreement entered into between the housing society and the assessee. Ld. AR further submitted that assessee firm prepared the plan, got it approved by local authority, engaged architect/structural engineers and made follow ups to complete the housing project in a fair way and further made suitable development of the project for getting all the residential units ready to sell and all the brochures for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w :- Sr. No. Title As a Developer 1. Initiation Conception The partners of the assessee firm have taken initiative and had designed conceived the housing project and floated it. 2 Formation Co-op. Hsg. So, formed for smooth administration subsequently on completion of the housing project. 3 Relationship The officer-bearers of the society are near relatives of the partners of the firm. 4 Investment The investment of land (by the partners of the firm) N.A. Charges + plan passing expenses + all other incidental expenses of the housing project borne borne by the assessee-firm. 5. Ownership Deemed owner by virtue of right of possession over the land structure developed on it as per development agreement para -5. 6 Brochure Name/addresses/tele no. of the assessee firm is very well appeared in the brochure for booking or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 Risk Involved in whole of the development of the project/if project fails, the chances of loss was very high. But fortunately, the project succeeds. 19 Work The assessee firm s developmental work includes civil construction work. 20 Meaning Developer is wider terms. Means developer can be said to be a contractor but cannot vice a versa 21 Connection The assessee firm was directly connected to the actual users/customers/members/ brokers. They do not know the land owner society. 22 Keeping books of account etc. The assessee firm has kept the books of account/getting it audited/filed return of income regularly. 23 Possession On completion of the housing project, the possession of each residential unit is given to the members/buyers by the assessee firm. 24 Maintenance The assessee firm has maintained the housing project upto completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions stipulated from clause (a) to clause (d) of section 80IB(10) with respect to time limit of permissions, time limit of completion, area of land, built-up area limit prescribed for the residential units, and percentage of commercial construction which can be undertaken. His objection is that the appellant is not a developer because it is not the owner of the land on which the residential units were constructed. According to him the appellant is a works contractor executing construction authorized by the cooperative housing society and is thus not eligible for deduction because it is hit by the Explanation inserted in the Act by Finance Act 2009 according to which a works contractor who executes the work awarded by any person is not eligible for deduction u/s.80IB. The appellant according to the AO worked as contractor for constructing the residential units as authorized by the cooperative housing society through the Development Agreement. This objection of the AO has to be seen in the light of the tests laid down by Hon'ble ITAT Bench A Ahmedabad decision dated 7.11.2008 in the case of M/s. Shakti Corporation, Baroda in ITA No.i503/Ahd/2008 in AY 2005-06 where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. HARIOM CORPORATION agree to act as builder cum developer to develop the and build the housing project thereon on its own risk and cost. (3) It is agreed by both the parties that the construction and development work s^aii be in accordance with the approved plan. However, a separate agreement between the proposed/prospective buyers/purchaser/customer and the builder-firm shall be executed. The party of the first part shall not be held responsible for any delay in work and/or quality of the work. Each buyer will free to inspect the quality of tfie work and on satisfaction only, the builder-firm shall be entitled for the consideration of the work executed. All the risk and control over the housing project would be that of M/s HARIOM CORPORATION. (5) Except, as provided in this agreement, M/s HARIOM CORPORATION is and at all times will be independent builder cum developer. M/s HARIOM CORPORATION, the party of the other part has to raise fund for the development and construction work on their own. The necessary development expenses shall also be borne by the partnership firm. Any Profit/Loss arise on the development work of the Housing Project shall belong to M/s HARIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- 2(47): transfer , in relation to a capital asset, includes,- (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882); or Section 53A of the Transfer of Property Act reads as under:- 53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of remuneration the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect. 43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir Chand Gulati vs. Uppal Agencies Private Limited and another (supra) was rendered in the background of the provisions of the Consumer Protection Act. In the case before the Apex Court, the land owner had entered into an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either for cash or deferred payment, or valuable consideration. To be also noted that the definition does not lay down that the construction must be on behalf of an owner of the property or that the construction cannot be by the owner of the property. Thus even if an owner of property enters into an agreement to construct for cash, deferred payment or valuable consideration a building or flats on behalf of anybody else, it would be a works contract within the meaning of the term as used under the said Act. It was in background of this definition provided by the statute that the Apex Court concluded that the agreement was one of works contract. The Apex Court observed that the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration. Thus the interpretation rendered by the Apex Court in the said decision was based on not the normal meaning of term works contract but on the special meaning assigned to it under the Act itself, which provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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