TMI Blog2016 (7) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the treatment given by the assessee to the land in question in the books of accounts was capital asset and therefore at the time of joint development agreement the capital asset owned by the assessee was transferred to the undertaking under the joint development agreement for construction and development of housing project. Therefore, on transfer of land for the housing project it gives raise to the income being capital gains. The assessee has claimed to have incurred certain expenditure. However, we note that the alleged expenditure by the assessee does not pertain to the development / construction activity of the project because as per the terms of the agreement, the entire cost of construction or other development activities was to be borne by the developer. Even otherwise the alleged expenditure if any incurred by the assessee is post development and post ear-marking of the built up share in the project. When the assessee was under no obligation to incur any expenditure except to contribute the land for the project then this claim of the assessee is inconsistent with the terms and conditions of the agreement as well as the facts and circumstances of the case. Hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company and not that the assessee's business is that of developing and building of the housing projects. 6. The CIT(A) erred in holding that there is no specific condition in sub-section (10) of Sec 80IB that the main object should be construction of housing. 7. The CIT(A) erred in holding that there is no violation of the bye laws. i.e .. the Memorandum of Articles and Articles of Association on the ground that construction activity was its ancillary object without appreciating the fact that according to the Memorandum of Articles and Articles of Association the assessee could only construct buildings in connection with the business of the company and not that the assessee's ancilairy business was construction. 8. The CIT(A) erred in directing the AO to compute the deduction u/s. 80 IB(10) by excluding the flat (supra)) exceeding the prescribed area relying on the decision in the case of SJR Builders without appreciating the fact that the deduction U/S. 80 IB(10) is in respect of a housing project as a whole and not in respect of individual residential flats. 9. For these and such other grounds that may be urged at the time of hearing, it is humbly pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence received from the Registrar of Companies. Further, it is also evident from agreement between the assessee and Mangalya Developer on 15.10.2004 that the assessee Is not in the business of development or construction of buildings. The land used for the above project was the fixed assets in the depreciation schedule of the assessee company. Thus, the AO was justified in computing the capital gain arising from the sale of the flats. The Ld. D.R has further contended that the assessee company had no right once it handover its land to the developer up to the delivery of the share of its flats. The assessee did not participate in the activity of construction in the development of project. He has referred the relevant clauses of the development agreement and submitted that after handing over the possession of the land to the developer, the assessee was not required to do anything in the process of development of the project. It was contended that the CIT (Appeals) has not reversed the finding of the fact given by the Assessing Officer. Therefore the assessee is not entitled for deduction under Section 80IB(10) of the Act. 5. On the other hand, the learned Authorised Representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. 7. We have considered the rival submissions as well as the relevant material on record. From the terms and conditions of the agreement I is manifest that except the land in question the assessee was not required to do anything or incurred any expenditure towards the construction or other activity of the development of the project. For ready reference, we reproduce relevant clauses / recital of the agreement : WHEREAS the Schedule Property is ideal for development into Residential Apartment Buildings and First Party is desirous of developing the same and hence on lookout for a Developer who will be able to formulate a scheme of development of the Schedule Property into Residential Buildings and disposal of the same. The Second Party who is in the field of real estate having come to know of the intention of the First Party offered to develop the Schedule Property as permissible by the authorities and for disposal, for which the First Party agreed since development is beneficial to them also. As it is clear from the recital as well as the terms and conditions of the agreement that the assessee has contributed the land in question and the developer has contributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except to contribute the land for the project then this claim of the assessee is inconsistent with the terms and conditions of the agreement as well as the facts and circumstances of the case. Hence the said finding of the CIT (Appeals) is contrary to the basic fact and agreed terms of the agreement. However, we find that the income which is derived from the sale of flats, exclusion of capital gain towards the land would be eligible for deduction under Section 80IB(10) of the Act as held by the Hon'ble High Court in the case of Shreevani Constructions (supra) in paras 8 9 as under : 8. 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 land, paid the entire consideration but he did not take a registered sale deed in his name. On the contrary, the procedure adopted is he in turn entered into a joint development agreement with the builder and the owner of the land was made a party to the said proceedings. Thus, the assessee contributed the land, undertook the aforesaid developmental activities in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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