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Dy. Commissioner of Income Tax, Circle 11 (4) , Bangalore Versus M/s. Himalaya Containers & Cartons Pvt. Ltd.

Eligibility of deduction under section 80 IB (10) - income derived from the sale of flats - Held that:- There is no quarrel on the point that the income derived from the sale of flats developed under the housing development project is eligible for deduction under Section 80IB (10) of the Act. However, such deduction is available only on the income arising from the development activity. In the case of the assessee the income offered by the assessee consist of two elements - the difference in the .....

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rt of block of assets of the assessee and therefore 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 .....

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as 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 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 u .....

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d upon by the CIT (Appeals). - Decided partly in favour of revenue for statistical purpose. - I.T. A. Nos.386 & 1235/Bang/2013 - Dated:- 8-6-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Sunil Kumar Agarwala, JCIT (D.R). For The Respondent : Shri S. Sridhar, Advocate. ORDER Per Shri Vijay Pal Rao, J.M. : These two appeals by the revenue are directed against two separate orders of the Commissioner of Income Tax (Appeals)-I, Bangalo .....

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g and building of the housing project. 3. The CIT (A) erred in not appreciating that the other party to the .IDA Mangalya Developers was the undertaking developing and building the housing projects and not the assessee. 4. The CIT (A) erred in not appreciating that the assessee was not in the business of developing and building housing projects. 5. The CIT (A) erred in holding that the assessee is entitled to deduction u/s 8OIB(10) without appreciating the fact that according to the Memorandum o .....

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rticles 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 .....

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d at the time of hearing of the appeal. 3. The assessee is a private limited company and engaged in cargo business. The assessee was the owner of the plot of land measuring 1 acre 25 guntas in Survey No.17, new survey number 17-2 bearing City Municipal Assessment No.1/99, situated in Munnekolala village, Varthur Hobli, Bangalore. The assessee entered into a joint development agreement dated 15/10/2004 with developer Mangalya Developers, a partnership firm for development of housing project on th .....

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der section 80 IB (10) of the Act. 4. Before us the Ld. D.R. has submitted that when the assessee is in the business of cargo, then how can the assessee claim the deduction under section 80 IB (10) of the Act which is available only to the builder or developer on fulfilment of certain conditions under this section. The Ld. D.R. has pointed out that the assessee is not in the business of construction and development of buildings but the assessee was the owner of the land in question which was giv .....

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er found the claim of assessee that the assessee had submitted a resolution of the company to the office of the Registrar of Companies is not correct as it was evident from the documentary evidence 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 depreciat .....

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session 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 Representative of the assessee submitted that joint development does not mean participation of each and every activity of the .....

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dictional High Court in the case of CIT Vs. Shravanee Constructions. (ITA Nos.421 & 422 of 2009) ii. Decision of the co-ordinate bench of this Tribunal in the case of Abdul Khader Vs. ACIT, Bangalore. 137 ITD 188. iii. Decision of Chennai Benches of this Tribunal dt.22.11.2012 in the case of ACIT Vs. Sri Lakshmi Brick Industry in ITA No.1644 to 1647/Che/2012. Relying upon the above decision, the learned Authorised Representative of the assessee has submitted that the assessee did not underta .....

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High Court in the case of Shravanee Constructions (supra) and held that participation in the construction activity is not a condition required under the provisions of Section 80IB (10) of the Act. He has further submitted that even otherwise the assessee has incurred various expenditure in respect of his share of the constructed portion of the project. Therefore the assessee has participated in the construction activity of the building. 6. In rejoinder, the learned Departmental Representative ha .....

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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 .....

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and development right from getting the plan sanctioned till the completion of the construction and necessary approval from the concerned authorities. Therefore the value of the land was the contribution by the assessee in the project in question and the said valuation is equivalent to the share of market price of the land as on the date of handing over the possession of the land to the developer as per the joint development agreement. There is no quarrel on the point that the income derived from .....

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etween the market price of the land and the sale price of the constructed portion of the share of the assessee in the project. Consequently, there are two components of income one is capital gain on land and other is business income from sale of flats in the housing project. There is no dispute that the land in question was part of block of assets of the assessee and therefore the treatment given by the assessee to the land in question in the books of accounts was capital asset and therefore at .....

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he 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 .....

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hich 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 .....

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