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GANESH HOUSING CORPORATION LTD Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 4 AND 1

2016 (9) TMI 764 - GUJARAT HIGH COURT

Reopening of assessment - deduction under section 80IB(10) - whether retrospective amendment cannot be a ground for reopening assessment beyond a period of four years? - Held that:- In the original assessment, the Assessing Officer had occasion to examine the petitioner's claim for deduction under section 80IB(10) of the Act. In fact, this was the principle claim of the assessee, since bulk of its income was derived from housing projects, with respect to which, the assessee had claimed deduction .....

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n granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee's claim of deduction under section 80IB(10) of the Act, except for limiting it to the extent of profit. - Thus, the entire claim of deduction came up for consideration at the hands of the Assessing Officer in the original assessment. The claim was minutely examined and only thereafter accepted. It would therefore not b .....

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as acting as a contractor. In this respect, the Assessing Officer has placed reliance on the retrospective explanation added to section 80IB(10) of the Act. It is well settled by the series of judgments of this Court that retrospective amendment in statute would not enable the Assessing Officer to reopen an assessment beyond a period of four years. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 13589 of 2011 - Dated:- 12-9-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR T .....

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roject. For the assessment year 2004-05, the petitioner had filed the return of income declaring total loss of ₹ 28.43 lakhs (rounded off). One of the major claims raised by the assessee in the return was of deduction under section 80IB(10) of the Income Tax Act, 1961 ('the Act' for short). Such return was taken in scrutiny by the Assessing Officer, during which, he raised several queries and the petitioner replied to the same. The Assessing Officer passed order of assessment under .....

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assessment year. For issuing the notice, the Assessing Officer had recorded the following reasons: In this case, the assessee company filed the return of income for the A.Y. 2004-05 on 31/10/2004 declaring total loss of ₹ 28,43,830/-. The assessee company is engaged in the business of civil construction. In the return of income, the assessee company had claimed deduction u/s. 80IB(10) of the Act of ₹ 10,12,56,034/-. The return filed was processed u/s. 143(1) of the Act on 07.02.2005 .....

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As per Explanation inserted below Section 80IB( 10) by the Finance Act (No.2), Act, 2009 with retrospective effect from 01.04.2000 deduction u/s. 80IB(10) shall not be admissible to a contractor in respect of works contract awarded by any person. For the sake of clarity, same is reproduced hereunder :- Explanation - For the removal of doubts, it is hereby declared that nothing contained in this subsection shall apply to any undertaking which executes the housing project as a works contract awar .....

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Cooperative Housing Society Ltd and the assessee had merely entered into a development agreement with the said society according to which, the assessee company was to bear all the expenses on the housing project and also to connect all the revenue. (iii) The assessee company has shown the entire booking receipts actually received and accrued for receivable as income of the assessee after adjusting the amount to be reimbursed to the society for the cost of the land and other expenses incurred by .....

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and 23.09.03 for Maniratnam II. The BU permission issued was in the name of society for which the development work was done. (v) As against No.28(b) of 3CD report filed with the return of income, the C.A. Has stated that the company is carrying on only construction activities. The raw materials for the construction activities were procured by the cooperative society which has given this order to the company. As the company does not purchase any raw materials, the quantitative details cannot be g .....

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the society in respect of Maniratnam II (92 units) without mentioning the name of the assessee as developer. (viii) The construction permission issued by AMC for Maniratnam I bears the owner of the land as the society, i.e. Dhaneshwar Par CoOp. Society Ltd. and the developer as Ganesh Housing Corporation Ltd. (assessee). However, in respect of ManiratnamII, the assessee's name had not been mentioned as developer. It categorically states that the permission for construction is granted subject .....

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disregard these facts in Form No.10CCB while claiming deduction u/s.80IB(1) of the Act. The Assessing Officer in the assessment proceedings u/s. 143(3) did not give any opinion regarding the allowability or otherwise of deduction u/s. 80IB(10) of the Act. If an issue has not been examined in correct perspective in the initial assessment proceedings, nothing prevents the assessing officer to take a suitable remedial action by way of reopening the assessment. As seen in Point No.(iii) above, the a .....

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le to a contractor in respect of works contract awarded by any person. In view of the above, I have reasons to believe that the income chargeable to tax to the extent of ₹ 10,12,56,034/-has escaped assessment. Issue notice u/s. 148 of the I.T.Act, 1961. 4. The petitioner raised objections against the notice for reopening of assessment, under a communication dated 17.08.2011. Such objections were however, rejected by the order dated 19.08.2011 by the Assessing Officer. Hence, the petition. .....

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the part of the assessee to disclose truly and fully all facts. II. The Assessing Officer did not have any new material establishing that there has been escapement of income. III. The entire claim of deduction under section 80IB(10) of the Act was minutely examined by the Assessing Officer during the original assessment. IV. The Assessing Officer has relied on an explanation added to the statute with retrospective effect, which cannot be the ground for reopening of the assessment beyond four yea .....

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e that the assessee was acting as a contractor and not as a developer. This aspect was not examined during the original assessment. 8. For multiple reasons, the notice for reopening cannot be sustained. Our reasons for this conclusion are as follows. 9. In the original assessment, the Assessing Officer had occasion to examine the petitioner's claim for deduction under section 80IB(10) of the Act. In fact, this was the principle claim of the assessee, since bulk of its income was derived from .....

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se documents contained the development permission and construction permission granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee's claim of deduction under section 80IB(10) of the Act, except for limiting it to the extent of profit, making following observations. 3. On perusal of the return of income filed by the assessee, it is seen that the assessee company is engaged i .....

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claimed loss of ₹ 27,84,880/-and the same cannot be allowed, as the deduction u/s. 80IB is to be allowed only upto the total income available and hence, the assessee was asked to state as to why deduction u/s. 80IB should not be restricted upto the total income. In response to this, the assessee has, vide its letter dated 16.10.2006, submitted as under: … … 4. The reply filed by the assessee company has carefully been considered, but in view of assessee's own admission a .....

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fore not be permissible to the Assessing Officer to disturb such claim in exercise of powers under section 147 of the Act that by issuing the notice beyond the period of four years beyond the period of relevant assessment year. Here again, the Assessing Officer had not recorded, in what manner the assessee failed in its duty to disclose truly and fully all material facts. In fact, the thirst of the contention of the Assessing Officer appears to be that the assessee had not developed housing proj .....

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d as a developer. The petitioner has explained this in the objections raised to the reasons recorded by pointing out that after development of PhaseI of the project, when permission was granted for PhaseII, the same was done in computerized format, which did not contain an entry for showing of the name of the developer. Quite apart from this explanation, on this ground, it would not be open for the Assessing Officer to reexamine the claim, which was originally accepted after scrutiny. If there w .....

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ought to have been examined by the Assessing Officer originally and surely cannot provide a ground for reopening the assessment beyond a period of four years. Secondly, the deduction of tax at source principally is in the hands of the payer of an account. For whatever reason if the tax is deducted at a higher rate or deducted when no such deduction was warranted, it would be for the payee for taking up the issue before the department and claim adjustment or refund, as the case may be. Mere fact .....

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taking in developing and building housing projects approved by the local authority. Apparently, such provision would be aimed at giving encouragement to providing housing units in the urban and semi-urban areas, where there is perennial and acute shortage of housing, particularly, for the middle income group citizens. To ensure that the benefit reaches the people, certain conditions were provided in sub- Section(10) such as specifying date by which the undertaking must commence the developing an .....

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at ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semiurban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under Section 80IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is not .....

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wing meaning of the term 'developer' as: 1. One who or that which develops;2. A person who invests in and develops the Urban or Suburban potentialities of real estate. b. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition gives meaning of the term 'developer' as persons or company that develops land. c. Random House Dictionary of the English Language, the following can be found. Develop: a. To bring out the capabilities or possibilities of; bring to a mo .....

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lexicon Dictionary: The following definitions could be seen: Development a. To act, process or result of development or growing or causing to grow; the state of being developed. b. Happening. 32. Section 80IB(10) of the Act thus provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances noted above. It does not provide that the land must be owned by the assessee seeking such deductions. 33. It is well settled tha .....

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