TMI Blog2017 (2) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for deduction u/s.80IB(10) of the Act. The various case law relied on by the ld. AR is not applicable to the facts of the present case, as those judgments were delivered on its own facts - Decided against assessee. - ITA No. 214/Mds/2016 - - - Dated:- 25-1-2017 - Shri Chandra Poojari, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member Appellant by : Shri Devendra Kumar Bandari, CA Respondent by : Smt. Vijayalakshmi, CIT ORDER Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) dated 17.12.2015. 2. The only ground in this appeal is with regard to allowability of deduction u/s.80IB(10) of the Act. 3. The facts of the case are that the assessee filed e return of income for AY 2011-12 on 30.9.2011 declaring total income at Nil . Thereafter, the assessee filed revised return of income and claimed deduction u/s.80IB(1) for 7 17.35 crores. The case was selected for scrutiny under CASS. The Assessing Officer after carrying out the detailed scrutiny found that the assessee was not eligible for claim of deduction u/s. 80IB(1) for 7 17.35 crores. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of attorney agent and the fourth partner, M/s. Arihant Foundation and Housing Ltd., who have sold the undivided share of land to the customer. 4.2 According to the CIT(Appeals), it is not a case where the three land owner partners have contributed their land either towards the capital in the partnership firm transfer the ownership in favour of the partnership firm for adequate consideration. This fact is evidenced by the partner s capital accounts where no such contribution of land was shown as a capital contribution. As per the sale agreement, which is not a registered document, the four partners of the firms are stated as owners of the land . The firm, M/s. Arihant Heirloom is to construct flats and the payment for the sale of undivided share and construction are receivable by the partners as well as the firm separately, which goes to prove that the firm is only a work contractor and cannot be considered as an undertaking engaged in development of residential project. 4.3 Further, the CIT(Appeals) observed that the firm, M/s. Arihant Heirloom ought to have constructed and sold the flats in order to be eligible for deduction u/s.80IB(1) of the Act. For this purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese luxurious amenities making the prospects of purchasing houses by the middle class or the lower middle class people to a very minimal. The assessee tries to take income tax benefit on built up area where the super built-up area premises were charged to the customers. Therefore, the CIT(Appeals) observed that if the benefits of tax deductions are to reach the deserving class of people then super built-up area which has been charged to the customers becomes the qualifying built-up area for the purpose of availing deduction u/s.80IB(1) of the Act. And accordingly, in the scheme, there are flats more than the size of 1500 sq.ft. of area which makes assessee disqualified for deduction u/s.80IB(10) of the Act. After considering the case laws, cited, referred and relied on by the assessee, the CIT(Appeals) concluded that the assessee is not able to satisfy the qualification criteria to make him eligible for deduction of claim u/s.80IB(1) of the Act and he confirmed the disallowance made by the AO for an amount of 7 17,40,37,793/- u/s.80IB(10) of the Act. Against this the assessee is in appeal before us. 5. The ld. AR submitted that [ground No.2 to last] is not justified in concludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilt up area is more than 1500 sq.ft. The same very issue on which the Assessing Officer denied the claim of the assessee came before the Hon ble Jurisdictional High Court in the case of Sanghvi and Doshi Enterprises and others v. ITO, 255 CTR (Mad) 156, relating to assessment years 2005-06 and 2006- 07, wherein the Hon ble Court has observed that the provisions nowhere required that developer who are the owner of the land alone would be entitled to grant of deduction under section 80IB(1) of the Act, So far as built up area is concerned, as per section 80IB(1)(14)(a) of the Act, which is very clear that the common areas showed that the residential units alone does not include built up area. In this case, it is very clear that the built up area alone has to be considered to see the threshold limit of 1500 sq.ft. as observed by the ld. CIT(Appeals). 10. Keeping in view of the Hon ble Jurisdictional High Court s decision and also provisions of section 80IB(14)(a) and by considering the facts and circumstances of the case, we do not find any infirmity in the order passed by the ld. CIT(Appeals) and the grounds raised by the Revenue are dismissed. 6. The ld. DR, supported the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with prospective buyers of individual flat along with land lord and received a portion of the total consideration towards the work carried on by the assessee. This amount is nothing but for the labour contracts undertaken by the assessee. Further, the ld. DR, submitted that the assessee was undertaken works contract and not developed the housing project. The project was conceived and executed by the land-lord and not by the assessee and the flat was sold to independent prospective purchasers by the land lord. According to the ld. DR, Explanation to sec.80IB(10) introduced w.r.e.f. 1.4.2001 is applicable, as the assessee is only undertaking works contract and not entitled for deduction u/s.80IB(10) of the Act. 6. We have heard both the parties and perused the material on record. The provisions of sec.80IB(10) reads as follows : (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent. of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) not more than one residential unit in the housing project is allotted to any person not being an individual ; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely :- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta; Explanation 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). 7.3 The contention of the ld. AR is that the assessee is a developer and not mere a contractor and being so, the assessee is entitled to deduction u/s.80IB(10) of the Act. Now, we have to examine as to whether the assessee can be called as a developer within the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the meaning of the words developer and contractor, as put forth before us by the rival parties from other legislations, be they State or Central enactments, cannot be automatically applied in the present context. In order to ascertain the meaning of a word not defined in the Act, a useful reference can be made to the General Clauses Act, 1897. If a particular word is not defined in the relevant statute but has been defined in the General Clauses Act, such definition throws ample light for guidance and adoption in the former enactment. According to s. 3 of the General Clauses Act the definitions given in this Act shall have applicability in all the Central Acts unless a contrary definition is provided of a particular word or expression. On scanning s. 3 of the General Clauses Act we observe that neither the word contractor nor developer has been defined therein. Thus, the General Clauses Act is also of no assistance in this regard. Going ahead, when these words are neither defined in the IT Act, 1961 nor in the General Clauses Act, the next question is that wherefrom to find the meaning of such words. There is no need to wander here and there in search of an answer which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t some part of the housing project is assigned by the land lord to some contractor for doing it on his behalf. That will not put the doer of such work in the shoes of a developer. 8. In the present case, the assessee, the assessee has entered into a Agreement with the land owner, for development of vacant land into the multi-storied residential complex. 8.1 Coming to the merits of the case as to whether the assessee is a developer or a works contractor, there is an agreement for developing the property between the parties and the main activity of construction of flats is undertaken by virtue of the construction agreement into between the assessee and the buyers of the undivided co-ownership right in the property as a contractor. The AR only highlighted about the so called agreement without making any reference to the construction agreements entered into with land lord of the property. The land owner who was represented by M/S Arihant Foundations and Housing Ltd sold undivided co-ownership right in the property to various individuals and these individuals given the construction work to the assessee. The owner of the land, which have sold the undivided share of land to various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, when the income-tax authority based on the above document, finds that it is only a contractor and not a developer for taking a decision on sec.80IB of the Act, the assessee states that it is a contractor only in name but a developer in spirit. Thus, the assessee by jugglery of words has managed to avoid paying service tax to the Central Excise Authorities, as it is only a contractor and claims deduction u/s.80IB as not being a contractor but as a developer. This jugglery of words and interpretation of the construction agreement has far reaching implications for the Revenue. 11. For the sake of clarity in holding that the assessee is only a contractor and not a developer, we reiterate the following point: The assessee was not denied the benefit of 80IB by the Assessing Officer not solely because of the fact that he was not the owner of the land. The AO has given his reasons in he e assessment order which is The above act of the assessee entering into an agreement with the land owner is not a governing factor for claiming deduction under these provisions of the Act. What is the governing fact is relationship between the flat buyers and the assessee for whom he -has worked a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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