TMI Blog2017 (12) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... re any interference so that the appellant in this case having filed the requisite audit report also is entitled to deduction under section 80IB(10) in terms of the Instruction No. 4/2009 issued by the CBDT. The assessing authority accordingly shall allow the deduction to the appellant in both the years under appeal. - Decided in favour of assessee. - D. B. Income Tax Appeal No. 21 -22 / 2014 - - - Dated:- 13-9-2017 - K. S. Jhaveri And Vijay Kumar Vyas, JJ. For the Appellant : Mr. Anuroop Singhi with Mr. Aditya Vijay For the Respondent : Mr. Sanjay Jhanwar with Ms. Archana JUDGMENT 1. In both these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby Tribunal has partly allowed the appeal of the assessee. 3. This court while admitting the appeals (21/2014) (22/2014) on 15.9.2015 framed following substantial question of law:- (i) Whether the Tribunal was justified in reversing the orders passed by CIT(A) as well as the Assessing Officer and allowing the benefit of deduction u/s 80IB of the Act to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub- contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was thus insulated against any risk. 37. By no stretch of imagination can it be said that the assessee acted only as a works contractor. The terms works contractor has been receiving judicial attention in several cases In the case of Commissioner of Income-Tax vs. Glenmark Pharmaceuticals Ltd. (supra), the Bombay High Court observed as under: Contract of work or a contract of sale 14. The question as to whether a contract is a contract of work or a contract of sale is the subject-matter of precedents on the subject. The principles, as decided cases would show, are well defined but the application of those principles to individual cases often poses a difficulty. The consistent line of thinking that emerges from the decided cases is that essentially, in determining as to whether a contract constitutes one for work or is a contract of sale, it is the dominant interest and object of the parties in entering into the contract, as evinced by the terms of the contract, the circumstances of the contract and the custom of the trade that provide a guiding indicator. The object of the parties is of necessity to be deduced from the terms of the contract. In order to elucidate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaken by the payee of the price is not the transfer of a chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of material, nor the value of the skill and labour as compared with the value of the material, is conclusive, though these circumstances may be taken into consideration in deciding whether a subsisting contract is a contract of work and labour or contract for a sale of a chattel. In Sentinel Rolling Shutters and Engineering Co. Pvt. Ltd. v. CST MANU/SC/0341/1978 : AIR 1978 SC 1747 : 42 STC 409 this principle was reiterated by the Supreme Court. In State of Tamil Nadu v. Anandam Viswanathan MANU/SC/0560/1989 : AIR 1989 SC 962 : 73 STC 1, the contract in question involved supply and printing of question papers to universities. The assessee entered into those contracts for printing and the question involved was whether the taxable turnover for the purpose of the Tamil Nadu General Sales Tax Act, 1959 would include the printing and block making charges. The Supreme Court held that the contract in question was a contract of work, having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is material in determining the nature of transaction. 17. In Hindustan Shipyard Ltd. v. State of Andhra Pradesh (2000) 119 STC 533, the Supreme Court enunciated certain principles which were deduced from the decided cases on the distinction between the two concepts. The second, third and fourth principles laid down in the judgment of the Supreme Court, read thus (page 545): (2) Transfer of property of goods for a price is the linchpin of the definition of ' sale Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of contract, the circumstances of the transaction and the custom of the trade. It is the substance of the contract document/s and not merely the form, which has to be looked into. The court may form an opinion that the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale, then it is a sale. If the primary object of the contract is the carrying out of work by bestowal of labour and services and materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in transferred from the seller to the buyer, the contract is that of sale, but where transfer of property in the goods is to take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is not a sale but is an agreement to sell. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of the offer. Under section 5(1) the contract may provide for immediate delivery of the goods or immediate payment of the price or postponement of delivery or payment of the price by installments. In the case of State of Andhra Pradesh vs. M/s.Kone Elevators (India) Ltd. (supra),Apex Court observed as under: 5. It can be treated as well settled that there is no standard formula by which one can distinguish a 'contract for sale' from a 'works-contract'. The question is largely one of fact depending upon the terms of the contract including the nature of the obligations to be discharged thereunder and the surrounding circumstances. If the intention is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said Explanation introduced by Finance (No.2)Act, 2009 provided as under: (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)). 6. The same view was also subsequently followed by the Bombay High Court in Commissioner of Income Tax vs. Cajetano Mario Pereira (2014) 88 CCH 152 wherein Bombay High Court held as under:- 10. We are in respectful agreement with the view of the Gujarat High Court in Radhe Developer s case (supra) that the deduction u/s 80IB(10) is available to an assessee who is engaged in the business of developing and building a housing project. 11. The CIT(A) as also the ITAT have given concurrent findings of the fact that in the facts of the present case also risks and rewards relating to the project were on the assessee developer and not on the owner of the land. The deduction is available in case of developing and building housing project, and it is the respondent-assessee who are engaged in the business of developing and building housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions towards the complete turnkey group housing project. The terms and conditions in the tender and letter of intent have also been made a part and parcel of such Deed of Transfer. The perusal of definition of turnkey contract as contained in the Agreement placed in assessee s paper book page 18, relevant page 22, it has been agreed and accepted by the parties that under a Turnkey Housing Contract, a fully functional complex has to be developed for the organization, on the land of the company upto and including transferring and handing over the complete complex to the beneficiaries of the organization including fully operational dwelling units as per the specifications including land, development and specified common facilities to the beneficiaries of the organization, performing Defect rectification during the Defect Liability Period of 12 months extendable by another 12 months and obtaining completion certificates. It is scope of the work of the assessee company that complete planning, designing and approval of project plans, development of land and the housing project is to be carried out by the appellant and the appellant has agreed and undertaken to give possession of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as a developer in terms of judgment rendered by Hon ble Gujarat High Court in the case of CIT vs. Radhe Developers (2012) 341 ITR 403 (Guj.). In the present case in appeal, the authorities below are found to have erred in holding that the appellant is a work contractor and did not appreciate the material fact that CGEWHO did not become owner of the property on a brick to brick basis. It is a case where is the appellant has first become the owner of the property during its formation and thereafter was to transfer the property to the CGEWHO/its allottees by way of handing over of the possession and executing a joint deed in that regard. Before the delivery of the possession to the allottees, the assessee had full right to develop the land by putting the housing project at its on risks and costs and not that of the CGEWHO. The ld. CIT(A) has not brought on record any significant risk and reward of ownership transferred in this regard to CGEWHO. In the light of above findings, it has to be held that the explanation below section 80IB(10) of the Act is not applicable to the case of the appellant. In the case of Unique Builders Developers vs. DCIT (supra), the Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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