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M/s. Samrat Corporation C/o. V.P. Patel & Co. Versus Income Tax Officer, Ward 9 (3) / Ward 9 (1) , Ahmedabad

2017 (12) TMI 419 - ITAT AHMEDABAD

Deduction claimed u/s. 80IB(10) - housing project in the name and style of a society M/s. Saundarya Cooperative Housing Society Ltd. - ownership of plot - Held that:- It is no more in dispute that Section 80IB(10) deduction does not envisage ownership of the plot in question relevant to a housing project. See CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Assessee only has undertaken the above entrepreneurial risk / reward in developing the above housing project after ha .....

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e the impugned disallowance - Decided in favour of assessee. - ITA Nos. 1147 to 1149/Ahd/2011 And ITA Nos. 344 And 1671/Ahd/2013 - Dated:- 20-9-2017 - SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER For The Assessee : Shri M. K. Patel, A.R. For The Revenue : Shri Roopchand, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER These five assessee s appeals for assessment years 2000-01 to 2003-04 & 2005-06 emanate from the CIT(A)-XV, Ahmedabad s separate orders dated 31 .....

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r.w.s. 254 of the Income Tax Act, 1961; in short the Act . Heard both sides. Case files perused. 2. Learned representatives inform us at the outset that the sole substantive issue in all five instant appeals is that of correctness of both the lower authorities identical action disallowing assessee s deduction claimed u/s. 80IB(10) of the Act qua the housing project in the name and style of a society M/s. Saundarya Cooperative Housing Society Ltd. involving the above specific figures; assessment .....

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ocessed on 20.02.2002. The Assessing Officer thereafter formed reasons to believe that assessee s taxable income liable to be assessed had escaped assessment. He therefore issued Section 148 notice dated 18.05.2004. We find the assessee to have shown itself as a construction supervisor per its Form 3CD of audit report u/s.44AB of the Act. The Assessing Officer then framed re-assessment on 24.03.2005 disallowing the above deduction claim. The CIT(A) in his order dated 20.01.2006 partly accepted a .....

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thers in ITA No.2482/Ahd/2006, in the interest of justice, we vacate the findings of the ld.CIT(A) and restore the matter to the file of the AO with the directions to analyze the relevant development agreement entered into by the undertaking of taxpayer with the landowner in the light of facts obtaining in the books of accounts maintained for the said undertaking by the taxpayer and other relevant documents, keeping in view the aforesaid decisions of the ITAT as also after allowing sufficient op .....

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of the Act, in accordance with law. In case the AO finds that the undertaking of the tax payer has acted on behalf of the land owner and has got only the fixed consideration from the land owner for the development of the housing project, the tax payer would not be entitled to any deduction u/s.80IB(10) of the Act. With these directions, ground no.l in both the appeals is disposed of as indicated hereinbefore. (Emphasis supplied) 4. The assessing authority took up consequential proceeding. The as .....

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evant clauses in assessee s above development agreement. He found the above society to be owning the project land in question. The said society had taken all steps to apply for construction claim as accepted in local authorities action approving the project in question which nowhere indicated assessee s name to be mentioned therein. The Assessing Officer observed that the assessee had come in the picture only by way of the above development agreement which did not indicate any such development a .....

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ad taken possession of the plot in question for construction activity without having any stake in admitting prospective bias or consideration money or finance etc. He then rejected assessee s reliance upon its development agreement to be not in the nature of conveyance deed executed by the society in its favour. The Assessing Officer s opinion accordingly was that the assessee s job in development of the above housing project was that of performing architectural and structural engineering functi .....

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eveloper not entitled for the impugned Section 80IB(10) deduction. He therefore made the disallowance in question amounting to ₹ 4,66,910/-. 6. The CIT(A) confirms the Assessing Officer s above action disallowing assessee s deduction claim. 7. We have heard rival submissions. We have already indicated that the sole question arising for our apt adjudication is whether or not the assessee is entitled for Section 80IB(10) deduction in above set of facts. It is no more in dispute that Section .....

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o-ordinate bench decision in case of Shri Umeya Corporation vs. ITO ITA No.211/Ahd/2010 decided on July 7,2015 further holds that it is the entrepreneurial risk involved in development of a housing project than ownership of the project land which forms the decisive factor for the purpose of raising Section 80IB(10) deduction claim. Learned co-ordinate bench decision settles the issue as under: 3. So far as this grievance of the assessee is concerned, the relevant material facts are as follows. T .....

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t acquired the dominant control over the project. The Assessing Officer was of the view that since the assessee did not own the land, since the necessary approval of the project was taken by the land owners and since the assessee has merely acted as an agent and as a contractor as it has entered into construction agreement with the landowners, the assessee is not eligible for deduction under section 80IB(10) of the Act. Aggrieved, assessee carried the matter in appeal before the CIT(A) but witho .....

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not the case here. Vide written submission dated 24.11.2009 it was once again stated that the appellant had not purchased lands but the lands owned by the other persons have been developed in terms of Development Agreement. Development Agreement dated 2.7.2003 was entered by the appellant with the land owner Shri Ramabhai Chaturdas Patel for construction of the housing project known as Someshwar and another Agreement dated 2.4.2004 was entered with Shri Parsotambhai Joitaram Patel for construct .....

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constructing tenements of the said properties along with the work of development of basic common infrastructure facilities, fid/ease refer to clause 1 of the Development Agreement) . Clause 2 of the Development Agreement states as under: The said Owner shall sell / allot to the desiring persons the plot/s either by himself or through the Developer/Builder being the party of the Second Part. Thus in this case the land was never purchased by the appellant, neither any investment was made by the ap .....

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ntract. In this decision in para 54 part of Memorandum explaining the provisions in the Finance bill 2007 has been quoted, relevant portion is reproduced below: .....Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus in a case where a person makes the investment and himself executes the development work i.e. carries out the civil .....

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appellant has not A made any investment towards ownership of land or project. It was assigned construction / development of the housing projects by the land owners, though it incurred cost and derived profit but it was never the Owner of the project or of the land on which it was constructed. The individual plots on which tenements were constructed were purchased by the individual tenement buyers from the land owners. The disallowance made by the AO u/s. 80IB(10) (on the grounds summarized in pa .....

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ility of deduction under section 80IB(10). Hon'ble jurisdictional High Court has, in this context, inter alia observed as follows: 32. Sec. 80-16(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 that while interpreting the statute, particularly, the taxing s .....

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jects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. (Emphasis, .....

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ssessee, the assessee is obviously taking the entrepreneurship risk qua the project; and is, accordingly, eligible for deduction under section 80IB(10), in respect of the same. The assumption of such an entrepreneurship risk is not dependent on ownership of the land. The business model of developing and building housing projects by buying, on outright basis, and constructing residential units thereon could probably be the simplest business models in this line of activity, but merely because ther .....

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the fundamental character of the business remains the same, but certainly such modalities or complexities of business models cannot come in the way of eligibility for an incentive which is for the purpose of 'developing and building a housing project'. There is no justification, conceptual or legal, in restricting eligibility of deduction under section 80IB(10) to any particular business model that an entrepreneur adopts in the course of developing and constructing housing project. 8. A .....

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ity view, vide order dated 28th February, 2013 and on somewhat peculiar fact situation in this case, the final order of the Tribunal did not endorse these views. Quite to the contrary, following Hon'ble Bombay High Court decision in the case of CIT Vs ABG Heavy Industries Ltd and Ors [(2010) 322 ITR 323 (Bom)] and upon by taking into account Hon'ble Bombay High Court's specific directions in the case before the Tribunal, the Tribunal's final order had, inter alia, concluded as fo .....

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ee with regard to the projects in question for both the years. 9. It is not even the case of the Assessing Officer that the assessee did not assume the entrepreneurship risks of the housing project. The format of arrangements for transfer of built up unit, and business model of the assessee for that purpose, is not decisive factor for determining eligibility of deduction under section 80 IB (10), but that is all that the authorities below have found fault with. The objections of the authorities .....

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ment dated 06.03.2000 with the owner society M/s. Saundarya Co-operative Housing Society Ltd. forming pages 43 to 47 in the paper book. The said agreement sufficiently indicates the assessee/first party to be both developer as well as contractor than the latter role only as follows: And Party of the First Part will be appointed as a Developer and Contractor. The Terms & Conditions of this Agreement are as under:- (A) To book the Members for the unit to be constructed on the said land by Seco .....

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t from members. The cost of the units does not include Lift Exp., Water, Boar, Motor Pump, General Connection Exp., and Cost of Electric Cable, and Architect Engineer Fees, because exact amount of all above exp. will be known after sometime and that will collect separately by First party. (C) As per this agreement First party will registered the members of the scheme and they will collect amount by cash or by cheque in favour of firm name and afterwards the first party will return this amount to .....

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eives the full amount of units and second party do not have any objection. (E) Party of the first, part will give only the list of the member, unit as & when it booked to second party. Party of the second part will registered that unit holder as a member of the society as & when it is inform by first party in written and by giving the full details of the payment to Second party. And it is also dearly mention trial' second party will not enter the name of the unit holder as a member o .....

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ame to give the receipt of amount etc., and second party does not have any liabilities. (G) First Party has full rights to book any person, Firm, company, to make advertisement or handbill or hoardings, neon sign of the scheme or to give advertisement in any local, or national daily weekly or in monthly magazines etc. for the Scheme, But for this expenses will be born by First Party. (H) First party will keep all the agreements, letters, copies of approved plan etc. of the said scheme with them .....

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encies, experts etc. if require for the development of the scheme and salary, other expenses will be born by First party and second party will not be responsible. (K) First part is appointed as a Developer /Contractor by the Second party, hence without their permission, First party cannot transfer or assign their rights to any other person. (L) If any, problem arise for the booking of the unit holder or any legal problem arise then, all such legal actions will be taken by the first party and exp .....

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ents to the unit holder if require, and they also have, right to make any Agreement, Declaration, Statement on Oath etc. with any person, firm, company who came to become a unit holder of the Said Scheme. (O) Second party has to pay the Development Charges to the first party on the basis of the Units they have booked. The development charge will be at the rate of 15% of the total receipts from the Members. First party has a right to collect 15% as a development Charges said Development charges i .....

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