TMI Blog2021 (2) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopmental activities either as a Owner or as a Developer or Jointly. As a owner of the land , there was no risk to the assessee and its interest was in the realisation of the potentialities by way of encashing the past investment made etc. Therefore , the assessee has not made out a case that it is entitled for the deduction claimed u/s 80-IB(10) and hence the Revenue s appeal is allowed. - I.T.A. No. 722/Chny/2019 - - - Dated:- 28-1-2021 - Shri Duvvuru RL Reddy, Judicial Member And Shri S. Jayaraman, Accountant Member For the Appellant : Shri. G. Chandrababu. Sr. AR For the Respondent : Shri. S. Sridhar, Advocate ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)- 12, Chennai, in ITA No. 274/CIT(A)-12/2013-14 dated 28.12.2018 for assessment year 2010-11. 2. The Revenue filed this appeal belatedly by one day. It was pleaded that the relevant assessment records and other documents which were in transit from the higher authorities were received only on 18.03.2019 and the appeal was filed on the next day which caused one day delay which is due to the circumstances be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the Ld. CIT(A) failed to appreciate the fact that the assessee is merely a land owner and it has not developed and built housing projects approved by the local authority , thus the primary condition for claiming the deduction u/s. 80IB(10) has not been fulfilled. The Ld. CIT(A) without properly appreciating the facts of the assessee s case which is merely a land owner vis-a-vis M/s. Sanghvi Doshi Enterprises, which is clearly a developer , has wrongly allowed the appeal and hence pleaded to restore the order of the Ld. A O . Per contra, the Ld. AR supported and relied on the order of the Ld. CIT(A). 6. We heard the rival submissions. The main issue in this case is whether the assessee is eligible for the deduction claimed u/s. 80-IB(10) of the Act. The essence of sub section (10) of section 80-IB requires involvement of the undertaking in developing and building housing projects approved by the local authority subject to certain conditions. In this regard, let us examine the issue on the basis of case laws relied on by the assessee before the Ld. CIT(A) as under : 6.1 In the case of CIT vs Radhe Developers (and connected appeals) reported in 341 ITR 403 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject 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. 6.2 The next case law relied by the assessee was CIT , Central Circle vs Shravanee Constructions (2012) 209 Taxman 06 (Kar) in which the essential facts are that the assessee, Shravanee Constructions , purchased agricultural land for a certain amount in a village of Bangalore City. The sale deed was not registered. A memorandum of understanding was entered with the land owner and the assessee took possession of the land. Later on, a joint development agreement was entered into by the assessee as consenting witness with (i) the land owner as owner ; and (ii) M/s Purvankara Projects Ltd as promoter , to develop a residential apartment on the above land. As per the agreement, the promoter was to pay a certain consideration and to deliver 22 percent of the super built area to the assessee. As a consequence of the agreement, the assessee got the land converted into non-agricultural land and got the work commencement from the Municipal Corporation. Out of the total 211 flats that were to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apartment complexes. 8. In terms of the agreement, which 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 land, undertook the aforesaid developmental activities in the said land and thus, complied with all other conditions, which have to be fulfilled before claiming benefit under section 80IB(10) of the Act. The builder has invested the money in the construction. It is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of section 80IB(10), the assessee is claiming deduction. As is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer viewed that the assessee had acted only as a builder for H and section 80IB(10) allows deduction only in respect of developing and building housing projects and not developing or building. Since the assessee had only acted as a mere executor of the project and was not the owner of the property, held that the question of the assessee being considered for grant of deduction did not arise. The tribunal pointed out that the ownership of the land was not a criteria to decide the status of the developer to claim the deduction . The provisions emphasised about the investment risk, which could be taken either by the owner or the builder or jointly by both. The tribunal further pointed out to the argument of the Revenue that as the owner was paid based on the built-up area, it was only the owner, who was the developer. Rejecting such a reasoning by the Revenue, the tribunal pointed out that all that the owner was entitled to on the terms of the agreement between the parties was for the undivided share of the land measured in terms of the built-up area and he had no interest in the cost of construction, which the builder alone had to bear. In the circumstances, the consideration th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various clauses in the agreement between the assessee and the owner dated 28.4.2003. A reading of the various clauses therein clearly points out the role of the assessee, which is not just as that of a builder to put up construction as per the directions of the owner; on the other hand, as rightly pointed out by the Tribunal, the risk element that is involved in the project undertaken by the assessee is more than of a normal builder, undertaking mere construction. It is seen from the data furnished before the Assessing Officer that while flats in the 6th floor and 11th floor were sold even as early as 2003, flats in first floor with Nos.104 and 103 were sold in the year 2009. So too, some of the flats in second floor and third floor were sold in the year 2007, 2006 and 2005. The flat in 12th floor was sold on 15.10.2003 and in the 9th floor on 5.11.2003. The flats in the first floor with Nos.101 and 102 were sold on 17.6.2009. Apart from this, we find that there were still some flats left unsold. 30. In the background of these facts, the risk factors, as projected by the assessee accepted by the Tribunal, needs to be seen. Under Clause 4 of the agreement, the assessee was to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectful agreement with the law declared by the Gujarat High Court. 7. From the above decisions, whether it is owners of the land (including an agreement holder as in the case of CIT , Central Circle vs Shravanee Constructions (2012) 209 Taxmann 06 (Kar)) or the Developers of the property, who held agreements in their favour and possessed the land, as in the cases of CIT vs Radhe Developers (and connected appeals) in 341 ITR 403 (Guj) and in the case of CIT, Business ward XV(3) vs Sanghvi and Doshi Enterprise, 214 ITR 463 (Mad), in order to claim the deduction under sub section (10) of section 80-IB each one of them shall have to be establish the primary condition that they had developed and built housing projects approved by the local authority. 8. The undisputed fact in this case is that the assessee is owner of the land. Therefore, for claiming the deduction u/s. 80IB(10), the assessee has to establish that it had undertaken developmental activities which include activities like undertaking the levelling the road and removal of rock surface in the said land and making the land usable for the purpose of construction of the apartment complexes, where the nature of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marcation of the built up area. - Para 20/page 5 of the Agreement. 4 That the party of the second part shall complete the construction in the schedule a mentioned property and the project known as NPL - Redmond square, and the construction area shall be a minimum of 66,000 sq. feet and as per CMDA rules. However the proportion of both constructed area and land will be in the ratio 50 % - 50% as between parties of the first part and the second part. They will be free to sell their respective constructed areas to their nominees and the party of the first part shall execute due and proper conveyance in favour in relation to the entitlement of the party of the second part. Para 26/page 6 of the Agreement. From the above clauses, it becomes amply clear that the assessee, M/s. Anjali foundations had transferred/assigned 50% of the land holdings to the other company, M/s. Narendra Properties Limited who in turn had made investments by way of constructing all the flats for M/s. Narendra Properties and M/s. Anjali foundations. The constructed flats were sold in the ratio 50:50 by the above two entities. The above two entities hold 50% rights in all the aspects of flat promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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