9911796707
TMI Blog2011 (3) TMI 1834X X X X Extracts X X X X X X X X Extracts X X X X ..... ding housing projects was granted to the original owners of the land and not to the assessee who acted only as an agent for execution of the project of Vrindavan Township, which rights were obtained by the assessee firm from the original owners. (4) The ld. CIT(A) failed to appreciate that the land being an essential and intrinsic part of developing and building of a housing project, approval is granted by the local authority to the owner of the land for developing and building housing projects thereon and any other person to whom he entrusts the works connected with the execution of the project instead of taking it up himself, cannot be said to be an undertaking developing and building housing projects approved by the local authority within the meaning of section 80IB(10) of the Act. (5) The ld. CIT(A) failed to appreciate that it is the owners of the land who entered into agreements for sale of the developed units to the buyers and the assessee acted only as a confirming party which renders the owners of the land and not the assessee as an undertaking in terms of section 80IB(10). (6) The ld. CIT(A) erred in adopting liberal interpretation of a benevolent provision despite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners. According to him profits earned during the year was sufficient to cover the withdrawal by the partners. 5. We have heard the parties and carefully perused the material on record. In our considered view there is no case for interference in the order of ld. CIT(A). It is because there is a finding by ld. CIT(A) that money was borrowed by the assessee from bank and other depositors for the purpose of business and once it is so the question of any disallowance out of any interest paid therefrom does not arise. It is immaterial whether the partners have made heavy withdrawals. So long as finding of the ld. CIT(A) that borrowed money was utilized for the purpose of business no disallowance can be made out of interest payment. Hon. Supreme Court in the case of Munjal Sales Corporation (2008) 298 ITR 298 held that no disallowance of interest under section 36(1)(iii) can be done if borrowed funds are utilized for the purpose of business. In view of this we confirm the order of ld. CIT(A) on this issue. This ground of Revenue is dismissed. 6. The next issue is the allowability of deduction under section 80IB(10). The AO noted that assessee claimed deduction u/s 80IB(10) of Rs.7,17,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the claim of deduction u/s 80IB(10 at Rs.76,07,792/-. 7. The ld. CIT(A) allowed the claim of the assessee by holding that expenditure of Rs.1,34,92,927/- is specifically allocable to the noneligible part of the business and, therefore, non-eligible part of the construction had shown a loss and accordingly, the calculation made by the assessee for claiming deduction u/s 80IB(10) was correct. The assessee in fact had carried out the calculation of deduction u/s 80IB(10) as under :- Particulars Amount(Rs.) Gross total income as per income tax return 7,79,94,475/- Less: Dividend and other income - 22,165/- Add: Expenses not incurred for eligible project 1,34,92,927/- Allocable profit 9,14,65,237/- Total turnover 27,14,11,910/- Turnover of eligible project 21,30,32,663/- Turnover of non eligible project 5,83,79,247/- Allocation to eligible project (91465237 x 213032663/271411910) 7,17,90,881 Allocation to non eligible project (914665237 x 58379247/271411910) 1,96,74,356/- 9,14,65,237/- Income from non eligible project Allocation to non-eligible project 1,96,74,356/- Add: Dividend and other income 22,165/- Less: expenses not incurred for eligible pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project. Our view that profits cannot be estimated without pointing out defects and rejecting the books by invoking the provisions of section 145(3) earlier u/s 145(1). It is supported by following several authorities: Hon. Gauhati High Court in Madnani Construction Corpn. (P) Ltd. vs. CIT (2008) 296 ITR 45 (Gau) has held that accounts cannot be rejected if AO did not find books of accounts incorrect or any infirmity in the audit report and therefore, resort to best judgment assessment cannot be taken. In CIT vs. Rajnikant Dave (2006) 281 ITR 06 (All) it is held that if there is no finding that books of accounts are incomplete or incorrect accounts cannot be rejected. In Ashok Refractory (P) Ltd. vs. CIT (2005) 279 ITR 457 (Cal) it is held that even though there may be absence of stock register or item-wise accounting of stock but if there is no finding that income cannot be deduced from the method of accounting followed by the assessee then accounts cannot be rejected and section 145 cannot be invoked. Similar view was taken by Hon. Calcutta High Court in Juggilal Kamlapath Udyog Ltd. vs. CIT (2005) 278 ITR 52 (Cal) wherein it is held that if there is no finding that income ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The proposed amendment will take effect from 1-4-2000, and will, accordingly, apply in relation to the assessment year 2000-01 and subsequent years." 25. The provisions of section 80-IB(10) thus are sought to provide that for approved housing project, the profits are fully deductible if the project has the built-up area for the cities of Delhi and Mumbai, and the area within 25 kms. from the municipal limit thereof does not exceed 1,000 sq. ft. and for other places the built up area of residential unit does not exceed 1,500 sq. ft. A provision is also made whereby any undertaking of an Indian company, which is entitled to deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger (a) no deduction to be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section to apply to the amalgamated or resulting company as they would have applied to the amalgamating or demerged company as if the amalgamation or demerger had not taken place. 26. The sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agreement with the assessee to develop and build housing project but on a perusal of the agreement as narrated above, it is evident that the development and building work has been carried out by the assessee in pursuance of a tripartite agreement and it is not by the land-owners. Therefore, the mere fact that the landowner and the undertaking developing and building housing project, are two different entities would not make any difference. The deduction would be eligible to the person who is developing and building housing project and not to the mere owner thereof. 29. It is also the case of the revenue that the assessee was a mere contractor developing and building housing project and, therefore, it could not be a developer. We fail to understand as to how such a situation could emerge. A person who enters into a contract with another person is no doubt a contractor. Having entered into agreements with landowners for development and building the housing project, assessee was obviously a contractor but it does not derogate the assessee for being a developer, as well. The term 'contractor' is not essentially contradictory to the term developer. As stated above, it is the underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The development means the realization of potentialities of land or territory by building or mining. Accordingly, it can be safely said that a person who undertakes to develop real estate by developing and constructing a housing project is an eligible undertaking; developing and building of housing projects within the meaning of section 80-IB(10) of the Act. In the present case in hand, the landowner has not made any conscious attempt to develop the property except ensuring their rights as landowner so that the sale value of the land could be realized to them as per the terms of 'Agreement to Sale' and the 'Development Agreement'. The landowners, no doubt, have not thrown themselves into development of property. It is only the assessee who is developing the property. Throwing itself into the business of development and building of housing projects by taking all risks associated with the business by engaging architects, structural consultants, designing and planning of the housing schemes, payment of development charges, obtaining necessary permissions, approving plans, hiring machinery and equipments, hiring engineers, appointing contractors, etc. No doubt, the permission has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, to another Indian company in a scheme of amalgamation or demerger. (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) ) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place." 34. Even if that is so required, the assessee in the present case can also be said to be the owner of the land as it had made part payment to the landowners during the financial years 2000-01 and 2001-02 for an amount of Rs.56 lakhs, and taken the possession of the land for development and building the housing project and satisfy that condition as well of being the owner of the land in view of provisions of section 2(47)(v) of the Act. When the assessee has taken on the possession of immovable property or retained it in part performance of a contract of a nature referred to in section 53A of the Transfer of Property Act, 1882 it amounts to transfer under section 2(47)(v), which reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from any business referred to in sub-sections (3) to (11) and (11A) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section." 19. Further who should be developer has been discussed by Hon. Supreme Court in Gujarat Industrial Development Corporation vs. CIT (1997) 229 ITR 414 (SC) where in para 7 thereof the issue has been discussed. The Tribunal in Radhe Developer's case has referred to that judgment and has observed as under :- "31. The Supreme Court in the case of Gujarat Industrial Development (supra), considering the meaning of 'developer' held that the word 'Development' appearing in the provisions should be understood in its wider sense and, therefore, granted exemption even though the Gujarat Industrial Development Corporation was engaged in the industrial development. The development means the realization of potentialities of land or territory by building or mining. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
