Green Associcates, Baroda vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.822/AHD/2013 (Assessment Year: 2009-10)

Green Associates 4th Floor, V/S I.T.O., Ward-5(2), Baroda Kothari Chambers, Kothi Road, Raopura, Vadodara-390001 (Appellant) (Respondent)

PAN: AAHFG 4507H

Appellant by : Shri S.N. Soparkar, A.R. Respondent by : Shri Roop Chand, Sr. D.R.

(आदेश )/ORDER

Date of hearing : 18-12-2014 Date of Pronouncement : 05-01-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Assessee is against the order of CIT(A)-V, Baroda dated 23.02.2013 for A.Y. 2009-10.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is a partnership firm stated to be engaged in the business of development and building of housing projects. Assessee filed its return of income for A.Y. 09-10 on 30.09.2009 declaring total income at Rs. Nil after claiming deduction of Rs. 29,32,078/- u/s. 80IB(10) of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide 2 ITA No 822/AHD/2013 . A.Y. 2009-10 order dated 26.12.2011 and after denying the claim of deduction u/s. 80IB, the total income was determined at Rs. 29,32,080/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who dismissed the appeal of the Assessee. Aggrieved by the aforesaid order of CIT(A), Assessee is now in appeal before us and has raised the following effective grounds;-

1.The Learned CIT (A) has erred in law and on facts of the appellant's case in confirming the action of Learned A.O. of disallowing the claim of deduction u/s 80-IB (10) of the I.T. Act 1961 on various erroneous plea.

2.Both the lower authorities have erred in law and on facts of the appellant's case in not appreciating the fact that the appellant is developing & building housing projects by fulfilling all the requirements for claiming the deduction u/s 80-IB (10) of the Act.

4. During the course of assessment proceedings, A.O noticed that Assessee has claimed deduction of Rs. 29,32,078/- u/s. 80IB(10) of the Act. Assessee was asked to justify its claim of deduction. On the basis of submissions made by the Assessee, A.O noted that the approval for construction of the project for which deduction was claimed by the Assessee was granted by Vadodara Municipal Corporation in the name of Shri Akshay Kothari and Ors. and was not in the name of the Assessee. He also noticed that the land did not belong to the Assessee. He was therefore of the view that a person who does not have land cannot be considered as a developer except as an agent or a contractor. A.O was further of the view that the entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the land owner. He was therefore of the view that since Assessee was not the owner of the land, it was not entitled to deduction under 80IB(10) of the Act and therefore denied the claim of deduction. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A).

CIT(A) noted that in view of the decision of Hon'ble Gujarat High Court in the case of Radhe Developers, the Assessee could not be denied deduction under 80IB(10) only for the reason that the Assessee was not the owner of the 3 ITA No 822/AHD/2013 . A.Y. 2009-10 entire property and the permissions regarding the project were in the name of original owners but he however noted that there was no sale of residential houses by the Assessee in the housing project but there was sale of developed residential plots with construction up to the plinth only. He was therefore of the view that Assessee has decided to sale fully developed residential plots only and complete rest of the work as a contractor of the plot owners. He was therefore of the view that the role of the Assessee as developer and builder of the project gets over as soon as residential plots are sold to individual purchasers with all the rights in the plot. Further a contractor of individual plot owners who is constructing housing cannot claim that he is a developer and builder of the housing project and therefore the Assessee was not eligible for deduction under 80IB(10).

He accordingly upheld the denial of deduction under 80IB(10) but for different reasons. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.

5. Before us, ld. A.R. at the outset submitted that the issue in the present appeal is directly covered by the decision of the co-ordinate bench of Tribunal in the case of Narayan Reality Ltd. ITA No. 2293/A/12 & 2095/A/13 order dated 2.05.2014. He also placed on record, the copy of the aforesaid decision. He further submitted that since the facts of the present case are exactly similar to that of Narayan Reality, the Assessee's claim of deduction be allowed.

6. Ld. D.R. on the other hand supported the order of A.O and CIT(A).

7. We have heard the rival submissions and perused the material on record. We find that in the present case the Assessee was denied deduction u/s. 80IB(10) by ld. CIT(A) for the reason that Assessee had not sold residential houses in the housing project but had sold developed residential plots with construction up to the plinth only and thus the Assessee could not be considered as developer of housing project but was a contractor and therefore Assessee was not eligible for deduction u/s. 80IB(10) of the Act. We find that on similar facts, in the case of 4 ITA No 822/AHD/2013 . A.Y. 2009-10 Narayan Reality Ltd. (supra) the issue was decided in favour of the Assessee by the co-ordinate bench by holding as under:-

8.We have heard the rival submissions and perused the material on record. On perusing the order of CIT(A), it is seen that CIT(A) has held that the issue relating to disallowance of deduction u/s 80IB(10) of the Act on the ground that Assessee is not the owner of the land and the approval of the project not being in the name of the Assessee is covered in favour of Assessee by the decision of his predecessor in assessees own case for AY 2008-

09. We further find that CIT(A) had disallowed the claim of the Assessee on the ground that Assessee had entered into two agreements namely "sale deed" for the sale of land and "construction agreement" for the construction the unit and therefore according to him, the Assessee was a contractor and therefore not eligible for deduction u/s 801B(10).

We also find that on identical facts, the co-ordinate Bench of the tribunal in the case of Satsang Developers (ITA No 1011, 2498 and 1221 of 2012 order dated 12.11.2013 has allowed the deduction to assessee by holding as under:-

4.2. In addition to above two objections, the Id.CIT (A) has raised one more objection that the assessee has sold the land to the Unit holders separately and has done the construction of units under separate agreement/contract and, therefore, the assessee is not eligible for deduction u/s.80-IB(10) of the Act because as per ld.CIT(A), profit earned by the assessee in respect of sale of land is not eligible for deduction u/s.80-

IB(10) of the Act and similarly, the profit earned by the assessee for construction activities is not eligible for deduction u/s.80-IB(10) because the assessee is doing the construction as a contractor for a work and not as a builder or developer and, therefore, the assessee is not eligible for deduction u/s.80-IB(10) of the Act. Against these objections of ld.CIT (A), the assessee is in appeal before us. ....................................

5.2 Regarding the 3rd objection that the assesse has sold land to the unit holders separately and has done the construction units under a project agreement/contract, it was submitted that it is a joint activity although the agreement and land sale-deed are executed separately, but for this reason alone, it cannot be said that the assessee is not a builder or a developer. He placed reliance on the following Tribunal decisions:-

Sl.No(s) Decision in the case of. ... Reported in....

1. DCIT vs. SMR Builders (P.)Ltd. (2012)24 Taxman.com 194 (Hyd.)

2. Sky Builders & Developers vs. (2011)14 Taxman.com ITO 78 (Indore)

3. M/s.Vardhman Builders and ITA No.559/Ind/2010 Developers vs. ITO dated 09/05/20 12 5 ITA No 822/AHD/2013 . A.Y. 2009-10 4. Raghava Estates Vs. Dy.CIT ITA Nos.248 & 49/Vizag/2009 dated 04/08/2011

5.2. He submitted that in the case of Vardhman Builders & Developers (supra) also, the assessee had entered into a separate agreement for sale of land and separate agreement for construction of housing on such land and under these facts, it was held by the Tribunal in that case that merely because of two separate agreements, the claim of the assessee for deduction u/s.80-IB (10) of the Act cannot be declined if other conditions are being satisfied.

5.3. He further submitted that in the case of DCIT vs. SMR Builders (P) Ltd. (supra) also, the facts were that the assessee had sold flats in a semi-finished stage. In that case, the AO had noted that as per the sale-deed, the assessee-company has sold undivided share of land with super-structure of semi-finished built-up area for a certain consideration. The AO held that the semi-finished structure has never been considered as a residential unit. It was also noted by the AO in that case that on the same date when the sale deed was executed, a construction agreement was also entered into with the transferee for further construction of the same flats by the builder company itself. He submitted that the facts in the present case are similar. He also pointed out that in that case, it was held by the Tribunal that the stand of the Revenue with regard to the semifinished condition of the flats is devoid of any merit in as much as what is sought to be constructed and sold by the assessee is a residential units and what is sought to be purchased by the buyer is the ownership of the specified unit and registration of flat in semi-finished condition is only to facilitate the convenience of the parties and agreement for development and completion of balance work in relation to the flats is only an incidental formality and this cannot be viewed as fatal to the claim of the assessee for deduction u/s.80-IB(10) of the Act. It was also held by the Tribunal that the entire work from the stage of the commencement to the stage of making the residential unit habitable have been carried out by the assessee only and, therefore, assessee is eligible for deduction u/s.80-IB(l0) of the Act.

9.2. Now we take up the third and last objection of Id.CIT (A) that the assesse had sold the land separately and undertook the construction work as per a separate agreement and, therefore the assessee is not a builder or a developer but a land dealer and contractor. In this regard, in our considered opinion, the issue involved is squarely covered in favour of assessee by the decision of ITAT Indore Bench rendered in the case of M/s.Vardhman Builders and Developers vs. ITO (supra). It is noted by the Tribunal in that case that the assessee had entered into an agreement for a sale of land and a separate agreement for construction of the house on the land and, therefore, the facts are similar. Under these facts, it was held by the Tribunal in that case that the claim of the assessee for deduction u/s.80-IB (10) of the Act cannot be declined if other conditions are being satisfied. Similarly, in the case of DCIT vs. SMR Builders (P.) Ltd. (supra) also, the assessee sold the land along with semi- finished structure to the buyers and as per separate agreement, agreed for construction for completion of balance work.

Hence, the facts of this case are also 6 ITA No 822/AHD/2013 . A.Y. 2009-10 similar because in that case also, the land was sold separately along with partial and unfinished construction of flats and, thereafter, construction agreement was entered into to carry out the balance construction work and under these facts, it was held by the Tribunal in that case that such agreement for construction to complete the balance work is only an incidental facilitation to protect interest of the parties and therefore, the assessee is eligible for deduction u/s.80-IB(10) of the Act. Similarly, in the case of Raghava Estates vs. Dy.CIT (supra) on which reliance was placed by the Id.AR of the assessee, the facts are similar. In that case also, the assessee had sold the plots separately and thereafter, constructed the houses and under these facts, the Revenue held that the assessee has to be considered as a mere contractor and, therefore, the assessee is not eligible for deduction u/s.80-IB (10) of the Act. This goes to show that the facts in that case were identical. In that case, it was noted by the Tribunal that the assessee had chosen to register the plot in the name of the buyer on payment of specified amount in order to achieve cost saving and to ensure reliability and thereafter, the assessee had proceeded to construct the house as per building plan obtained in the name of the plot-owners on payment of subsequent installments.

It is also noted that the assessee had also developed various public amenities within the project. Thereafter, it was held by the Tribunal that on a totality of a fact, the Tribunal is of the view that the assessee has undertaken developing and building housing projects as per the scheme provided in section 80-IB (10) of the Act. 9.3. Since the facts in the present case are similar to the facts in above noted three Tribunal decisions, we do not find any defect in the construction in the present case and hence respectfully following these decisions, we decide the issue in favour of the assessee. There is no other objection of the ld. CIT(A) regarding allowability of deduction to the assessee u/s. 80IB(10) of the Act. Hence, we direct the A.O to grant the deduction to the assessee u/s. 80IB(10) of the Act.

9.Before us, the Revenue could did not place any contrary decision on record nor could distinguish the facts of the case which was relied by the Assessee. In view of the aforesaid facts, we respectfully following the aforesaid decision of the co-ordinate Bench of the Tribunal, in the case of Satsang Developers (supra) hold that Assessee is eligible for deduction u/s 80IB(10). Thus this ground of Assessee is allowed.

8. We find that in the case of Narayan Reality Ltd. (supra) the Co-ordinate Bench of Tribunal, after placing reliance on the various decisions cited therein decided the issue in favour of Assessee. Before us, Revenue could not point out any distinguishing feature of the present case with that of Narayan Reality Ltd. (supra) nor has brought any contrary binding decision on record in its support. In view of the aforesaid facts, we respectfully following the decision of the co- ordinate bench of Tribunal in the case of Narayan Reality (supra) hold that the Assessee is eligible for deduction u/s. 80IB(10). Thus this ground of Assessee is allowed.

7 ITA No 822/AHD/2013 . A.Y. 2009-10 9. In the result, the appeal of Assessee is allowed.

Order pronounced in Open Court on 05 - 01 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad