Mudra Builders, Ahmedabad vs Department Of Income Tax

आयकर अपील सं./I.T.A. No.1700/Ahd/2011 ( नधा रण वष / Assessment Year : 2008-09) Income Tax Officer बनाम/ M/s.Mudra Builders Ward-9(2) Vs. 10, Kevalkunj Society Ahmedabad Nr.K.K.Nagar, Ghatlodiya,Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAHFM 4263 G (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri Nimesh Yadav, Sr.DR $%यथ# क' ओर से/Respondent by : Ms.Arti N.Shah

ु वाई क' तार*ख / सन Date of Hearing 16/04/2015 घोषणा क' तार*ख /Date of Pronounce ment 02/06/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XV, Ahmedabad ('CIT(A)' in short) dated 26/05/2011 pertaining to Assessment Year (AY) 2008-09. The Revenue has raised the following grounds of appeal:-

ITA No.1700 /Ahd/2011 ITO vs. M/s.Mudra Builders Asst.Year - 2008-09 -2-

1). The ld.Commissioner of Income-tax(A)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance amounting to Rs.81,88,289/- made by the Assessing Officer u/s.80IB(10) of the Act.

2). The ld.Commissioner of Income-tax(A)-XV, Ahmedabad has erred in holding that the assessee fulfills the conditions laid down for claiming deduction u/s.80IB(10) even when the land was in the name of Suryalok Sabarmati Co-op.Housing Society Ltd., which is a separate legal entity in the eyes of law and the assessee entered into the project by a development agreement with the Society. 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 Society. Assessee was just a contractor of the land owners constructing 32 residential units AND not a developer.

3). On the facts and circumstances and in law, the ld.CIT(A)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer.

4). It is therefore, prayed that the order of the ld.Commissioner of Income- tax(A)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 16/12/2010, thereby the Assessing Officer (AO in short) rejected the claim of the assessee for deduction u/s.80IB(10) of the Act. Against the said assessment order, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions, allowed the claim of the assessee for deduction u/s.80IB(10) of the Act. Now, the Revenue is in further appeal before us.

3. Ground Nos.1 & 2 inter-connected and, therefore, the same are decided together. The ld.Sr.DR Shri Nimesh Yadav vehemently argued ITA No.1700 /Ahd/2011 ITO vs. M/s.Mudra Builders Asst.Year - 2008-09 -3-

that the ld.CIT(A) was not justified in allowing the claim of the assessee for deduction u/s.80IB(10) of the Act. He submitted that the AO had disallowed the claim by observing that the assessee does not fulfill the requisite conditions. He submitted that under the identical facts, the Coordinate Bench of this Tribunal (ITAT "A" Bench Ahmedabad) in the case of ITO vs. M/s.Krishna Developers in ITA No.24/Ahd/2011 for AY 2007-08, dated 17/05/2013 was pleased to restore this issue to the file of ld.CIT(A) for decision afresh.

3.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the ld.CIT(A) has given an elaborate finding. He submitted that the AO has not given any finding as to what were the conditions which were not fulfilled. However, the ld.CIT(A) categorically given a finding that the assessee had incurred land cost and borne the entire risk of developing the project. The ld.counsel for the assessee submitted that the finding of the AO is contrary to the records.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO in assessment order declined the deduction u/s.80IB(10) of the Act by the following reasons:-

"3.27. It is, therefore, held that the assessee is not eligible for deduction under section 80IB for the following reasons.

ITA No.1700 /Ahd/2011 ITO vs. M/s.Mudra Builders Asst.Year - 2008-09 -4-

1. The assessee is not both developer and builder as required by the provisions of section 80IB(10). Assessee is not a developer because the assessee did not conceptualize and own the project in as much as the assessee is not the owner of the land and the approval was not issued to it by the Local authority.

2. The assessee has not undertaken any investment risk in the project. The risk taken is principally by the Society. The Assessee entered into the project by a Development Agreement with the land owner and construction was done as per the agreement and hence the assessee is merely a contractor for the purposes of construction of the project.

3. The assessee has not sold any unit to the purchaser but the Society has executed the sale deeds as a seller and the assessee joined only as a confirming party to the transaction. This also proves that the assessee was merely a contractor/agent of the society.

4. As per the Amendment to section 80IB by the Finance Act 2009, a works contractor who executes the work awarded by any person is not eligible for the deduction u/s.80IB. Any person includes the Survalok, Sabarmati Co-op.Housing Society Ltd., which is a legal entity."

4.2. However, the ld.CIT(A) in its order dated 26/05/2011 has countered the finding of the AO by observing as under:-

"5. It is seen that the AO has not disputed that the appellant did not fulfill any of the conditions specified in section 80IB(10) from clause (a) to (d) with respect to the approvals from the local authority, completion of project within the specified time limits, one acre of land condition, 1500 sq.ft. built up area condition of each unit I the project and that of percentage of construction for commercial use. His objection is that the appellant is not the owner of the land. This objection of the AO has to be seen in the light of the tests laid down by Hon'ble ITAT Bench A Ahmedabad decision in the case of M/s.Shakti Corporation, Baroda in ITA No.1503/Ahd/2008 in AY 2005-06 wherein Hon'ble ITAT has held that where the appellant is found having practically purchased the land ITA No.1700 /Ahd/2011 ITO vs. M/s.Mudra Builders Asst.Year - 2008-09 -5-

and has borne the risk of development deduction should be allowed. Here the appellant has been found fulfilling the conditions laid down in section 80IB(10) of the Income Tax Act and has also been found meeting the tests laid down in Hon'ble ITAT Bench A Ahmedabad decision in the case of M/s.Shakti Corporation, Baroda in ITA No.1503/Ahd/2008 in AY 2005-06 as it had practically purchased the land as clear from the P&L account where Rs.58,67,163 has been debited as land cost and cheque payments made to Suryalok Sabarmati Cooperative Housing Society from its bank account and it had borne the entire cost and risk of developing the project as clear from Clause 17 of the Development Agreement, which clearly states that the profit was to be of the appellant, therefore in my view it is eligible for deduction u/s.80IB(10) and the AO is directed to allow the same."

4.3. During the course of hearing, a query was raised to the ld.Sr.DR as to how the finding of the ld.CIT(A) is incorrect or contrary to the records. No specific error into the above finding of the ld.CIT(A) is pointed out by the ld.Sr.DR. We find that the ld.CIT(A) has given categorical finding that the assessee has met the test laid by the Coordinate Bench in the case of Shakti Corporation(supra) and also the risk and consequences in developing the project are borne by the assessee. Reliance is also placed on the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Radhe Developers reported at (2012) 341 ITR 403 (Guj.). Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground Nos.1 & 2 raised in the Revenue's appeal are dismissed.

5. Ground Nos.3 & 4 are general in nature which require no independent adjudication.

ITA No.1700 /Ahd/2011 ITO vs. M/s.Mudra Builders Asst.Year - 2008-09 -6-

6. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on Tuesday, the 2nd day of June, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 02/ 06 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संब4ं धत आयकर आय6 ु त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-XV, Ahmedabad

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 05.05.15 (dictation-pad 4+pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..14.5.2015

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......2.6.15

7. Date on which the file goes to the Bench Clerk..................... 2.6.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................