Nagma Developers, Baroda vs Assessee

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 2385/Ahd/2012 %नधा)रण वष)/Assessment Year: 2007-08

M/s.Nagma Developers ITO, Ward-2(5) F/20, National Plaza Vs Baroda. R.C. Dutt Road Baroda.

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Assessee(s) by : Ms.Urvashi Shodhan Revenue by : Shri Nimesh Yadav, Sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 16/04/2015 घोषणा क तार ख / Date of Pronouncement: 29 /04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This is an appeal filed by

the assessee against the order of the Commissioner of Income-Tax (A)- III, Baroda dated 21.8.2012.

2. Sole ground of appeal taken in this appeal is that the CIT(A) erred in confirming the action of the AO by disallowing the claim under section 80IB(10) of the Act.

3. In the instant case, the CIT(A) has disallowed the deduction under section 80IB(10) of the Act on the ground that the assessee was acting as a contractor for the owner of the plots of land, on the ground that, the sale deed for land was executed in favour of the purchaser of the plots, and purchaser of the plots have entered into construction contract for construction of units.

ITA No.2385/Ahd/2012 2 4. The AR of the assessee has relied on the decision of this Bench of the Tribunal in the case of Narayan Reality Ltd. Vs. DCIT, in ITA No.2293/Ahd/2012 and 2095/Ahd/2013 for the Asstt.Year 2009-10 and 2010-11 vide order dated 2.5.2014 wherein the Tribunal has held that no disallowance can be made for deduction under section 80IB(10) by treating the assessee as a contractor and not developer. We find that Tribunal has held 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.

ITA No.2385/Ahd/2012 3 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 78 ITO (Indore)

3. M/s.Vardhman Builders and ITA No.559/Ind/2010 dated Developers vs. ITO 09/05/20 12

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 semifinished 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 ITA No.2385/Ahd/2012 4

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(l 0) of the Act.

9.2. Now we take up the third and last objection of Id.CIT (A) that the assessee 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 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 ITA No.2385/Ahd/2012 5

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.

10. This the appeal of Assessee is allowed."

5. DR supported the order of the CIT(A).

6. We find that the issue is covered in favour of the assessee by the above cited decision of the Tribunal. The DR could not point any good reason for which the above cited decision of the Tribunal should not be followed by us. We, therefore, following the above decision of the Tribunal, set aside the order of the CIT(A) and delete the disallowance ITA No.2385/Ahd/2012 6

of claim of deduction under section 80IB(10) of the Act. Thus, this ground of appeal of the assessee is allowed.

7. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on Wednesday the 29th April, 2015 at Ahmedabad.

Sd/ Sd/- (KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER