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TMI Blog2010 (12) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, scrutiny assessment was passed on 16.11.2007 in which the claim of deduction under section 80-IB(10) was not allowed mainly on the ground that the assessee is not the owner of the land and has also not developed the property. Apart from this, the A.O. has also disallowed the payment of Rs. 5,30,250, allegedly paid to Corpus Fund to the Flat Owners' Association. The case of the assessee is that the regular practice followed in the State of Tamil Nadu is that the developers obtain development projects through power of attorney after making full payment, of the settled consideration, for the land to the owner of the land. The Power of attorney is worded in a manner in keeping with the line with the legal requirements to pass proper title to the perspective buyers of the flats. The assessee is stated to be one of the leading property developers in Chennai city. As per the assessee, all the activities connected with development of land, including demolition, approval, preparation of scheme drawings and submission of plans to CMDA, have been undertaken by the assessee, the facts of which are evident on record. Although the fees are paid in the name of the owner, the assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the controversy as to whether deduction under section 80-IB(10) of the Act is admissible to the assessee or not, let us state that there is no dispute with regard to the fact that the assessee has constructed the building in question; there is no dispute with regard to the fact that entire consideration of the land was handed over to the owner of the land and the possession was taken by the assessee thereof; there is no dispute with regard to the fact that other activities connected with selling, like advertising, marketing, etc. were done by her. It is also undeniable fact that all the activities connected with development of the project were done by the assessee and the owner of the land has done nothing except for signing the purchase agreements and receiving the consideration. It is also an undeniable fact that the land owner has not shown the income from both developing and construction in his hands. The owner of the land has been taxed only for capital gains and this assessee has shown income from business. Having stated the above undeniable and undisputed facts, we now try to analyse the requisite conditions to avail deduction under section 80-IB(10) of the Act specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d)the built-up area of the shops and other commercial establishments included in the housing project does not exceed [three per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher];] (e)not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta. (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] Explanation - For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the land as per the sale agreement dated 29.08.2003, and the possession of entire property of 69 grounds was handed over to her, as per the income-tax proceedings, the 'transfer' as envisaged in section 2(47) of the Act stands completed, even if, it was through a Power of attorney and, thereafter, the assessee had to develop the project even though the approval was to be taken formally in the name of the owner of the land Shri K.L. Choudhury. Now, let us see whether for claiming such a deduction, the assessee is required to be the owner of the land or not. In the book of Sampath Iyengar "Law of Income-tax" Vol. 4.10 edition at page 5784 it has been explained - "It is true that an entrepreneur undertaking development and construction in a housing project, may not have any interest in land. But the sub-section does not require that he should be the owner of the land. A promoter should qualify for deduction because he runs an undertaking for developing and constructing a housing project, so that the conditions for relief are satisfied. If he were not the owner, plan approval also may not be in his own name, since local government usually insists on granting such approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary fee for the same was paid by it. Road formation was also done by the assessee. Besides, for marketing the flats the assessee did advertise the property also. We have perused the reasonings adduced by the Commissioner (Appeals) in the impugned order. In our opinion he took a correct view in the matter and his order calls for no interference on this count. Accordingly we uphold the same." 9. In an another case, the Ahmedabad Bench of ITAT in I.T.A. No. 2482/2006 dated 29.06.2007 in the case of M/s Radhe Developers v. ITO for the assessment year 2003-04 decided the case as under:- "After perusing the agreement entered into between the assessee and the landowners, the Tribunal noted that the agreement effectively transferred to the assessee firm all the rights of development and construction and to deal with the land for a consideration payable within a stipulated time and the assessee had also been put in possession of the land. The Tribunal further noted that the assessee firm was required to obtain necessary approvals from the local authorities on behalf of the land owners and all the expenses for such purposes were to be incurred by the assessee. It was also noted that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has to be both a developer as well as a builder. It was held that if the assessee is only either one of the two, then it is very clear that it is not eligible for deduction. In that case, the assessee was engaged by the buyers of the land for doing construction work as contractors. If we go through page Nos.5 and 6 of that order dated 27th February, 2009, it becomes clear that the facts in the present case and the facts of the case in M/s Sashwat Constructions (P) Ltd., are entirely different and not identical. For ready reference, we extract the above portion herein as below:- "From the aforementioned analysis of the documents and discussions thereon, what emerges is listed as below :- 1. Sashwath Foundations develops the land. Gets the project approved by the local authority, and sells the undivided share of the property to the buyers. 2. The assessee company Sashwath Constructions Pvt. Ltd. enters into a builders agreement with the buyer, which is more or less akin to being a Contractor, for executing the construction work. However, as per the provisions of section 80-IB(10), a person has to be both a developer as well as the builder, as the provisions clearly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire consideration from the flat buyers that is both for the land cost and the construction cost and passes on the land cost to the owner i.e. to the firm M/s Sashwath Foundations and thus the assessee acts only as a contractor or builder and is not undertaking a project. The above noted grounds clearly make out the difference between the facts of these two cases. Therefore, this decision of the Tribunal in the case of M/s Sashwat Constructions (P) Ltd. dated 27th February, 2009 is entirely on different facts and hence of no help to the Revenue. The learned D.R. has further relied on the decision of Hon'ble Supreme Court in the case of M/s K. Raheja Development Corporation, a copy of which was filed on record. We are afraid, the circumspection of this decision, clearly shows that this case does not support the case of the Revenue at all rather, it supports the case of the assessee. This decision was rendered in a different context when the Hon'ble Court was dealing with the Karnataka Ownership Flats (Regulation of Promotion of Construction, Sales, Management and Transfer) Act, 1974; and in that case the question for consideration for their Lordships was whether the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions laid down in section 80-IB(10) of the Act. The definition of any term or word given in other enactments cannot be imported which dealing with Income Tax matters. No parallels can be drawn, unless, it is so specifically provided in the IT Act itself. The assessee was not 'awarded' any works contract either by any party or State or Central Government. The term used in the Explanation is 'awarded' which has a entirely different connotation. Therefore, the explanation appended to section 80-IB(10) is also not attracted at all. The development done in this case is not on account of a works-contract. In our considered opinion the finding of the ld. CIT(Appeals) does not deserve any interference at our end. The decision of Chennai Bench and Ahmedabad Bench fully support the case of the assessee, as similar questions arising out of identical facts are involved therein. The other decision of Chennai Bench and that of Supreme Court's decision in the case of M/s K. Raheja Development Corporation relied on by the learned D.R. are definitely rendered in entirely different context and facts are distinguishable. Consequently, we uphold the finding of the CIT(Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is that CPDPL transferred to CHPL at the instruction of the assessee as Director but the transfer of money was on behalf of the assessee as no such transaction is made in the books of the company. The books of the company are audited as per law CPHL has debited in relation to these transactions and not the assessee. According to assessee, the entries made in the audited books and balance sheet filed before the Registrar of Company cannot be ignored. In this regard, decision of Chennai Bench in the case of Shri Harbinder Singh v. ITO in I.T.A. No. 443/Mds/2010 order dated 06.08.2010 was relied on. The further case of the assessee is that the assessee had sufficient credit balance with CPDPL during the year and hence the advance made to CHPL was only repayment of such credit outstanding to the assessee. The A.O. was not aggreable with the assessee but the CIT(Appeals) has deleted the impugned addition by holding that this being a business transaction and not loan or deposit, the sum cannot be treated as deemed dividend in the hands of the assessee. 16. After carefully considering the rival submissions as put forth before us, we are of the considered opinion that section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section. The A.O. has stated that the assessee has been making payments for transaction done and the assessee cannot claim the excess money lying with CPDPL. The advance of Rs. 20,00,000 was made by CPDPL to CHPL on 26.12.2000 and balance of the assessee with company was Rs. 4,35,67,200. The contract referred to by the A.O. was completed after two years in a total amount of Rs. 8 Crores. It was stated that the assessee was advancing all her funds in the two companies in which she is a director, for the purpose of business. A letter dated 15th December, 2006 clearly shows that the assessee had current account with company and advancing monies to the company as and when required for the purpose of business of the company. Therefore, we are also in agreement with CIT(Appeals) that this section can be invoked to curtail the misuse of the funds belonging to a private limited company by its shareholder but not when there is a business transaction between the two entities; and funds of the Director were also lying with the company. In this case, assessee's money ranging between 313.72 lakhs to 490.67 lakhs with the Ceebros Property Development Pvt. Ltd., the payment by the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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