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TMI Blog2015 (3) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... able to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue’s interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO concluded that the projects were “owned” by IRWO or DDA and that the assessee was only a works contracts, was unwarranted. - Decided in favour of assessee. - ITA No. 2069/2010, ITA No. 318/2014, ITA No. 320/2014 - - - Dated:- 18-3-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Appellant : Ms. Suruchi Aggarwal, Advocate For the Respondent : Ms. Padma Priya, Advocate JUDGMENT Mr. Justice S. Ravindra Bhat (Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) The assessee should have submitted its proposal to a local authority and there should be an approval of proposal for the project from local authority. The AO observed that in this case, the assessee had executed works in respect of housing projects of IRWO DDA. The project belonged to IRWO DDA. The assessee company did not develop and build any housing project of its own but merely executed the contract work awarded to it by the principals, i.e DDA and IRWO. There was consequently no development of building of housing project of the assessee. 4. The assessee was asked to file copies of its proposals to Noida Authority (as it was a local authority) as well as DDA and the copies of approval granted to it by these local authorities for developing and building housing projects. The assessee company filed a letter dated 10.01.2002 of Executive Engineer SW D-9, DDA accepting the tender of the assessee; likewise, a letter dated 30.07.2001 from the Director Technical IRWO, accepting the tender for the construction of dwelling works was also placed on record. The IRWO, by its letter dated 16.09.2005 addressed to the AO, Ward 17(1) stated that the assessee was awarded a work for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company was undisputedly approved prior to 03.03.2008. There is also no dispute to the fact that assessee has commenced construction of housing project after 01.10.1998. The copies of approval of the projects from the local authorities were also duly submitted to the AO and the same are appended in the assessee s paper book at pages 1 to 5. However, in view of the explanation introduced with retrospective effect, the benefit of exemption under Section 80IB(10) is available only to an undertaking developing housing projects as a developer and not merely as a work contractor.... As the words developer and contractor have not been defined in Section 80IB nor in the General Clauses Act, we can take the dictionary meaning. As per Chambers 21st Century Dictionary (Revised Edition), contractor means a person or fiem that undertakes work on contract, specially connected with building, installation of equipment or the transportation of goods . The word developer has been defined as someone who builds on land or improves and increases the value of building . It is crystal clear from the above definition that scope of work of developer is wider than the contractor insofar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by adhering to be time schedule laid down in the NIT. (v) The agency will also be responsible for getting the fire fighting arrangements, approved from the Delhi Fire Service before execution of the water supply scheme. 22. It is crystal clear from the scope of work as enumerated above and which has been undertaken by the assessee, that the assessee has worked as a builder and developer of housing project as a whole and for this purpose he has undertaken work of planning, designing of layout plan and architectural/structural drawing of complete housing project as approved by the DDA. It has also carried out survey of the site, also prepared layout plan within the development controls, and has also undertaken detailed soil investigation, prepared complete structural, design and drawing for foundations and drawing for super structure. The assessee company has also undertaken the work of planning, designing and execution of internal sanitary system, water supply system, drainage system, including all its fittings and fixtures, testing etc. As a developer, the assessee company has also undertaken necessary arrangements for supply of water through dual pipe system, planning, desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atus of the assessee as to the contractors only. Even admission of the assessee is held to be not conclusive as held by the Hon ble Delhi High Court in the case of Faster Industries Ltd. 316 ITR 260. Hon ble Supreme Court in the case of Staluj Cotton Mills -116 ITR 1 observed that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper principles of accountancy, concealed profit or showed loss and the entries made by him cannot be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profits or loss to the assessee.... In view of these judicial pronouncements, mere mention by the assessee in TAR will not detract him from the legal rights which he is entitled to under Section 80IB of the Act. Similarly, since ownership of the project is not provided as a precondition for the claim of deduction u/s 80IB(10), there is no merit in the AO s allegation for decline of assessee s claim for suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IB (10) i.e to boost private participation in housing, ownership of lands cannot be an added condition when the plain terms of the provision do not enact such pre-condition. Analysis and Conclusions 10. Section 80-IA was introduced by the Finance Act, 1995 w.e.f. 1st April, 1996. It exempted an enterprise carrying on the business of developing, maintaining and operating any infrastructure facility. To be eligible for deduction, an assessee had to carry out all the three activities, i.e., (i) to develop, (ii) to maintain, and (iii) to operate. After the amendment by Finance Act, 1999, w.e.f. 1st April, 2000, deduction under section 80-IA(4) became available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Therefore, from assessment year 2000-01, deduction is available if the assessee carries on the business of any one of the said three types of activities, and also when the assessee carries on the activity of only developing. Section 80-IB reads as follows: 80IB.Deduction in respect of profits and gains from certain industrial undertakings other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. 11. Subsequently, Section 80-IB enacts by various provisions specific conditions in respect of different classes of activities, for income to qualify for deduction (as well as its extent). The specific activities mentioned are industrial undertakings [Section 80 IB (3)]; industrial undertakings in industrially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by the Central or a State Government in any other manner, shall be treated as a single undertaking . (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 but not later than the 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 12. It is plain that textually, Section 801B(10) deduction can be availed by an undertaking developing and building housing projects- approved before 31.03.2008 by the local authority. Such undertaking should have embarked on construction of the housing project on or after 01-10-1998. 100% deduction can be availed of the profits derived from construction of such housing projects. The explanation to Section 80-1B(10), introduced later, clarifies that nothing contained in that provision applies to an undertaking that executes the housing projects as a works contract awarded by any person including the central or state government. 13. Development and construction of a housing project is an undefined phrase of wide import. The Bombay High Court the had occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing projects are undertaken on the very same plot of land, the deduction would not be available to those housing projects as the plot ceases to be a vacant plot after the construction of the first housing project. Such a construction if accepted would defeat the object with which section 80-IB(10) was enacted. 27. Moreover, plain reading of section 80-IB(10) does not even remotely suggest that the plot of land having minimum area of one acre must be vacant. The said section allows deduction to a housing project (subject to fulfilling all other conditions) constructed on a plot of land having minimum area of one acre and it is immaterial as to whether any other housing projects are existing on the said plot of land or not. In these circumstances, construing the provisions of section 80-IB(10) by adding words to the statute is wholly unwarranted and such a construction which defeats the object with which the section was enacted must be rejected. 14. Likewise, in Commissioner of Income Tax v G.R. Developer 2013 (353) ITR 01 (Karn) the Karnataka High Court had the occasion to consider whether the provision which required project approval before 2005 applied for older projects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. 15. Since the assessee developed an infrastructure facility/project and was not required to maintain or operate, it was entitled to cost, plus the margin of income or profit; not to expect this treatment would render one who develops an infrastructure facility project, unable to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue s interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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