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TMI Blog2015 (12) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... production of completion certificate of the project. The assessee is not eligible for deduction u/s.80IB(10) of the Act. - Decided against assessee. - ITA No. 933/Mds/2013 - - - Dated:- 23-9-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For The Appellant : Shri K. Ravi, Advocate For The Respondent : Dr. B. Nischal, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) dated 12.2.2013 for the assessment year 2009-10. 2. The grievance of the assessee in this appeal is with regard to non-granting of deduction under sec.80IB of the I.T. Act, 1961. 3. The facts of the case are that the assessee firm is engaged in the business of property development. The assessee filed its return of income for the assessment year 2009-10 admitting total income as NIL after claiming deduction of ₹ 3,86,83,668/- u/s.80IB of the Act. The Assessing Officer denied the deduction claimed u/s.80IB by observing that the assessee is not a developer of housing project but it works as a contractor. Aggrieved by this, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR submitted that the CIT(Appeals) has not considered the fact that the assessee is involved in the development of the property and not merely in the execution of the works contract and after the AO had given a finding that the assessee herein is involved in the development of the property for the ay 2007-08 and 2008-09, he cannot invoke the Explanation to sec.80IB(10) , which is applicable only for works contractors. The ld. AR further submitted that the CIT(Appeals) has erred in disallowing the claim of the assessee even after considering the JDA which is the master agreement and has failed to understand that the assessee is a developer and not merely a contractor. 4.2 According to the ld. AR, the CIT(Appeals) has erred in considering that the owner of the property Prime Textiles Ltd. had secured the requisite sanctions and approvals from Tiruppur Muncipal Corporation and concerned public authorities on the ground that no Power of Attorney was executed by the owner to the assessee. The ld. AR also submitted that the CIT(Appeals) has erred in concluding that a power of attorney to be executed by the owner of the property and the developer is mandatory, as it is a custom in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that a Power of Attorney is a document of convenience and the developer for the purpose of applying to the statutory authorities for the grant of permission for the project enters into this agreement. According to him, in the case, the owner of the property holds the majority share in the assessee firm and hence there was no need for a power of attorney to be given to the assessee. The ld. AR further submitted that the CIT(Appeals) erred in the assumption that all the permissions from the Municipal Corporation and Local authority, plan approvals and commencement certificate were obtained by the owner of the property and not the assessee, who is the developer. It was contended that it was paid by the assessee firm, which is given in the form of ledger extracts along with dates of payments made are as annexure C for reference. According to the ld. AR, the assessee is a developer and not merely a contractor. Thus, according to the ld. AR, the assessee is a developer who has undertaken construction of flats with various owners though the assessee is not an owner of the land. Further, he relied on the following judgments: (i) CIT vs. Radhe Developers (2012) 341 ITR 403(Guj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation - For the purposes of this clause,- (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority ; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority ; (b) the project is on the size of a plot of land which has a minimum area of one acre : Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs etc. Besides, there is heavy financial involvement in terms of deployment of man and machine as well as all materials. At this point, it is pertinent to note that the judgment of the Supreme Court in the case of HAL Ltd. vs. State of Orissa 55 STC 327 (SC) in which it has been observed that in a contract for work, the person producing has no property in the thing produced as a whole, even if part or whole of the material used by him may have been his property earlier. Further, in another judgment of the Summit Court in the case of Tamil Nadu vs. Anandam Vishwanathan (1989) 1 SCC 613 in which it was held that the nature of contract can be found only when the intention of parties are found out. The fact that in the execution of the works contract some material are used and the property in the goods so used passes to the other party, the contractor undertaking the work will not necessarily be deemed, on that account, to sell the material. It was, therefore, argued that the developer is a person who brings in additional resources by way of investment and technical expertise for developing the infrastructure facilities. Since the assessee had simply done a part of work of civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas contractor is a person or a company that has a contract to do work or provides services or goods to another. The New Shorter Oxford Dictionary defines the word contractor as : A person who enters into a contract or agreement. Now chiefly spec. a person or firm that undertakes work by contract, especially for building to specified plans . In the light of the meaning ascribed to these words by the dictionaries it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary the contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer. His duty is to translate such design into reality. There may, in certain circumstances, be overlapping in the work of developer and contractor, but the line of demarcation between the two is thick and unbreachable. When the person acting as developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly agree on contracted price for each square feet towards undivided co-ownership rights and on parking slots(s) purchased by each of the persons identified by the developer shall be at not less than 14% of such contracted price and such payment shall be made to the owner out of the initial advance money received from the prospective purchasers. vi) The developer undertakes and agrees to complete the .construction adhering to the Rules and Regulations stipulated by the Municipal Authorities and adhere to the stipulated time limit. 7.1 Thereafter, the owner (M/s Prime Textiles Ltd.) obtained the necessary permissions from the local authority for construction of the residential apartments. The plan was approved on 3.5.2005. After obtaining the approval, the owner of the land sold the undivided co-ownership right in the property to various purchasers vide registered sale deeds. Clause 'H in the sale deed reads as under : The purchaser has evinced Interest in purchasing an undivided co-ownership right in scheduled;property which, undivided share is more fully described in schedule. B hereto (hereinafter) referred to as schedule B property in order that the PURCHASE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions referred to in SCHEDULE D and also with a provision of car parking space. NOW THIS AGREEMENT BETWEEEN THE DEVELOPERS AND THE PURCHASER ENTERED INTO WITNESSES AS FOLLOWS:- The PURCHASER hereby appoints the DEVELOPER as the contractor and the DEVELOPER accepts the appointment to construct or cause to be constructed for the PURCHASER an Apartment on SCHEDULE A PROPERTY as described in SCHEDULE-C hereto and according to. the specifications given in SCHEDULE-D hereto and as per the approved, plan i for the agreed consideration of ₹ 26,24,214/- (Rupees Twenty six lakhs twenty four thousand two hundred and fourteen only) Copy of typical floor plan for the said Apartment Is attached hereto as Annexure C. The DEVELOPER undertake and agree that the construction of the SCHEDULE C PROPERTY by. the, Developer for the PURCHASER shall be of good quality materials and. conform to specifications given in SCHEDULE D and shall be proper and of acceptable standard and also without structural defects of any kind. 7.3 From the above recitals of the Construction Agreement, it is clear that the owner has secured the requisite sanctions and approvals from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, it is very clear even though the assessee has entered into joint development agreement with the land owner, the .land owner in turn sold the undivided co-ownership right in the property to various prospective buyers who in turn entered into, separate construction agreements with the assessee as a contractor. The AR's argument that the assessee is primarily a developer who has taken the development work such as planning development of the properties etc. is not a clinching factor in deciding the issue as to the eligibility for deduction under sec. 801B(10) of the Act, as the main revenue earned by the assessee was in the nature of works contractor by virtue of the written agreements entered into with various owners of undivided co-ownership right in property. It is relevant to mention here that on similar facts the Tribunal, Indore Bench in the case of M/s Sky Builders Developers vs. I.T.O, Ward 1(1), Bhopal 14 Taxman 78 (2011) clearly held that where the assessee sold plots to respective customers by registering a sale deed and thereafter assessee constructed building at an agreed price, it had to be concluded that assessee merely acted as building contractor and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs as a contractor and when the assessee s job includes only controlling and directing the work of building construction as per plan and design by the land lord and hand over the constructed flats on behalf of the land lord to the eligible flat owners who have got registered undivided right in the property. It is only performed the work as a contractor and the assessee s job is not included designing the project and selling of the project and the assessee would not get any share in the constructed area and in the undivided property and the assessee cannot be said to have invested its own money to carry on the project. Similar view has been taken by the Tribunal, Indore Bench in the case of M/s. Sky Builders Developers vs. ITO in ITA No.255/Mds/Ind/2010 dated 17.8.2011 for the assessment year 2006-07. Since we have observed that the assessee is a contractor, there is no question of going to the merits of the case, as nonproduction of completion certificate of the project. The assessee is not eligible for deduction u/s.80IB(10) of the Act. The various case law relied on by the ld. AR is not applicable to the facts of the present case, as those judgments were delivered on its own f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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