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TMI Blog2016 (5) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and on facts in directing the Assessing Officer to allow the Assessee's claim for deduction of ₹ 95,56,580/- u/s. 80IB(10) of the l.T. Act. 2). The Ld. Commissioner of Income-tax (Appeals)-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 Parth Bunglows (nana chiloda) Co-op. Housing Society Ltd., which is a seperate legal entity in the eye 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. The local Authority had granted permission for development to the Society. Assessee was just a contractor of the land owners constructing 81 residential units of the scheme titled ' Parth Bunglows ' and not a developer. 3). On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer. 4). It is therefore, prayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and allowed the deduction u/s 80IB(10) to the assessee at ₹ 95,56,579/-. 4. Aggrieved, Revenue is now in appeal before the Tribunal. 5. Ld. DR supported the order of Assessing Officer. 6. On the other hand, ld. AR submitted that assessee firm acted in the capacity of a developer and not a mere contractor as the partners of the assessee firm took initiative to design and conceive the housing project and also formed co-operative housing society for smooth administration post completion of housing project. Investment in the land, NOC. Charges, plan passing expenses and all other incidental expenses of the housing project were borne by the assessee firm and worked as deemed owner by virtue of right of possession over the land and structure developed on it as per development agreement entered into between the housing society and the assessee. Ld. AR further submitted that assessee firm prepared the plan, got it approved by local authority, engaged architect/structural engineers and made follow ups to complete the housing project in a fair way and further made suitable development of the project for getting all the residential units ready to sell and all the brochures for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. Title As a Developer 1. Initiation Conception The partners of the assessee firm have taken initiative and had designed & conceived the housing project and floated it. 2 Formation Co-op. Hsg. So, formed for smooth administration subsequently on completion of the housing project. 3 Relationship The officer-bearers of the society are near relatives of the partners of the firm. 4 Investment The investment of land (by the partners of the firm) -N.A. Charges + plan passing expenses + all other incidental expenses of the housing project borne borne by the assessee-firm. 5. Ownership Deemed owner by virtue of right of possession over the land & structure developed on it as per development agreement -para -5. 6 Brochure Name/addresses/tele no. of the assessee firm is very well appeared in the brochure for booking or information of the housing project is floated. 7 Preparation of plans The assessee firm has prepared the plan/got it approved from local authority, engaged architect/structural engineers and made follow ups to complete the housing project in a fair way. 8 Approval of the plans Solely responsible to get the construction lay out plans approved as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit. 8. Further we observe from the development agreement that assessee firm was having control on the project in the capacity of developer which is justifiable on the basis of below mentioned clauses of the development agreement by virtue of which assessee was appointed as a builder firm :- 3. It is agreed by both the parties that the construction and development work shall be in accordance with the approved plan. However, a separate agreement between the proposed/prospective buyers/purchaser/customer and the builder-firm shall be executed. The party of the first part shall not be held responsible for any delay in work and / or quality of the work. Each buyer wilt free to inspect the quality of the work and on satisfaction only, the builder-firm shall be entitled for the consideration of the work executed. Alt the risk and control over the housing project would be that of M/s. HARIOM 5. Except as provided in this agreement, M/S. HARIOM CORPORATION is and at all times will be independent builder cum developer. M/S. HARIOM CORPORATION, the party of the other part has to raise fund for the development and construction work on their own. The necessary developmental expenses sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the land and has borne the risk of development deduction should be allowed. 7. The submission of the appellant dated 2.5.2011 in which it rated that the funds to the Cooperative Housing Society were made available by the appellant was sent to the AO for remand report. Remand report of the AO was received vide letter dated 7.9.2011. Counter comments of the appellant on remand report were received vide letter dated 17.10.2011. 8. The AO in his report dated 7.9.2011 stated as under: *As directed by your honour the AR of the assessee submitted the copy of Mger account of the society appearing in the books of partners. On perusal of the same, it is noticed that partners have paid cash of ₹ 52,000 on 1Z4.2005 and ₹ 3,50,000 (Rs.1,50,000 + ₹ 1,50,000) on 11.5.2005 i.e. the date of purchase of land on which project is developed." After going through rival submissions it is seen that in the remand report the AO has not disputed the land funding argument of the appellant therefore the appellant is found meeting the test of having practically purchased the land, set forth in Hon'ble ITAT decision in the case of Shakti Corporation. 9. Further in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration/charges by M/S HARIOM CORPORATION in accordance with the prevailing rates reasonably as per the progress of eh construction work carried out for the prospective buyers. A separate agreement shall be executed between the appointee builder-firm and the proposed/prospective buyers containing the charges/rate of construction to be paid to the builder-firm. " 10. Violation by the appellant of any of the conditions of section 80IB(10) stipulated from clause (a) to clause (d) is not under dispute and the appellant has been found fulfilling the tests laid down by Hon'ble ITAT Bench A Ahmedabad decision dated 7.11.2008 in the case of M/s.Shakti Corporation. Baroda in ITA No.1503/Ahd/2008 in AY 2005-06 having practically purchased the land and possessing dominant control over the project, therefore in my view there is no justification in denying the deduction to the appellant. The case laws cited by the AO are not applicable in this case because the appellant actual conceived and developed the housing project at its own cost and risk and is not merely a contractor executing the specifications given. The AO is directed to delete the addition made u/s.80IB(10)." 10. From go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the HC-NIC Page 37 of 42 Created On Tue May 10 11:53:01 IST 2016 TAXAP/546/2008 38/42 JUDGMENT Transfer of Property Act would lead to a situation where the land would be for the purpose of Income Tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53:01 IST 2016 TAXAP/546/2008 40/42 JUDGMENT question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under Section 80IB(10) of the Act. 44. In the case K. Raheja Development Corporation vs. State of Karnataka (supra), the Apex Court considered whether the builder, who was engaged in the development of property and for such purpose had entered into an agreement with the land owner, can be stated to have executed works contract. Such interpretation was rendered in the background of the term "works contract" defined in Section 2(1)(v-i) of the Karnataka Sales Tax Act, which reads as under:- "12. Section 2(1)(v-i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under Section 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners. 46. We find that it is not even the case of the Revenue that other conditions of Section 80IB of the Act were not fulfilled. We, therefore, answer the question in favour of the assessee and against the Revenue and dispose of all appeals accordingly. 11. Respectfully following the decision of Hon. Jurisdictional High Court in the case of CIT vs. Radhe Developers (supra) and applying the ratio of the decision to the facts of the case before us, we are of the considered opinion that assessee is a developer of the project and not merely a works contractor and is eligible for deduction u/s 80IB(10) of the Act at ₹ 95,56,579/-. Therefore, we do not find any reason to interfere with the order of ld. CIT(A) and uphold the same. The ground nos. 1 & 2 raised by the Revenue are dismissed. 12. Other grounds are general in natur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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