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TMI Blog2016 (11) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the same is hereby reversed. Interest on FDR received on account of the funds to be used by the proposed society - Held that:- here was no clarity on facts with regard to transferring of impugned Security Deposit amount to the Society by the assessee in entirety. In fact, from the arguments of the Ld. DR it transpires that this is the only objection left to be addressed as per final stand of the Revenue. Thus, in all fairness to both the parties, we find it appropriate to send this issue back to the Assessing Officer for verification of these facts. The assessee shall bring on record all requisite evidences to demonstrate that the impugned amounts received by way of deposits from the customers along with the amount of interest credited by the bank thereon have been transferred to the concerned Society. In case, any amount has been appropriated by the assessee in violation of the agreement or in violation of the regulations of MOFA, then corresponding amount of interest thereon can be brought to tax in the hands of the assessee. Thus, with these directions, this issue is sent back to the file of the Assessing Officer. The Assessing Officer shall give adequate opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant never be said to have derived profits from contributions made by the members to the fund which could only be spent for their benefit or returned to the members is bad in law and the same needs to be deleted. 3. Ground 1: In this ground, the assessee has challenged the action of the Ld. CIT(A) in confirming the action of AO in reducing the business income by ₹ 9.37 crores being the share of profit of one of the members of AOP of the assessee, viz. M/s Sanand Properties Pvt Ltd (hereinafter referred to as SPPL) by holding that it was a case of Diversion of Revenue at Source and not a case of application of revenue. 4. During the course of hearing before us, it was stated at the very outset by the ld. counsel of the assessee that now this controversy has been laid to rest as this issue has been decided in favour of the assessee by the Tribunal consistently for the previous years, and that in one of the earlier years, the matter also reached before the Hon ble Bombay High Court wherein Hon ble High Court also affirmed the order of the Tribunal and thus, the issue stands covered as on date in favour of the assessee. In response to the queries raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f RKC. RKC will be at liberty to actually withdraw its share of revenue/income as worked out hereinabove, from time to time. The above arrangement of sharing of revenue and income is restricted to the present housing project developed by AOP on land admeasuring 31026.90 sq. mtrs (approx. 7.76 acres) on Plot No, 72, Yerawada TPS and bearing S. No, 210 (Part) situated at village Yerawada, Taluka Haveli, Dist. Pune. However for any other project to be developed by this AOP in future the sharing of revenue and income shall be decided mutually by the parties hereto from time to time. 7. During the course of assessment proceedings, the AO recomputed the business income of the assessee by excluding 35% of the sale proceeds, and thus he computed the business income only on the basis of remaining 65% of the revenue. It was noted by the AO that the perusal of the aforesaid agreement revealed that it was a revenue sharing agreement and not a profit sharing arrangement because SPPL, i.e. one of the members of the AOP was entitled to 35% of the gross sale proceeds of the project constructed on land belonging to SPPL and contributed to AOP and remaining 65% of the sale proceeds was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and High Court in earlier years and we shall deal with them one by one hereunder: 11.1 It is noted by us that in A.Y. 2007-08, this issue was raised for the first time by the CIT by passing order u/s 263. The matter reached before the Tribunal and the Tribunal decided this issue in favour of the assessee by its order dt 12-10-2012 reported in 141 ITD 133. It is noted by us that the Tribunal not only quashed the order u/s 263 but also discussed and adjudicated the issue involved therein on its merits. Therefore, we find it relevant to refer and reproduce the relevant portion of the order passed by the Tribunal hereunder: 5.5 We have carefully considered the version of Ld. CIT in the light of available on our record. We have carefully gone through the clause 7 of the agreement and the distribution of revenue by the assessee in its accounts distribution of the revenue in the account of the assessee in accordance with the intent and purpose of clause-7 of the agreement. According to clause-7 of the agreement SPPL is entitled to 35% share of the gross sale proceeds of the inclusive of the value of the land. According to distribution in the accounts of the assessee SPPL has rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility or otherwise of deduction under section 80-IB( 10) is dependent upon the manner in which the profit has been distributed among members of AOP but it depend upon the fulfillment of the conditions laid down in that section and also the deduction is available to an undertaking and the individual constituent of an undertaking, 5.6 We have also not found any force in the submission Ld. D.R that 35% share allocable to SPPL was in the nature of overriding title. Clause-7 of the agreement which has been sought interpreted by Ld. CIT DR in this manner does not indicate that 35% of the gross revenue to be shared by SPPL was in the overriding title, therefore, this argument of Ld. CIT DR has to be rejected and it is to be held that 35% share received by SPPL was not in the nature of overriding title to the revenue but it is only share of profit of SPPL. 5.7 In view of above discussion, it is held that the impugned assessment order her erroneous nor prejudicial to the interest of revenue on account of lion of profit between members as per accounts of the assessee as ion of profit in the accounts of the assessee is in accordance with clause- e agreement and manner of allocatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties interpretation of the relevant clause (7) of the Association of Persons agreement with his own reasoning and that too, to the detriment of the assessee. The facts, in the present case also, reveal that the conclusions arrived at by the Tribunal, vide order dated October 12, 2012, are neither perverse nor giving rise to any error of law apparent on the face of the record. The issue cannot he reopened in the manner sought to be done in the present case and section 263 of the Act could not be resorted to for the purpose. The order of the Assessing Officer had obviously merged with the first appellate authority, accordingly, we find that the subject appeal does not raise any substantial question of law. The appeal is, dismissed. There will be no orders as to costs. 11.3. It is further noted that in A.Ys. 2008-09 2009-10, this issue came up before the Tribunal wherein identical ground was raised by the assessee which is reproduced as under for the sake of ready reference: On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the reduction of business income by ₹ 14,64,64,961/- being the share of profit of on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure pertaining to cost of construction are provided for in the period to which they relate. For the sake of simplicity, one consolidated chart has been submitted by the Ld. Counsel which clarifies this issue threadbare. The working submitted in this chart is reproduced hereunder for the sake of ready reference: Sr. No. Particulars A.Y. 07-08 A.Y. 08-09 A.Y. 09-10 A.Y.10-11 A.Y. 11-12 1. Gross Receipts 44.66 42.50 17.06 27.47 24.44 2. Less : WIP (inclusive of land and construction cost) proportionate to sales 30.41 19.38 6.89 10.34 8.,71 3. Income of AOP 14.25 22.12 10.17 17.13 15.73 4. Share of M/s Sanad Properties Pvt Ltd 3.49 14.18 5.89 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the aforesaid interest income was not income of the assessee at all, and therefore, the same was not taxable in its hands. The relevant part of assessee s submission is reproduced below: We submit that the assessee is contractually obliged to follow the agreed terms. It is submitted that the amount kept deposited by the flat purchaser was only for their use for mutual use of the members of the common organization only. The assessee is an agent of the members for collection and keep the corpus as per the specific directions as mentioned above. The facts are that all flat purchasers will become members of the common object of maintenance and upkeep of the common fund for f inancing the cost of common object of maintenance and upkeep of the common amenities/ buildings for mutual interest and have no dealings or relations with any outside body. The concept and principal of mutuality has been elaborately examined by the Apex Court and followed in several decisions of High Courts and Tribunals. There are three conditions for applicability of the principle of mutuality, which are as follows:- a) Where a number of reasons combine together contribute to a common fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apacity from the buyers which were to be transferred to the Society along with amount of interest received thereon. Our attention was also drawn upon relevant provisions of Maharashtra Ownership Flats (Regulations and the Permission of Construction, Sale, Management Transfer) Act, 1963 (hereinafter called, MOFA) and it was argued that the assessee was bound by these regulations and accordingly assessee was bound to keep these funds in fiduciary capacity to be handed over to the Society for maintenance of the building constructed by the assessee. During the course of hearing, Ld. Counsel submitted that though in the A.Ys 2012-13 2013-14 similar interest income was offered to tax by the assessee inadvertently, but he gave an undertaking at the bar on behalf of the assessee that in case this addition is deleted in the impugned year, then the assessee shall not seek any rectification in assessment years 2012-13 and 2013-14 in pursuance to order of the Tribunal. 17. Per contra, the Ld. DR relied upon the orders of the lower authorities and further submitted that these facts are still not available on records that whether the assessee has transferred this amount in totality to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes for which they were given and shall disburse the moneys for those purposes and shall on demand in writing by a Competent Authority, make full and true disclosure of all transactions in respect of that account. 20. It is further noted that section 13(1) (2) of MOFA deal with offences of promoter and consequences on conviction, provide as under: 13. Offences by Promoters and consequences on conviction- (1) Any promoter who, without reasonable excuse, fails to comply with or contravenes, the provisions of sections 3, 4, 5 (save as provided in sub-section (2) of this section), 10 or 11 shall, on conviction be, punished with imprisonment for a term which may extend to three years or with fine, or with both. (2) Any promoter who commits criminal breach of trust of any amount advanced or deposited with him for the purposes mentioned in section 5 shall, on conviction, be punished with imprisonment for a term which may extend to five years, or with fine, or with both. 21. Thus, from the perusal of various clauses of the agreement entered with the buyers and strict provisions of MOFA, as reproduced above, we can conclude that assessee was boun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court or any other law / judgment as may be applicable and also keeping in view applicability of the principles of mutuality. 23. The other apprehension raised by the Ld. DR was that in A.Ys. 2012-13 2013-14 the assessee has itself paid tax on the amount of interest on these deposits and therefore, position in these years should not be disturbed irrespective of the fact that whatever decision is taken by the Tribunal in the impugned year. In reply, the Ld. Counsel submitted that though the tax was paid in A.Ys. 2012-13 2013-14 by mistake and inadvertently, still the assessee hereby undertakes not to seek any kind of refund/ rectification in these two years. In this regard, the assessee also submitted an undertaking by way of its letter dt 20-07-2016, the relevant part of which is reproduced hereunder: 1 Kindly refer to the captioned matter that was heard before Your Honours on 20.07.2016 2. The assessee AOP had been collecting deposits as per the provisions of agreement executed with the buyers of the f lat towards corpus for maintenance, etc. till the formation of the society. The said amount which was held in fiduciary capacity by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. In the result, appeal of the assessee is partly allowed. 26. Now we shall take up revenue s appeal in ITA No. 7453/Mum/2014 for A.Y. 2010-11. The revenue has filed appeal on following grounds: 1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing the deduction u/s. 801B(10). 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of the assessee of deduction u/s.80IB(10) of ₹ 17,08,31,084/- without appreciating the fact that CIT(A) in the impugned order itself correctly interpreted clause 7 of the AOP agreement dated 29/04/2003 by detailed analysis by upholding the action of the AO of excluding the share of SPPL from the revenue of the assessee while computing business income of the assessee while dealing with ground no. 3 of the assessee. 26. Ground 1 : In this ground, the Revenue has challenged the action of the Ld.CIT(A) in allowing deduction u/s 80IB(10). The brief facts are that the assessee has been claiming deduction u/s 80IB (10) as developer since AY 2007- 08. It is noted by us that in AYs 2007-08, 2008-09 and 2009-10, Ld. CIT(A) has all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the assessee and considered the relevant material on record. In view of our finding that the assessee is entitled for deduction u/s 80IB (10), the issue of addition has become infructuous as it become revenue neutral. Accordingly, we uphold the order of the CIT(A) on this issue also. 8. In the result, the appeal filed by the revenue is dismissed. 30. It is further noted that this issue reached before the Hon ble Bombay High Court which was decided in favour of the Revenue by the Hon ble High Court. The Revenue carried the matter before the Hon ble Apex Court where it was decided as part of batch of appeals and is reported as CIT vs Sarkar Builders Ors 375 ITR 392 (SC) wherein it has been inter alia held that where housing project was sanctioned before the amendment but has been completed after April 1, 2005, when the amended provisions came into operation, the assessee would be entitled to deduction u/s 80IB (10) and conditions mentioned in clause (d) would not apply. It has been stated that assessee s project was approved prior to the said date which has not been disputed by the Revenue. Thus, respectfully following the decisions of the Tribunal and judgement o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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