9911796707
TMI Blog2009 (7) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... s and prejudicial to the interest of Revenue, a notice under s. 263 of the IT Act was issued to the assessee company on 19th Nov., 2007 and CIT, after taking into consideration the stand of the assessee, set aside the assessment order vide his order dt. 31st March, 2008 by invoking provisions of s. 263 of the IT Act. 3. Being aggrieved by the said order, the assessee has filed appeal before us requesting that proceedings under s. 263 of the Act be cancelled. The stand of the assessee is that he claimed deduction of ₹ 58,44,390 under s. 80-IB(10) of the Act for the asst. yr. 2003-04 after fulfilling all the conditions as stipulated in that section. The same was allowed by the AO vide its order dt. 31st Oct., 2005 as discussed above. Similarly for the asst. yr. 2004-05, deduction of ₹ 64,00,681 under s. 80-IB(10) of the Act was disallowed by the AO vide his order dt. 29th Dec, 2006. However, in appeal, the CIT(A), vide its order dt. 31st April, 2007 (sic-30th April, 2008), allowed deduction claimed for asst. yr. 2004-05 for which the Department is in appeal before us. So, the assessee is before us against the order of the CIT passed under s. 263 for the asst. yr. 2003- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, the only issue is with regard to deduction under s. 80-IB(10) of the Act. The AO noticed that the assessee has made claim under s. 80-IB(10) of the Act for ₹ 64,00,681. During the course of assessment proceeding, the assessee submitted copy of approval given by the Bhubaneswar Development Authority (hereinafter called BDA) in favour of Orissa State Housing Board (hereinafter called OSHB), for developing a housing project. The AO noticed that the deduction under s. 80-IB(10) of the Act is not ( sic) allowed provided the following conditions are satisfied : (e) The projects should have been approved by a local authority prior to 31st March, 2005. (f) The undertaking has commenced development and construction of the housing project after 1st Oct., 1998. (g) The project is on the size of the plot of land of minimum 1 acre. (h) The built-up area of each residential unit should be not more than 1,500 sq. ft. in places other than Delhi or Mumbai. (i) Apart from these technical conditions, the statutory requirement is that the assessee should produce an audit report duly certified by a chartered accountant in Form No. 10CCB. 6. During the examination of claim, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the order of the AO and submitted that since the approval of the project was in the name of OSHB, so, irrespective of contract entered with the assessee, the arrangement was between a principal and owner and not principal to principal. Precisely, the learned Departmental Representative heavily relied on the order of the AO. On the other hand the learned Authorised Representative heavily relied on the order of the CIT(A) and also supported its order by relying on the decisions of Radhe Developers Ors. v. ITO [2008] 113 TTJ (Ahd) 300 and Saroj Sales Organisation v . ITO [2008] 115 TTJ (Mumbai) 485 : [2008] 3 DTR (Mumbai)(Trib) 494. Learned Authorised Representative submitted that deduction under s. 80-IB(10) of the Act has rightly been allowed by the CIT(A). 8. So, we find that basically the issue before us is with regard to allowability of deduction under s. 80-IB(10) of the IT Act which reads as under : 80-IB. (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including housing project should not exceed 5 per cent of the aggregate built-up area of the housing project or 2,000 sq. ft. whichever is less. Therefore, the above conditions were fulfilled for the claim under s. 80-IB(10) of the IT Act with regard to project in question. 10. OSHB, being lessee of plot in question; invited sealed offer to construct multi-storied residential complex in joint venture on 1.3 acres of land from real estate developers/builders/consortium of buildings/promoters/housing co-operative societies and construction companies. This advertisement mentioned that the developers would have to finance and carry out the entire execution of the project along with the required infrastructure as per the plan to be prepared by them and approved by OSHB. 11. The assessee came forward and became successful bidder and entered into an agreement dt. 3rd Nov., 1998 with OSHB. The said agreement shows that OSHB was having leasehold rights on the said plot of land and decided to develop the plot of land by construction/erecting the multi-storied residential flat, etc., and for this purpose they have published the tender notice and invited bids to which the assessee obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores and the space consideration as per the specified deeds. After the handing over, the assessee was to pay all the municipal taxes and levies of multi-storied complex. 13. The terms of agreement show that M/s KZK Developers had a principal to principal relationship with OSHB. In terms of agreement, OSHB was duly compensated not only monetarily but also in terms of saleable area in multi-storied complex. There is nothing on record to suggest that OSHB was to make any payment to the assessee at different stages of completion of the work. A plain reading of the agreement shows that the assessee was not a contractor at all. In fact, the advertisements appearing in the newspaper, in this regard, reveal the state of affairs. OSHB has formerly entered into a development agreement with the assessee, who was assigned the right to use, develop, construct, sell or transfer the saleable area. This right entailed to payment of consideration which has been duly paid. The BDA was aware of the fact that OSHB had joint venture along with the assessee. It is not in dispute that the assessee was engaged in the development and construction of the housing project. The assessee alone has underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obviously a contractor but it does not derogate the assessee for being a developer as well. The term contractor is not essentially contradictory to the term developer. The assessee was a developer and not contractor as held by the lower authorities. The developer is not working on remuneration for the landowners but developer is working for himself in order to exploit the potential of its business in his own interest and therefore, opted for all business risks associated with the business of development of real estate including developing and building of housing project. The facts of Radhe Developers (supra) are applicable to the facts of the assessee's case. We also find that Mumbai Bench in case of Saroj Sales Organisation (supra) granted deduction for two blocks comprising of 9 wings out of total 11 wings on the ground that each such block complied with the conditions of s. 80-IB(10). In the said case, the owner of the land was M/s A.W. Pereira Conwood Agencies (P) Ltd. was the principal developer who acquired the development rights of this plot of land from the said owner. Mumbai Municipal Corporation sanctioned a building plan to the principal developer for the constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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