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TMI Blog2021 (7) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... on of residential and commercial units. It filed its return of income on 30th March, 2007 disclosing total income of Rs. 50,24,995/- after claiming deduction of Rs. 11,68,72,431/- u/s 80IB(10) of the IT Act, 1961. 3. During the course of assessment proceedings, the AO noted that the assessee has executed a developer agreement with M/s Sahara India Commercial Corporation Ltd. (SICCL) on 21st Sept. 1999. He analysed the salient features of the agreement vis-à-vis the provisions of section 80IB(10) of the Act and observed that the assessee is not eligible to claim the deduction u/s 80IB(10) since it does not fulfill the conditions laid down in section 80IB(10) of the Act. According to the AO, as per section 80IB(10)(d) inserted by Finance (No.2) Act, 2004 w.e.f. 01.04.2005: (a) the built up area of the shops and commercial establishments cannot exceed 5% of the aggregate built up area or 2000 sq. ft. whichever is less and the project developed by the assessee comprised of 30,300 sq. ft. of commercial establishment which exceeds the prescribed limit. (b) the assessee was to obtain a completion certificate prior to 31st March, 2008 and the assessee did not produce such certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of such housing project issued by the local authority. Since, in the instant case, the assessee society has been unable to procure such a certificate, which has been made mandatory after the amendment w.e.f. 01.04.2005 i.e for A.Y. 2005-06 and, subsequently, the assessee society is not eligible for claiming the deduction. 6. The AO further noted that the assessee society has contracted out the development and construction work to its flagship company i.e M/s Sahara India Commercial Corporation Ltd.. According to the AO, since 80IB(10) deduction is allowable to an undertaking where it employees capital and labour for the purpose of development and construction and since the assessee society is not actively involved in the development and construction work, therefore, the assessee is not eligible for the deduction. He further noted that a perusal of booking application forms shows that these are addressed to M/s Sahara India Commercial Corporation Ltd. and not to the society. He observed that the assessee has authorized SICCL to collect the money from the prospective purchasers/allottees directly for or on behalf of the assessee. He, therefore, held that the assessee society is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) deserves to be upheld on the facts and circumstances of the case as well as law. 3. That the respondent craves leave to add, alter, amend or withdraw any or all the grounds of cross-objections on or before the date of hearing." 9. The ld. DR strongly challenged the order of the CIT(A) in allowing the claim of deduction u/s 80IB(10) made by the assessee. He submitted that the AO has rightly rejected the claim of deduction u/s 80IB(10) since the assessee does not meet the conditions prescribed u/s 80IB(10) of the IT Act. He submitted that the aggregate built up area of the shops and commercial establishments in the project developed by the assessee comprised of 30300 sq. ft. which far exceeds the area prescribed under the Act at 5% of the aggregate built up area or 2000 sq. ft. whichever is less. Referring to the assessment order, the ld. DR submitted that the assessee did not claim to have obtained the completion certificate which is a necessary condition as per section 80IB(10) of the Act and, therefore, the AO rightly did not allow the claim of deduction u/s 80IB(10) of the Act. He submitted that the conditions were inserted by the Finance Act, 2004 w.e.f. 01.04.2005 applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011. Relying on various decisions, he submitted that in absence of issue of completion certificate of the project within the stipulated time, the assessee is not entitled to claim deduction u/s 80IB(10) of the Act. So far as the other objection of the AO that the assessee has contracted out the developers and construction work to its flagship company i.e., SICCL is concerned, the ld. DR submitted that the application forms for booking were addressed to SICCL which also collected money from the prospective buyers/allottees on behalf of the assessee. This conclusively proves that the assessee was not engaged in development and construction of housing project and, therefore, not eligible for deduction u/s 80IB(1) of the Act. He submitted that there was no employee on the rolls of the assessee which is evidenced by the audit report, therefore, the claim of the assessee being a developer does not hold good. 12. So far as the additional evidences filed by the assessee are concerned, the ld. DR submitted that the assessee, for the first time, has filed the additional evidences before the Tribunal on 15.11.2018. The AO's assessment order is dated 24th December, 2007 while the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions prescribed u/s 80IB(10)(d) cannot be applied to projects approved prior to 01.04.2005. Therefore, the allegation of the AO that the assessee does not fulfill the condition of built up commercial area is not applicable to the assessee and, therefore, the denial of deduction u/s 80IB(10) on this issue is not justified. 15. So far as the condition for obtaining completion certificate on or before 31st March, 2008 is concerned, the ld. Counsel referred to the provisions of section 80IB(10(a)(i) r.w. Explanation (ii) and submitted that the above mentioned condition was introduced vide Finance (No.2) Act, 2004 w.e.f. 01.04.2005 and the same was not in existence when the project was approved by the development authority on 26th March, 2003. The said condition was, thus, prospective and not applicable to projects approved prior to 01.04.2005. For the above proposition, the ld. Counsel relied on the following decisions:- (i) CIT vs. CHD Developers Ltd., 362 ITR 177 (Del); (ii)PCIT vs. Sahara States Gorakhpur, 418 ITR 168 (Allahabad); (iii) Sahara Estates, Hyderabad AOP vs. DCIT, ITA No.1886/Hyd/2011 16. The ld. Counsel, referring to the following additional evidences, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of flats directly on behalf of the assessee is concerned, he submitted that merely because certain procedural formalities relating to the collection of booking application forms and money from the buyers were delegated to SICCL would not render SICCL as a developer of the project since the money collected by SICCL was on behalf of the assessee only and on the authorization of the assessee and not in its independent capacity. Therefore, the delegation of certain formalities regarding collection of booking application forms and money on behalf of the assessee would not cease the assessee company as being registered as a developer of the project. 20. The ld. Counsel for the assessee submitted that the conditions of eligibility of the section 80IB(10) of the Act were tested and satisfied/allowed in the first year of claim of deduction, i.e., A.Y 2003-04 and 2004-05 and, therefore, the same is not open for examination in the subsequent years in absence of change in factual position. The ld. Counsel for the assessee relying on various decisions submitted that without disturbing the assessment for the initial year it is not open to the Revenue to make disallowance of such deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0) of the IT Act, 1961. We find, the AO rejected the claim of deduction u/s 80IB(10) on the ground that: (a) the built up area of the shops and commercial establishments is 30300 sq. ft. which far exceeds the area prescribed under the Act at 5% of the aggregate built up area or 2000 sq. ft. whichever is less; (b) the assessee was to obtain a completion certificate prior to 31st March, 2008 and the assessee did not produce such certificate; and (c) The assessee cannot be regarded as a developer since it was not actively involved in the development and construction works due to nonemployment of capital and labour for the purpose of development and construction. 24. We find, in appeal, the ld. CIT(A) allowed the claim of deduction made by the assessee u/s 80IB(10) of the Act. So far as point No. (a) and (b) above are concerned, the ld.CIT(A) held that these conditions were not in existence on the date when the approval was granted by the Development Authority. Therefore, the said conditions cannot apply to the projects which were approved prior to 01.04.2005. So far as the third objection is concerned, the ld.CIT(A) held that appointment of SICCL as a contractor for the develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial area far exceeds the prescribed limit is not applicable to the assessee. 24.2 So far as the second objection of the Revenue is concerned, i.e., completion of the project on or before 31.03.2008 is concerned, it is the submission of the ld. Counsel that the project was completed before 31st March, 2008 in view of the following additional evidences:- (i) Letter from M/s Sahara India Commercial Corporation ltd to the assessee dated 14/03/2008 [Pg 5 of additional evidence compilation] (ii) Letter from the assessee to M/s Sahara India Commercial Corporation ltd dated 18/03/2008 [Pg 6 of additional evidence compilation] (iii)Architect certificate dated 15/09/2009 along with the official translation [Pg 7 and 8 of additional evidence compilation], 25. Since these documents were never produced before the lower authorities and were filed before the tribunal for the first time in the shape of additional evidences, therefore, we admit the additional evidences filed in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963 and deem it proper to restore the issue relating to completion of the project prior to 31st March, 2008 to the file of the AO for adjudication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above discussion, the objection No. 1 and 3 by the AO while denying the benefit of deduction u/s 80IB(10) are rejected since the assessee, in our opinion has fulfilled the condition regarding built up area of shops and commercial establishments and the assessee in our opinion is a developer. However, the third objection relating to obtaining of completion certificate prior to 31st March, 2008 is restored to the file of the AO for fresh adjudication in view of the additional evidences filed by the assessee as per para 24.2 above. The grounds raised by the Revenue are accordingly allowed for statistical purposes. CO No.221/Del/2011 (A.Y. 2005-06) 29. The grounds raised by the assessee in the CO are merely in support of the order of the CIT(A). Since one of the issues raised in the grounds raised by the Revenue has been allowed for stastical purposes, therefore, the CO filed by the assessee is dismissed. ITA No.2482/Del/2011 (A.Y. 2006-07) 30. The grounds raised by the Revenue reads as under:- "On the facts and in the circumstances of the case the Ld. CIT(A) has erred in:- 1. The order of the Ld. CIT(A) is not correct in law and facts. 4. On the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X
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