PR COMMISSIONER OF I T JAIPUR-1 vs. PREM KUMAR SANGHI

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ITA/120/2016HC RajasthanRJHC02082131201604 July 20174 pages
AI SummaryRemanded

What did the High Court hold?

The High Court decided the issues as follows: For the first issue, the Tribunal's judgment was quashed and set aside, and the matter was remitted back to the Tribunal to decide it afresh. The Court noted that the Tribunal had relied on its previous judgment in CIT, Jaipur vs. M/s Indo Continental Hotels, which was confirmed by the High Court. However, the Court found that the Tribunal had committed an error in not referring to the price in the previous year, necessitating a remand on this specific point. For the second issue, the Court held in favour of the assessee, relying on the Supreme Court's decision in Commissioner of Income Tax Vs. Veena Developers. The Supreme Court had interpreted the expression 'housing project' and held that once a project is approved by the local authority, it is to be treated as a housing project, even if it includes commercial activity within permissible limits under Development Control Regulations. The Court made it clear that it had not expressed any opinion on the merits of the first issue during the remand.

What were the facts?

These appeals by the Principal Commissioner of Income Tax (Revenue) challenge the order of the Income Tax Appellate Tribunal (Tribunal) that dismissed the department's appeals and a cross-objection by the assessee, Shri Prem Kumar Sanghi. The core dispute revolves around the allowability of deduction under Section 80IB(10) of the Income Tax Act, 1961, for housing projects. The assessee claimed deductions of Rs. 7,91,87,666 in Appeal No. 120/2016 and Rs. 2,54,89,737 in Appeal No. 118/2016. The Revenue contends that the assessee was merely a landowner who entered into a development agreement with another developer, and therefore, not eligible for the deduction.

What were the issues?

1. Whether the Tribunal was justified in holding the assessee as the developer and allowing deduction under Section 80IB(10) of Rs. 7,91,87,666 (in ITA 120/2016) and Rs. 2,54,89,737 (in ITA 118/2016), ignoring the development agreement where the assessee acted merely as a landowner with another developer to execute and construct flats on his land? (Question of mixed law and fact, concerning Section 80IB(10)). 2. Whether the Tribunal was justified in allowing deduction under Section 80IB(10) when the assessee neither undertook the development and construction of the housing project nor furnished the completion certificate as required by Clause (ii) of the Explanation to Section 80IB(10)(a)? (Question of mixed law and fact, concerning Section 80IB(10)). Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the Tribunal's decision in favour of the assessee on the second issue was based on the Supreme Court's ruling in Commissioner of Income Tax Vs. Veena Developers. Revenue's Contentions: The Revenue argued that the assessee was not the developer but merely a landowner who entered into a development agreement with another developer. Therefore, the assessee was not eligible for the deduction under Section 80IB(10) as he did not undertake the development and construction of the housing project.

Which sections of the Income-tax Act were involved?

Section 80IB(10)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 120 / 2016 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Shri Prem Kumar Sanghi 137, M.I. Road, Panch Batti, Jaipur. ----Respondent/Assessee Connected With D.B. Income Tax Appeal No. 118 / 2016 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Shri Prem Kumar Sanghi 137, M.I. Road, Panch Batti, Jaipur. ----Respondent/Assessee _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Siddharth Ranka with Mr. Mohd. Iqbal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 04/07/2017 1. In both these appeals, common question of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellants have assailed the judgment and order of the Tribunal whereby Tribunal has dismissed the appeals preferred by the department and cross objection filed by the assessee was also dismissed.

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3.

This court while admitting the appeals framed following substantial questions of law:- 3.1 Appeal No.120/2016 admitted on 20.4.2017 ““(i) Whether the Tribunal was justified in holding assessee as the developer and thereby allowing deduction u/s 80IB(10) of Rs.7,91,87,666/-, ignoring the specific development agreement entered into by him merely as land owner with another developer to execute and construct the flats on the land of the assessee?

(ii) Whether the Tribunal was justified in allowing deduction u/s 80IB(10) to the assessee when neither he undertook development and construction of the housing project as required in Clause-ii of explanation to Section 80IB(10)(a) was furnished by the assessee?” 3.2 Appeal No.118/2016 admitted on 31.01.2017 “(i) Whether the Tribunal was justified in holding assessee as the developer and thereby allowing deduction u/s 80IB(10) of Rs.2,54,89,737/-, ignoring the specific development agreement entered into by him merely as land owner with another developer to execute and construct the flats on the land of the assessee? (ii) Whether the Tribunal was justified in allowing deduction u/s 80IB(10) to the assessee when neither he undertook development and construction of the housing project nor the completion certificate of the project as required in clause-ii of explanation to Section 80IB(1) (a) was furnished by the assessee?” 4. The Tribunal has sought to rely upon the judgment in the case of CIT, Jaipur vs. M/s Indo Continental Hotels and Resorts which judgment was confirmed by this court in D.B. Income Tax Appeal No.630/2011 (CIT Jaipur vs. M/s Indo Continental Hotels

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and Resorts) & other connected matter decided on 30.5.2017 which reads as under:- 4.1 The issue agitated before tribunal as regard to previous year, the issues is discussed in Income Tax appeal No.470/2009, which we have decided today but there is no reference of price in the same. In our view in CIT(A) and the tribunal have committed an error in not referring to the price in the previous year. 4.2 Therefore, the matter is required to be remitted back to the tribunal only on this issue. 4.3 The matter is remitted back to tribunal to decide, the same keeping in view the statutory provision. We make it clear that we have not expressed any opinion of merits. 5.1 The second issue is covered by the decision of this court in Commissioner of Income Tax Vs. Veena Developers(2015) 277 CTR 0297(SC) wherein it has been observed as under: “ High Court interpreted the expression “housing project” by giving grammatical meaning thereto as housing project is not defined under the Income Tax Act in so far as the aforesaid provision is concerned. Since sub-section (10) of Section 80IB very categorically mentioned that such a project which is undertaken as housing project is approved by a local authority, once the project is approved by the local authority it is to be treated as the housing project. We may also point out that the High Court had made observations in the context of Development Control Regulations (hereinafter referred to as ‘DCRs’ in short) under which the local authority sanctions the housing projects and noted that in these DCRs itself, an element of commercial activity is provided bu the total project is till treated as housing project. a. Upto 31/3/2005 (subject to fulfilling other conditions), deduction under Section 80IB (10) is allowable to housing projects approved by the logal authority having residential units with commercial user to the extent permitted under DC Rules/Regulations framed by the respective local authority. b. Where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules/Regulation, the deduction

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under Section 80IB(10) upto 31.3.2005 would be allowable irrespective of the fact that the project is approved as ‘housing project’ or ‘residential plus commercial.” 5.2 Therefore this issue is required to be held in favour of assessee. 5.3 For the first issue the judgment of the tribunal is quashed and set aside. The matter is remitted back to the tribunal to decide this issue afresh. However, the second issue is decided in favour of assessee.” 4.1 In that view of the matter, the issues are answered in favour of the assessee and against the department. 5. The appeals stand dismissed. A copy of this judgment be placed in each file. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 89-90.

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