SHYAM CORPORATION,,SURAT vs. THE DY. CIT, CIRCLE-2(3),, SURAT

आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-1; Surat (in short “the CIT (A)”) dated 05.10.2015 for the assessment year 2012-13. Which in turn has arisen from the order passed by the Deputy Commissioner of Income-Tax, Circle-2(3), Surat (in short “the AO”)

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 2 of 16 dated 30.03.2015 under section 143 (3) of Income Tax Act,1961 (in short ‘the Act’).

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 3 of 16 approval was revised before it was lapsed. The AO further observed that the revised application for development permission was sought by the assessee on 18.01.2010 and the same was approved by SMC on 03.07.2010 in the name of Shri Bhailalbhai Nanubhai Sheladiya, administrator of Shyam Corporation. In addition, the second development permission has no reference of first approval taken. Beside this, Business Use Certificate (BUC) was issued by SMC also made reference to date of application as on 18.01.2010 for which permission was granted on 03.07.2010. On the basis of above stated reasons, the AO has rejected the claim u/s. 80IB (10) of the Act of Rs.1,32,45,096/-.

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 4 of 16 for project was dtd. 26.03.2012 have also mentioned the date of application as 18.01.2010 and date of granting development permission on 03.07.2010. Obviously, new permission has been sought for different project and by different owner. The original plan approval was got lapsed on 28.08.2007, so new development plan (claimed to be revised plan) altogether different and fresh approval having no connection with earlier development plan except for the same piece of land. Hence, the CIT (A) held that the project for which deduction u/s. 80IB (10) has been claimed is approved on 03.07.2010, hence, the project is not eligible for deduction u/s. 80IB (10) of the Act. The CIT (A) also observed that CIT (A) –II, Ahmedabad vide order No. CAS (A)-II/CC-4/32/20/13- 14 dtd. 19.06.2014 for the assessment year 2010-11 in the case of K.G. Developers has denied deduction where the Appellant was having similar issue; hence, he has also followed the same.

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 5 of 16 construction of housing project. The said satakhat has been duly registered with Sub Registrar Surat on 11.07.2006. The ld. A.R. referred Page No. 28 to 33 of Paper Book also, being copy of permission of development of plan by SUDA dtd. 29.08.2006 in the name of Shri Ashokbhai Vallabhai Dobaria, the original owner of the land. The ld. A.R. submitted that as per clause 9 of this development permission, the assessee is required to start construction within 12 months from the data of permission otherwise this approval would automatically lapse if not renewed. The ld. A.R. submitted that original development permission was granted in the name of Shri Ashokbhai Vallabhbhai Dobaria, as the name in land record was original owner. Thereafter, the assessee has started the construction and an intimation of commencement of construction work was given on 25.01.2007 to Local authority i.e. before the expiry of original development plan on 28.08.2007. The assessee has entered in to a Dastavej on 26.03.2007. The ld. A.R. referred clause 3.5 of General Development Control Regulation, (GDCR) of SUDA, as per which this developer permission shall mean to have lapsed if construction of the building is not commenced within the stipulated period in para

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 6 of 16 6.5.2. of GDCR. Since the assessee has commenced the construction from 20.01.2007 before expiry of period of permission on 28.08.2007, therefore, the original plan was effective and permission was not lapsed. The assessee has moved an application on 19.01.2010 for approval of revised plan, which was necessitated as the assessee, has sold out some portion of land (2345 sq. meter) to another person, stating that it is revised plan and not original plan. The original plan was approved for 23006.58 sq. meter of construction of low-rise building. As the firm has sold out 2345 sq. meter of land, if the firm would not have sold then the original plan does not get to require the approval of revised plan as it was originally approved on 29.08.2006. The ld. A.R. also took us through the lay out plan placed at Page No. 37 of Paper Book and submitted that same very layout plan was got renewed on 03.07.2010.The revised plan was for the construction of low-rise building and approval of construction was for 16690.95 sq. meter. Therefore, it was contended that the original permission for construction dtd. 29.08.2006 was already in force on the date of application for revised plan. Further, there is no different in layout of development plan approved on 29.08.2006 and revised plan

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 7 of 16 approved on 03.07.2010 which was in continuation with original plan approved on 29.08.2006. Therefore, it was contended that the project was approved by Local Authority before 31.03.2008 i.e. on 29.08.2006. The size of plan is minimum of 1 acres on which project was to be constructed. The ld. A.R. submitted that contention of the Revenue that original permission dtd. 29.08.2006 was taken in the name of Shri Ashokbhai Vallabhai Dobaria and second permission dtd. 03.07.2010 is in the name of Shri Bhaillabhai Nanubhai Sheladiya, hence, first approval has no links with second approval is incorrect as the assessee is eligible in law to obtain revised approval as per Explanation to section 80IB (10) of the Act and original approval would be deemed to be approval for the purpose of section 80IB (10) of the Act. Further, relying on the decision in the case of CIT vs. Radhe Developers [2012] 341 ITR 403 (Guj) wherein it was held that the assessee was entitled to benefit u/s. 80IB (10) of the Act even where the title of the land was not passed on to the assessee and in some cases, the development permission may also be have been obtained in the name of original land owners. It was further submitted that that the layout plan and revised layout plan are same for low-rise

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 8 of 16 house, hence, second permission dtd. 03.07.2010 was in continuation of original approval dtd. 29.08.2006. The reliance by the CIT (A) in the case of K. G. Developers (supra) not applicable as in that case original approval was taken for high-rise houses and second plan was altogether different, whereas in the case of the assessee, the original approval, layout, and revised layout plan are same, hence, the original approval was in force.

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 9 of 16 in to an agreement to sale dated 11.07.2006, with owners of land and has obtained possession of land for construction and development. This agreement to sale was registered with Sub Registrar, Surat. In the most common mode of development of real estate by the developers, the owners of land do not desire to develop the land and they sell the land to a developer. It is the obligation of the developer to develop the land, and if necessary, to get agricultural land converted into non-agricultural land by the change of user, appoint the architects to prepare the building plans, get them approved with the local authority and to construct the houses in the form of tenements and flats. The developer would carry out the construction on his own, namely, carry out all necessary statutory formalities for construction, buy material for construction, employ labour or an agency, which would supply labourers and thereupon complete the construction. The developer would then sell the houses/ flats to the prospective buyers. The developer would buy land and get it transferred in his name even before the plans are placed. In the present case, the assessee has entered in to agreement to sale of land situated at Mojegam, Taluka Chorayasi district Surat. The development of

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 10 of 16 plan of construction has to be approved by SUDA. The by-laws of SUDA clearly says that anyone, who develops the land on his own account or for the benefit of any other person or as a joint trustee, guardian, manager, etc., is to be treated as an owner. The permission for development could be granted to whoever has applied for the permission not necessarily only the owner. In the present case, the assessee has applied for development permission and received approval on 29.08.2006 from SUDA Surat, for developing of low-rise housing project as per layout plan submitted. However, the permission was granted in the name of Shri Ashokbhai Vallabhai Dobaria, the original owner of land, as the title of ownership of land was not passed on to the assessee by that time, hence, this permission was given as per land revenue records as name of original owner was appearing whereas the possession of land in question was already taken over by the assessee as per agreement to sale dtd. 11.07.2006. As per clause 9 of said development permission, it was effective for 12 months from date of permission and further approval of construction work should be taken by taking renewal permission from time to time as per rules. Thus, this permission, so taken was effective as per

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 11 of 16

by laws for one year and would lapse if no construction Works started. We observe that the assessee has started construction work on or before 25.01.2007 as could be seen from the intimation letter dtd. 25.01.2007 (PB-36) submitted to AEN of SMC wherein the assessee has intimated the commencement of construction work. Since, some part of land was sold out by the assessee; hence, a revised plan was moved on 18.01.2010 for revised approval, which was granted on 03.07.2010. Thus, we find that the original approval granted on 29.08.2006 was in subsistence as the assessee has started construction work within 12 months of approval and the revised application for approval was in continuation of original development approval, which was approved on 03.07.2010. For better appreciation of law, it would be relevant to reproduce the Explanation with section 80IB(10) of the Act as under:

“(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,— (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 5[but

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 12 of 16

not later than the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority; 6[(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation.—For the purposes of this clause,— (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the 7date of completion of construction of the housing project shall7 be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;” 8. Thus, the clause (i) of Explanation to section 80IB(10) provides that where approval for housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority on 29.08.2006, hence, as per this Explanation to section 80IB(10) of the Act, the housing project would be deemed to have been approved from first housing project was approved by the Local Authority on 29.08.2006 and not from second approval dated 03.07.2010 as claimed by the Revenue.

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 13 of 16 is in the name of partner of the assessee and there is no reference of first approval. We find that this contention is not tenable in law. As there is no provision which says that Local Authority should mention the reference of first Approval. Further, the approval dated 03.07.2010 makes reference as revised plan, which means it was in continuation to original approval. As the developer of land are required to take permission for development. In this case, the land was taken in possession by the assessee vide agreement to sale on 11.07.2006, registered with Sub Registrar, but it was not executed as sale deed and therefore, the name of the assessee did not figure in Revenue records. Therefore, the development permission was given in the name of original landowner Shri Ashokbhai Vallabhai Sheladiya. Since the permission was taken for the same piece of land for same original plan hence, original approval even though not in the name of the assessee would be deemed to be valid approval which is apparent from Explanation to section 80IB(10) as reproduced above. This view is further supported by decision of Hon`ble Jurisdictional High Court of Gujarat in the case of CIT vs. Radhe Developers [2012] 341 ITR 403 (Guj) wherein it was held as ‘45. Under the circumstances, we

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 14 of 16 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.”

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 15 of 16 year by charge fee of Rs. 300 for renewal of development permission. Thus, we find that the assessee has taken renewal further renewal permission on 03.07.2010., which was in continuation of original permission dated 29.08.2006. Hence, we observe that the assessee has taken permission for development of housing project before 31.03.2008. In view of this matter, the assessee is eligible for deduction u/s. 80IB (10) of the Act. We may mention that decision relied by the Ld. CIT (A) in the case of K. G. Developers v. DCIT [ I.T.A.No. 1414/Ahd/2014 dtd. 13.06.2017 ] is not applicable in the present case as in said case original development permission dated 19.07.2006 was taken for construction of row houses whereas fresh second approval 16.03.2009 was taken for housing project towards high rise building, hence, the second approval was treated as fresh approval by Tribunal being approval of altogether for different project and benefit of section 80IB(10) was denied. However, in the present case, the original approval dtd. 29.08.2006 and revised approval dtd. 03.07.2010 are for same housing project, same lay out plan for construction of low-rise type building. Hence, second approval cannot be treated as fresh approval as it was necessitated due to

Shyam Corporation v. DCIT-2(3) Surat/I.T.A. No.123/Ahd/2016/SRT/A.Y.:2012-13 Page 16 of 16 sale of some part of land and was therefore, in continuation of original approval. Therefore, the development permission obtained before the cut-off date of 31.03.2008. Hence, the assessee is entitled to deduction u/s. 80IB (10) of the Act. In view of these facts and circumstances, we direct the AO to allow the deduction under section 80IB (10) of the Act as claimed by the assessee. Accordingly, this ground of appeal of the assessee is allowed.

Sd/- Sd/- (सी.एम.गग� /C.M. GARG) (ओ.पी.मीना/O.P.MEENA) �याियकसद�यतथा/JUDICIAL MEMBER लेखासद�यकेसम� /ACCOUNTANT MEMBER सुरत Dated: 31st August, 2018 / OPM आदेश क� �ितिलिप अ�ेिषत/Copy of the Order is forwarded to : 1.अपीलाथ�/ The Appellant; 2. ��थ�/ The Respondent; 3. आयकरआयु� (अपील) The CIT(A)4.आयकरआयु� / Pr. CIT 5.िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/D.R. (ITAT) 6. गाड�फाईल / Guard file ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat