M/S. VAISHALI DEVELOPERS & BUILDERS,BHOPAL vs. THE ITO 1(2), BHOPAL

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ITA 77/IND/2016Status: DisposedITAT Indore12 January 2017AY 2011-128 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee had submitted evidence of land ownership, development approvals, and completion certificates in its name. Since similar appeals for preceding years were pending before the CIT(A), the Tribunal restored the matter to the CIT(A) for fresh adjudication.

What were the facts?

The assessee, a developer, claimed deduction under Section 80IB(10) for its housing projects. The Assessing Officer (AO) and Commissioner (Appeals) disallowed the claim, holding that the assessee acted merely as a contractor after selling plots, not as a developer.

What were the issues?

Whether the assessee qualifies as a developer eligible for deduction under Section 80IB(10) or if it acted merely as a contractor. Whether the evidence of ownership and project completion submitted by the assessee was adequately considered.

Which sections of the Income-tax Act were involved?

Section 80IB(10)

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Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI D.T. GARASIA & SHRI O.P. MEENA

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 1 of 8

आयकर अपील�य अ�धकरण ,इ�दौर �यायपीठ ,इ�दौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE �ी डी.ट�.गरा�सया ,�या�यक सद�य तथा �ी ओ.पी.मीना ,लेखा सद�य के सम�

BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER

आ.अ.सं /.I.T.A. No.77/Ind/2016 �नधा�रण वष� / Assessment Year:2011-12 M/s. Vaishali Developers & Builders, ITO 1(2) Bhopal 240 MP Nagar Zone-I Bhopal Vs. 462011 अपीलाथ� /Appellant ��यथ� /Respondent अपीलाथ� / अपीलाथ� / अपीलाथ� / ��यथ� / ��यथ� / ��यथ� / �था.ले.सं./PAN: AACFV 7638 P Shri Ashish Goyal& Shri N .D. अपीलाथ� क� ओर से/Appellant by अपीलाथ� क� ओर से/ अपीलाथ� क� ओर से/ अपीलाथ� क� ओर से/ Patwa Advocates Shri Mohd. Javed, Sr. DR ��यथ� क� ओर से/Respondent by ��यथ� क� ओर से/ ��यथ� क� ओर से/ ��यथ� क� ओर से/ 14.12.2016 सुनवाई क� तारीख/Date of hearing सुनवाई क� तारीख सुनवाई क� तारीख सुनवाई क� तारीख 12.01.2017 उ�ोषणा क� तारीख/Date of pronouncement उ�ोषणा क� तारीख उ�ोषणा क� तारीख उ�ोषणा क� तारीख आदेश /O R D E R आदेश / आदेश / आदेश / PER O.P. MEENA, ACCOUTANT MEMEBR. This appeal is filed by the assessee against the order of ld. Commissioner of Income tax (Appeals)-I, Bhopal [hereinafter referred to as the CIT (A)] dated 27.10.2015. This appeal pertains to Assessment Year 2011-12 as against appeal decided in respect of assessment order dated 18.03.2014 passed u/s. 143(3) of Income Tax Act, 1961(herein after referred to as "the Act) by the ITO-1(2) Bhopal [hereinafter referred to as the AO]. The assessee has taken following grounds of appeal:-

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 2 of 8

1.

That on the facts and in the circumstances of the case and in law, the decision of the learned CIT (A) is materially incorrect, bad on facts, and unsustainable in law and his finding are materially incorrect. 2. That on the facts and in the circumstances of the case and in law, the appellant submits that its housing project fulfill all the conditions laid down in section 80IB (10) of the I.T. Act and, therefore, the income from such project is deductible under the said provisions. The learned CIT (A) erred and not justified in his finding that the appellant is not eligible for deduction u/s. 80IB(10) of the I.T. Act and, therefore, finding of the learned CIT(A) be quashed and exemption as claimed u/s. 80IB(10) be kindly be allowed. 3. That on the facts and in the circumstances of the case and in law, the learned CIT (A) erred in affirming the view of the AO that “the appellant had acted merely as a contractor after selling the plot and not as a developer. Therefore, the appellant was not eligible for claiming deduction u/s. 80IB (10) on the profits claimed from this project.” 4. That on the facts and in the circumstances of the case and in law, the learned CIT (A) erred in rejecting claim u/s. 80IB (10) of the I.T. Act, of the appellant mentioning that the appellant has acted as a contractor and not as a Developer and Builder, for the only reason that the appellant had not registered the sale deeds in favour of the customers for the full value of the units as agreed among them. 5. That on the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding the view that “it is evidently clear that the appellant had acted merely as a contractor after selling the plot and not as developer. Therefore, the appellant was not eligible for deduction u/s. 80IB(10) of the

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 3 of 8

Act on the profits derived from the project”, therefore, disallowed the deduction claimed u/s. 80IB(10) of the I.T. Act by the Appellant. 6. That on the facts and in the circumstances of the case and in law, the levy of interest u/s. 234B is unlawful, hence, be cancelled. 2. The ground no. 1 to ground no. 5 are basically relates to confirming of the finding of the AO that the assessee has merely acted as contractor after selling plot and not as a developer, therefore, the assessee is not eligible for deduction u/s. 80IB(10) on the profits claimed for the projects for the reasons that the assessee has not registered the sale deeds in favour of the customers for the full value of units as agreed among them and not fulfilled the conditions of section 80IB(10) of the Act. Therefore, these are being considered together and decided by common finding for the sake of brevity and convenience. 3. Succinctly, facts as culled out from the orders of lower authorities are that the assessee is a partnership firm engaged in the business of development of housing project. The assessee has filed return of income on 26.09.2011 declaring total income of Rs. NIL after claiming deduction of Rs. 1,38,06,905/- u/s. 80IB(10) of the Act in respect of projects named as Vijay Nagar-I and Vijay Nagar-II as tabulated below.

Name of the Project Vijay Nagar –I Vijay Nagar –II

Location of the Project Village Village Hirdepur Hirdepur Damoh Damoh

Area 6.024 Acres

Colony layout /TNCP Approval No. 1009/TNCP/05 4259/TNCP/07

Date of Approval 22.08.2005 28.03.2007

Building Permission/ Gram Panchayat Nil Nil

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 4 of 8

Approval No.

Date of Approval 01.05.2006 30.03.2007

Commencing Year of the Project 2005-06 2007-08

Completion Year of the Project 2010-11 2011-12

Date of issue of Completion Certificate 30.03.2011 22.03.2012

4.

The AO examined the claim of the assessee and found that the assessee first sold the plots to the customers and thereafter, executed construction on the plots. The AO also noted that entries in the books of accounts had also been made accordingly and receipts had been booked in respect of sale of plots and construction receipts. Therefore, the AO stated that from above it was clear that the assessee had merely acted as a contractor to the customers to whom the land was sold. The deduction u/s. 80IB(10) of the Act is allowable only to an undertaking developing and building housing project whereas the assessee could not be termed as an undertaking developing and building housing project as it had merely acted as a contractor to the customers to whom land was independently sold. The AO also relied on the decision in the case of Sky Builders & Developers vs. ITO1 (1) Bhopal [2011 14 taxmann.com 78(Indore-Trib) in support of his view. The AO also noticed that the income of the assessee also included interest income of Rs. 4,25,627/- pertaining the income from other source not eligible for deduction u/s. 80IB(10) of the Act. The AO also noted that ld. CIT (A) has also dismissed the appeal of the assessee for A.Y. 2008-09 and 2009-10 by consolidated order dtd. 24.10.2012 by holding that the assessee has merely acted as a contractor and was thus, not eligible for deduction u/s. 80IB (10). Accordingly, the AO disallowed the claim of deduction of Rs. 1,38,06,910/- u/s. 80IB(10) of the Act.

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 5 of 8

5.

Being, aggrieved the assessee filed an appeal before the ld. CIT (A). 6. The Ld. CIT (A) appeal noted that the identical issue was also there in A.Y. 2008-09 to A.Y. 2009-10 and also the issue was considered by the CIT(A) in A.Y. 20101-11 vide order dated 23.12.2014 wherein the CIT(A) referred the decision of Sky Builders & Developers vs. ITO 1(1) Bhopal [2011] 14 taxmann.com 78 (Indore-Trb) wherein it was had that where the assessee sold plots to respective customers by registering sale deed and thereafter, constructed building an agreed price, it had to be concluded that the assessee merely acted as a contractor and not as a developer and , therefore, not eligible for deduction u/s. 80IB(10). And also in view of these fact that no completion certificate had been issued to assessee by local authority, in view of sub-clause (2) of Explanation to section 80IB (10) assessee`s claim for deduction is rejected. Accordingly following the said decisions of the Ld. CIT (A) for A.Y. 2008-09 to 2010-11 wherein it was held that the assessee has acted merely as contractor after selling the plots and not as developer, held that therefore, the assessee is not eligible for deduction u/s. 80IB(10) of the Act. Accordingly confirmed the disallowance made under section 80IB (10) of the Act. 7. The learned Counsel for the assessee submitted the land admeasuring 6.024 hectares has been purchased and registered in the name of the assessee. NOC for mortgaged of land, release of land and the assessee obtained permission for development / approval of colony from Gram Panchayat obtained in the name of the assessee. The project completion certificate was also given in the name of the assessee. The assessee has adopted the modus operandi by which the assessee has agreed to sale complete constructed bungalow / flats with fixed built up area for the consideration agreed. The advertisement in name of the projects to enroll the customers in the project and received the booking amount against the sale of bungalows/ flats with definite built up area. In none of the case, the assessee was

M/s. Vaishali Developers& Builders vs. ITO-1(2) Bhopal / I.T.A. No.77 /Ind/2016/A.Y.:11-12 Page 6 of 8

given fixed price for the executing work. A work contract will be awarded on a fixed consideration for doing his work. Thus, the learned Counsel contended that the assessee has not only done construction of houses but also done the construction of roads, took electricity connection , took help of architect , obtained water connection and carry out all the activities of projects. Therefore, the assessee is a developer and builder hence, entitled to deduction u/s. 80IB (10) of the Act. The learned Counsel submitted that on similar facts, the deduction u/s. 80IB(10) was allowed by the Indore Bench of Tribunal in the case of Mahendra Builders & Developers in I.T.A. No. 371,372/Ind/2012 dtd. 30.07.2015 which is a decision after the Sky Builders & Developers vs. ITO 1(1) Bhopal [2011] 14 taxmann.com 78 (Indore-Trb). Therefore, it was argued that the assessee should be treated as developer and contractor of the project in the light of decision in the case of CIT vs. Amlatas Associates [2011] 75 taxmann.com 183(Guj) following judgement in the case of CIT vs. Radhe Developers 341 ITR 403 (Guj) wherein it was held that the assessee had, in part performance of the agreement to sell the land in question , was given possession thereof and had also carried out the construction work for development of housing project. The learned Counsel submitted that the combined reading of section 2(47) (v) and section 53A of the Transfer of Property Act would lead to a situation where the land for the purpose of Income Tax Act,1961 deemed to have been transferred to the assessee. In that view of matter, for the purpose of income derived from such property, the assessee would be owner of the land for the purpose of said Act. It is equally true that such title would pass only upon execution of duly registered sale deed. However, for the limited purpose of these proceedings one is not concerned with the question of passing of the title of the property but only examining whether for the purpose of benefit under section 80IB(10), the assessee could be considered as the owner of the land in question. For the limited purpose of deduction u/s. 80IB (10), the assessee

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had satisfied the condition of ownership also even if it was necessary. The Tribunal committed no error in holding that the assessee was entitled to the benefit u/s. 80IB (10) even where the title of the lands had not passed on to the assessee and in some cases, the development permission may also have been obtained in the name of original owners. It is not even the case of Revenue that the other conditions of section 80IB were not justified. The learned Counsel also submitted that the assessee has been claiming deduction u/s. 80IB (10) from A.Y. 2003-04 and same was allowed onwards. The claim was denied for the first time from A.Y. 2007-08 and thereafter. The ITAT in A.Y. 2007-08 to 2010-11 restored the matter to the file of the AO, since documents of ownership of land, in whose name approval has been obtained were not before the AO /CIT (A) and tribunal. However, in present case all the documents were available before the AO as well as CIT(A), but they have brush aside the same by holding that the case is covered by decision of Sky Builders & Developers vs. ITO 1(1) Bhopal [2011] 14 taxmann.com 78 (Indore-Trb). 8. We have heard the rival submissions of both the parties and have perused the material available on record. We find that as per the claim of learned counsel, the details of ownership of land purchased, the approval of site plan and colony of obtained in the name of the assessee, the permission for development of residential projects was in the name of the assessee, the completion certificate issued by the concerned authorities was available before the learned Commissioner of Income tax (Appeal) and also before the Assessing Officer. However, the lower authorities brush aside these evidences. The learned CIT(A) choose to follow the decision of Sky Builders & Developers vs. ITO 1(1) Bhopal [2011] 14 taxmann.com 78 (Indore-Trb) and confirm the same by following the finding as given in earlier years. We are also aware told that the set aside assessments have been reframed by the AO by repeating the disallowance u/s.

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80IB(10) of the Act. The assessee has filed an appeal, which is pending before the Commissioner of Income tax (Appeals) for the decision. Since the facts involved in this assessment year are same as in the preceding assessment year’s 2007-08 to 2010-11 and same are pending before that lower authorities, therefore, it would be justifiable to restore the matter to the ld. CIT (A) since the appeal for preceding assessment years are pending before him. Therefore, in the interest of Justice and fair play, we deem it fit that appeal for this year is also restored to the file of the Commissioner of income tax (Appeals) for the decision after considering all the evidences as filed by the assessee before him. Nevertheless, we also direct the ld. CIT (A) to consider all relevant facts and necessary evidences as filed by the assessee and after analyzing the evidence in the form of ownership of land purchased, after all taken in the name of the assessee, completion certificate obtained by the assessee from local authority and decided on appeal on merits. The assessee is allowed to produce any further evidence in support of his claim before the learned CIT (A). In view of that matter, the appeal for this year is also set aside the file of the CIT(A) for fresh adjudication. The appeal of the assessee is allowed for statistical purpose. 9. In the result, the appeal of the assessee is allowed for statistical purpose. 10. The order pronounced in the open court on 12.01.2017

(डी.टी.गरािसया) (ओ.पी.मीना) �याियक सद�य लेखा सद�य (D.T.GARASIA) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 12th January 2016.

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