SASWAT INFRASTRUCTURE (P) LTD,BHUBANESWAR vs. DCIT, CIRCLE-2(2), BHUBANESWAR, BHUBANESWAR

This is an appeal filed by the assessee against the order of CIT(A)-

Berhampur Camp: Bhubaneswar, dated 27.10.2014 for the assessment

year 2010-2011.

the CIT(A) erred in confirming the order of the Assessing Officer

disallowing deduction u/s. 80IB of the Act for Rs.31,60,090/- on the

ground that the assessee is not the owner of the land.

that the assessee has earned profit of Rs.31,60,090/- from business and

has claimed the same as deduction u/s. 80IB, which has resulted in the

claim of Nil income. The Assessing Officer observed that the assessee

does not own any land nor has developed any property so as to be eligible

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for deduction u/s. 80IB of the Act and, accordingly, brought to tax the

amount of Rs.31,60,090/-.

“First, the assessee in instant case was only a constructor/builder and not a developer or otherwise. The assessee had highlighted and admitted in its profit and loss account the entire sale consideration received on account of sale of apartments as a sale receipt.

After execution of irrevocable power of attorney dated 28 November 2005 the land owner had transferred the possession of the land entire property of one acre to the appellant through a power of attorney and, thereafter, the assessee had to develop the project even though the approval was to be taken formally in the name of the owner of the land.

Now it was to be seen whether for claiming such a deduction, the assessee was required to be the owner of the land or not. In the book of Sampath Iyengar Law of Income tax, Vol.4.10 edition at page 5784 it has been explained- Ít is true that an entrepreneur undertaking development and construction in a housing project, may not have any interest in land. But the sub-section does not require that he should be the owner of the land. A promoter should qualify for deduction because he runs an undertaking for developing and constructing a housing project, so that the conditions for relief are satisfied. If he were not the owner, plan approval also may not be in his own name, since local government usually insists on granting such approval only to the title holder. This by itself does not give right to owner to claim deduction under section 80-IB(10) nor does it forfeit the right of the developer to it'. As per the Oxford Advance Learner's Dictionary, a developer is a person or company that buys land or building in order to build new houses, shops/stores, etc. or improves the old ones and makes a profit from doing this. As per Mozley & Whitely 's Law Dictionary, 'development' means 'with certain exceptions, the carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land'. [Para 6]

From the above discussion, what is required is that if the assessee is a beneficial owner or to put it in a legal term if he is a de facto owner of the land, any developer becomes eligible for this deduction. It is not at all necessary that the developer should be a de jure owner of the/and. It is quite possible to develop the property with consent of the owner. It transpires from the perusal of the records that the assessee was de factor owner of the property when the entire allotment procedure was executed by him only. It was the assessee who incurred all the expenses connected with the developments of the property right from filing application for planning permission and paying necessary fees for the same. The marketing of the site was also done by the assessee through]

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advertisement, etc. Thus, from the terms of the agreements and other relevant! document, it was apparent that instant case was not a case of works-contract. [Para 7]

From the above discussion, it becomes evidently clear that the assessee was not required to be the owner on record for claiming such a deduction under section 80-IB(10). Insofar as execution of power of attorney by the land owner after the receipt of full consideration and when the assessee has taken possession of the land and developed the same was concerned, he fulfils all the conditions laid down in section 80-IB(10) and Explanation appended thereto. [Para 10] "(emphasis by underlining supplied)”

as under:

“ I have carefully considered the matter and gone through the records. I do not find any reason to interfere with the action of the AO. The appellant made the claim of deduction in the return u/s.80IA. When being asked by the AO to substantiate the claim, the appellant changed its claim to section 80IB(10). Section 80IB(10) is available to an undertaking which is developing and building housing projects. In the instant case, as can be seen from the first two lines of the written submission extracted above, the appellant itself has submitted that it was not a developer. Given such clear admission of the status of the appellant, there is no way that the appellant shall be eligible for any deduction u/s.80IB(10). However, more than the admission by the appellant, I am inclined to sustain the action of the AO based on the facts in the instant case. Admittedly, the appellant does not own any land. It had merely produced an agreement to sale before the AO. An agreement to sale is not equivalent to a sale deed and there is nothing on record to prove that the appellant is owner of land on which houses have been constructed. Secondly, even if the appellant is not the owner, it perhaps would have got the benefit had it entered into any development agreement with the land owner. In the instant case, the only document produced before the AO which was also produced before me is a general power of attorney by the land owner who also has got the plan sanctioned in its name. The general power of attorney authorizes the appellant to deal on behalf of the land owner. At best, this is an agreement where the appellant becomes an agent of the land owner. By virtue of this agreement the appellant does not take any development risk. From the copies of the agreement with various customers available in the assessment record it is seen that the/ appellant has taken up construction work like a contractor. In view of the above discussion, I do not find any reason to allow the claim of the appellant u/s.80IB. The ground is, accordingly, dismissed.”

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assessee had claimed deduction u/s. 80IB of the Act in assessment year

2008-09 of Rs.3,14,359/- and Rs.4,53,461/- in assessment year 2009-

2010 and the same was allowed deduction to the assessee. It was his

submission that on the very same set of facts during the year under

appeal, the department cannot turn around and say that the assessee

was not eligible for deduction u/s. 80IB of the Act. He submitted that on

the ground of consistency deduction should be allowed to the assessee.

He further argued that it was submitted before the CIT(A) that the

assessee was not a developer which fact will be evident from the accounts

of the assessse where in the Profit and Loss account, the assessee has

shown the entire sale consideration receipts for sale of apartments as its

business receipts. As regards the ownership of the land, he relied on the

decision of Hon’ble Gujarat High Court in the case of CIT vs. Radhe

Developers, 341 ITR 403 (Guj), wherein, it has been held that section 80-

IB of the Act requires involvement of an undertaking in developing and

building housing projects approved by the local authority. The provisions

nowhere required that only those developers who themselves own the

land would receive the deduction under s. 80-IB(10) of the Act. Neither

the provisions of s. 80-IB nor any other provisions contained in other

related statutes demonstrate that ownership of the land would be a

condition precedent for developing the housing project. Such requirement

must be read into the statute. There is nothing under s. 80-IB(10) of the

Act requiring that ownership of the land must vest in the developer to be

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able to qualify for such deduction. Hence, he prayed that the

disallowance of deduction to the assessee u/s.80IB(10) of the Act should

be deleted.

authorities and materials available on record. In the instant case, the

undisputed facts of the case are that the assessee in the impugned

assessment year in the return of income filed claimed deduction for

Rs.31,60,090/- u/s.80IB(10) of the Act. The same was disallowed by the

Assessing Officer on the ground that the assessee was not the owner of

the land and has not developed any property so as to be eligible for

deduction u/s. 80IB of the Act.

on the ground that the assessee was not a developer.

as he had taken the risk for the entire project undertaken by him and

was liable for loss or profit from the said project. For this he had

submitted before the lower authorities that the entire sale proceeds from

the sale of apartments in the project was shown by the assessee as its

sale receipts in its profit and loss account. Further, the assessee has

relied on the decision of Hon’ble Gujarat High Court in the case of Radhe

Developers (supra), wherein, it was held that the ownership of land was

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not necessary to be eligible for deduction u/s.80IB of the Act and it was

suffice if the assessee was the developer of the project. Further,

deduction u/s.80IB(10) was allowed to the assessee for the assessment

year 2008-09 for Rs.3,14,359/- and Rs.4,53,461/- in assessment year

2009-2010 on the very same project undertaken by the assessee.

Therefore, even though res-judicata is not applicable in the income tax

proceedings but it has been held by the Hon’ble Supreme Court in the

case of RADHASOAMI SATSANG vs. COMMISSIONER OF INCOME TAX,

193 ITR 321 (SC) that where a fundamental aspect permeating through

the different assessment years has been found as a fact one way or the

other and parties have allowed that position to be sustained by not

challenging the order, it would not be at all appropriate to allow the

position to be changed in a subsequent year. Therefore, consistency

should be maintained in the present year under appeal. Further, the

Hon’ble Supreme Court in the case of CIT vs. Excel Industries Ltd. (2013)

358 ITR 295 (SC) held that a consistent view had been taken in favour of

assessee on the question raised, there was no reason for the Court to

take a different view unless there were convincing reasons. As no material

was brought on record by the revenue to show that the facts in the year

under appeal are different to the facts in the assessment year 2008-09

and assessment year 2009-2010 also in view of the decision of decision

of Hon’ble Supreme Court in the case of RADHASOAMI SATSANG(supra)

and also in the case of CIT Vs. Excel Industries Ltd. 358 ITR 295(SC),

we hold that the ownership of the land is not necessary to claim deduction

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u/s.80IB(10) of the Act and would suffice if the assessee was the

developer of the project. No material has been brought before us by the

revenue to show that the assessee was not the developer of the housing

project in question. In our considered view the substance of the

agreement entered into with the prospective purchasers of the flat shows

that the assessee was the developer. It is a well settled position that to

ascertain the actual character of the transaction, substance will prevail

over the form.

Hon’ble Supreme Court and keeping in view the fact no change in facts

has been brought on record by the revenue during the year under appeal,

I set aside the orders of lower authorities and vacate the disallowance

u/s.80IB(10) of the Act of Rs.31,60,090/- and allow the ground of appeal

of the assessee.

the CIT(A) was not justified in confirming the addition made by the

Assessing Officer u/s.40(a)(ia) of the Act of Rs.3,41,050 under the head

watch and ward expenses, Rs.80,000/- under the head advertisement”

and Rs.8,18,500/- under the head “commission expenses”.

the CIT(A) was not justified in confirming the action of the Assessing

Officer in disallowing deduction u/s.40(a)(ia) of the Act for non-deduction

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of TDS u/s.194C of the Act to the supply of broachers and leaflets for

Rs.80,000/-.

the CIT(A) was not justified in confirming the disallowance of expenses of

Rs.57,110/- u/s.40A(3) of the Act.

genuine business expenditure of the assessee and if the disallowance

under the above heads is sustained then the income of the assessee in

the house project will increase to that extent and, therefore, the assessee

would be eligible for deduction for the same u/s.80IB(10) of the Act.

record, we find force in the submission of ld A.R. of the assessee.

Therefore, we direct the Assessing Officer to allow deduction of enhanced

profit u/s.80IB(10) of the Act to the extent of expenses made under the

above heads. Accordingly, these grounds are allowed.

Order pronounced in the open court on 23 /08/2017. Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 23/08/2017 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. The appellant : Saswat Infrastructure (P) ltd., Plot No.627, Saheed Nagar, Bhubaneswar 2. The Respondent. DCIT, Circle 2(2), Bhubaneswar 3. The CIT(A) Berhampur. 4. Pr.CIT, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack