2021 (7) TMI 802 - AT - Income Tax

Tribunal dismisses Revenue's objections, restores completion certificate issue for fresh review.

The Tribunal dismissed the Revenue's objections regarding the built-up area and the assessee's status as a developer. However, it restored the issue of ... Deduction u/s 80IB(10) - assessee is a cooperative society of Sahara India group and is engaged in the business of development and construction of residential and commercial units - CIT(A) allowed the claim of the assessee - built up area of shops and commercial establishments far exceeds the area prescribed under the statute - HELD THAT:- The issue stands settled in favour of the assessee by the decision in the case of Sarkar Builders [2015 (5) TMI 555 - SUPREME COURT] and CIT vs. Vatika Township Private Ltd.,[2014 (9) TMI 576 - SUPREME COURT] wherein it has been held that restriction on extent of commercial space in housing project imposed by way of amendment to section 80IB(10) w.e.f. 01.04.2005 does not apply to housing projects approved before 01.04.2005 even though completed after 01.04.2005. Since, in the instant case the housing project was admittedly approved before 01.04.2005, therefore, the first allegation of the Revenue that the aggregate built up commercial area far exceeds the prescribed limit is not applicable to the assessee Completion of the project on or before 31.03.2008 - it is the submission of the ld. Counsel that the project was completed before 31st March, 2008 in view of the additional evidences - 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 this issue i.e., completion of the project prior to 31st March, 2008. The AO shall examine the documents and any other details that he may require and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Assessee is not a developer - we find the condition of developer was decided and allowed in the initial years of claim, i.e., in the A.Y. 2003-04 and 2004-05 which is evident from the order of the CIT(A) for A.Y. 2005-06. Therefore, we find merit in the argument of the ld. Counsel that the same is not open for examination in subsequent year in absence of change in the factual position. In our opinion, without disturbing the assessment for the initial assessment year it is not open to the Revenue to make disallowance of such deduction in subsequent year by taking a contrary stand. Further, merely appointing SICCL as a contractor for development and construction of the project, in our opinion, cannot lead to the conclusion that the said activities were not carried on by the assessee society. Since the assessee is bearing the entire risks and responsibilities relating to the project and SICCL was appointed only to execute the project, therefore, in the light of the ratio of various decisions relied on by ld. Counsel for the assessee, the assessee ought to be considered as a developer and cannot be denied the benefit of deduction u/s 80IB(10). Merely because certain procedural formalities relating to collection of booking application forms and money from the buyers were delegated to SICCL, it would not render SICCL as the 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, in our opinion, 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 rendered as a developer of the project. Issues Involved:1. Eligibility for deduction under section 80IB(10) of the Income Tax Act, 1961.2. Compliance with conditions regarding built-up area of commercial establishments.3. Requirement of obtaining a completion certificate prior to 31st March 2008.4. Determination of the assessee's status as a developer.Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10):The primary issue revolves around the eligibility of the assessee, a cooperative society involved in the development and construction of residential projects, for claiming a deduction under section 80IB(10) of the Income Tax Act, 1961. The assessee claimed a deduction of Rs. 11,68,72,431 for A.Y. 2005-06 and Rs. 5,19,52,369 for A.Y. 2006-07.The Assessing Officer (AO) denied the deduction on three grounds:- The built-up area of commercial establishments exceeded the statutory limit.- The assessee failed to obtain a completion certificate by the stipulated date.- The assessee was not actively involved in the development and construction work.2. Compliance with Conditions Regarding Built-up Area of Commercial Establishments:The AO noted that the built-up area of the shops and commercial establishments in the project was 30,300 sq. ft., exceeding the limit of 5% of the aggregate built-up area or 2000 sq. ft., whichever is less, as prescribed under section 80IB(10)(d) inserted by Finance (No.2) Act, 2004 w.e.f. 01.04.2005. However, the CIT(A) allowed the claim, stating that these conditions were not in existence when the project was approved by the Development Authority before 01.04.2005.The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's rulings in CIT vs. Sarkar Builders and CIT vs. Vatika Township Pvt. Ltd., which clarified that the amendment does not apply to projects approved before 01.04.2005.3. Requirement of Obtaining a Completion Certificate Prior to 31st March 2008:The AO disallowed the deduction because the assessee did not produce a completion certificate by 31st March 2008, a requirement introduced by the Finance (No.2) Act, 2004. The CIT(A) ruled that this condition was not applicable to projects approved before 01.04.2005.The Tribunal admitted additional evidence submitted by the assessee, including letters and an architect's certificate indicating the project's completion before 31st March 2008. The Tribunal restored this issue to the AO for fresh adjudication, instructing the AO to examine the new evidence and decide accordingly.4. Determination of the Assessee's Status as a Developer:The AO argued that the assessee was not a developer because it had contracted out the development work to M/s Sahara India Commercial Corporation Ltd. (SICCL) and was not actively involved in the construction. The CIT(A) disagreed, stating that appointing a contractor does not negate the assessee's role as a developer.The Tribunal supported the CIT(A)'s view, noting that the assessee bore the project's risks and responsibilities, and the initial years' assessments had accepted the assessee's status as a developer. The Tribunal emphasized that without disturbing the initial year's assessment, the Revenue could not disallow the deduction in subsequent years.Conclusion:The Tribunal dismissed the Revenue's objections regarding the built-up area and the assessee's status as a developer. However, it restored the issue of obtaining the completion certificate to the AO for fresh adjudication. The appeals filed by the Revenue were allowed for statistical purposes, and the Cross Objections filed by the assessee were dismissed.