AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2009 (10) TMI 636
X X X X Extracts X X X X
X X X X Extracts X X X X
....any engaged in building construction activities. During the relevant assessment years under consideration, the assessee-company in joint venture with Ghaziabad Development Authority, had been engaged in the business of development and construction of houses of different categories, The assessee-company has undertaken the commencement of construction on two major complexes namely M/s. Shipra Riviera at Indirapuram and M/s. Shipra Suncity at Indirapuram, Each complex was further sub-divided into small projects consisting of number of flats of various sizes. The Shipra Riviera Complex was sub-divided into six projects while Shipra Suncity Complex was sub-divided into five projects. Shipra Riviera Complex is sub-divided into six projects namely : (a)Bhagirathi Project. (b)Alaknanda Project. (c)Brahmaputra Project. (d)Kaveri Project. (e)Amravati Project. (f)Damodar Project. 3. Similarly, Shipra Suncity Complex was sub-divided into five projects namely : (a)Nilgiri Project. (b)Shivalik Project. (c)Sadpura Project, (d)Kanchenjunga Project. (e)Aravali Project. 4. As the Bhagirathi and Alaknanda project was commenced prior to 1-10-1998, no claim of any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me of Project Land Area (Sq.mtrs.) of flats Total (1) (2) (3) (4) (i) Bhagirathi project 10977.37 216 (ii) Alaknanda project 13700.00 324 (iii) Brahmaputra project 11710.63 248 (iv) Kaveri project 7664.69 152 (v) Amravati project 13394.63 248 (vi) Damodar project 7752.17 72 Total : 1260 (i)Shipra Riviera Bhagirathi Project Categories No. of flats Size of each flat (sq.ft) (i) Classic 120 742 (ii) Deluxe 96 664 Total : 216 (ii)Shipra Riviera Alaknanda Project Categories No. of flats Size of each flat (sq.ft) (i) Classic 160 742 (ii) Deluxe 128 664 (iii) Classic Gold 36 823 Total : 324 (iii)Shipra Riviera Brahmaputra Project Categories No. of flats Size of each flat (sq.ft) (i) Classic 108 742 (ii) Deluxe 88 664 (iii) Classic Gold 20 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been submitted that company entered into an agreement with Ghaziabad Development Authority on 12-12-1996 for the construction of various size of flats in different stage-wise projects. The total projects are known as Shipra Riviera, Indirapuram. The company filed detailed drawing with Ghaziabad Development Authority in respect of various projects which was approved by GDA vide Order No. 1/TNA/GH/97-98, dated 28-2-1998. The construction of two projects i.e., Bhagirathi and Alaknanda was started in financial year 1997-98 and for rest of the four projects, the construction was started in October, 1998. In support of the contentions that the construction of four projects i.e., Brahmaputra, Kaveri, Alaknanda and Damodar was started after the specified date i.e., 30-9-1998, the assessee submitted as under :- (i)The foundation stone of these projects was laid down by the then Secretary of GDA on 4-10-1998. The copy of letter informing GDA as well as photograph of foundation stone ceremony are placed on record. (ii)The built-up area of each flat on which deduction has been claimed is much below 1000 sq.ft. 9. In the light of these evidences, the assessee has submitted that sinc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity vide lease deed dated 7-4-1998 and the map was sanction by the GDA vide order dated 9-7-1998. The company awarded the contract for construction of flats on the land of Shipra Suncity to M/s. Vij Constructions, New Delhi on 5-10-1998, 12-10-1998 and 20-10-1998. The Foundation Ceremony of Shipra Suncity was held on 24-10-1998 and after that the construction was started. In support of the above contentions the assessee has submitted before the lower authorities the necessary evidences like lease deed, approval of plan by GDA and copies of construction contracts. As per the license deed dated 7-4-1998 entered into between the Ghaziabad Development Authority and Shipra Estate (P.) Ltd., about 50 acres of land in Indirapuram Scheme of GDA was allotted to the assessee in the auction sale held on 31-3-1998 for the highest bid amount of Rs. 38.70 crores. As per the license deed a joint venture committee was to be constituted under the Chairmanship of Vice Chairman, GDA and the license deed provided for a joint bank account in the name of GDA and Shipra Estate (P.) Ltd., Ghaziabad to be operated jointly. The bank shall transfer money from this joint account on first of every month in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. A statue or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim utres magis valeat quam pereat, i.e., a liberal construction should be put upon written instruments so as to uphold them, if possible, and carry into effect the intention of the parties. The court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute. 12. As per the system of accounting followed by the assessee, the expenses pertaining to a particular project are debited in that project only and the expenses of common nature are taken to head office expenses out of which the expenses pertaining to individual projects are appropriated at the year end and considered for determining the profit on individual projects. The work in progress as on 31-3-1998 in respect of head office includes payment of Rs. 15.50 crores to GDA as cost of land in terms of license deed which has been paid for the entire land under all the projects as per the prescribed time schedule. The Assessing Officer also observed that the assessee has claimed architect fees of Rs. 10,10....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese facts is that the customer/purchasers of flats had also booked their flats in other projects of Shipra Riviera complex other that Alaknanda and Bhagirathi projects. The Assessing Officer also stated that in all the four projects in respect of which the assessee has claimed deduction under section 80-IB(10) on the strength that construction of these projects was commenced after 30-9-1998, the flats were booked even prior to 31-3-1998. The above facts of booking coupled with purchase of land, approval of construction plan and development of land before 31-3-1998 clearly lead to the conclusion that the assessee has commenced the development and construction prior to 31-3-1998, not to say of prior to 1-10-1998. 14. In reply to Assessing Officer's query vide submissions dated 27-3-2003, the assessee has submitted that on the day of start of first project; the company received bookings and offers which were streamlined according to the requirement of prospective buyers. A prospective buyer has several factors in mind like size of flats, location of flat, facing of flat, vastu of flat., particular floor and several other factors, Such applications were selected for individual disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmissions made by the appellant and documents filed on record. I have also perused the case records of the appellant for the year under consideration, and also for the assessment year 1998-99 and assessment year 1999-2000. The appellant is a private limited company engaged in the construction business. The company entered into a license agreement dated 12-12-1996 with the Ghaziabad Development Authority for a joint venture between the Authority and the company namely M/s. Shipra Estate Private Limited, for promoting and developing housing sector. The land is allotted by the GDA for the construction of flats under group housing system. The work is supervised by a joint venture committee constituted for the purposes under the Vice Chairman, GDA, Ghaziabad. All the construction work is required to be undertaken strictly as per design and layout plants to be approved by the GDA, Ghaziabad. A joint account is operated by the Ghaziabad Development Authority and Shipra Estate Private Limited to control the finances. All the sale proceeds received from the flat buyers is deposited directly into the account operated under the joint signatures of the authority and the company namely Shipra E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....da were started on 26-10-1996 and in respect of these two projects, the appellant did not claim any benefit of exemption of income, and as such there is no dispute about these two projects. In the return filed for the account period ending 31-3-2000 relevant to assessment year 2000-01 the appellant claimed benefit of exemption in respect of income derived from the four projects under Shipra Riviera Complex namely Brahmaputra, Kavery, Amravati and Damodar. This exemption is claimed by the appellant in view of the specific provision contained under section 80-IA(4F) of the Income-tax Act and the same has been denied by the Assessing Officer. It is this dispute brought before me in respect of four projects under Shipra Riviera Complex. The provisions contained under section 80-IA(4F) subsequently amended to section 80-IB(10) have been already discussed in details in the proceeding paragraphs, and I do not find any use in repeating the same over here again, I have examined carefully the provisions contained under the act and the evidence on record. After going through the case record of the appellant and the order passed by the Assessing Officer it is seen that the claim of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atute away from its original meaning should be avoided. The earth filling activities, if at all performed, at the time of starting the first two projects, and the booking amount received and retained in few cases certainly would not change the situation as available under the law. The appellant has filed evidence on record to prove that the contracts for the construction of the four projects under Shipra Riviera was awarded after 30-9-1998 and that the foundation laying ceremony was also performed after 30-9-1998. It is reiterated at the cost of repetition that the Assessing Officer himself in the assessment order for the preceding year, i.e., 1998-99 has stated in the bold letters that the 4 projects in question commenced in the next financial year. The Assessing Officer has not given any reason to depart from the accounted version, and deviate from its own parameters, specially when the same set of contentions in the projects under Shipra Suncity Complex have been accepted to allow the benefit available to the appellant. The appellant has proved with evidence on record the fact that these four projects namely Brahmaputra, Alaknanda, Kaveri, Damodar A and B were started and com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b)the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a ) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c )the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d )the built-up area of the shops and other commercial establishments included in the housing project does not exceed fiv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elf has observed that for the commencement of development and construction, a person might own land which may be ancestral or even purchased prior to 1-10-1998, and the assessee may think of constructing housing project for availing deduction under section 80-IA in view of the newly inserted provisions for development and construction after the specified date. Thus, as per Assessing Officer, the date of purchase of land alone cannot be and should not be considered as a criteria for deciding the actual time of commencement of development and construction of housing project. Similarly, the Assessing Officer himself has observed at page 10 in para 7.4 that approval of plan by the lower authorities may either get automatically cancelled for the expiry of the time-limit when no construction is carried out, or may be cancelled by the assessee himself at his own and replaced by a new plan depending upon the changed circumstances. These observations of the Assessing Officer clearly indicate that in all reasonable probabilities the purchase of land and approval of construction plan may not necessarily lead to the inference that the development and construction of a project has commenced. No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n is undertaken by the contractors, the bills are raised by him and the required tax at source out of every payment made to the contractor for each specific project, is deducted at sources. Thus, the presumption of the Assessing Officer to the effect that construction contract/agreement has no relevance to the implementation of the project undertaken by the assessee is factually incorrect and not supported by any material on record. From the record, we also found that during the course of assessment proceedings itself, complete details of all agreements entered into with various contractors, details of payments made to them for various projects and the tax deducted at source thereon, has already been filed. The language used in the section is "development and construction of housing project". The development is an integral part of the construction. Both cannot be segregated. There is always development for a purpose. Had it been development of independent park only, it could be done at any point of time. Even if it is development of a farm house or a garden, it can also be done at any point of time but if it is development of a housing project, it cannot be said that such developme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9-1998. After taking into account all the evidences placed on record the CIT(A) held that the activities performed, if any incidental to achieve the main object by the assessee-company to undertake housing construction would not snatch away from him the benefit, otherwise provided under the law. Thus mere act of levelling the earth will not amount to construction of housing project within the meaning of section 80-IA(4F). Therefore assessee's act of mere levelling the earth prior to 30-9-1998 will not snatch the deduction permissible on account of construction of housing project which was undisputedly carried out only after 30-9-1998. The CIT(A) also observed that the technical interpretation taken by the Assessing Officer carried a statute away from the original meaning and intention of the Legislature and found that earth filling activities if at all performed, at the time of starting of first two projects and booking the amount received in few cases would not change the situation as available under the law, insofar as main construction activities as mentioned under section 80-IA(4F) and 80-IB(10) were undertaken only after 30-9-1998. As per CIT(A), the evidence filed on record p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d expenditure on cleaning of land and towards puja prior to 1-10-1998 will not take away assessee's right to claim deduction under section 80-IB(10) which he is entitled in respect of housing project to be commenced after 1-10-1998. It was specifically observed that these expenses do not indicate that development and construction of housing project had been commenced before 1-10-1998. Expenses were incurred on cleaning of land so that correct measurement of the land could be done. The issue with regard to expenditure on levelling of land, approval of plan, marketing of booking the residential units, receipt of advance booking money etc. has arisen in the instant case and by taking shelter of some of these activities having taken place prior to 1-10-1998, the Assessing Officer has denied claim of deduction under section 80-IB. Respectfully following the decision of the Coordinate Bench, we do not find any merit in the action of the Assessing Officer. 27. Allegation of CIT in his order under section 263 for the assessment year 2002-03 to the effect that construction project undertaken by the assessee was out of reconstruction and splitting the project which is already in existence....
X X X X Extracts X X X X
X X X X Extracts X X X X
....prejudicial to the interest of the revenue unless the view taken by the ITO is unsustainable in law. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law passes some order, the same cannot be branded as erroneous by the Commissioner simply because he is of some other view or in the opinion of the Commissioner the order passed by the Assessing Officer is weak. This section does not visualize a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous causing prejudice to the interest of revenue. The power of suo motu revision under sub-section (1) of section 263 is in the nature of supervisory jurisdiction and the same can be exercised only if both the circumstances specified therein exist. Furthermore an order passed by the Assessing Officer cannot be set aside for making roving inquiry without pointing out any error in his order. An order can be revised only when such order is demonstrated to be erroneous, the powers of revision is not meant to be exercised for purpose of directing officer to hold another investigation when the order ....