TaxTMI 
TaxTMI 
2016 (3) TMI 408
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the legitimate deduction u/s 80IB(10) of the Act of Rs. 1,32,19,672/-. The same may kindly be directed to be allowed such claimed. 3. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming addition of Rs. 2,34,39,999/-, being additionally claimed u/s 80IB(10) on the basis of seized records. The same may kindly be directed to be allowed on such legitimate claim. 4. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the charging interest u/s 234A, 234B, 234C & 234D of the Act. He may be directed to withdraw the same. 5. On the facts and in the circumstances of the case, the ld. CIT(A)-I, Ahmedabad, has grossly erred in confirming the initiation of penalty proceedings u/s 271(1)(c) of the Act. He may be directed to withdraw the same. 6. The appellant firm craves leave to add, alter, amend and withdraw all or any grounds of appeal on or before hearing of the appeal. 2. The assessee has raised six grounds of appeal out of which ground no.1 is not pressed by the assessee, so the same is dismissed. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for normal profits from business as developer at Rs. 1,32,19,672/- as shown in original return of income and also claimed deduction u/s 80IB(10) of the Act for Rs. 2,34,39,999/- on account of undisclosed income surrendered in the return of income pursuant to search action u/s 132 of the Act. 12. During the course of assessment proceedings various replies and submissions were submitted by the assessee in support of its claim for deduction u/s 80IB(10) of the Act but Assessing Officer was not convinced by submissions of assessee on account of following reasons as mentioned in assessment order:- "5.23 It is therefore held that the assessee is not eligible for deduction under section 80IB for the following reasons:- 1. The assessee is not both developer and builder as required by the provisions of section 80IB(10). Assessee is not a developer because the assessee did not conceptualise and own the project in as much as the assessee is not the owner of the land and the approval was not issued to it by the local authority. 2. The assessee entered into the project by way of tripartite agreement executed between the members. Shree Madhav Co-op. Housing Society Ltd. and the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Revabhai Prajapati and Shri Kantibhai Revabhai Prajapati. The modus operandi and nature of work is also exactly the same. 6.2 The appellant filed his submission with exactly the same defence as was produced before the Assessing Officer. In his submission he relied on the decision of Gujarat High Court in the case of Radhe Developers and M/s Shakti Corporation In view of this and in absence of any additional material against the decision of CIT(A) except relying on the judgment by the judicial authorities in case of M/s Radhe Developers/Shakti Corporation, I am of the view that no interference is called for in the matter. As far as applicability of decision in case of M/s Radhe Developers, in appellant's case is concerned, the matter is already pending before ITAT in Madhav Corporation, a firm of appellant's own group for the AY 2007-08. In this situation at the moment, without going into merits of the case, I find it proper not to differ from the order passed by CIT(A)-XV, Ahmedabad in the case of Madhav Corporation. Accordingly, to maintain consistency, subject to outcome of the decision of ITAT, Ahmedabad, in case of Madhav Corporation, AY 2007-08 on the exactly similar issue,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de by the assessee for development is such that no profit whatsoever is passed to the Society, though it is the real owner of the land. * This arrangement has actually resulted in abnormally high profits in the assessee's hand which has been orchestrated to claim higher deduction. * The additional income offered on account of on-money received has been included in the income of the assesses with the intention of claiming higher than due deduction u/s, 80lB(10) of the Act. Hence, in view of provisions of section 80IA (5) and 80IA (7) and also 80lA(10) of the I.T, Act. 1961, the additional income of the appellant cannot be treated as income eligible for the deduction u/s. 80lB (10) of the I T Act. 1961. 8.3 In view of above discussion, the disallowance of Rs. 2,34,39,999/- is confirmed, the appeal on this ground is dismissed." 14. Aggrieved assessee is now in appeal before the Tribunal. ld. AR submitted that - i) During the course of assessment proceedings the Assessing Officer called for details of assessee's claim for deduction u/s 80IB(10) of the Act of Rs. 3,66,59,672/- attributable to housing project. The assessee submitted exhaustive details. However, the Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... record, cumulatively the total claim of legitimate deduction u/s 80IB(10) on the basis of seized papers and regular books of accounts for the whole project worked out as under:- - As per seized paper annexed Al/7: Rs. 2,34,39,999/- Add as per regular books of Accounts Rs. 1.32.19.672/- as claimed and allowed in original assessment order u/s 143(3) dated 04/02/2008. Total claim made in block return Rs. 3,66,59,671/- v) Further to substantiate, it claims, the assessee firm has submitted required documents i.e. copy of plans, copy of commencement of permission, B.U. permission along with requisite audit report, during the course of ssessment proceedings. The project was approved on 03/12/2004, the same has been completed on 29/06/2006, the size of plot on which the housing project was floated by the assessee firm, is 38,365 sq.mts. which exceed area of 1 acre, the residential unit of the project did not exceed the prescribed limit of 1500 sq.feet of built up area. Thus, the basic conditions of claiming the legitimate deduction u/s 80IB(10) are duly-fulfilled. 15. As regards assessee's claim of deduction u/s 8OIB(10) on additional incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed. The departmental authorities have taken different stand. This is contrary to the intention of the legislature and against the letter and spirit of the beneficial provisions of the Act. 16. Further the ld. AR submitted that the issue stands settled in the assessee's own case by virtue of order passed by the Hon'ble Guiarat High Court in the assessee's case for assessment year for A.Y. 2004-05 was framed u/s 143(3) of the Act on 28/03/2006. Subsequently, by notice dated 17/03/2011, the assessment was reopened by the department. The assessee challenged the notice before the Hon'ble Gujarat High Court in S.C.A. No.17304 of 2011. Thereby Hon'ble High Court vide its order dated 27/12/2011 has quashed the notice u/s 148 and also consequential order of assessment passed pursuant thereto, While disposing of the Writ, the Hon'ble High Court has reasoned as under- "10. It can be noted from the record that for the assessment year 2004-05, as mentioned hereinabove, on 28/03/2006, the assessment in the case of the present petitioner is finalized u/s 143(3) of the Income Tax Act after allowing deduction of Rs, 75,72,250/~ u/s 80IB(10) of the Act. It can be noted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsideration i.e. as per 'registered sale deed' von money' received on sale of said agriculture land." The Co-ordinated Bench, in the case of Bhagwanbhai R. Prajapati held that beneficial provisions play in their own sphere and they are meant for benefit of the tax payers and observed as under :- "6,2 Regarding al/owability of claim of claim of "On-money" the Ld. AR drew our attention to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Suman Paper & Boards Ltd. (2009) 221 CTR 0781 wherein it was held that in view of amendment on the provisions of section 158BB by the Finance Act, 2002 with retrospective effect from 1st July, 1995 the assessee was entitled to claim deduction under sec. 80-1 or section 80-IA in block assessment of the block period. The Revenue has acknowledged the benefit of deduction with regard to undisclosed Income of the block period. 6.3 In the case before us the issue is with regards to the benefit of exemption under section 54B with regard to the on money. Both are beneficial provisions in their own spheres so drawing the same analogy, we are of the view that assessee is entitled for getting benefit of exemption u/s 54B with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such legitimate claim." The Co-ordinated Bench in the case of M/s Madhav Corporation (Supra) has allowed the assessee's ground raised as above holding that the assessee is eligible for deduction u/s 80IB(10) of the Act in respect of undisclosed income assessed by the A.O. in accordance with the return filed by the assessee u/s 153A of the Act, in response to notice u/s 153A of the Act issued by the department. The relevant portion of the order dated 28/07/2015 is reproduced as under:- Para. 5.3 "Even otherwise based on the rule of consistency if the eligible project undertaken remains the same and the conditions are satisfied and if deduction is allowable in the first assessment year (which is A.Y. 2006-07 in the assessee's case) then the same has to be allowed in the subsequent assessment years. We find that coordinate "D" bench of Tribunal in ITA No. 496/Ahd/2011 A.Y. 2007-08 in the case of Golden Developers Vs. ITO(OSD), Range-9, Ahmedabad dated 13/11/2014, it was held that in case the applicant is entitled for claim of deduction u/s 80IB(10) in A.Y.2006-07 then the appellant is also eligible for the said in A.Ys. 2007- 08 & 2008-09. Following same reasoning, we ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e local authority on or after the 1st day of April, 2004 98[but 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; [(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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....im deduction u/s 80IB(10) of the Act for the undisclosed income surrendered during search/survey action in a situation when assessee has been assessed in previous years and has been allowed the deduction u/s 80IB(10) of the Act. 20. We will now analyze the above matters one by one to arrive at the decision. The most crucial issue is - (1) Whether the assessee is a developer or a works contractor With retrospective amendment which came in force by Finance Act 2009 effective from 1.4.2001 whereby to remove the doubts it was declared that the provisions of section 80IB(10) shall not apply to any undertaking which executes housing project as an works contractor. In other words if an assessee is a developer and not a works contractor then only he will be eligible for deduction u/s 80IB(10) of the Act. During the course of hearing ld. AR has submitted that the assessee firm in the capacity as a developer has built and developed the housing project on land survey No.1043 F.P.64 situated at village Vastral, Ta. Dist. Ahmedabad. The total area of the land was 38,365 sq.meters and the housing project in the name of Madhav Bungalows was developed. Permission for commencement of this proje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been discussed and this question has been held in favour of the assessee and in the present case also the petitioner being the works contractor should be availed the benefit of deduction under Section 80IB(10) of the Act and notice of reopening requires to be quashed. As mentioned earlier since there was no time available for communication as the notice along with the interim order had been passed on 28.11.2011, and pursuant to the notice under challenge when the assessment order has been passed by the Assessing Officer on the very same day, when the very notice is not being found sustainable, there is a need to quash both the impugned notices dated 17.3.2011 18.11.2011 and all consequential proceedings and the order of assessment dated 28.12.2011 passed pursuant thereto. Petition is accordingly allowed. No order as to costs." 22. By referring to the above mentioned paragraph in the decision of Hon. Gujarat High Court in assessee's own case, ld. DR mentioned that the assessee was being termed as "works contractor" and, therefore, submitted that as the Hon. High Court has mentioned the assessee as a works contractor, the same should be construed for the purpose of section 80IB(10....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... who develops the facility and such person may or may not be a contractor. On the other hand, a contractor is stated to be a legal term whose rights and duties vis- à-vis contractee are determined by way of legal document called the contract. According to the ld. AR, the assessee has undertaken all risks involved in the project including technological inputs, entrepreneurial inputs etc. Besides, there is heavy financial involvement in terms of deployment of man and machine as well as all materials. At this point, it is pertinent to note that the judgment of the Supreme Court in the case of Hindustan Aeronautics Ltd. v. State of Orissa [1989] 55 STC 327 in which it has been observed that in a contract for work, the person producing has no property in the thing produced as a whole, even if part or whole of the material used by him may have been his property earlier. Further, in another judgment of the Supreme Court in the case of State of Tamil Nadu v. Anandam Viswanathan [1989] 1 SCC 613 in which it was held that the nature of contract can be found only when the intention of parties are found out. The fact that in the execution of the works contract some material are used and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not be disregarded. 6.3 Coming back to our point of ascertaining the meaning of the words 'contractor' as well as 'developer', which have neither been defined in the Act nor in the General Clauses Act, we fall upon Oxford Advanced Learner's Dictionary to find out their meaning. According to this dictionary "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do work or provides services or goods to another. The New Shorter Oxford Dictionary defines the word "contractor" as: "A person who enters into a contract or agreement. Now chiefly spec. a person or firm that undertakes work by contract, especially for building to specified plans". In the light of the meaning ascribed to these words by the dictionaries it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary the contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer. His duty is to translate such design into reality. There may,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re of procuring residential units for its members on the said property, as per the wish of the members by the said housing society on the above referred property, the society is planning to organize a scheme of residential housing units on the said land but the said housing society is lacking the skill and the funds required for financial investment for fulfilling the said scheme and due to lack of necessary efficiency and necessary expertise and time by the office-bearers of the housing society for enrolling new members in the said housing society as and when required, they themselves are not in a position to organize a scheme on the said land and under such circumstances, the said housing society has till date taken help of the First Party Builder. And from now onwards, appointing the said builder as organizer/builder, the society is planning of entrusting the liability of organizing the said scheme to the said First Party -Organiser and for that the society is desirous of handing over all the working powers. And whereas as the said First Party - Organiser / Builder Partnership firm is holding necessary qualification, efficiency, working capacity and skill required for organizing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lotment of the property to the members would be acceptable and binding to the said housing society and its members and proposed members. (7.10) The said housing housing society has entrusted all the rights and powers to the organizer for the purpose of completing and erecting the said scheme and all other related powers and therefore the said organizer will have to complete the said scheme using his discrepancy and as per his wisdom by taking decision that may be deemed fit and proper by him and till the society does not complete the accounts related to the funds invested by the organizer from the date of the implementation of the said scheme is to be maintained by the organizer. The concerned accounts submitted by the said organizer to the said housing society is to be accepted by the said housing society without any dispute and objection and moreover the accounts pertaining to the said scheme submitted by the said organizer is to be accepted by the housing society without any sort of criticism, remark, audit or doubt whatsoever and the said accounts are to be included in the records of the housing society and moreover an understanding has been arrived at between the parties tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Housing Society Ltd. being a sundry debtor of Rs. 8,87,166/- and the remaining amount of debtor i.e. Rs. 1,90,34,279/- are being debit balance in the names of various flat owners from whom the assessee had yet to receive the amount which it has spent for the housing project. This shows that assessee was not working only as a work contractor on behalf of Shree Madhav Co-op. Housing Society Ltd. else the assessee would have been showing the complete outstanding balance in the name of Shree Madhav Co-op. Housing Society Ltd. This fact has not been controverted by the revenue at any stage below and, therefore, looking to the terms and conditions of the development agreement and audited financial statement of the assessee, we are of the view that assessee comes under the category of developer and not of works contractor and, therefore, comes within the definition of developer as referred in the provisions of section 80IB(10) of the Act. (2) Whether the assessee fulfills all the conditions of section 80IB(10) of the Act other than the matters mentioned at point (1) above; 26. The issue entails upon to examine that whether the assessee (now as we have held that assessee is a developer)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich a different view has been taken for the year under consideration. If the assessee was 'developer' in the earlier years, it would remain so in the following years unless a new material comes to notice of AO or otherwise which was available on record but was not considered in earlier years. Nowhere in the orders of the authorities below this fact has been recorded. Therefore, in our considered view, the Revenue was not justified in rejecting the claim for deduction u/s.80IB(10) of the Act in this year. It is also noteworthy that the authorities below have not recorded any finding as to what was the remuneration fixed by the contract and how the submission of the assessee that it was bearing all risks and consequences arising from the contract were not correct. In fact, the AO has stated these stipulations are only intended to make the Society toothless but they cannot convert by any stretch of imagination an agreement for construction into a conveyance deed in the eyes of the law. It is not disputed that such terms and conditions were in the agreement in the earlier years also. On the basis of such terms the assessee was found to have fulfilled the conditions as envisaged u/s.80....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titled 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. Relevant extract of the decision is as under :- "39. We may now move on to the question of ownership of the land. 40. Relevant portion of Section 2(47) reads as under:- "2(47): "transfer", in relation to a capital asset, includes,- (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882); or Section 53A of the Transfer of Property Act reads as under:- 53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect. 43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of Faqir C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....struction of a building takes place either for cash or deferred payment, or valuable consideration. To be also noted that the definition does not lay down that the construction must be on behalf of an owner of the property or that the construction cannot be by the owner of the property. Thus even if an owner of property enters into an agreement to construct for cash, deferred payment or valuable consideration a building or flats on behalf of anybody else, it would be a works contract within the meaning of the term as used under the said Act." It was in background of this definition provided by the statute that the Apex Court concluded that the agreement was one of works contract. The Apex Court observed that the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration. Thus the interpretation rendered by the Apex Court in the said decision was based on not the normal meaning of term "works contract" but on the special meaning assigned to it und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling membe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition of ownership also; even if it was necessary. 42. In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing there from was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to Section 80IB(10) therefore in this group of cases also will have no effect. 43. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 132 of the Act, on the basis of seized papers/documents assessee surrendered Rs. 2,34,39,999/- as undisclosed profits from the housing project namely Madhav Bunglows by showing it in the return filed pursuant to ntice u/s 153A of the Act. However, assessee simultaneously claimed deduction u/s 80IB(10) of the Act for its undisclosed income on the ground that assessee was not having any other business activities except the business activities carried on as a developer of housing project coming within the ambit of section 80IB(10) of the Act and nor there was any other charge on the assessee of earning this undisclosed income from any other sources except the business activity of working as a developer of the housing project and, therefore, assessee claimed an additional deduction of Rs. 2,34,39,999/- u/s 80IB(10) of the Act. From perusal of the records, we find that in the group cases of assessee in one of the case i.e. Madhav Corporation vs. ACIT Central Circle-1(4), Ahmedabad in IT(SS)A No.380 to 382/Ahd/2014 for Asst. Year 2006-07 to 2008-09 has discussed the issue in detail and held as under :- 5. Next issue in A.Y 2008-09 is regarding additional claim of deduction u/s.80IB(10....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent on the said returns income. The said assessment orders were challenged before the concern CIT(A), who passed appellate orders on it negating claim of assessee. We find that assessee has demonstrated with supportive documentary evidence that it is eligible for the claim of deduction u/s. 80IB(10) of the Act and the same is allowable not only on the profit disclosed in the pre-search returns of income filed u/s. 139(1) but also on the entire profit including the one disclosed additionally subsequent to the search proceeding u/s. 132 of the Act and disclosed in the return of income filed u/s. 153A of the Act. Even otherwise based on the rule of consistency if the eligible project undertaken remains the same and the conditions are satisfied and if deduction is allowable in the first assessment year (which is A.Y. 2006-07 IT(SS)A Nos. 380 to 382/Ahd/2014 Asst. Years 2006-07 to 2008-09 16 in the assessee's case) then the same has to be allowed in the subsequent assessment years. We find that coordinate "D" bench of Tribunal in ITA no. 496/Ahd/2011 A.Y. 2007- 08 in the case of Golden Developers Vs. ITO (OSD), Range-9, Ahmedabad dated 13/11/2014, it was held that in case the appell....