TaxTMI 
TaxTMI 
2016 (3) TMI 408
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....ed. 2. On the facts and in the circumstances of the case, 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 o....
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....uction u/s 80IB(10) of the Act at Rs. 3,66,59,672/-. The assessee claimed deduction u/s 80IB(10) of the Act 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 pro....
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....llant is the firm of the same group to which M/s Madhav Corporation belongs. The main working partners are the same in both the firms i.e. Shri Motibhai 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. Accor....
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....g reasons: i) The assessee firm is closely connected with the partners and close relatives have provided funds uniformly for purchase of land by the Society. * The arrangement made 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....
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.... by the department on the basis of which, the assessee firm, has arrived at the undisclosed profit from the referred project [which fulfills the criteria of legitimate deductions u/s 8016(10) of the Act] to the tune of Rs. 2,34,39,999/- As per copy profit & loss account and balance-sheet placed on 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....
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....ecords that the disclosed income attributable to 'on-money' has been duly offered for taxation in the form of enhanced profit while computing taxable income in the year under consideration. Meaning thereby undisclosed income was, in fact, received in the normal course. However, on one hand the undisclosed income is taxed; whereas Iegitimate deduction is disallowed. 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 d....
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....d grossly erred in aliowing the legitimate exemption u/s. 54B to the extent of Rs. 39,38,100/-being the sale consideration received as per registered sale deed only. She has not allowed the legitimate deduction u/s.54B on the von money' received on sale of agriculture land. The same may kindly be directed to be allowed legitimate deduction of Rs. 92,47,100/- claimed u/s.54B on full sale consideration 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 Rev....
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.... allowed as deduction u/s 80IB(10) of the Act." The relevant ground of appeal raised in the case of the present - appellant reads as under:- "On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-I, Ahmedabad, has grossly erred confirming addition of Rs,2,34,39,999/- being additionally claimed u/s80IB(10) on the basis of seized records. The same may kindly be allowed on 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 th....
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....vant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the 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 wh....
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....assessee before the lower authorities, observations made by the Assessing Officer and findings of ld. CIT(A), following matters need to be analyzed in the present case- (1) Whether the assessee is a developer or a works contractor; (2) Whether the assessee fulfills all the conditions of section 80IB(10) of the Act other than the matters mentioned at point (1) above; (3) Whether it is a pre-condition for claiming exemption u/s 80IB(10) of the Act that the developer owns the land on which the housing project has been constructed; (4) Whether the assessee is eligible to claim 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) s....
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.... As can be seen from the assessment order as well as from the record that has been placed before the Court that the petitioner had disclosed all the material facts which were necessary for the purpose of assessment and as the notice under challenge is issued on expiry of the period of 4 years from the end of the relevant year of assessment under consideration, there is nothing to indicate nor anything to establish that the assessee has not disclosed fully and truly all material facts. The very edifice to the impugned notice is not to be held sustainable. 14. As is mentioned hereinabove, this identical issue already has 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 no....
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....)-Tirupur in ITA No.933(Mds) of 2013, for Asst. Year 2009-10 dated September 23, 2015, which reads as under :- 6.1 The contention of the ld. AR is that the assessee is a developer and not mere a contractor and being so, the assessee is entitled to deduction under section 80-IB(10) of the Act. Now, we have to examine as to whether the assessee can be called as a "developer" within the meaning of section 80-IB(10) read with Explanation I herein above. The ld. AR submitted that the work carried on by the assessee made it a developer entitled for deduction under section 80-IB(10) of the Act. According to him, a developer is a person 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 ....
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....xpression. On scanning s. 3 of the General Clauses Act we observe that neither the word 'contractor' nor 'developer' has been defined therein. Thus, the General Clauses Act is also of no assistance in this regard. Going ahead, when these words are neither defined in the IT Act, 1961 nor in the General Clauses Act, the next question is that wherefrom to find the meaning of such words. There is no need to wander here and there in search of an answer which has been aptly given by the Supreme Court in the case of CWT v. Officer-In-Charge (Court of Wards) [1976] 105 ITR 133 (SC) in which it was held that the ordinary dictionary meaning of a word cannot 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 defi....
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....In the present case, the above said aspect can be examined by going through some of the clauses of development agreement dated 26.8.2003 between the assessee i.e Madhav Builders and Shree Madhav Co-op. Housing Society Ltd. copy of whch is placed in the paper book dated 3/11/2015 at pages 1 to 110. Some parts of development agreement are as under :- (3) The said organizer/building is carrying out all constructed related work. In this way, the main work and activity of the said builder is to development housing projects or to remain attached with the work of construction and to carry out/get carried out the construction work. (5) In order to fulfill the desire 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....
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....l provide all types of help and aid. (7.3) The organizer will have to collect construction fund, land fund and the amounts of deposits with regard to other expenses from the present members and from the proposed members in order to meet with the construction cost and other related expenses of the said scheme by issuing pucca receipt thereof. (7.9) The said organizer would allot concerned properties to the member of the said housing society getting enrolled in the said schemes as per the said scheme and in the final scheme that would be formed after necessary changes and in the concerned tenement, open land and common amenities etc. But the final decision of the said organizer with regard to the allotment 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....
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....ssee and the land owner Shree Madhav Co-op. Housing Society, it can be construed that the assessee is having much wider authority -rights and powers for accomplishing the plan of the housing project and certainly such type of powers and rights which are exercised along with collection of revenue from each unit of the housing project and successful completion of each part of the housing project very well justify to large extent that assessee was working as developer and not works contractor. Further we have also examined the financial statement of the assessee and find that in the audited balance sheet as on 31.3.2006 assessee has shown sundry debtor of Rs. 1,99,21,445/-, the list of which includes 42 parties including Shri Madhav Co-op. 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 o....
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.... No.10 of the paper-book is enclosed the assessment pertaining to the AY 2006-07, wherein also the AO also allowed the claim of the assessee of deduction u/s.80IB(10) of the Act. Facts are identical and project is also same and the Revenue has not pointed out as to how the claim that was allowed in earlier years and ITA No.496 /Ahd/2011 M/s.Golden Developers vs. ITO (OSD) Asst.Year - 2007-08 - 6 - under the same facts and circumstances would be disallowable in the year under consideration. It is settled position of law that every year is an independent year, however, the rule of consistency is to be adopted by the Revenue authority while framing the assessment. In the present case, the Revenue has not brought out any new material on the basis of which 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 reje....
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....d not the assessee and the constructions were done in a tripartite agreement executed between the members, Shree Madhav Co-op. Housing Society Ltd. and the assessee and, therefore, Assessing Officer was of the view that assessee is merely a contractor for the purpose of construction of the project. 29. We find that apart from the fact discussed above that assessee is a developer and not a works contractor, assessee is eligible for deduction u/s 80IB(10) of the Act in a situation when the land on which the housing project is constructed is not in the ownership of the developer. This finding is based on the decision of Hon. Jurisdictional High Court in the case of Radhe Developers wherein their Lordships has given the decision that the assessees were entitled 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): "trans....
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....tered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of Mysore Minerals Ltd. vs. Commissioner of Income Tax (supra), and in the case of Commissioner of Income-Tax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition 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 t....
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....ng out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;" It is thus to be seen that under the Karnataka Sales Tax Act the definition of the words "works contract" is very wide. It is not restricted to a "works contract" as commonly understood i.e. a contract to do some work on behalf of somebody else. It also includes "any agreement for carrying out either for cash or for deferred payment or for any other valuable consideration, the building and construction of any movable and immovable property". (emphasis supplied) The definition would therefore take within its ambit any type of agreement wherein construction 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 f....
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....ct or Engineer, legal adviser and other professionals. He would appoint Subcontractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire 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 ....
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....or the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of Mysore Minerals Ltd. vs Commissioner of Income Tax (supra), and in the case of Commissioner of IncomeTax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition 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 concern....
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....der the circumstances, in the present group of Tax Appeals also, such question is answered against the Revenue and in favour of the assessees". 31. Respectfully following the above decisions, we are of the considered view that even in the situation if the assessee is not the owner of the land, nor approval for construction received from the local authority is in its name but still assessee being a developer and fulfilling all the conditions embedded in the provisions of section 80IB(10) of the Act assessee is eligible for deduction under section 80IB(10) of the Act. (4) Whether the assessee is eligible to claim 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. 32. In the case of assessee pursuant to search proceedings u/s 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 ded....
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.... income. The head of income has to be determined from the nature of business which assessee was being carried at the time of search. Therefore, additional income disclosed by the assessee being part and parcel of business income only i.e. already IT(SS)A Nos. 380 to 382/Ahd/2014 Asst. Years 2006-07 to 2008-09 15 disclosed by the assessee firm during the course of search has been business income and the assessee is eligible for deduction u/s. 80IB(10) of the Act. In view of the above and consequent to search u/s. 132 of the Act, document marked as Page No. 116 at Annex. A/19 was seized by the Department which contain noting of calculation of profit for the housing project executed by the assessee and such profit was inclusive of "On Money" component. In response to notice u/s. 153A of the Act, the returns of income u/s. 153A are filed which are the returns of income u/s. 139 of the Act. The Assessing Officer has made assessment 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....