TaxTMI 
TaxTMI 
2011 (6) TMI 838
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....had two housing projects; the first one is that of New Naklank Co-operative Housing Society Ltd. and the second one is Rajshila. Co-operative Housing Society Ltd. The A.O. has stated that the AUDA authorities had approved the project by giving permission to Babubhai Popatbhai Vasani being power of attorney holder of different persons in both the cases. The AO noticed that the land was registered in the name of respective societies and permission for development was also given in the name of societies. He has noticed that in respect of Rajshila Co-operative Housing Society Ltd. 60 units were to be developed and in the case New Naklank Co-operative Housing Society Ltd. 50 units were to be developed. The assessee had shown the work in progress in the profit & loss accounts as also direct and indirect expenses along with the profit in the profit & loss account of the respective years. The AO has rejected the claim of assessee for deduction u/s. 80 1B (10) of the IT Act on the following grounds: (a) The project has been developed on an area 8094 Sq. Mtrs. and 9410 Sq. Mtrs. The piece of land is owned by societies i.e. New Naklank Co-operative Housing Society Ltd. and Rajshila Co Oper....
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.... should be approved before 31/03/2007 23/07/2003 Approved by AUDA 2 Undertaking commence or commences development and construction of housing project on or after 1/10/1998 and approved by local authority before 1/4/2004 and completes such construction on or before 31/3/2008 BU permission is received on 21/08/2007 3 Size of the plot of land having a minimum one acre 8094 square meters 4 Maximum built up area of 1500 Sq feet for each residential unit Each residential unit is having built up area of less than 1500 Sq. Ft. 5 Location of the project should be .within Municipal Corporation Limits Project is within such limits. B New Naklank Co Operative Housing Society limited 1 Housing project should be approved before 31/03/2007 30/10/2002 Approved by AUDA 2 Undertaking commence or commences development and construction of housing project on or after 1/10/1998 and approved by local authority before 1/4/2004 and completes such construction on or before 31/3/2008 BU permission is received on 16/02/2008 3 Size of the plot of land having a minimum one acre 9410 square meters 4 Maximum built up area of 1500 Sq feet for each residential unit Each residential unit i....
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....velopment of the said project. (C) The approval from local authority was obtained with the efforts of the assessee developer as stated in earlier Para. (D) The developer has accepted money from the persons enrolled in the project. The price to be charged to customers is solely determined by the assessee and thereby, collects the consideration. Entire sales value of a units collected by developer has been shown as income in the books of account of the assessee. (E) For the purpose of completing the project, as planned and within stipulated period, developer has made all necessary applications, replies, statements, which are needed, in the Government Offices or Municipal Corporation Offices, etc. (F) The complete responsibility of the planning, and the total construction is rested upon the developer and during the time when the project was going on, the complete responsibility for whatever agreements executed under the project and whatever transactions taken place with third parties, the same was rested upon the developer and the Society was not responsible. (G) The assessee-developer has created common amenities and other infrastructure like roads, electricity, water, drainage,....
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....le of flats, It was further submitted by the assessee that as it follows percentage completion method of accounting, the profit is shown with reference to work in progress i. e. project work carried out during the year though the project is not completed/still pending and the units are not sold. It was pointed out by the assessee that if he had not shown income from sale of flats, there would not have been any profit/loss from housing project in year under consideration. The assessee further submitted that the assessee was not working on fixed remuneration from the land owners but was working itself as a developer in order to exploit the potential of its business in its own interest and, therefore, opted for all business risks associated with the business of development of real estate including development and building of housing projects. Thus entire risk i. e. profit/loss was to be born by developer and not the society. This can be appreciated from clause 15 & 16 of development agreement and clause 6 of Banakhat Agreement. With the above explanation the assessee claimed that the deduction was rightly admissible u/s 80IB (10) of the IT Act. The assessee relied upon the decision o....
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.... is to be borne by the appellant. It is noticed that appellant is following percentage completion method of accounting and profit is shown with reference to work in i. e. project work carried out during the year. Other conditions of section 80 IB (10) are not disputed by the AO and assessee has furnished all information thereto. Accordingly the appellant was entitled to deduction u/s.80 IB(10). On consideration of all these aspects and the ratio of the decision of ITAT, Ahmedabad in the case of Radhe Developers and subsequent decision in the case of Shakti Developers the A.O. is directed to allow deduction u/s. 80 IB(10) to the appellant." 4. The learned DR relied upon the order of the AO and submitted that the assessee is not owner of the project in question and was merely engaged as contractor and has not shown the sale consideration in the profit & loss account. Therefore, the assessee has no dominant control over the project. Therefore, the learned CIT(A) should not have allowed the claim of the assessee. He has submitted that earlier decisions of the Tribunal in the case of M/s. Radhe Developers and Shakti Corporation are in favour of the revenue. The learned DR also referred....
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....to 12 are reproduced as under: "6. We have considered rival submissions and material available on record. Section 80IB (10) reads as under: "80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.--(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections 3(3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. xxxx xxxx xxxx xxxx (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent. of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and cons....
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...., which means "the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units." Before proceeding further, it would be relevant to mention the facts considered in the case of Radhe Developers and Shakti Corporation (supra) decided by the ITAT, Ahmedabad Benches. In the case of Radhe Developers (supra), the assessee claimed deduction under Section 80IB(10). However, the AO disallowed the claim on the ground that (i) the assessee was not the owner of the land, and (ii) each approval was also not in the name of the assessee and it had acted merely as an agent/contractor for construction of residential house. The claim was denied to the assessee. The Tribunal considered the averments and material on record and held as under: "27. A bare reading of these provisions of s. 80- IB(10), as they stood in the years under consideration, the requirements for claiming deduction for housing projects are that (i) there must be an undertaking developing and building housing project; (ii) such housing project is approved by the local aut....
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....s the contractor thereof. The requirement for claiming deduction is that such an undertaking must develop and build housing project, be it on their own land or on the land of others and for which a tripartite agreement has been entered into for development and building housing project; or be the assessee a contractor for developing and building housing project or an owner of the land. The word 'development' means the realization of potentialities of land or territory by building or mining. Accordingly, it can be safely said that a person who undertakes to develop real estate by developing and constructing a housing project is an eligible undertaking; developing and building of housing projects within the meaning of s. 80-IB(10) of the Act. In the present case in hand, the landowner has not made any conscious attempt to develop the property except ensuring their rights as landowner so that the sale value of the land could be realized to them as per the terms of ' Agreement to Sale ' and the ' Development Agreement ' . The landowners, no doubt, have not thrown themselves into development of property. It is only the assessee who is developing the property. Throwing itself into the bu....
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.... the possession of immovable property or retained it in part performance of a contract of a nature referred to in s. 53A of the Transfer of Property Act, 1882 it amounts to transfer under s. 2(47)(v). In the instant case there was, definitely, a dominion of the developer over the land to the exclusion of others inasmuch as possession of the land is given to the developer by the land owners to carry out the construction activity of the housing project. The assessee developer has complied with all the conditions as provided under s. 80-IB(10) of the Act, so as to claim deduction. The assessee has also passed on the part consideration for acquiring the land through an 'Agreement to sale' and in view of the provisions of s. 2(47) r/w s. 53A of the Transfer of Property Act, 1882, the assessee has completely performed his part of the contract and developed the housing project and transferred the flats/tenements to the buyers in view of 'Agreement to sale' as well as 'Development agreement'. It shows that the assessee was in full possession of the land for the development of housing project and has carried out all the activities of a complete housing project by taking all risks associate....
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....s for carrying out the construction, permission, NA, NOC, legal proceedings and the results of the development lies with the assessee. The first party is only to cooperate the assessee in carrying out the development and also to execute the documents whenever it is required by the developer. The assessee has also handed over the physical possession to the builder for carrying out the development of the project. The landowner does not have any right, interest, title in the development so carried out except to the extent he has to receive the consideration from the assessee. The assessee is entitled to publicize the project, print brochures, etc., and can sell the project at its own right. All the expenses have to be incurred by the assessee for carrying out the construction, etc. The landowner has to do nothing except to the extent he has to receive consideration from the assessee. His motive is not to develop, construct or carry on the business as a builder or developer. Practically no right in the land remains with the owner. For whole practical purpose the assessee acquired dominant right over the land and he can deal with the land in the manner in which he may like. Thus, the te....
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....oject (PB 62). According to which, the responsibility of the assessee have been analyzed in such manner that the planning, sanction of plan, work of construction, development of the property, labour engagement shall have to be done by the assessee in respect of the development of the property in question. It is further provided that the assessee shall provide parties/members to whom sale is to be made by enrolling the members. The assessee shall accept all the payments from the members/buyers. The learned counsel for the assessee filed details of the sale proceeds received from the parties of 110 units in the assessment year 2005-2006 and 2006-2007. It would support the case of the assessee that the assessee received entire sale consideration from the members/buyers after completion of the development and building housing project. Agreement further provides that the assessee shall provide payment for construction, engage architect, engineers/site supervisors and shall also obtain all permission from the AUDA. The assessee shall make all financial arrangements for the purpose of implementing housing project and shall execute all deeds in this behalf. The agreement further provides t....
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.... physical possession to the society as a builder for carrying out the development of the project. The land owner did not left with any right, interest or title in development which was carried out by the assessee. The assessee was entitled to enroll the members for selling the units within its own rights. All the expenses have to be incurred by the assessee for carrying out the construction etc. The motive of the real owner was not to develop, construct or carrying out any business as a builder or developer and practically no right in the hands of the real owner in this behalf. With all intents and purposes, the assessee has acquired dominant right over the land and the assessee could deal with the land in the manner in which the assessee might have liked. The terms and conditions entered into between the assessee and the society as per the development agreement and agreement to sell provided all dominant control and rights over the land to the assessee and the assessee would be developing and constructing the housing project at its own cost and would remain owner of the building without any interference from the land owner. The agreement in question did not provide that the assess....
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....y/verandah and if it is included in the definition of built-up area, then it would exceed the prescribed limit. The definition of built-up area means inner measurement of the residential unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. The learned counsel for the assessee provided from different dictionaries the definition of "balcony" which reads as under: 1. (Arch.) A platform projecting from the wall of a building, usually resting on brackets or consoles, and enclosed by a parapet; as a balcony in front of a window. Also, a projecting gallery in places of amusements; as, the balcony in a theater. [1913 Webester] 2. 1): an upper floor projecting from the rear over the main floor in an auditorium 2): a platform projecting from the wall of a building and surrounded by a balustrade or railing or parapet. Source : Word Net (r) 2.0 3. 1(Arch.) A platform projecting from the wall of a building, usually resting on brackets or consoles, and enclosed by a parapet; as a balcony in front of a window. Also, a projecting gallery in places of amusements....
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....ejected the claim of the assessee at least on alternate contention that the assessee would be entitled for deduction under Section 80IB(10) on pro-rata basis. No other point was considered against the assessee for refusing relief under Section 80IB(10) by the authorities below. Since we have held above that the open terrace is not part of balcony/varandh therefore according to the submissions of the assessee, the built up area of the assessee was within the prescribed limit. Therefore, there is no need to give further finding with regard to alternate claim of the assessee. Considering the facts of the case, in the light of the above decisions, we are of the view that the assessee fulfilled the conditions and requirement of the Section 80IB(10) of the Act, therefore, the claim of the assessee for deduction should not have been denied by the authorities below. We accordingly, set aside the orders of the authorities below and direct the AO to grant deduction to the assessee under Section 80IB(10) of the Act as claimed by the assessee. 12. In result, the assessee's appeal is allowed." 7. We have examined the facts of the present appeals in the light of the decisions in the case of M....
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....ar under consideration. The learned Counsel for the assessee filed a copy of the profit & loss account for the financial year 2007-08 (assessment year 2008-09) to show that the project income of the assessee on completion of the housing project was shown in a sum of ₹ 8,53,37,886/- and after deducting the direct and indirect expenses the net profit is shown in a sum of ₹ 3,38,66,039.75 Paise. It would, therefore, show that the assessee not only booked the profit from the housing project with all rights but also spent huge direct and indirect expenses for completion of the housing project as per law. The assessee was not getting any fixed remuneration from the societies and in fact the assessee could not have obtained any remuneration from the societies because of the property acquired by the assessee from both the societies through agreements to sell and the development agreements. In fact, the assessee worked as a developer in order to exploit the potential of its business in its own interest and had undertaken the project with all risks associated with the business of housing project. The entire risk i.e. profit/loss is borne by the assessee and not by the societies. ....
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.... of the land in question was not to develop; construct or carrying out any business as a builder or developer of project and no right is left in this behalf. For all intent and purposes, the assessee has acquired dominant right over the land and the assessee could deal in the land in any manner in which the assessee might have liked. The terms & conditions entered into between the assessee and the societies as per the development agreements and the agreements to sell provided all dominant control and right over the land to the assessee and the assessee developed and constructed the housing project at its own costs and risks and shall remain owner of the buildings without any interference from the land owners. The development agreements and the agreements to sell do not provide that the assessee would work as contractor or agent on behalf of the societies. The facts of the case, if considered, in the light of the decisions of the ITAT Ahmedabad Benches in the cases of M/s. Radhe Developers, Shakti Corporation and M/s. Amaltas Associates (supra), we are of the view that the issue is fully covered by the above decisions of the Tribunal in favour of the assessee because the assessee ha....