TaxTMI 
TaxTMI 
2011 (6) TMI 838
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.... Rs.67,78,990/- The AO noticed that the assessee 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 ....
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....ction u/s. 80IB Fulfillment of conditions of deduction u/s. 80IB A Rajshila Co Operative Housing Society limited 1 Housing project 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 ....
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....Engineers, Legal Advisors and such other professionals necessary for the purpose of implementation of such project and has born the necessary expenditure. The developer has made all necessary arrangements with the aforesaid professionals for successful planning, construction and development 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 agree....
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....tion of funds from the members was by the assessee as a developer. It was also stated that no separate amount is collected for land and construction but the amount is received for sale of each unit. With reference to the AO's observation that the assessee had not shown income from sale 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 develop....
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....counting and thus the profit/loss in respect of the project was shown on year to year basis and it was not correct to say that the appellant had not shown any income on sale of units. It is also seen from the agreement for development as well as the banakhat agreement that the risk for development including cost 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. Theref....
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....e case of Amaltas Associates Vs ITO (supra) in which earlier decision of this Bench in the cases of M/s. Radhe Developers and Shakti Corporation (supra) had already been taken into consideration. Copy of the same is placed on record. The findings of the Tribunal in the case of M/s. Amaltas Associates (supra from Para 6 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 amou....
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....p area of the housing project or two thousand square feet, whichever is less." xxxxxx Explanation.- For the removal of doubts, it is hereby declared that nothing contained in this subsection shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 7. The definition of "built-up area" is provided in section 80IB(14) (a) of the Act, 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....
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....ving entered into agreements with landowners for development and building the housing project, assessee was obviously a contractor but it does not derogate the assessee for being a developer, as well. The term contractor is not essentially contradictory to the term developer. As stated above, it is the undertaking that develops or builds the housing project that is entitled to deduction irrespective of the fact whether that it is the owner or not or whether it is 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-....
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....veloped by a contractor or by an owner. The assessee, in the instant case, can also be said to be the owner of the land as it had made part payment to the landowners during the financial years 2000-01 and 2001-02 for an amount of Rs. 56 lacs, and taken the possession of the land for development and building the housing project and satisfy that condition as well of being the owner of the land in view of provisions of s. 2(47)(v). When the assessee has taken on 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....
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....pproval from the Municipal Corporation was in the name of the original land owner and not in the name of the assessee. The Tribunal considered the averment and the material on record and allowed the claim of the assessee and it was held as under: "In the instant case, there was no agreement to share the constructed area. This agreement relates only to purchase part of the land from the landowner by the assessee for a predetermined consideration. All the responsibilities 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 expe....
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....lied universally without looking into the development agreement entered into by the developer along with the landowner. In the case of the assessee, since it had filed copy of the development agreement and crux of the agreement was that the assessee had purchased the land and had developed the housing project at its own, the assessee would be entitled to the deduction under section 80IB(10)." 9. The learned counsel for the assessee referred to the terms of the agreement for housing project (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 th....
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....he assessee. The above facts would prove that the assessee entered into an agreement to sell with the society for consideration. All the responsibilities for carrying out the construction, permission and development of the project lie with the assessee. The real owner of the land was only to cooperate with the assessee in carrying out the development and also to execute necessary documents whenever required by the assessee as a developer. The real owner has also handed over the 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 th....
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....l 110 units of the residential flats at page no.52 and 53 of the PB to show that the built up area was less than 1500 sq. feet. However, the DVO reported in his report (PB-46) that considering the open terrace in front of pent-house room at 6th floor which is analogous to balcony/verandah, then built-up area in this manner will measure more than 2500 sq. feet to 2600 sq. feet approximately. It is therefore a case set up against the assessee that the open terrace is analogous to balcony/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 amus....
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.... a built-up area of less than 12500 sq. ft., i.e. the limit prescribed under section 80IB(10). In view of the above, the AO was to be directed that if it was found that the built-up area of some of the residential units was exceeding 1500 sq. ft., he would allow the proportionate deduction under section 80-IB(10). Accordingly, the appeal of the revenue was to be dismissed and cross-objection of the assessee was deemed to be partly allowed." Therefore, in the light of the decision of the ITAT, Nagpur Bench, the authorities below should not have rejected 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 decision....
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....erein. The assessee was entitled to charge and collect the money on transfer and sale of the housing projects from the members. It was found that the assessee was following percentage completion method of accounting and profit is shown with reference to work in progress i.e. project work carried out during the year though the project was not completed/pending and the units were not sold. It was explained by the assessee that if it had not shown income from the sale of the flats, there would not have been any profit/loss from the housing project in the year 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 Rs. 8,53,37,886/- and after deducting the direct and indirect expenses the net profit is shown in a sum of Rs. 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 ....
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....t of the housing project lie with the assessee. The real owners of the land were only to cooperate with the assessee developer in carrying out development and also to execute documents whenever required by the assessee as developer. The real owners have also handed over physical possession of the property in question to the assessee as a builder for carrying out the development project. Thus, the land owners were not left with any right, title or interest in the development which was carried out solely by the assessee. The motive of the real owners 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 rema....