TaxTMI 
TaxTMI 
2016 (7) TMI 670
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....ciating that the other party to the .IDA Mangalya Developers was the undertaking developing and building the housing projects and not the assessee. 4. The CIT (A) erred in not appreciating that the assessee was not in the business of developing and building housing projects. 5. The CIT (A) erred in holding that the assessee is entitled to deduction u/s 8OIB(10) without appreciating the fact that according to the Memorandum of Articles and Articles of Association the assessee could only construct buildings in connection with the business of the company and not that the assessee's business is that of developing and building of the housing projects. 6. The CIT(A) erred in holding that there is no specific condition in sub-section (10) of Sec 80IB that the main object should be construction of housing. 7. The CIT(A) erred in holding that there is no violation of the bye laws. i.e .. the Memorandum of Articles and Articles of Association on the ground that construction activity was its ancillary object without appreciating the fact that according to the Memorandum of Articles and Articles of Association the assessee could only construct buildings in connection with the business ....
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....as relied upon the orders of the assessing officer and submitted that the AO has examined the facts and found on verification of the record from the Registrar of Companies that assessee has not amended its Memorandum of Association. The learned DR has referred to the finding of the assessing officer and submitted that the Assessing Officer found the claim of assessee that the assessee had submitted a resolution of the company to the office of the Registrar of Companies is not correct as it was evident from the documentary evidence received from the Registrar of Companies. Further, it is also evident from agreement between the assessee and Mangalya Developer on 15.10.2004 that the assessee Is not in the business of development or construction of buildings. The land used for the above project was the fixed assets in the depreciation schedule of the assessee company. Thus, the AO was justified in computing the capital gain arising from the sale of the flats. The Ld. D.R has further contended that the assessee company had no right once it handover its land to the developer up to the delivery of the share of its flats. The assessee did not participate in the activity of construction in ....
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....ncurred various expenditure in respect of his share of the constructed portion of the project. Therefore the assessee has participated in the construction activity of the building. 6. In rejoinder, the learned Departmental Representative has submitted that the decision of the Hon'ble jurisdictional High Court was delivery in the facts of the said case wherein the assessee was engaged in the business of development of real estate whereas the assessee in the present case is not in the business of development of property. 7. We have considered the rival submissions as well as the relevant material on record. From the terms and conditions of the agreement I is manifest that except the land in question the assessee was not required to do anything or incurred any expenditure towards the construction or other activity of the development of the project. For ready reference, we reproduce relevant clauses / recital of the agreement : "WHEREAS the Schedule Property is ideal for development into Residential Apartment Buildings and First Party is desirous of developing the same and hence on lookout for a Developer who will be able to formulate a scheme of development of the Schedule Prope....
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....rtain expenditure. However, we note that the alleged expenditure by the assessee does not pertain to the development / construction activity of the project because as per the terms of the agreement, the entire cost of construction or other development activities was to be borne by the developer. Even otherwise the alleged expenditure if any incurred by the assessee is post development and post ear-marking of the built up share in the project. When the assessee was under no obligation to incur any expenditure except to contribute the land for the project then this claim of the assessee is inconsistent with the terms and conditions of the agreement as well as the facts and circumstances of the case. Hence the said finding of the CIT (Appeals) is contrary to the basic fact and agreed terms of the agreement. However, we find that the income which is derived from the sale of flats, exclusion of capital gain towards the land would be eligible for deduction under Section 80IB(10) of the Act as held by the Hon'ble High Court in the case of Shreevani Constructions (supra) in paras 8 & 9 as under : "8. In terms of the agreement, which are not in dispute, the assessee not only undertook ....