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TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1510
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....ssessee towards the eligible project to substantiate that the assessee involved development of the eligible project without noting that no details were produced by the assessee either before the Assessing Officer or at the time of appellate proceeding before the Commissioner of Income Tax (Appeals) or at the time of appellate proceedings before the Income Tax Appellate Tribunal? (iii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was right in deciding that the assessee is eligible for deduction u/s. 80IB (10) without appreciating the fact that all the approvals such as planning permit, building permit and completion certificate from the statutory authorities were obtained only in the name of M/s.Iswaryalaxmi Properties P Ltd and not in the name of the assessee? Relevant facts leading to the filing of the instant appeal by the Revenue: 2. The respondent, assessee firm, M/s.Indra Housing, claims to be engaged in the business of development of residential apartments, real estate and civil contract works. It filed its return of income declaring NIL income after claiming deduction under Section 80IB (10) of the Income Ta....
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..../s.Indra Housing (Firm), it had shown net profit at 30.31%. On such consideration, the Assessing Officer opined that the assessee firm had admitted huge profit in cases where exemptions under Section 80IB of the Act were claimed and in other cases net profit is shown very less. 5. On the basis of such scrutiny made, the Assessing Officer required the assessee to submit certain documents to verify the correctness and entitlement of its claim under 100% deduction under Section 80IB (10) of the Act. 5.1. The assessee was asked to furnish the following information: "(1) Original partnership deed dated 29.11.2007 of M/s.Indra Housing; (2) Any kodisil to the above partnership deed. If so, original and copy of the same; (3) Original JDA with Iswaryalakshmi Properties P Ltd. (4) Books of accounts in the case of M/s.Indra Housing for FY 2009-10 relevant to asst year 2010-11 (5) Current A/c and capital A/c of partners & ledger account with narrations. (6) Project expenses details with supporting bills/ vouchers. (7) Account copy of Iswaryalakshmi Properties P Ltd in the books of M/s.Indra Housing. (8) Account copy ....
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....e produced before the Department indicated the name of M/s.Iswaryalaxmi Properties P Ltd only. 8. The Assessing Officer finally concluded that the assessee firm peeked its nose in order to get exemption under Section 80IB (10) of the Act and therefore, disallowed the claim. 9. Aggrieved by the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), which too was dismissed, affirming the order of the Assessing Officer. 10. The reasons assigned were inter alia that the assessee was not the owner of the land; the building plan approval and completion certificate were not in the name of the assessee; M/s.Iswaryalaxmi Properties P Ltd, on whose name the building plan approval and completion certificate were obtained, was a loss making company, having carry forwarded losses and therefore, would not be worthwhile to claim the benefit of Section 80IB (10) of the Act. 11. During the course of appeal, the CIT (Appeals) required the assessee to furnish details to verify whether any deduction under Section 80IB (10) of the Act was claimed by M/s.Iswaryalaxmi Properties P Ltd. Upon perusal of the statement of income fu....
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....owners of the land and the assessee firm had their respective roles in the development of the project, jointly sharing the risk involved in the project and also executing the project. It was further concluded that the entire project was developed by both the parties, i.e. the owners of the land and assessee firm on the land extending more than one acre (106 cents) as stipulated under the Act and no other associate concern of the assessee claimed benefit of Section 80IB (10) of the Act on the same project as the entire profit was declared in the hands of the assessee firm only and deductions claimed accordingly. On such consideration, the appeal was allowed and assessment, as framed by the Assessing Officer and affirmed by CIT (Appeals) was reversed, and the assessee was held entitled to claim deduction under Section 80IB (10) of the Act, holding the same to be fully justified. Submissions on the first question of law :- Submissions of learned counsel for the Revenue : 15. Learned counsel for the Revenue contended that the entire transaction, claimed to be a joint venture agreement between the owners of the land and the assessee firm, is expediently doubtful and was intende....
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....hat the second party is shown as M/s.Indra Housing, represented by its partner Mr.V.G.Rajendran. It does not refer to M/s.Indra Housing as a registered partnership firm. 17.1. This appeal was admitted on the above questions of law way back on 19.08.2016. However, after receiving notice of admission of appeal on the questions of law as framed by this Court, the assessee did not come out with any material to explain as to how the assessee firm, registered as partnership firm, claimed to be in existence, in the eye of law, as on the date the joint venture development agreement was entered into. 17.2. A bare perusal discloses that the partnership deed was entered into at Chennai on 29.11.2007. Curiously enough, the partners are as below:- (i) Mrs.D.G.Lakshmi (ii) Mr.D.L.Madhusudhan (iii) Mrs.D.V.Kasturi (iv) Mr.G.Damodharan All represented by their power of attorney Mr.D.L.Madhusudhan, Managing Director of M/s.Iswaryalaxmi Properties P Ltd (the deed of power of attorney having been registered on 14.12.2004); (v) Mr.V.G.Rajendran 17.3. The following were the parties to joint venture development agreement dated 21.12.2005: ....
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.... 29.11.2007 up to the date of issuance of completion certificate i.e. 31.12.2008. Though it may not be necessary to prove joint venture only by way of a joint venture agreement, we have to hold that there was no joint venture development agreement in the eyes of law, as between the owners of the land and assessee firm M/s.Indra Housing between the period from 21.12.2005 to 28.11.2007. 20. Consequently, the first question of law is answered in the manner that the joint venture development agreement entered on 21.12.2005 is not genuine and valid, as there was no partnership firm M/s.Indra Housing as on 21.12.2005. Second Substantial Question of Law : Submissions of learned counsel for the appellant : 21. Learned counsel for the Revenue would submit that the Assessing Officer disallowed the claim under Section 80IB (10) of the Act as the claim of the assessee was based only on a bare joint venture agreement and declaration of income and profits, without there being any proof. The Assessing Officer issued notices to the assessee for production of all the relevant documents, including the bills and vouchers as prima facie proof of investment by the assessee, if at all it cla....
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....was made and expenditure was incurred was relevant. Therefore, it could be inferred that M/s.Iswaryalakshmi Properties Private Limited which was not party to the joint venture, may have developed some project and all the documents relating to development of project standing in the name of M/s.Iswaryalakshmi Properties Private Limited were sought to be utilized by the assessee only in order to claim 100% deduction under Section 80IB (10) of the Act. The joint venture development agreement is itself a back dated document. 21.2. Alternative submission of the assessee that it has sub-contracted the work, was also not supported from any bills and vouchers collected by the sub-contractor and there is no detail whatsoever of receipts of Rs. 28 crores, as disclosed in the return. Submissions of learned counsel for the respondent- assessee 22. Per contra, learned counsel for the respondent assessee argued that the Assessing Officer and CIT (Appeals) failed to see that the assessee was a party to the joint venture development agreement and a huge amount of Rs. 50 lakh was paid through cheque, by its partner, which is an evidence of infusing funds in the housing project. The assessee....
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....rties to the joint venture, it has produced a copy of the joint venture development agreement, partnership deed of the assessee firm before the Department, along with its return, balance sheet and books of accounts. The case of the assessee was taken up in scrutiny and notice under Section 142(1) of the Act was issued on 24.07.2012, in response to which, the assessee was represented and was asked to file certain documents in connection with the assessment proceedings. The assessee filed details on 20.08.2012. The Assessing Officer, from the partnership deed filed, noticed that the partnership itself was constituted on 29.11.2007 with partners. It also noted that as per the partnership deed, four persons were the owners of the land, who had brought the land to an extent of 106 cents of land and value of the land brought in as capital, with details submitted. 23.1. Importantly, the Assessing Officer noticed the share of profit defined as 20% for each partner as per the deed of partnership. It also noticed that the first four partners of M/s.Indra Housing gave general power of attorney in favour of M/s.Iswaryalakshmi Properties Private Limited represented by its managing director, ....
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....ed the statutory requirement of Section 80IB (10) of the Act, concluded that the assessee failed to establish that it was eligible for deduction under Section 80IB (10) of the Act. The documents which were submitted by the assessee were noted but were not found sufficient as proof of assessee having invested in the project as developer, admittedly, it being not the owner of the land. It recorded a specific finding that the assessee has not furnished details of how much undivided share of land along with the constructed area went to four partners, who were the owners of the land, and because of this arrangement, 106 cents of land would have been reduced to 1 acre. 24. In addition to the above circumstances and having recorded a finding that the assessee failed to produce any document of expenditure by the assessee in the housing project (undertaking). The Assessing Officer also noted that all the certificates were standing in the name of M/s.Iswaryalakshmi Properties Private Limited. Therefore, the claim of deduction under Section 80IB (10) of the Act was rejected and income of Rs. 7,94,98,820/- was held exigible to tax, finding that the assessee firm peeked its nose in order to ....
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....ect has been, or, is approved by the local authority on or after the 1st day of April, 2004, [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 ....
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....plete such construction within stipulated period, depending upon the approval of the project by the local authority. 29.2. Further, in order to be eligible for deduction, the size of plot of land involved in the project must also satisfy minimum requirement criteria. 29.3. The maximum built up area of residential unit or shops or other commercial establishments has also been provided, depending upon the city and township where such housing project is developed. 29.4. Moreover, one of the pre-condition is that, not more than one residential unit in the housing project is allotted to any person not being an individual. 29.5. Lastly, the condition incorporated in clause (f) requires certain conditions to be fulfilled by the individual. 30. The essence of Section 80IB (10) of the Act therefore requires involvement of an undertaking in developing and building housing projects approved by the local authority. Such a scheme of deduction clearly appears to be aimed at giving encouragement to providing housing units in urban and semi-urban areas, where there is perennial and acute shortage of housing, particularly for the middle income group citizens. In order to ensure that ....
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....condition, an undertaking is entitled to 100% deduction against the profits. It needs no authority for settled proposition that taxing statutes are required to be construed strictly and further, that all conditions claiming deduction must be fully complied with before any deduction/ exemption is claimed. 35. Keeping in forefront the scope and ambit of the meaning of the expression 'undertaking', in the context of the statutory scheme of deduction under Section 80IB (10) of the Act, and various preconditions mentioned therein, if we look into the order of the Assessing Officer and CIT (Appeals), it is found that there were many unusual features, which came to light during the scrutiny assessment and the very role of the assessee in the housing project required due verification. It was in this context, that the Assessing Officer required the assessee to produce various documents to satisfy that the assessee had invested in the project as developer. This was all the more necessary because the assessee claimed deduction under Section 80IB (10) of the Act on the basis of a joint venture development agreement which was executed only on 21.12.2005. The joint venture development....
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....e stage, books of account or bills or vouchers were not produced to examine and verify as to who actually developed the projects. That means, even though the assessee had an opportunity, it failed to produce the required documents, which would have immediately satisfied the Appellate Authority with regard to assessee's claim of deduction. The CIT (Appeals) noted a striking feature, as seen from paragraph 7 of its order, that the entire transaction has been so designed that the assessee firm, by virtue of a joint venture development agreement, could claim deduction in M/s.Indra Housing as carry forward losses in the case of M/s.Iswaryalakshmi Properties Private Limited could not reap the full benefit of Section 80IB (10) of the Act. It was also noted that though the assessee kept on reiterating that it was the developer, but never produced books nor other details for verification for his claim for deduction under Section 80IB (10) of the Act. 38. The order of the Tribunal, however shows that all relevant considerations, based on close analysis by the Assessing Officer and CIT (Appeals), were kept at bay and the Appellate Tribunal jumped to the conclusion of the assessee havin....
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....t contain any sign or receipt. 41.1. Be that as it may, the assessee claims to have submitted documents on the date when the assessment order was passed. Had it been so, we fail to understand as to what prevented the assessee from harping on these documents and press the same into service in appellate proceedings. On the contrary, the CIT (Appeals) has clearly recorded that the assessee has not produced any documents as demanded by the Assessing Officer. Moreover, this letter was placed for our perusal during the course of argument and we fail to understand how this letter was never referred to in any proceedings and is being placed for the first time before us. 41.2. With all vehemence at this command, learned counsel for the assessee sought to persuade us to remand the case for fresh inquiry into the claim of deduction. At this distance of time, we do not find any justification to remand the case to the Assessing Officer to verify various claims with reference to documents which are referred to in letter dated 25.03.2013, particularly when this does not bear any acknowledgment of receipt by the office of Assessing Officer. 42. As an upshot of our discussion, the second q....
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....wner, who was the developer. Rejecting such a reasoning by the Revenue, the Tribunal pointed out that all that the owner was entitled to on the terms of the agreement between the parties was for the undivided share of the land measured in terms of the built-up area and he had no interest in the cost of construction, which the builder alone had to bear. In the circumstances, the consideration that was payable to the owner in respect of the sale of undivided share was with reference to the super built-up area. Irrespective of whether all the flats are booked or not, the owner would receive the cost of the land. Thus, on a reading of the various clauses in the agreement, the Tribunal held that the fact that the assessee was not the owner would not disentitle the assessee from claiming relief under Section 80IB(10) of the Income Tax Act. It further pointed out that the builder on its part had invested on materials and labour as and when the construction progressed and the recoupment of the investment was uncertain. Thus, irrespective of whether all the flats were booked or not, the builder would have to construct the entire building and even if there was a bo....
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....xman 543/341 ITR 403. The Court took note of various development agreements executed by the assessee in favour of individuals claiming that they had been engaged in the activity of housing development. Revenue's contention, that the nature of activities carried on by the assessee's would only qualify them to be the contractors executing works contract, was also considered. It was held that the assessee had undertaken the development of housing project at their own risk and cost. The owner of the land had accepted the full price of the land. He was therefore not concerned with the successor or failure of the housing project. In such background, reference was made to the definition of term 'transfer' under Section 2(47) of the Act and held that merely because the land was held by the original owner when the housing development project was executed, would not be detrimental to the assessee's claim of deduction under Section 80IB(10) of the Act." 46.1. Special leave petition preferred against the aforesaid order was dismissed by the Supreme Court in Principal Commissioner of Income Tax vs. Green Associates [2019] 105 taxmann.com 80 (SC). 46.2. The view taken by th....