IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD Before Shri Rajpal Yadav, JM, & Shri Manish Borad, AM. ITA No. 34/Ahd/2011 Asst. Year: 2007-08 ITO, Ward-9(1), Ahmedabad. Vs. Shivam Builders, 206, Rajvi Arcade, Drive- in-road, Memnagar, Ahmedabad. Appellant Respondent PAN AAZFS 8573R Appellant by Shri Prasoon Kabra, Sr. DR Respondent by Shri M. K. Patel, AR Date of hearing: 21.9.2016 Date of pronouncement: 26/9/2016 ORDER PER Manish Borad, Accountant Member. This appeal of Revenue is directed against order of ld. CIT(A)-XV, Ahmedabad dated 22.11.2010 vide appeal No.CIT(A)- XV/ITO 9(1)/225/09-10, passed against order u/s 143(3) of IT Act, 1961 (in short Act) framed on 16.12.2009 by ITO, Wd-9(1) Ahmedabad. Following grounds have been raised by Revenue :- 1) Id. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in law and on facts in directing Assessing Officer to allow assessee's claim for deduction of Rs. 1,88,38,020/-u/s. 801B(10) of Act ITA No. 34/Ahd/2011 2 Asst. Year 2007-08 2) Id. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in holding that assessee fulfills conditions laid down for claiming deduction u7s.80IB(10) even when land was in name of New Rajvir Co-operative Housing Society Ltd. . land owners are separate legal entity in eye of law and assessee entered into project by development agreement / with Society. entire responsibility to execute housing project and abide by terms and conditions of its approval right from inception of project till its completion rests with Society. Assessee was just contractor of land owners constructing 30 residential units (tenaments) AND not developer. 3) On facts and in circumstances of case, Ld. CIT(A)- XV, Ahmedabad ought to have upheld order of Assessing Officer. 4) It is therefore, prayed that order of Id. CIT(A)-XV, Ahmedabad may be set-aside and that of Assessing Officer be restored. 2. Briefly stated facts of case are that assessee is partnership firm engaged in business of construction of housing projects. Return of income was e-filed on 13.09.2007 declaring total income at Rs.92,800/- after claiming deduction u/s 80IB(10) of Act of Rs.1,88,38,020/-. case was selected for scrutiny assessment. Detailed questionnaire was issued to assessee. Necessary reply was received by Assessing Officer. Assessing Officer was of view that assessee is not owner of land and is merely works contractor and, therefore, denied deduction u/s 80IB(10) of Act at Rs.1,88,38,020/-by observing following reasons :- 1. Assessee is not both developer and builder as required by provisions of section 80IB(10). Assessee is not developer because assessee did not conceptualize and own project in as much as assessee is not owner of land and approval was not issued to it by Local authority. ITA No. 34/Ahd/2011 3 Asst. Year 2007-08 2. Assessee entered into project by Development Agreement with land owner and construction was done as per agreement and hence assessee is merely contractor for purposes of construction of project. 3. assessee has not sold any unit to purchaser but Society has executed sale deeds as seller and assessee joined only as confirming party to transaction. This also proves that assessee was merely contractor/ agent of society. 4. As per Amendment to section 801B by Finance Act 2009, works contractor who executes work awarded by any person is not eligible for deduction u/s 80IB. Any person includes New Rajvir Co-operative Housing Society Ltd., which is legal entity. 3. Aggrieved, assessee went in appeal before ld. CIT(A). Ld. CIT(A) allowed assessee s appeal by deleting disallowance made by ld. Assessing Officer by relying on decision of Co- ordinate Bench, Ahmedabad, dated 7.11.2008 in case of shakti Corporation, Baroda in ITA No.1503/Ahd/2008 for Asst. Year 2005-06 by observing as under :- 6. It is seen that AO has not disputed that appellant did not fulfill any of conditions specified in section 80IB(10) from clause (a) to (d) with respect to approvals from local authority, completion of project within specified time limits, one acre of land condition, 1500 sq.ft. built - up area condition of each unit in project and that of percentage of construction for commercial use. His objection is that appellant is not owner of land. This objection of AO has to be seen in 'light of tests laid down by Hon'ble ITAT Bench Ahmedabad decision dated 7.11.2008 in case of M/s.Shakti Corporation, Baroda in ITA No.15Q3/Ahd/2Q08 in AY 2005-06. But here appellant has also been found meeting tests laid down in Hon'ble ITAT Bench Ahmedabad decision in case of M/s.Shakti Corporation and as it had practically purchased land and acquired dominant control over project and bore 'the risk of developing project, that is why in my view it is eligible for deduction u/s.80IB(10) and AO is directed to allow same. 4. Aggrieved, Revenue is now in appeal before Tribunal. ITA No. 34/Ahd/2011 4 Asst. Year 2007-08 5. Ld. DR referred and relied on observations made by ld. Assessing Officer. Ld. DR has also referred and relied on decision of Tribunal in case of ITO vs. M/s Krishna Developers in ITA No.24/Ahd/2011 for Asst. Year 2007-08 dated 17.5.2013 and requested for setting aside issue to file of ld. CIT(A) to examine as to how assessee is treated as deemed owner on which housing project has been developed. 6. On other hand, ld. AR referred and relied on observation and has also filed paper book at pages 1 to 112 which includes copy of development agreement. Ld. AR submitted that assessee has duly complied with all conditions as laid down u/s 80IB(10) of Act for claiming deduction. Ld. AR also took us to various clauses in development agreement available at pages 81 to 112 of paper book to demonstrate that total control of project from preparation of project plan, appointment of architect and other agencies, booking of flats and all related works attached to development of housing project which were undertaken by assessee. Ld. AR also submitted that facts are verbatim similar to facts of case of M/s Radhe Developers decided by Hon. Jurisdictional High Court [329 ITR 01(Guj)]. Further ld. AR also briefed that even during course of assessment proceedings assessee submitted about similarity of facts with decision of Co-ordinate Bench in ITA No.2482/Ahd/2006 in case of Radhe Developers but ld. Assessing Officer did not accept plea on ground that case of Radhe Developer is still pending for judgment before Hon. Jurisdictional High Court. Ld. AR also submitted that ITA No. 34/Ahd/2011 5 Asst. Year 2007-08 decision of Tribunal in case of Radhe Developers (supra) has been upheld by Hon. Jurisdictional High Court. Ld. AR also referred to judgment of Hon. Jurisdictional High Court in case of CIT vs. Vishal Developers in Tax Appeal No.507 of 2014 dated 7/10/2014 which has further crystallized issue of sec.80IB(10) and decided same in favour of assessee by referring to judgment of Radhe Developers (supra). 7. We have heard rival contentions and perused material on record and also gone through judgments referred by both parties. Solitary grievance of Revenue is against order of ld. CIT(A) directing Assessing Officer to allow claim of deduction at Rs.1,88,38,020/- u/s 80IB(10) of Act. We find that land bearing Survey No.317/1 having total area of 12141 sq.metres was purchased by new Rajvi Co-op. Housing Society Ltd. on 6.11.2004. local authority granted permission for development and construction vide order dated 15.12.2005 to new Rajvi Co-op. Housing Society Ltd. On 30.11.2004 i.e. much before approval accorded by local authority, assessee entered into development agreement with New Rajvi Co-op. Housing Society Ltd. As per terms of agreement assessee was given possession of land for construction of housing units as per plan. Assessee was allowed to enroll prospective buyers and collect sale consideration for land as well as super structure from them. assessee was also to retain consideration received for construction and charge land cost of society. As society (land owner) was having no experience of construction assessee was allowed to construct ITA No. 34/Ahd/2011 6 Asst. Year 2007-08 housing project as per terms & conditions narrated in development agreement. Further we also find that construction, and appointment of structural engineers were done by assessee and entire land purchase consideration, finance were arranged by assessee which proves direct nexus between money consideration and fund for purchasing land and construction. Further we also observe that entire expenditure in name of administrative expenses for putting housing construction was controlled, managed by assessee including arrangement of labour, architect, engineers, design, development and other requirements in connection with successful completion of project. From going through above activities undertaken by assessee we find that facts of case before us are similar to facts of case of M/s Radhe Developers (supra). Further ld. DR was unable to demonstrate any variation of facts of assessee with that of Radhe Developers whereas ld. AR was successfully proved same by taking us through relevant clauses of development agreement and various activities undertaken. We further find that Hon. Jurisdictional High Court in case of CIT vs. Vishal Developers (supra) has dealt with similar issue and facts have touched upon various aspects relating to deduction u/s 80IB(10) of Act and also difference between works contractor and developer. Hon. Court has decided issue in favour of assessee by observing as below :- 12. On combined reading of above referred decisions, it is apparent that both decisions of Supreme Court in case of Larsen and Toubro Limited (supra) as well as in K. Raheja Development Corporation (supra) were ITA No. 34/Ahd/2011 7 Asst. Year 2007-08 rendered in backdrop of Karnataka Sales Tax Act and Maharashtra Value Added Tax Act. While construing meaning of term works contract , what Supreme Court had in mind was Article 366(29-A)(b) of Constitution. By Article 366(29-A)(b), legal fiction had been introduced into contract which was divisible into one for sale of goods and other for supply of labour. Supreme Court while dealing with above cases had understood term works contract in manner that Parliament had in its view at time of Forty-sixth Amendment which was more than appropriate to Article 366(29-A)(b) and which was not restricted to works contract as commonly understood i.e. contract to do some work on behalf of somebody else. ordinary meaning of term works contract means contract to do some work on behalf of somebody else whereas in above decisions, Supreme Court having regard to provisions of Article 366(29-A)(b) has adopted wider meaning of expression works contract . In opinion of this court, while construing provisions of Income Tax Act, ordinary meaning of expression works contract is required to be taken into and resort cannot be had to meaning of said expression as envisaged under relevant Sales Tax Act which are in context of provisions of Article 366(29-A)(b) of Constitution. 13. Division Bench of this court in case of Commissioner of Income Tax III v. Swastik Associates rendered on 7th May, 2014 in Tax Appeal No.348/2014 had referred to decision of Supreme Court in case of K. Raheja Development Corporation v. State of Karnataka (supra) which held that interpretation of expression works contract was rendered in background of term works contract defined in Section 2(1)(v-i) of Karnataka Sales Tax Act and it was in that backdrop that Supreme Court concluded that agreement was one of works contract. court was of view that interpretation rendered by apex court in said decision was based not on normal meaning of term works contract but on special meaning assigned to it under Act itself, which provided for definition of inclusive nature. court was, accordingly, of view that Tribunal did not commit any error in holding that assessees were entitled to benefit under section 80IB of Act even where title of lands had not passed on assessees and under some cases development permissions also have been obtained in name of original owners. 14. In Commissioner of Income Tax-I v. Archan Enterprises rendered on 18th March, 2014 in Tax Appeal No.171/2014, Division Bench of this court had occasion to consider decision of Supreme Court in case of Larsen and Toubro Ltd. v. State of Karnataka (supra) and Raheja Development Corporation (supra) in context of provisions of section 80IB(10) of Act. court held that decision in case of Raheja Development Corporation (supra) was rendered in background of definition of term works contract contained in Karnataka Sales Tax Act and even decision in case of Larsen and Toubro Limited (supra) was rendered in context of Sales Tax/VAT of said State. Supreme Court while upholding ratio of ITA No. 34/Ahd/2011 8 Asst. Year 2007-08 decision in case of Raheja Development Corporation (supra) further laid down certain principles for judging when contract for construction can be stated to be works contract and in process when materials used in execution of such contracts can be exigible to Sales Tax/VAT. Division Bench after considering both above referred decisions of Supreme Court did not find any reason to deviate from case of Radhe Developers (supra) 15. above referred decision in case of Commissioner of Income Tax-I v. Archan Enterprises would be squarely applicable to facts of present case. Under circumstances, when Tribunal has recorded concurrent findings of fact to effect that decision of this court in case of Radhe Developers (supra) would be squarely applicable to facts of present case, in absence of any perversity being pointed out in findings of fact recorded by Tribunal, there is no warrant for interference. decision of Supreme Court in case of Larsen and Toubro Limited (supra) having been rendered in context of Karnataka Sales Tax Act and Maharashtra Value Added Tax Act, would not be applicable to facts of present case and meaning assigned to expression works contract in said decisions cannot be imported while construing meaning of said expression in context of provisions of Income Tax Act. 16. In light of above discussion, it is not possible to state that there is any legal infirmity in impugned order passed by Tribunal, so as to give rise to any question of law, much less, substantial question of law so as to warrant interference. appeal, therefore, fails and is, accordingly dismissed. 8. Respectfully following judgment of Hon. High Court in case of CIT vs. Vishal Developers (supra) we are of view that assessee is developer of housing project and has complied with all conditions of section 80IB(10) of Act. We, therefore, find no reason to interfere with order of ld. CIT(A). We uphold same and dismiss appeal of Revenue. 9. Other grounds of general nature which need no adjudication. ITA No. 34/Ahd/2011 9 Asst. Year 2007-08 10. In result, appeal of Revenue is dismissed. Order pronounced in open Court on 26th September, 2016 Sd/- sd/- (Rajpal Yadav) (Manish Borad) Judicial Member Accountant Member Dated 26/9/2016 Mahata/- Copy of order forwarded to: 1. Appellant 2. Respondent 3. CIT concerned 4. CIT(A) concerned 5. DR, ITAT, Ahmedabad 6. Guard File BY ORDER Asst. Registrar, ITAT, Ahmedabad 1. Date of dictation: 21/09/2016 2. Date on which typed draft is placed before Dictating Member: 23/09/2016 other Member: 3. Date on which approved draft comes to Sr. P. S./P.S.: 4. Date on which fair order is placed before Dictating Member for pronouncement: __________ 5. Date on which fair order comes back to Sr. P.S./P.S.: 6. Date on which file goes to Bench Clerk: 26/9/16 7. Date on which file goes to Head Clerk: 8. date on which file goes to Assistant Registrar for signature on order: 9. Date of Despatch of Order: ITO, Ward-9(1), Ahmedabad v. Shivam Builder