Assistant Commissioner of Income-tax, Circle-9, Ahmedabad v. Sukun Infrastructure
[Citation -2016-LL-1019-67]

Citation 2016-LL-1019-67
Appellant Name Assistant Commissioner of Income-tax, Circle-9, Ahmedabad
Respondent Name Sukun Infrastructure
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags condition precedent • housing project • local authority
Bot Summary: During the course of scrutiny assessment proceedings, the Assessing Officer noted that, while the assessee has claimed deduction under section 80IB(10) amounting to Rs 80,64,657, the assessee is not owner of the land on which the residential units are developed and the approval, by the municipal authorities, is also not in the name of the assessee. We have heard the learned Departmental Representative but none appeared for the assessee even though the notice of hearing was duly served upon the assessee by affixture. Under the agreements, the assessee had full authority to develop the land as per his discretion. In our humble understanding in order to answer the question as to whether the condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not the assessee is engaged in developing and building housing projects , all that is material is whether assessee is taking the entrepreneurship risk in execution of such project. So in view of above discussion, following the ratio of jurisdictional High Court in case of ABG Heavy Industries Ltd., the Assessing Officer is directed to allow deduction u/s.80IA(4) of the Act to the assessee with regard to the projects in question for both the years. The format of arrangements for transfer of built up unit, and business model of the assessee for that purpose, is not decisive factor for determining eligibility of deduction under section 80 IB, but that is all that the authorities below have found fault with. Respectfully following the aforesaid decision, we hold that in order to answer the question as to whether the condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not the assessee is engaged in developing and building housing projects , all that is material is whether assessee is taking the entrepreneurship risk in execution of such project.


I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 1 of 8 IN INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [Coram: Pramod Kumar AM and Mahavir PrasadJM] I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Assistant Commissioner of Income Tax Circle 9, Ahmedabad .Appellant Vs. Sukun Infrastructure .. Respondent 9, Gayatri Flats, Behind Circuit House Shahibagh, Ahmedabad 380 004 [PAN: ABGFS0974C] Appearances by: Prasoon Kabra for appellant None for respondent Date of concluding hearing : 18/10/2016 Date of pronouncing order : 19/10/2016 ORDER Per Pramod Kumar AM: 1. By way of this appeal, directed against order dated 26 th March 2012 by CIT(A) for assessment year 2007-08, Assessing Officer has raised following grievance: 1. That learned CIT(A) has erred in law and on facts in directing Assessing Officer to allow assessee s claim for deduction of Rs 80,64,654 under section 80IB(10) of Act. 2. That learned CIT(A) has erred in holding that assessee fulfils conditions laid down for claiming deduction under section 80IB(10) even when land was in name of Shri Boponchandra Chimanbhai Patel and Shri Harshadbhai Dhanji Patel, who are separate legal entities in eyes of law and assessee entered into project by development agreement with them. entire responsibility to execute housing project and abide by terms and conditions right from inception of project till completion rests with them. local authority I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 2 of 8 had granted permission for development to them. Assessee was just contractor of landowners constructing residential units and not developer. 2. To adjudicate on this appeal, only few material facts need to be taken note of. During course of scrutiny assessment proceedings, Assessing Officer noted that, while assessee has claimed deduction under section 80IB(10) amounting to Rs 80,64,657, assessee is not owner of land on which residential units are developed and approval, by municipal authorities, is also not in name of assessee. It was also noted that assessee has executed banakhet cum development agreement with actual owners of land and sale deeds were directly executed by these landowners in favour of end buyers. On these facts, deduction under section 80IB(10) was declined. However, when matter travelled in appeal before CIT(A), learned CIT(A) reversed action of Assessing Officer, and held that that as assessee has dominant control over land, and limited interest of landowner is fixed agreed price of land, assessee is eligible for deduction under section 80IB(10). In coming to this conclusion, CIT(A) was, inter alia, following Hon ble jurisdictional High Court in case of CIT vs Radhe Developers [(2012) 341 ITR 403(Guj)]. Assessing Officer is aggrieved and is in appeal before us. 3. We have heard learned Departmental Representative but none appeared for assessee even though notice of hearing was duly served upon assessee by affixture. We have also perused material on record I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 3 of 8 and duly considered facts of case in light of applicable legal position. 4. We find that issue in appeal is directly covered by coordinate bench decision, in case of Shri Umeya Corporation Vs ITO (ITA No. 21/Ahd/ 2010; order dated 7 th July 2015), which has, summing up legal position in light of law laid down by Hon ble jurisdictional High Court s decision in case of Radhe Developers (supra), observed as follows: 6. We find that, in case of CIT Vs Radhe Developers [(2012) 341 ITR 403(Guj)], Hon ble jurisdictional High Court had occasion to consider issue of ownership of land, on which housing project is developed, in context of eligibility of deduction under section 80IB(10). Hon ble jurisdictional High Court has, in this context, inter alia observed as follows: 32. Sec. 80-IB(10) of Act thus provides for deductions to undertaking engaged in business of developing and constructing housing projects under certain circumstances noted above. It does not provide that land must be owned by assessee seeking such deductions. 33. It is well settled that while interpreting statute, particularly, taxing statute, nothing can be read into provisions which has not been provided by legislature. condition which is not made part of s. 80-IB(10) of Act, namely that of owning land, which assessee develops, cannot be supplied by any purported legislative intent. I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 4 of 8 34. We have reproduced relevant terms of development agreements in both sets of cases. It can be seen from terms and conditions that assessee had taken full responsibilities for execution of development projects. Under agreements, assessee had full authority to develop land as per his discretion. assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of project belonged entirely to assessee. It can thus be seen that assessee had developed housing project. fact that assessee may not have owned land would be of no consequence. 7. In our humble understanding, therefore, in order to answer question as to whether condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not assessee is engaged in developing and building housing projects , all that is material is whether assessee is taking entrepreneurship risk in execution of such project. When profits or losses, as result of execution of project as such, belong predominantly to assessee, assessee is obviously taking entrepreneurship risk qua project and is, accordingly, eligible for deduction under section 80IB(10) in respect of same. assumption of such entrepreneurship risk is not dependent on ownership of land. business model of developing and building housing projects by buying, on outright basis, and constructing residential units thereon could probably be simplest business models in this line of activity, but merely because there is improvisation in business model or because assesse has adopted some other business models for purpose of developing and building housing project does not vitiate fundamental character of business activity as long as risks and I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 5 of 8 rewards of developing housing project, in substance, remain with assesse. It is difficult, if not altogether impossible, to visualize all business models that assessee may use in this dynamic commercial world even as, in substance, fundamental character of business remains same, but certainly such modalities or complexities of business models cannot come in way of eligibility for incentive which is for purpose of developing and building housing project . There is no justification, conceptual or legal, in restricting eligibility of deduction under section 80IB(10) to any particular business model that entrepreneur adopts in course of developing and constructing housing project. 8. As regards learned CIT(A) s reliance on decision of larger bench of this Tribunal, in case of B T Patil & Sons (Belgaum) Constructions Pvt Ltd vs ACIT [(2010) 1 ITR (Tribunal) 703 (Mum)], what has been referred to by her is view of three member bench resolving point of difference between members of division bench. However, this view was stillborn, and its relevance is confined to academic significance, for reason that that while giving effect to majority view, vide order dated 28th February, 2013 and on somewhat peculiar fact situation in this case, final order of Tribunal did not endorse these views. Quite to contrary, following Hon ble Bombay High Court decision in case of CIT Vs ABG Heavy Industries Ltd and Ors [(2010) 322 ITR 323 (Bom)] and upon by taking into account Hon ble Bombay High Court s specific directions in case before Tribunal, Tribunal s final order had, inter alia, concluded as follow .while giving effect to opinion of Third Member u/s.255(4) of Act, we take view in conformity with order of jurisdictional High Court in case of ABG Heavy Industries Ltd. (supra) available at this time though contrary to I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 6 of 8 opinion expressed by Third Member. So in view of above discussion, following ratio of jurisdictional High Court in case of ABG Heavy Industries Ltd. (supra), Assessing Officer is directed to allow deduction u/s.80IA(4) of Act to assessee with regard to projects in question for both years. 9. It is not even case of Assessing Officer that assessee did not assume entrepreneurship risks of housing project. format of arrangements for transfer of built up unit, and business model of assessee for that purpose, is not decisive factor for determining eligibility of deduction under section 80 IB (10), but that is all that authorities below have found fault with. objections of authorities below are thus devoid of legally sustainable merits. In view of above discussions, and bearing in mind entirety of case, we are of considered view that stand of authorities below, in declining deduction under section 80IB (10) and on facts of this case, is incorrect. We vacate same and direct Assessing Officer to delete disallowance. 5. We have no reasons to take any other view of matter than view so taken by us, as extracted above. 6. Respectfully following aforesaid decision, we hold that in order to answer question as to whether condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not assessee is engaged in developing and building housing projects , all that is material is whether assessee is taking entrepreneurship risk in execution of such project. When profits or losses, as result of execution of project as such, belong predominantly to assessee, assessee is obviously taking I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 7 of 8 entrepreneurship risk qua project and is, accordingly, eligible for deduction under section 80IB(10) in respect of same. assumption of such entrepreneurship risk is not dependent on ownership of land. As regards learned Departmental Representative s contention to effect that assessee has not even bothered to appear before us and it is not clear whether factual elements embedded in legal position as above are borne out of material on record, we find that CIT(A) had called for remand report and this aspect of matter was not even in dispute. It was not case of Assessing Officer, directly or even by implication, that entrepreneurial risk was not being carried by assessee. case of revenue primarily rests on fact that land was in name of original owner and directly transferred to end buyer, while construction was shown as having been done in contractual capacity. That is question of what business model is employed by assessee, and, in light of discussions above, that aspect of matter is not really relevant. In this view of matter, we see no useful purpose being served by matter being remitted to file of Assessing Officer for factual verification. matter must reach finality now. We, therefore, deem it fit and proper to uphold relief granted by CIT(A) and decline to interfere in matter. 7. In result, appeal is dismissed. Pronounced in open court today on 19 th day of October, 2016. Sd/- Sd/- Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Dated: 19 th day of October, 2016. I.T.A. No. 1116/Ahd/2012 Assessment year: 2007-08 Page 8 of 8 Copies to: (1) appellant (2) respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order etc Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Assistant Commissioner of Income-tax, Circle-9, Ahmedabad v. Sukun Infrastructure
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