Commissioner Of Income Tax-24,4[Th] Flr., Piramal Chambers, Lalbaug,Parel, Mumbai-400 012 v. Abode Builders03, Bilquis Apartment, Mahakali Caves Road, Andheri (E),Mumbai-400 093Pan: Aabfa 2111K

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2022.02.2317:48:16+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 2020 OF 2017 Commissioner of Income Tax-24,4[th] Flr., Piramal Chambers, Lalbaug,Parel, Mumbai-400 012. ...Appellant vs. Abode Builders03, Bilquis Apartment, Mahakali Caves Road, Andheri (E),Mumbai-400 093PAN: AABFA 2111K ...Respondent Mr.Sham V. Walve for appellant. Mr.Rahul Sarda i/b Mr.Shashank Dundu for respondent. CORAM :K.R. SHRIRAM &N. J. JAMADAR, JJ.DATE : 16 FEBRUARY, 2022 PC : 1.The appellant has proposed the following three questions of law : (A) Whether the facts and in the circumstances ofthe case, the Hon’ble ITAT has erred in treating theassessee as developer, ignoring the fact that as perthe Joint Venture Agreement between the assesseeand M/s. Vaman Estate the development andconstruction of the building was done by M/s. VamanEstate at its own cost and the assessee did neitherinvest any money nor developed /constructed thebuilding? (B) Whether the facts and in the circumstances ofthe case and in law, the Hon’ble ITAT has erred indirecting the AO to allow deduction u/s. 80IB(10) of the Income Tax Act, 1961, amounting toRs.17,94,05,681/- when the assessee did not assumeany risk associated with being a developer and hencewas neither land owner nor developer, but merefacilitator? (C) Whether on the facts and in the circumstancesof the case and in law, the Hon’ble ITAT has erred indirecting the AO to allow deduction u/s.80IB(1) of theI.T. Act, 1961, amounting to Rs.17,94,05,681/- ignoringthe fact that the commencement of development ofresidential project started before the statutory date of01.10.1998? 2.According to appellant, respondent-Assessee Firm is adeveloper and builder who developed a residential project called“Trans Residency” on a piece of land admeasuring 12,540 sq.metre in Andheri Area of Mumbai. The assessee frm entered intoa Joint Venture Agreement with another concern M/s. VamanEstate to develop the property vide agreement dated 28-08-2001.The residential project “Trans Residency” has 7 wings in BuildingNo. I (A to G) and 3 wings in building No. III (A to C). Theconstruction activity was undertaken for Wing E & F frst andresidential units were sold before 31-03-2005. The project for E &F Wing was completed in 2005 and profts were offered for tax(deduction u/s. 80IB was claimed on the same) in the return ofincome fled for A.Y. 2005-06, while the rest of the project wascompleted in March, 2007, and proceeds on sale of residential units was shown in the return of income fled for A.Y. 2007-08.The return of income was fled on 19.10.2007 declaring totalincome of Rs.18,16,656/-. The only addition was made on accountof disallowance of claim u/s 80IB(10) of the Income Tax Act, 1961(‘the Act’) amounting to Rs.17,94,05,681/-. 3.During the course of assessment proceedings, the AssessingOffcer (AO) scrutinieed the assessee’s claim keeping in view twomajor criteria having a direct bearing on the legitimacy of theclaim. The AO observed that the land on which the TransResidency Project had been built was not owned by the assesseebut by Malad Satguru Sadan CHS Ltd. and that the ConveyanceDeed for the said land had been executed in the name of thesociety in pursuance to the directions of the High Court videConsent Decree passed on 18.07.1995. The AO also noted that theassessee had been engaged as a ‘developer’ by the Malad SadguruSadan CHS and has made payment on behalf of the society. Basedon this, the AO concluded that the assessee was not the owner ofthe said land. Then the AO proceeded to examine whether theassessee could be considered as a developer. The AO observedthat the assessee entered into a Joint Venture Agreement with M/s. Vaman Estate on 28.08.2001 and observed that as per the agreement, the development and construction of the building wasto be done by M/s. Vaman Estate at its own cost and both theparties were to share the gross sale proceeds in the ratio of 50:50.The AO concluded that the assessee did not incur any expenditureon the project, nor did he do any construction activity and theproceeds from the project were its net proft. The AO observed thatonce the Joint Venture Agreement was entered into, the status ofthe assessee changed from that of a ‘developer’ to that of a‘facilitator’. The AO, thus, observed that the assessee was neither‘the owner’ nor ‘the Developer’ of the property and accordingly theassessee was not eligible for claiming deduction u/s 80IB(10) ofthe Act. 4.A supplementary agreement had been executed between theassessee and M/s. Vaman Estate on 14.03.2005. Based onvarious clauses of both the above-mentioned agreements, the AOconcluded that the BMC had given sanction to the Plan submittedby the assessee through letter dated 21.09.1996. He observed thatthe Explanation to section 80IB(10) of the Act stipulated thatwhere the approval for the concerned project was given more thanonce, the date of initial approval would be the operative date ofapproval. Thus, the assessee was not eligible to claim deduction u/s 80IB(10). Accordingly, the AO rejected the assessee’s claim ofdeduction u/s. 80IB(10) of the Act amounting toRs.17,94,05,681/-. The assessment was completed u/s 143(3) ofthe Act on 24.12.2009 assessing the total income atRs.18,12,22,340/-. 5.Respondent-Assessee frm challenged this order before theCommissioner of Income Tax (Appeals) [‘CIT (Appeals)’] by fling anappeal. The appeal was allowed by an order dated 31.01.2013. TheCIT (Appeals) allowed the claim of deduction under section80IB(10) of the Act. Aggrieved by this order of CIT (Appeals),revenue preferred an appeal before the Income Tax AppellateTribunal, Mumbai (‘ITAT’). The ITAT dismissed the appeal by anorder dated 26.08.2016. Impugning the order of ITAT, this appealhas been fled. 6.The issue is regarding disallowability of claim of deductionunder section 80IB(10) of the Act. Revenue had originally raisedthree points, namely, (a) lack of ownership of land on which theproject was constructed; (b) Assessee not having invested in theconstruction activity or done construction, could not beconsidered as developer; and (c) Project was approved and commenced before the stipulated date of 01.10.1998. On thesethree grounds, the claim of assessee under section 80IB(10) of theAct was denied by Assessing Offcer. 7.As regards the frst issue regarding the ownership of theland, though it was raised before the ITAT, has not been raised inthis present appeal. Mr. Walve submits that the controversy hasbeen settled by the Gujarat High Court in the case of CIT Vs.Radhe Developers[1]in favour of assessee. Therefore, we need toconsider only the other two issues for not allowing the claim ofdeduction under section 80IB(10) of the Act. 8.The ITAT has given a fnding of fact which is not disputedinasmuch as the ITAT has observed that respondent through, itspartner one Liaq Ahmed, has been involved in the project rightfrom the beginning with the signing of the Principal Agreementand primary acquisition of the development rights for the land inquestion. The AO has not even disputed that Intimation ofDisapproval (‘IOD’) issued by the Municipal Corporation was inthe name of assessee. So also the Commencement Certifcate(CC). It is also noted that all tax related to the land in questionwere paid by the assessee from 1998 onwards. It is also noted that1341 ITR 403 (Guj.) assessee has even made payment for the development rights.What the AO has missed out is unless respondent had any role inthe development of the project, the joint venture partner wouldnot agree to share 50% proft in the project with the assessee.Therefore, on this issue, we are in agreement with ITAT. assessee has even made payment for the development rights.What the AO has missed out is unless respondent had any role inthe development of the project, the joint venture partner wouldnot agree to share 50% proft in the project with the assessee.Therefore, on this issue, we are in agreement with ITAT. 9.As regards the other objection that the project wascommenced much before the stipulated date of 1.10.1998,Mr.Walve submitted that the assessee had submitted the originalPlan to the concerned authorities on 7.11.1996 for which the IODwas granted in 1997, and therefore, even if a subsequent IOD hasbeen obtained, as per the Explanation to section 80IB(10) of theAct, where the approval for the concerned project was given morethan once, the date of fnal approval would be operative date ofapproval. 10.The ITAT has once again come to a fnding of fact that theproject, as completed, was different from the project for whichinitial approval had been obtained. It is true that the original Planwhich was submitted and for which IOD was granted, was in1997. The life of the IOD once granted as per the MaharashtraRegional Town Planning Act, 1966 is four years. This fnding has not been disputed by Mr.Walve or appellant. The original Lay-outPlan became invalid after 7.01.2001. The assessee applied for IODfor the second time on 22.11.2001 and was granted permission on21.07.2002. The ITAT has come to a conclusion on facts, which isalso not disputed, that the second project proposal was for onlythree buildings as against the four for which the permission wassought earlier and IOD for different building was granted ondifferent dates. The ITAT has concluded that therefore the projectfor which permission was granted on 24.07.2002 was not thesame as that, for which the IOD has lapsed in 2001. 11.In our view, we do not fnd that the ITAT has committed anyperversity or applied incorrect principles to the given facts andwhen the facts and circumstances are properly analysed andcorrect test is applied to decide the issue at hand, then, we do notthink that questions, as pressed, raise any substantial question oflaw. 12.The appeal is devoid of merit and is dismissed with no order as to costs. (N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)