Commissioner Of Income Tax Ii v. Shreeji Developers....opponent(S

O/TAXAP/1287/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1287 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX II....Appellant(s) Versus SHREEJI DEVELOPERS....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIand HONOURABLE MR.JUSTICE K.J.THAKER Date : 18/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of this appeal, the appellant has challenged the judgment and order dated 16.5.2014 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “B” in ITA No. 1402/Ahd/2011 for AY 2007-08. 2.The facts of the present appeal are that the assessee is a firm stated to be engaged in the business of housing building construction. Assessee filed its return of income for AY 2007-08 on 26.10.2007 declaring total income of Rs. NIL after claiming the entire profit of Rs. 83,48,670/- as deduction under section 80IB(10) of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 31.12.2009 and the total income was determined at Rs. 83,48,670/- after disallowing the claim of deduction under sec. 80IB(10). That being aggrieved by the order of AO, the assessee carried the matter before CIT(A), which came to be allowed . Being aggrieved by the order of CIT(A), the Revenue has preferred an appeal before the ITAT which was dismissed, against which, the present Tax Appeal by the Revenue. 3.Heard the learned advocate appearing for the appellant and considered the submissions. Learned advocate for the appellant has contended that the view taken by the Tribunal and the CIT(A) is contrary to the provisions of law. However, in view of the decision in the case of Commissioner of Income-Tax v. Radhe Developers, reported in [(2012) 341 ITR 403 (Guj)] and the decision in Tax Appeal No. 643/2012, the present Tax Appeal deserves to be dismissed. This Court, in the case of Commissioner of Income-Tax v. Radhe Developers (supra), has dealt with such an issue in the following manner: 3.Heard the learned advocate appearing for the appellant and considered the submissions. Learned advocate for the appellant has contended that the view taken by the Tribunal and the CIT(A) is contrary to the provisions of law. However, in view of the decision in the case of Commissioner of Income-Tax v. Radhe Developers, reported in [(2012) 341 ITR 403 (Guj)] and the decision in Tax Appeal No. 643/2012, the present Tax Appeal deserves to be dismissed. This Court, in the case of Commissioner of Income-Tax v. Radhe Developers (supra), has dealt with such an issue in the following manner: “30. The essence of sub-Section (10) of Section 80IB, therefore, requires involvement of an undertaking in developing and building housing projects approved by the local authority. Apparently, such provision would be aimed at giving encouragement to providing housing units in the urban and semi-urban areas, where there is perennial and acute shortage of housing, particularly, for the middle income group citizens. To ensure that the benefit reaches the people, certain conditions were provided in sub-Section(10) such as specifying date by which the undertaking must commence the developing and construction work as also providing for the minimum area of plot of land on which such project would be put up as well as maximum built up area of each of the residential units to be located thereon. The provisions nowhere required that only those developers who themselves own the land would receive the deduction under Section 80IB(10) of the Act.” O/TAXAP/1287/2014 JUDGMENT “36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered intobetweentheparties.Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power O/TAXAP/1287/2014 JUDGMENT O/TAXAP/1287/2014 JUDGMENT of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the O/TAXAP/1287/2014 JUDGMENT housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk.” 4. Since the issue involved in the present appeal is governed by the decision of this Court in the above referred two decisions, the present appeal deserves to be dismissed. Hence, the present Tax Appeal is dismissed. (K.S.JHAVERI, J.) mandora (K.J.THAKER, J)