The Commissioner Of Income Tax,Chennai v. M/S.sri Lakshmi Brick Industries,H-6, Ambattur Industrial Estate,Ambattur, Chennai – 600 058

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 17.03.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMYAND THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI T.C.A.Nos.387 to 394 of 2013 The Commissioner of Income Tax,Chennai. ... Appellant in all 8 TCAs Vs. M/s.Sri Lakshmi Brick Industries,H-6, Ambattur Industrial Estate,Ambattur, Chennai – 600 058. ... Respondent in all 8 TCAs Appeals preferred under Section 260A of the Income Tax Act,1961, against the orders of the Income Tax Appellate Tribunal,Chennai, "B" Bench, dated 22.11.2012 in I.T.A.Nos.1644 to1647/Mds/2012 for the assessment years 2006-07, 2007-08, 2008-09, 2009-10 and I.T.A.Nos.1662 to 1665/Mds/2012 for theassessment years 2006-07, 2007-08, 2008-09 and 2009-10. Appeal against the order of the Commissioner of Income Tax(Appeals)-XII, 121, M.G.Road, Nungambakkam, Chennai-34, made inITA.No.358/2009-10 & ITA.No.629 to 631/2011-12 order dated25/05/12. Appeal against the order of the Assistant Commissioner ofIncome Tax, Circle-XIV, 121, Chennai-34, made in PANNo.ABJFS6851R, Assessment Year 2009-10. Appeal against the order of the Assistant Commissioner ofIncome Tax, Circle-XIV, 121, Chennai-34, made in PANNo.ABJFS6851R, Assessment Year 2008-09. Appeal against the order of the Assistant Commissioner ofIncome Tax, Circle-XIV, 121, Chennai-34, made in PANNo.ABJFS6851R, Assessment Year 2006-07. Appeal against the order of the Income Tax Officer, BusinessWard XIV(2), Chennai-34, made in PAN No. , AssessmentYear 2007-08. https://hcservices.ecourts.gov.in/hcservices/ For Appellant : Mr.M.Swaminathan,(in all 8 TCAs) Senior Standing CounselFor Respondent: Mr.R.Sivaraman(in all 8 TCAs) COMMON JUDGMENT (Judgment was delivered by M.DURAISWAMY, J.)Challenging the orders passed in I.T.A.Nos.1644 to 1647/Mds/2012 in respect of the assessment years 2006-07, 2007-08, 2008-09 & 2009-10 and the orders passed in I.T.A.Nos.1662 to 1665/Mds/2012 in respect of the assessment years 2006-07, 2007-08,2008-09 & 2009-10 on the file of the Income Tax AppellateTribunal, Chennai “B” Bench, the Revenue has filed the aboveappeals. 2.The appeals in T.C.A.Nos.387 to 390 of 2013 were admittedon the following substantial questions of law:“1)Whether on the facts and circumstances of thecase, the Tribunal was right in holding that theassessee had satisfied the conditions laid down underthe Section 80IB(10) and is eligible for deduction saidunder 80IB(10)? 2)Whether on the facts and in the circumstancesof the case, the Tribunal was right in holding thatassessee who is only a owner of the land and had outsourced the work of constructing the building and hadrealised the sale proceeds in the form of constructedarea is entitled for deduction u/s 80IB? 3)Whether on the facts and circumstances of thecase, the Tribunal was right in holding that assesseecan be treated as developer or builder, eligible forclaiming benefit under Section 80IB(10)?4)Whether on the facts and circumstances of thecase, the Tribunal was right in holding that assesseeneed not be a builder cum developer for claimingbenefit under Section 80IB(10)?5) Whether on the facts and circumstances of thecase, the Tribunal was right in holding that assesseeis entitled for deduction under Section 80IB(10) eventhough the construction work was outsourced to a subcontractor?6) Whether on the facts and circumstances of thecase, the Tribunal was right in holding that assesseeis entitled for deduction under Section 80IB(10) eventhough the Company that had under taken the developmenthad also claimed the deduction under Section 80IB(10)?” 3.The appeals in T.C.A.Nos.391 to 394 of 2013 were admittedon the following substantial question of law:“Whether on the facts and circumstances of thecase, the Tribunal was right in law in holding that theappeal of the revenue as infructuous wherein therevenue had raised the grounds against the order of theCIT (A) admitting the additional grounds raised by theassessee with respect to capital gains and consideringthe income as capital gains and giving consequentialdeductions and reliefs?” 4.So far as the appeals in T.C.A.Nso.387 to 390 of 2013 areconcerned, Mr.M.Swaminathan, learned senior standing counselappearing for the appellant – Revenue fairly submitted that thequestions of law involved in these appeals were already decidedby the Hon'ble Division Bench of this Court in the judgmentreported in [2019] 103 taxmann.com 425 (Madras) [BashyamConstructions (P) Ltd., Vs. Deputy Commissioner of Income Tax,Corporate Circle - 1 (2), Chennai] wherein the Division Benchheld as follows: “... 8.As noticed by the Court in the case of ShravaneeConstructions (supra), the assessee contributed land,undertook development activity in the land and hascomplied with all the conditions, thereby beingentitled to the benefit under Section 80IB(10) of theAct. The assessee in his explanation to his AssessingOfficer, vide letter dated 20.03.2013, stated that thecompany has incurred initial expenses towards thehousingprojectlikearchitectfee,planreclassification charges, construction expenses,project administrative expenses etc. The Tribunalstates that the expenses are not reflected in the P & Laccount. However, this aspect was considered by the CIT(A) and by referring to the P & L account, statedhttp://www.judis.nic.in that the assessee has not takenthe cost of the land into consideration therebyclaiming more surplus income for the purpose of 80IB(10) benefit. Further, the CIT(A) noted that theassessee has shown only increase in work-in-progress ofRs.2.22 crores along with some minimal expenses in itsP & L Account, but this has nothing to do with the costof the land alone. This aspect of the matter has notbeen dealt with by the Tribunal, but the Tribunal madea sweeping observation that the expenses are notreflected in the said account. Therefore, we do notagree with the reasoning given by the Tribunal in thisregard.9.A Division Bench of this Court in the case ofCIT vs. Sanghvi and Doshi Enterprise, [2013] 29 taxmann.com 386 (Madras), examined a similar questionraised by a developer/promoter. The question of lawframed for consideration was whether the assesseetherein, who was a builder/promoter was eligible fordeduction under Section 80IB(10) of the Act. TheDivision Bench after considering the facts of the caseand the terms of the joint development agreement, as inthe instant case, decided the question in favour of thesaid assessee in the following terms:- “30. ....... Thus, seen in the background of thedata available as regards the date of sale, theclause in the agreement between the owner of the landand the assessee and the sale agreement with theprospective purchasers, it is evident that what theassessee had undertaken is not a mere construction,but developing and construction of a project, whichqualifies for a deduction under Section 80IB of theIncome Tax Act. As rightly pointed out by learnedSenior Counsel appearing for the assessee, a barereading of Section 80IB of the Income Tax Act showsthat the deduction contemplated therein is orientedtowards the project and not with reference to anassessee. It is no doubt true that the project has tobe done by the assessee, but then, when the deductionis specific enough as regards the particularactivity, we fail to see how one should assume anysignificance in the matter of considering adeduction.” The above decision was followed by another DivisionBench in Income tax Officer vs. Doshi Enterprise,[2013] 55 taxmann.com 500 (Mad.). 10.Similar decision was taken by a Division Benchin the case of CIT vs. Ceebros Property Development(P.) Ltd., [2014] 41 taxmann.com 263 (Madras). 11.In CIT vs. Radhe Developers, [2012] 17taxmann.com 156 (Gujarat), the substantial question oflaw, which was framed for consideration was whether theTribunal was right in law in allowing deduction underSection 80IB(10) read with Section 80IB(1) to theassessee, when the approval by the local authority aswell as completion certificate was not granted to theassessee, but to the landowner and the rights and theobligations under the said approval were nottransferable, and when the transfer of dwelling unitsin favour of the end-users was made by the landownerand not by the assessee. The question was decided inthe favour of the assessee therein, in the followingterms:- “30. The essence of sub-section (10) of Section80IB, therefore, requires involvement of anundertaking in developing and building housingprojects approved by the local authority. Apparently,such provision would be aimed at giving encouragementfor providing units in the urban and semi-urbanareas, where there is perennial and acute shortage ofhousing, particularly, for the middle income groupcitizens. To ensure that the benefit reaches thepeople, certain conditions were provided in sub-Section (10) such as specifying date by which theundertaking must commence the developing andconstruction work as also providing for the minimumarea of plot of land on which such project would behttp://www.judis.nic.in put up as well as maximumbuilt up area of each of the residential units to belocated thereon. The provisions nowhere required thatonly those developers who themselves own the landwould receive the deduction under Section 80IB (10)of the Act.” 12.The said decision in Radhe Developers (supra)was followed by the High Court of Gujarat in CIT vs.Moon Star Developers, (2014) 88 CCH 0211 GujHC; and inthe case of CIT vs. Prathama Developers, [2013] 32taxmann.com 336 (Gujarat). 13.The High Court of Bombay in CIT vs. CajetanoMario Pereira, (2014) 88 CCH 0152 MumHC, held thatSection 80IB(10) does not require that the ownership ofland must vest in the developer to be able to qualifyfor such deduction. The Revenue preferred appealagainst all such cases, which were clubbed as a batchbefore the Hon'ble Supreme Court and all the decisionswere affirmed by the Hon'ble Supreme Court in the caseof CIT vs. Veena Developers, (2015) 93 CCH 0184 ISCC. 14.It is interesting to note that in all thesedecisions, the Revenue placed reliance on the aspect ofownership as a criteria for grant of deduction underSection 80IB of the Act and submitted that Section 80IB(10) contemplates grant of deduction and it being adeduction provision, the same has to be complied inabsolute terms by the assessee. The Courts have heldthat in a case of development, the developer is alsoentitled to claim deduction and ownership is not thecriteria. Unfortunately, in the instant case, theRevenue took a reverse stand contrary to the consistentstand taken by them before this Court and other High Courts, which was rejected by the High courts andaffirmed by the Hon'ble Supreme Court.15.We may point out that the decision of theDivision Bench in the case of Sanghvi and DoshiEnterprise (supra) was affirmed by the Hon'ble SupremeCourt as reported in (2017) 84 taxmann.com 241 (SC). Courts, which was rejected by the High courts andaffirmed by the Hon'ble Supreme Court.15.We may point out that the decision of theDivision Bench in the case of Sanghvi and DoshiEnterprise (supra) was affirmed by the Hon'ble SupremeCourt as reported in (2017) 84 taxmann.com 241 (SC). ...21.The correctness of the above finding was notconsidered by the Tribunal and the Tribunal merelystated that no expenses were recorded in the P & Laccount. Therefore, the contention advanced by theRevenue in this regard is not tenable. That apart, aplain reading of Section 80IB(10) of the Act evidentlymakes it clear that deduction is available in a casewhere an undertaking develops and builds a housingproject. The Section clearly draws the distinctionbetween 'developing' and 'building'. In the precedingparagraphs, we have noted the factual position as couldbe culled out from the joint venture agreement, whichclearly shows that the assessee is the developer andM/s.ETA is the builder and mutual rights andobligations are inextricably linked with each other andundoubtedly, the project is a housing project thereby,the assessee would be entitled to claim deduction underSection 80IB (10) of the Act.” 5.Further, the learned senior standing counsel submittedthat the Income Appellate Tribunal, while allowing the appealsfiled by the assessee, erroneously dismissed the appeals filedby the Revenue as infructuous. 6.When the Tribunal had set aside the order passed by theCommissioner of Income Tax and allowed the appeals filed by theassessee, the Tribunal should have dismissed the appeals filedby the Revenue and the appeals would not become infructuous. 7.Mr.R.Sivaraman, learned counsel appearing for therespondent – assessee submitted that the ratio laid down by theHon'ble Division Bench in the judgment reported in [2019] 103taxmann.com 425 (Madras) [Bashyam Constructions (P) Ltd., Vs.Deputy Commissioner of Income Tax, Corporate Circle - 1 (2),Chennai], may be followed and the appeals may be dismissed. 8.Having regard to the submissions made by the learnedcounsel on either side, following the ratio laid down by theHon'ble Division Bench of this Court in the judgment reported in[2019] 103 taxmann.com 425 (Madras) [Bashyam Constructions (P)Ltd., Vs. Deputy Commissioner of Income Tax, Corporate Circle -1 (2), Chennai], cited supra, the questions of law raised in the https://hcservices.ecourts.gov.in/hcservices/ appeals in T.C.A.Nos.387 to 390 of 2013 are decided against therevenue and in favour of the assessee and the appeals aredismissed. Consequential to the dismissal of the appeals inT.C.A.Nos.387 to 390 of 2013, the appeals in T.C.A.Nos.391 to394 of 2013 are also dismissed. So far as the question of lawraised in the appeals in T.C.A.Nos.391 to 394 of 2013 areconcerned, we are not giving any finding for the reason that wehave already decided the questions of law in the appeals inT.C.A.Nos.387 to 390 of 2013 in favour of the assessee. No costs. Sd/- Assistant Registrar //True Copy// va Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai, "B" Bench Chennai, "B" Bench 2.The Commissioner of Income Tax(Appeals)-XII, 121, M.G.Road, Nungambakkam, Chennai- 34 121, M.G.Road, Nungambakkam, Chennai- 34 3.The Assistant Commissioner of Income Tax, Circle-XIV, 121, M.G.Road, Nungambakkam, Chennai-344.The Income Tax Officer, Business Ward XIV(2), 121, M.G.Road, Nungambakkam, Chennai- 34 Circle-XIV, 121, M.G.Road, Nungambakkam, Chennai-344.The Income Tax Officer, Business Ward XIV(2), 121, M.G.Road, Nungambakkam, Chennai- 34 +1cc to Mr.M.Swaminathan, Advocate, S.R.No.17830 T.C.A.Nos.387 to 394 of 2013 SR II(CO)KM(22/04/2021)