TAXAP/1718/2008 14/ 14 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1718 of 2008 THE I T O - WARD - 5(1) - Appellant(s) Versus M/S [ENTITY] - Opponent(s) Appearance : MR [ENTITY] for Appellant(s) : 1, MR [ENTITY] for Opponent(s) : 1, CORAM : HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MS JUSTICE [ENTITY] Date : 11/01/2012 ORAL ORDER
(Per : HONOURABLE MS JUSTICE [ENTITY])
1. Revenue has challenged in the present Tax Appeal preferred under [SECTION] of the [ACT] ( hereinafter referred to as "the Act") challenging the order of the Income Tax Appellate Tribunal dated 31.3.2008 proposing the substantial question of law for consideration of the Court.
2. This appeal was admitted for considering the following substantial question of law:-
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction u/S/80IB(10) R.W.S. 80IB(1) to the assessee when the approval by the local authority as well as completion certificate was not granted to the assessee but to the landowner and the rights and the obligations under the said approval were not transferable, and when the transfer of dwelling units in favour of the end-users was made by the landowner and not by the assess?"
3. Vide order dated 20.11.2009 and simultaneously the notice was issued to the respondent although no one has contested this appeal.
4. On hearing learned counsel Mr. [ENTITY] for the Revenue and on examining the material on record with his assistance, this Tax Appeal is being decided.
5. The central question is as to whether the respondent assessee is eligible for the benefit under [SECTION]. As can be culled out from the record, both CIT(Appeals) as well as the Tribunal had allowed the deduction to the assessee respondent under [SECTION].
6. As candidly pointed out to us by the learned counsel, this Bench in [CASE NUMBER] and allied appeals in case of [PRECEDENT] decided the identical question of law on 13.12.2011. As the present appeal also arise in similar factual background leading to the same question of law, instead of giving independent reasonings to the question proposed, relevant findings arrived at in case of Radhe Developers(supra) would be appropriate to be reproduced for the purpose of deciding the present appeal.
"3. In [CASE NUMBER] (M/s. Radhe Developers), the assessee had claimed deduction under [SECTION] of the [ACT] ( "the Act" for short) of Rs.24,75,940/- on the premise that such income was derived from the business of the undertaking developing and building housing project approved by the local authority. To execute such housing project, the assessee had entered into a development agreement with [ENTITY] (HUF) and others as party of the First Part and heirs of deceased [ENTITY] as party of the Second Part. In the said development agreement dated 18.5.2000, the assessee was referred as a party of the Third Part. The party of the Second Part represented the land owners and party of the First Part represented those, who had previously entered into an agreement to purchase such land. Under this development agreement, the assessee agreed to develop the land belonging to party of the Second Part on certain terms and conditions. We would refer to relevant terms and conditions at a later stage.
4. On the same day i.e. 18.5.2000, the land owners entered into an agreement to sell the land in question to the assessee. The assessee was described as purchaser and the original land owners i.e. the heirs of deceased [ENTITY] were described as party of the Second Part or the sellers.
5. The Assessing Officer, however, rejected the assessee's claim for deduction under [SECTION] of the Act. The Assessing Officer was of the opinion that the assessee firm was not the owner of the land. Approval by the local authority as well as permission to develop the project and permission to commence construction were not in the name of the assessee firm. The Assessing Officer was also of the opinion that the assessee had merely acted as an agent or a contractor for construction of residential houses.
6. The assessee carried the matter in appeal. CIT(Appeals) vide order dated 19.9.2006 rejected the assessee's appeal. CIT(Appeals) put considerable stress on the requirement of ownership of the land to qualify for deduction under [SECTION] of the Act. He was of the opinion that the land is intrinsic and inalienable part of the housing project. No assessee, therefore, could carry on the business of undertaking developing and building housing projects without owning the land.
7. The assessee carried the matter further in appeal before the Income Tax Appellate Tribunal (" the Tribunal" for short). The Tribunal vide its impugned judgment dated 29.6.2007 allowed the assessee's appeal and reversed the orders passed by the Revenue authorities. The Tribunal based its order on two aspects. Firstly, the Tribunal was of the opinion that for deduction under [SECTION] of the Act it is not necessary that the assessee must be the owner of the land. Second aspect of the Tribunal's judgment was that even otherwise looking to the provisions contained in [SECTION] of the Act, read with [SECTION] of the [ACT], by virtue of the development agreement and the agreement to sell, the assessee had, for the purpose of Income Tax, become the owner of the land. The Tribunal, accordingly, allowed the assessee's appeal directing the Assessing Officer to grant deduction under [SECTION] of the Act. The Revenue is, therefore, in appeal before this Court.
8. Second stream of appeals led by [CASE NUMBER] ( M/s. Shakti Corporation) arises in the following background.
8.1 Here also the assessee had claimed deduction under [SECTION] of the Act on the ground that the income was derived from the business of the undertaking developing and building housing projects approved by the local authority. The Assessing Officer disallowed the claim primarily on the ground that not being the owner of the land, the assessee was not eligible for deduction under [SECTION] of the Act.
8.2 In appeal, CIT(Appeals) followed the decision of the Tribunal in case of M/s. Radhe Developers, which was by then available. This decision of CIT(Appeals) was challenged by the Revenue before the Tribunal. Revenue contended that the assessee's facts were different from those involved in the case of M/s. Radhe Developers. The Revenue pressed in service the decision of the Apex Court in the case of [PRECEDENT] to contend that for an assessee to seek benefit under [SECTION] of the Act, he must show his ownership over the land in question.
8.3 The Tribunal, though did not accept the Revenue's stand; in view of the decision of the Apex Court in the case of [PRECEDENT] (supra), made a minor departure from its own decision in the case of M/s. Radhe Developers. The Tribunal confined its view in its judgment dated 7.11.2008 on the aspect of the ownership of the land. Considering the terms and conditions of development agreement and other documents on record, the Tribunal was of the opinion that the benefit of [SECTION] of the Act to the assessee could not be denied.
8.4 The Tribunal held that the assessee had acquired dominion over the land, which he had developed by constructing housing project incurring expenses and also taking risks. The Tribunal, however, observed that decision in the case of M/s. Radhe Developers would not apply in cases, where the assessee had entered into an agreement for a fixed remuneration and worked merely as contractor to construct the housing project on behalf of the land owners. In such a case, agreement between the assessee and the land owner would not permit the assessee to claim the benefit.
9. In the case of M/s.Shakti Corporation, since the assessee had produced documents on record, the Tribunal accepted its case for benefit under [SECTION] of the Act. However, in group of other cases, which the Tribunal was disposing off by the said common judgment, such documents were not readily available. The Tribunal remanded the proceedings to the Assessing Officer with a direction that the Assessing Officer should look into the agreement entered into in each case by the land owner and decide whether the assessee had in fact purchased the land for a fixed consideration and had developed a housing project at its own cost and risk. If it was so found, the Assessing Officer should allow the deduction under [SECTION] of the Act. On the other hand, if the Assessing Officer found that the developer had acted on behalf of the land owner and received only a fixed consideration for developing the housing project, the assessee would not be eligible for deduction under [SECTION] of the Act. This common judgment in the case of M/s. Shakti Corporation is also in appeal before us at the hands of the Revenue. We may record that the assessees have accepted the judgment and not carried the issue further before us.
xxx xxx xxx
28. From the above documents on record and the statutory provisions brought to our notice, it is necessary for us to examine whether the Tribunal was justified in granting benefit to the assessees under [SECTION] of the Act. As already noted, the Tribunal in the case of M/s.Radhe Developers proceeded on the footing that [SECTION] does not require that the developer must also be an owner of the land and further that in any case, the assessee by virtue of agreement with the land owners, should be deemed to have acquired ownership of the land in view of the provisions contained in [SECTION] of the Act and [SECTION] of the [ACT]. Taking into account the first limb of the Tribunal's decision, we notice that erstwhile [SECTION] of the Act was bifurcated with effect from 1.4.2000. The provision for deduction of income derived from development of housing project was introduced in [SECTION] of the Act, which for the purpose of these cases, at the relevant time, read as under:-
"80IB.(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections(3) to [(11) and (11A) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section.
(10) The amount of profits in case of an undertaking developing and building housing projects approved [before the 31st day of March, [2005 by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if, -
(a) such undertaking has commenced or commences development and construction of the housing project or or after the 1st day of October, 1998;
(b) the project is on the size of a plot of land which has a minimum area of one acre; and
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place."
29. From the above provisions it can be seen that [SECTION] provided for deduction of the entire amount of profits of an undertaking derived from the business of developing and building housing projects which were approved by the Local Authority before the specified date. Such deduction, however, was subject to certain conditions, namely, that such undertaking had commenced development and construction prior to a specified date and that the project was on the size of a plot of land with a minimum area of 1 acre and the residential unit had maximum inbuilt area of 1500 sq.feet, (except in cases of cities of Delhi and Mumbai, where maximum area permitted was 1000 sq.feet.)
30. The essence of [SECTION], 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] of the Act.
31. Neither the provisions of [SECTION] nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under [SECTION] of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under [SECTION] of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term developer has been understood in common parlance as well as in legal sense carrying a much wider connotation. The Tribunal itself in the impugned order has traced different meanings of term developer explained in different dictionaries, which read as under:-
"a. The Webster's Encyclopedia unabridged of the English Language gives Following meaning of the term ' developer' as:
"1. One who or that which develops;2. A person who invests in and develops the Urban or Suburban potentialities of real estate.
b. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition gives meaning of the term 'developer' as persons or company that develops land.
c. Random House Dictionary of the English Language, the following can be found.
Develop:
a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state.
b. To cause to grow or expand.
Developer:
a. The act or process of developing; progress.
b. Synonym:
Expansion, elaboration, growth, evolution, unfolding, maturing, maturation.
d. Webster Dictionary,the following definitions emerge:
a. To realize the potential of;
b. To aid in the growth of Strength, develop the biceps, c. To bring into being: make active (develop a business) d. To convert ( a tract of land) for specific purpose, as by building extensively.
e. Law lexicon Dictionary: The following definitions could be seen:
Development a. To act, process or result of development or growing or causing to grow; the state of being developed.
b. Happening."
32. [SECTION] of the Act thus provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances noted above. It does not provide that the land must be owned by the assessee seeking such deductions.
33. It is well settled that while interpreting the statute, particularly, the taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of [SECTION] of the Act,namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent.
34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The 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 the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence.
35. With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the [ACT] and, in particular, [SECTION] of the Act and to examine the effect of Explanation to [SECTION] introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together.
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 into between the parties. 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 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 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.
37. By no stretch of imagination can it be said that the assessee acted only as a works contractor. The terms works contractor has been receiving judicial attention in several cases In the case of [PRECEDENT] (supra), the Bombay High Court observed as under:
"Contract of work or a contract of sale
14. The question as to whether a contract is a contract of work or a contract of sale is the subject-matter of precedents on the subject. The principles, as decided cases would show, are well defined but the application of those principles to individual cases often poses a difficulty. The consistent line of thinking that emerges from the decided cases is that essentially, in determining as to whether a contract constitutes one for work or is a contract of sale, it is the dominant interest and object of the parties in entering into the contract, as evinced by the terms of the contract, the circumstances of the contract and the custom of the trade that provide a guiding indicator. The object of the parties is of necessity to be deduced from the terms of the contract. In order to elucidate the distinction which has been made, it would be necessary to turn to some of the authorities on the subject. While dealing with authorities it would be necessary to note that some of the decided cases deal with issues under [ACT] and many of those judgments relate to the period prior to the enactment of the Forty Sixth Amendment to the [ACT]. The technicalities of [ACT], especially as a consequence of the Forty Sixth amendment do not fall for determination in this proceeding. The decided cases are being referred to only with a view to emphasise the distinction between a contract for work and a contract for sale.
15. In [PRECEDENT], the Supreme Court held that in the execution of a contract of work some materials may be used and property in the goods so used passes to the other party. However, the contractor who undertakes to do the work will not necessarily be deemed on that account to sell the materials. The Supreme Court noted that a contract for work in the execution of which goods are used may take one of three forms. Those three forms were elaborated as follows( page 1404 of [PRECEDENT]):
"The contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price: it may be a contract for work in which the use of materials is accessory or incidental to the execution of the work: or it may be a contract for work and use or supply of materials though not accessory to th execution of the contract is voluntary or gratuitous. In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances: if it is of the first: it is a composite contract for work and sale of goods: where it is of the second category, it is a contract for execution of work not involving sale of goods."
16. In a subsequent decision in the [PRECEDENT], the Supreme Court held that a contract for sale is one whose main object is the transfer of property in, and the delivery of the possession of a chattel as a chattel to the buyer. Where the principal object of the work undertaken by the payee of the price is not the transfer of a chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of material, nor the value of the skill and labour as compared with the value of the material, is conclusive, though these circumstances may be taken into consideration in deciding whether a subsisting contract is a contract of work and labour or contract for a sale of a chattel. In [PRECEDENT] this principle was reiterated by the Supreme Court. In [PRECEDENT], the contract in question involved supply and printing of question papers to universities. The assessee entered into those contracts for printing and the question involved was whether the taxable turnover for the purpose of the [ACT] would include the printing and block making charges. The Supreme Court held that the contract in question was a contract of work, having regard to the nature of the job to be done and the confidence reposed in the contractor for work to be rendered. The supply of paper was merely incidental. More recently, in [PRECEDENT], the assessee was under the terms of contract required to supply and install lifts to its customers, while it was the customers' obligation to undertake work connected in keeping the site ready for installation. The Supreme Court noted that under its contractual obligations, the assessee had undertaken the installation of lifts manufactured and brought to site in a knocked-down state and the contract in question was a contract of sale and not a works contract. The distinction between a contract of sale and a works contract found elaboration in the following observations( page 26 of 140 STC):
"If the intention is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a 'contract of sale', the main object is the transfer of property and delivery of possession of the property, whereas the main object in a 'contract for work' is not the transfer of the property but it is one for work and labour. Another test often to be applied is: when and how the property of the dealer in such a transaction passes to the customer:
is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a 'sale'; if it is the latter, it is a 'works contract'. Therefore, in judging whether the contract is for 'sale' or for 'work and labour', the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The predominant object of the contract, the circumstances of the case and the custom of the trade provide a guide in deciding whether transaction is a 'sale' or a 'works contract'. Essentially, the question is of interpretation of the 'contract'. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction."
17. In [PRECEDENT], the Supreme Court enunciated certain principles which were deduced from the decided cases on the distinction between the two concepts. The second, third and fourth principles laid down in the judgment of the Supreme Court, read thus (page 545):
"(2) Transfer of property of goods for a price is the linchpin of the definition of 'sale'.Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of contract, the circumstances of the transaction and the custom of the trade. It is the substance of the contract document/s and not merely the form, which has to be looked into. The court may form an opinion that the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale, then it is a sale. If the primary object of the contract is the carrying out of work by bestowal of labour and services and materials are incidentally used in execution of such work then the contract is one for work and labour.
(3) If the thing to be delivered has only individual existence before the delivery as the sole property of the party who is to deliver it, then it is a sale. If A may transfer property for a price in a thing in which B had no previous property then the contact is a contract for sale. On the other hand where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour.
(4) The bulk of material used in construction belongs to the manufacturer who sells the end-product for a price, then it is a strong pointer to a conclusion that the contract is in substance one for the sale of goods and not for the work and labour. However, the test is not decisive "
A contract for sale has hence to be distinguished from a contract of work. Whether a particular agreement falls within one or the other category depends upon the object and intent of the parties, as evidenced by the terms of the contract, the circumstances in which it was entered into and the custom of the trade. The substance of the matter and not the form is what is of importance. If a contract involves the sale of movable property as movable property, it would constitute a contract for sale. On the other hand, if the contract primarily involves carrying on of work involving labour and service and the use of materials is incidental to the execution of the work, the contract would constitute a contract of work and labour. One of the circumstances which is of relevance is whether the article which has to be delivered has an identifiable existence prior to its delivery to the purchaser upon the payment of a price. If the article has an identifiable existence prior to its delivery to the purchaser, and when the title to the property vests with the purchaser only upon delivery, that is important indicator to suggest that the contract is a contract for sale and not a contract for work. In India, the distinction between the two categories is elucidated by the [ACT]. [SECTION] provides that a contract of the sale of goods is a contract, whereby a seller transfers or agrees to transfer the property in goods to the buyer for a price. Where under a contract of sale, the property in goods in transferred from the seller to the buyer, the contract is that of sale, but where transfer of property in the goods is to take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is not a sale but is an agreement to sell. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of the offer. Under [SECTION] the contract may provide for immediate delivery of the goods or immediate payment of the price or postponement of delivery or payment of the price by installments."
In the case of [PRECEDENT] (supra),Apex Court observed as under:-
"5. It can be treated as well settled that there is no standard formula by which one can distinguish a 'contract for sale' from a 'works-contract'. The question is largely one of fact depending upon the terms of the contract including the nature of the obligations to be discharged thereunder and the surrounding circumstances. If the intention is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract'. In a 'contract of sale', the main object is the transfer of property and delivery of possession of the property, whereas the main object in a 'contract for work' is not the transfer of the property but it is one for work and labour. Another test often to be applied to is: when and how the property of the dealer in such a transaction passes to the customer; is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a 'sale', if it is the latter, it is a 'works-contract'. Therefore, in judging whether the contract is for a 'sale' or for 'work and labour', the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The predominant object of the contract, the circumstances of the case and the custom of the trade provides a guide in deciding whether transaction is a 'sale' or a 'works-contract'. Essentially, the question is of interpretation of the 'contract'. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction. No definite rule can be formulated to determine the question as to whether a particular given contract is a contract for sale of goods or is a works-contract. Ultimately, the terms of a given contract would be determinative of the nature of the transaction, whether it is a "sale" or a "works-contract". Therefore, this question has to be ascertained on facts of each case, on proper construction of terms and conditions of the contract between the parties."
38. In the present case, as already held the assessee had undertaken the development of housing project at its own risk and cost. The land owner had accepted only the full price of the land and nothing further. The entire risk of investment and expenditure was that of the assessee. Resultantly, profit and loss also would accrue to the assessee alone. In that view of the matter, the addition of the Explanation to [SECTION] with retrospective effect of 1.4.2001 would have no material bearing in the cases on hand. We may recall that the said Explanation introduced by [ACT] provided as under:-
[Explanation-
For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)].
39. We may now move on to the question of ownership of the land.
40. Relevant portion of [SECTION] reads as under:-
"2(47):
"transfer", in relation to a capital asset, includes,-
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in [SECTION] of the [ACT]; or [SECTION] of the [ACT] reads as under:-
53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."
41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of [SECTION] and [SECTION] of the [ACT] would lead to a situation where the land would be for the purpose of [ACT] deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property, the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under [SECTION] of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case of [PRECEDENT] (supra), and in the case of [PRECEDENT] (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under [SECTION] of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary.
42. In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of "remuneration" the assessee had to bear the loss or as the case may be take home the profits, it becomes abundantly clear that the project was being developed by him at his own risk and cost and not that of the land owners. Assessee thus was not working as a works contract. Introduction of the Explanation to [SECTION] therefore in this group of cases also will have no effect.
43. We may at this stage examine the ratio of different judgments cited by the Revenue. The decision in case of [PRECEDENT] (supra) was rendered in the background of the provisions of the [ACT]. In the case before the Apex Court, the land owner had entered into an agreement with the builder requiring him to construct apartment building on the land in question. Part of the constructed area was to be retained by the owner of the land. In consideration of the land price remaining area was free for the builder to sell. When the land owner found series of defects in the construction, he approached the Consumer Protection Forum. It was in this background the Apex Court was considering whether the land owner can be stated to be a consumer and the builder a service provider. It was in this background that the Apex Court made certain observations. Such observations cannot be seen out of context nor can the same be applied in the present case where we are concerned with the deduction under [SECTION] of the Act.
44. In the case [PRECEDENT] (supra), the Apex Court considered whether the builder, who was engaged in the development of property and for such purpose had entered into an agreement with the land owner, can be stated to have executed works contract. Such interpretation was rendered in the background of the term "works contract" defined in [SECTION] of the [ACT], which reads as under:-
"12. [SECTION] is relevant. It defines a "works contract" as follows:
"2.(1)(v-i) 'works contract' includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;"
It is thus to be seen that under the [ACT] the definition of the words "works contract" is very wide. It is not restricted to a "works contract" as commonly understood i.e. a contract to do some work on behalf of somebody else. It also includes "any agreement for carrying out either for cash or for deferred payment or for any other valuable consideration, the building and construction of any movable and immovable property". (emphasis supplied) The definition would therefore take within its ambit any type of agreement wherein construction of a building takes place either for cash or deferred payment, or valuable consideration. To be also noted that the definition does not lay down that the construction must be on behalf of an owner of the property or that the construction cannot be by the owner of the property. Thus even if an owner of property enters into an agreement to construct for cash, deferred payment or valuable consideration a building or flats on behalf of anybody else, it would be a works contract within the meaning of the term as used under the said Act."
It was in background of this definition provided by the statute that the Apex Court concluded that the agreement was one of works contract. The Apex Court observed that the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration. Thus the interpretation rendered by the Apex Court in the said decision was based on not the normal meaning of term "works contract" but on the special meaning assigned to it under the Act itself, which provided for a definition of the inclusive nature.
45. Under the circumstances, we are of the opinion that the Tribunal committed no error in holding that the assessees were entitled to the benefit under [SECTION] of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners.
46. We find that it is not even the case of the Revenue that other conditions of [SECTION] of the Act were not fulfilled. We, therefore, answer the question in favour of the assessee and against the Revenue and dispose of all appeals accordingly."
7. Resultantly, this Tax Appeal is also dismissed upholding the order of the Tribunal which in light of the discussion held hereinabove calls for no interference.
([ENTITY], J. ) (Ms. [ENTITY], J. ) sudhir