Appeals uphold s.80-IB(10) housing deduction, treat corpus fund as liability, delete s.2(22)(e) deemed dividend, exclude parking area

ITAT upheld CIT(A)'s order and dismissed all three Revenue appeals. It held the assessee was a de facto landowner and property developer, not a mere works contractor, and therefore eligible for deduction under s. 80-IB(10) despite not being the recorded owner. Corpus fund amounts collected from buyers for the future association were treated as a liability and not taxable income. The deemed dividend addition under s. 2(22)(e) was deleted, as the payments were part of business transactions where substantial funds of the assessee were lying with the company. Car parking area, being a common non-living space, was excluded from built-up area for s. 80-IB(10) computation.

---

---

Issues Involved:
1. Eligibility for deduction under section 80-IB(10) of the Income-tax Act, 1961.
2. Treatment of payment to the Corpus Fund of the Flat Owners' Association.
3. Applicability of section 2(22)(e) of the Income-tax Act, 1961 regarding deemed dividend.
4. Inclusion of car parking area in the built-up area for the purpose of section 80-IB(10).

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80-IB(10):
The primary issue was whether the assessee, who was not the legal owner of the land but developed the property, was eligible for deduction under section 80-IB(10). The Tribunal held that the assessee fulfilled all conditions laid down in section 80-IB(10), including developing and building the housing project, obtaining necessary approvals, and incurring all development-related expenses. The Tribunal emphasized that ownership of the land was not a prerequisite for claiming the deduction. The assessee was considered a "de facto" owner, having taken possession of the land and undertaken all development activities. The Tribunal relied on precedents, including the Chennai Bench decision in the case of ACIT v. M/s Sashwath Constructions Pvt. Ltd. and the Ahmedabad Bench decision in M/s Radhe Developers v. ITO, which supported the view that the developer need not be the legal owner of the land to claim the deduction.

2. Treatment of Payment to the Corpus Fund of the Flat Owners' Association:
The second issue was whether the payment of Rs. 5,30,250 to the Corpus Fund of the Flat Owners' Association could be allowed as a deduction. The Tribunal found that the assessee had collected this amount from buyers and shown it as a liability until it was handed over to the Association. Since the amount was collected for a specific purpose and not retained by the assessee, it could not be taxed in the hands of the assessee. The Tribunal upheld the CIT(Appeals)'s decision allowing the deduction.

3. Applicability of Section 2(22)(e) Regarding Deemed Dividend:
The third issue concerned the addition of Rs. 16,00,000 as deemed dividend under section 2(22)(e). The assessee, a director in CPDPL and CHPL, had arranged a payment from CPDPL to CHPL. The Tribunal noted that the assessee had a substantial credit balance with CPDPL and that the payment was a business transaction, not a loan or deposit. The Tribunal agreed with the CIT(Appeals) that section 2(22)(e) was not applicable, as the payment was part of a business transaction and the assessee had sufficient credit balance with CPDPL.

4. Inclusion of Car Parking Area in Built-up Area for Section 80-IB(10):
The fourth issue was whether the car parking area should be included in the built-up area for the purpose of section 80-IB(10). The Tribunal held that the car parking area was a common amenity and not a living space. It was accessible to all and did not have boundary walls, thus it should not be included in the built-up area. The Tribunal upheld the CIT(Appeals)'s decision that the car parking area should be excluded from the calculation of the built-up area of residential units, in line with the Tamil Nadu Apartments Ownership Act.

Conclusion:
The Tribunal dismissed all three appeals filed by the Revenue, upholding the CIT(Appeals)'s decisions on all issues. The order was pronounced on 10th December, 2010.

---