Land ownership not decisive for housing project deduction; income from contract receipts may be estimated when books are unavailable

Section 80IB(10) deduction cannot be denied merely because the developer is not the recorded owner of the land where it has possession, dominion, and control of the housing project and develops it at its own risk and cost; the arrangement may also be treated as a deemed transfer for tax purposes under Section 2(47)(v) read with Section 53A. On contract receipts, when books of account are unavailable, the entire receipt need not be taxed as income and profit may be estimated on a percentage basis; the 8% estimation under Section 44AD was upheld on the material before the Court.

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Issues: (i) Whether deduction under Section 80IB(10) of the Income-tax Act, 1961 could be denied merely because the assessee was not the recorded owner of the land used for developing the housing project; (ii) Whether the addition based on contract receipts could be sustained in full when the books of account were not available and income was estimated on percentage basis.

Issue (i): Whether deduction under Section 80IB(10) of the Income-tax Act, 1961 could be denied merely because the assessee was not the recorded owner of the land used for developing the housing project.

Analysis: The assessee had undertaken development and construction of the housing project under development arrangements that gave it possession, dominion, and control over the project, while the landowners received only a fixed consideration. The relevant inquiry for Section 80IB(10) was whether the assessee the housing project at its own risk and cost, not whether legal title had formally passed. The Court also treated the arrangement, for income-tax purposes, as involving a deemed transfer in view of Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882.

Conclusion: The deduction under Section 80IB(10) could not be denied on the ground that the assessee was not the registered owner of the land, and this issue was decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the addition based on contract receipts could be sustained in full when the books of account were not available and income was estimated on percentage basis.

Analysis: The concurrent finding was that the entire receipt could not be treated as income merely because the books were unavailable. The authorities below had estimated income from the contract work by applying Section 44AD of the Income-tax Act, 1961 and fixing profit at 8% of receipts. That approach was found to be factually and legally sound on the material before the Court.

Conclusion: The estimation of income was upheld and this issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The Revenue's challenge failed on the principal deduction issue, while the estimation made on the contract receipt issue was sustained, resulting in dismissal of the appeal.

Ratio Decidendi: For deduction under Section 80IB(10) of the Income-tax Act, 1961, formal ownership of land is not indispensable where the assessee has dominion over the project and develops the housing project at its own risk and cost; where books are unavailable, income from contract receipts may be estimated and the gross receipt need not automatically be treated as income.

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