2013 (11) TMI 726 - AT - Income Tax

Appeal success: Disallowance overturned under Income Tax Act

Kamleshkumar Gandalal Shah C/o. Mehta Lodha & Company Versus ITO, Ward-9(2) Ahmedabad

The Tribunal partly allowed the appeal, overturning the lower authorities' decision on the disallowance under section 80IB(10) of the Income Tax Act. The ... Deduction u/s 80IB of the Income Tax Act - Assessee claimed deduction of Rs. 74,34,997/- under section 80IB(10) of the IT Act. The AO disallowed the claim of deduction on the ground that the assessee acted only as an agent of the land owner, and therefore, is not qualified as a developer, as there is no constructive ownership of the land with the assessee - Learned CIT(A) confirmed the action of the AO on the very same ground, and also further observed that one corner house flat was of 1517.47 sq.ft., i.e. more than 1500 sq.ft. – Held that:- Issue of land ownership is squarely covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Lower authorities were not justified in disallowing the claim of deduction under section 80IB of the Act, on such ground. For the disallowance on the ground that unit size exceeds 1500 sq.ft., reliance has been placed on the judgment in the case of M/s.Aakar Associates Vs. ITO [2013 (11) TMI 719 - ITAT AHMEDABAD] - Following the above judgment, issue restored to the to the file of the AO with direction to restrict the disallowance under section 80IB(10) of the Act only in respect of profit derived from one corner flat of 1517.47 sq.ft. only, and allow the deduction under section 80IB(10) of the Act in respect of profit derived from other flats where it is not in dispute that they are of 1500 sq.fts. or less than that – Decided in favor of Assessee. Issues:1. Disallowance under section 234B of the Act2. Penalty proceedings under section 271(1)(c) of the Act3. Disallowance under section 80IB(10) of the ActDisallowance under section 234B of the Act:The appeal was filed against the order of the CIT(A)-XV, Ahmedabad. The ground nos. 1 and 5 were considered general and required no adjudication. Ground no. 3 regarding the interest charged under section 234B was dismissed for want of prosecution as no submissions were made by the counsel. Similarly, ground no. 4 concerning the initiation of penalty proceedings under section 271(1)(c) was dismissed as no submissions were made by the counsel. The only remaining ground was ground no. 2, which involved the disallowance under section 80IB(10) of the Act.Disallowance under section 80IB(10) of the Act:The assessee claimed a deduction under section 80IB(10) of the IT Act, but the AO disallowed the claim stating that the assessee acted only as an agent of the landowner and did not have constructive ownership of the land. The CIT(A) confirmed the disallowance, emphasizing that the assessee did not meet the requirements of being a developer and builder as per section 80IB(10). The CIT(A) observed that the assessee did not have dominant control over the land or the housing project and had not invested in the land purchase. The CIT(A) referred to agreements and development details to conclude that the assessee was engaged by the landowners to carry out the project without independent authority. The CIT(A) also highlighted non-compliance with the minimum land development requirements and compared the case to precedents where deductions were denied for failing to meet specific criteria.Judgment and Conclusion:The AR of the assessee argued that the disallowance was solely based on land ownership, citing a favorable decision of the Gujarat High Court. The Tribunal found in favor of the assessee, following the High Court decision. Regarding the development of land, the Tribunal disagreed with the CIT(A)'s interpretation, citing previous rulings that did not mandate full utilization of permissible FSI. The Tribunal directed the AO to restrict the disallowance only to the profit from one specific flat exceeding the size limit, allowing deduction for other compliant units. Consequently, the appeal was partly allowed, overturning the lower authorities' decision on the disallowance under section 80IB(10) of the Act.