2014 (3) TMI 804 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on section 80IB(10) claim for 2010-11

The Tribunal upheld the CIT(A)'s decision, allowing the appellant's claim under section 80IB(10) for the Assessment Year 2010-11. The disallowance of ... Disallowance of deduction u/s 80IB of the Act - Business of Developing & Building Housing Projects and sale of flats and villas – Approval taken from the local authority – Held that:- The decision in Commissioner of Income-tax Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - the terms of agreement of sale entered into between the parties the condition must be revealed that the owner of the land has received part of sale consideration and in lieu thereof he had granted development permission to the assessee - this condition is satisfied that the assessee developer was given possession and assessee has undertaken the construction as per plans approved by Local Authority - The assessee developer has paid fees to the Architects and Engineers. The assessee has carried out and admitted the members - The land owner has agreed to give necessary signature, agreements, and even power of attorney to facilitate the work of the developer - the assessee has undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging the original land owners - as per the sale agreement the developer was given full power of attorney and the land owner was given Rs. 95 lakhs in consideration of the property – the assessees were entitled to the benefit u/s 80IB(10) 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 – Decided against Revenue. Issues:Appeal against CIT(A)'s order for Assessment Year 2010-11 - Disallowance u/s. 80IB.Analysis:1. The department appealed against the CIT(A)'s order disallowing Rs. 8,34,50,531 under section 80IB for the Assessment Year 2010-11. The appellant, a partnership firm engaged in developing housing projects, claimed deduction under section 80IB(10) for the project CD Scenic Acres. However, certain allotments did not meet the conditions specified under 80IB(10)(e) & (f), and the approval for the project was in the land owner's name, not the firm's or partners'. Thus, the deduction was disallowed, but clauses (e) & (f) were allowed.2. CIT(A) allowed the claim by relying on the decision in the case of Radhe Developers. The judgment stated that ownership is not a requirement for claiming deduction under section 80IB(10) as long as the undertaking develops and builds the housing project. The A.O. was directed to allow the appellant's claim based on the similarity of facts with the Radhe Developers case.3. The department argued that section 80IB(10) can only be allowed to the owner of the property, who in this case was different from the appellant. However, the appellant and its AR relied on various judicial pronouncements supporting their position, emphasizing that the approval need not be in the assessee's name for claiming the deduction under section 80IB.4. The Tribunal analyzed the terms of the agreement between the parties, noting that the owner received part of the sale consideration and granted development permission to the appellant. The appellant undertook the entire development, construction, and sale of housing units, taking on all risks and responsibilities. The decision of the Gujrat High Court in CIT vs. Radhe Developers was found applicable to the appellant's case.5. The Tribunal dismissed the department's appeal, following the Radhe Developers case's principles. It emphasized the appellant's control over the project, the risks undertaken, and the responsibilities assumed, concluding that the appellant was entitled to the deduction under section 80IB(10).In conclusion, the Tribunal upheld the CIT(A)'s decision, allowing the appellant's claim and dismissing the department's appeal regarding the disallowance under section 80IB for the Assessment Year 2010-11.