2014 (5) TMI 221 - AT - Income Tax

Assessee qualifies for deduction under section 80IB(10) despite not owning land.

The Tribunal allowed the Assessee's appeals and dismissed the Revenue's appeals, holding that the Assessee is eligible for the deduction under section ... Disallowance of deduction u/s 80IB(10) of the Act – Conditions not fulfilled – Held that:- Following M/s. Satsang Developers Versus ACIT, Circle-2(2), Baroda [2014 (5) TMI 184 - ITAT AHMEDABAD] - what is sought to be purchased by the buyer is the ownership of the specified unit and registration of flat in semi-finished condition is only to facilitate the convenience of the parties and agreement for development and completion of balance work in relation to the flats is only an incidental formality and this cannot be viewed as fatal to the claim of the assessee for deduction u/s.80-IB(10) of the Act - the entire work from the stage of the commencement to the stage of making the residential unit habitable have been carried out by the assessee only – thus, the assessee is eligible for deduction u/s.80-IB(l 0) of the Act – Decided in favour of Assessee. Allowability of deduction u/s 80IB(10) of the Act – Legal relationship between assessee and the end user of the units was that of works contract not appreciated – Held that:- Following CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - the assessee was entitled to the benefit u/s 80-IB (10) even where the title of the lands had not passed on to the assessee and in some cases, the development permissions may also have been obtained in the name of the original land owner - ownership of land is not a necessary condition for claiming the deduction u/s 80IB(10) - Assessee has acquired dominant control over the land, Assessee is responsible for incurring all the expenses and taking all the risks involved - Assessee is not a contractor - Revenue could not controvert the findings of CIT(A) – thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue. Issues Involved:1. Allowability of deduction under section 80IB(10) of the Income Tax Act.2. Ownership of land and its impact on eligibility for deduction under section 80IB(10).3. Nature of agreements (sale deed and construction agreement) and their impact on the eligibility for deduction under section 80IB(10).Issue-wise Detailed Analysis:1. Allowability of Deduction under Section 80IB(10):The primary issue in all the appeals is the allowability of deduction under section 80IB(10) of the Income Tax Act. The Assessee claimed deductions for profits earned from housing projects, which were disallowed by the Assessing Officer (AO) on the grounds that the Assessee was not the owner of the land, and the project approvals were not in the Assessee's name. The AO further noted that the Assessee had entered into separate agreements for the sale of land and construction, thereby acting as a contractor rather than a developer. The CIT(A) upheld the AO's decision, but the Tribunal, relying on precedents such as the case of Satsang Developers, held that the Assessee is eligible for the deduction under section 80IB(10) as the Assessee had dominant control over the project and bore all associated risks.2. Ownership of Land and Its Impact on Eligibility:The AO and CIT(A) disallowed the deduction on the grounds that the Assessee was not the legal owner of the land, and the project approvals were in the name of the landowners. The Tribunal, however, referred to the decision in Radhe Developers, which clarified that ownership of land is not a necessary condition for claiming deduction under section 80IB(10). The Tribunal noted that the Assessee had dominant control over the land and was responsible for all expenses and risks, thus fulfilling the conditions for the deduction.3. Nature of Agreements (Sale Deed and Construction Agreement):The AO and CIT(A) also disallowed the deduction on the basis that the Assessee had entered into separate agreements for the sale of land and construction, implying that the Assessee was acting as a contractor. The Tribunal, however, referred to several precedents, including the cases of Vardhman Builders and Developers and SMR Builders, which held that entering into separate agreements for land and construction does not disqualify an Assessee from claiming deduction under section 80IB(10) if other conditions are met. The Tribunal concluded that the Assessee was a developer and not merely a contractor, thus eligible for the deduction.Separate Judgments Delivered:The Tribunal delivered a consolidated order for all four appeals, addressing each issue comprehensively and consistently across different assessment years. The Tribunal's decision was based on the principles established in previous judicial precedents, ensuring that the Assessee's eligibility for deduction under section 80IB(10) was upheld for all relevant assessment years.Conclusion:The appeals of the Assessee were allowed, and the appeals of the Revenue were dismissed. The Tribunal held that the Assessee is eligible for the deduction under section 80IB(10) as the Assessee had dominant control over the housing projects, bore all associated risks, and met all other necessary conditions, despite not being the legal owner of the land and having separate agreements for land and construction.