2015 (9) TMI 495 - AT - Income Tax

Tribunal grants deductions under section 80IB(10) for assessment years 2004-05 to 2009-10

Mahendra Builders & Developers Versus Asstt. Commissioner of Income Tax, 1 (1), Indore

The Tribunal allowed the appeals, determining that the assessee was eligible for the deduction under section 80IB(10) for the assessment years from ... Reopening of assessment - assessee has not fulfilled the required conditions of section 80IB(10) - Held that:- While framing the assessment for the assessment year 2006-07 the Assessing Officer found that the assessee has not fulfilled the required conditions of section 80IB(10) of the Act and the Assessing Officer recorded certain failure on the part of the assessee for not fulfilling the conditions as narrated u/s 80IB(10) of the Act which also include the built up area and amended provisions of the Act. The reassessment was not based on change of opinion but based on new material came into knowledge of the Assessing Officer during the assessment proceedings for the assessment year 2006-07. Considering all these aspects, we hold that the Assessing Officer was having sufficient material to make a belief for reopening of the assessment proceedings.- Decided against assessee. Claim of deduction u/s 80IB(10) - Held that:- The facts of the assessee's case show that the assessee was not a mere work contractor but it was a developer of the project. In none of the projects, the assessee has acted for fixed price for executing the work as in the case of works contract the work is awarded at a fixed consideration. Thus, the assessee cannot be held to be a mere contractor. Further, the assessee has not only constructed the houses but it has developed the roads, electrical work and also water connection system in whole of the project. There is no requirement that the project shall be approved in the name of assessee or assessee shall be land owner - Assessee is a developer as assessee has undertaken not only the development of the house but also of the road, water and electricity - Decided in favour of assessee. Issues Involved:1. Validity of notice under section 148 of the Income Tax Act.2. Eligibility for deduction under section 80IB(10) of the Income Tax Act.3. Requirement of completion certificate for claiming deduction under section 80IB(10).4. Whether the assessee is a developer or a mere works contractor.Detailed Analysis:1. Validity of Notice under Section 148:The assessee argued that the reopening of the assessment was based on a change of opinion, which is not permissible. The Assessing Officer (AO) had previously allowed the deduction under section 80IB(10) for the assessment year 2004-05. However, during the assessment year 2006-07, the AO found that the assessee did not fulfill the conditions of section 80IB(10) and recorded new material. The Tribunal held that the reassessment was based on new material and not a mere change of opinion. Therefore, the reopening of the assessment was valid, and this ground of the assessee was dismissed.2. Eligibility for Deduction under Section 80IB(10):The Tribunal examined various issues related to the eligibility of the assessee for deduction under section 80IB(10), including built-up area, commercial area, contractor status, completion certificate, approval, and land ownership. Key judgments cited include CIT vs. Radhe Developers, CIT vs. Shital Corporation, and CIT vs. Sarkar Builders. The Tribunal concluded that the assessee was eligible for the deduction even if the land was not in the assessee's name or the approval was not in the assessee's name, provided other conditions were met. The Tribunal also noted that the commercial area provisions were prospective and did not apply to projects approved before 1st April 2005.3. Requirement of Completion Certificate:The Tribunal noted that the completion certificate requirement was beyond the control of the assessee. The Tribunal relied on various judgments, including CIT vs. Tarnetar Corporation and ACIT vs. Surendra Developers, which held that if the assessee had applied for the completion certificate in time but the local authority delayed issuing it, the assessee should not be penalized. The Tribunal concluded that the assessee fulfilled the conditions for the deduction and should not be denied the benefit due to the delay in issuing the completion certificate by the local authority.4. Developer vs. Works Contractor:The Tribunal examined whether the assessee was a developer or a mere works contractor. The Tribunal referred to the Explanation introduced by the Finance (No. 2) Act, 2009, which clarified that section 80IB(10) does not apply to works contracts. The Tribunal found that the assessee was not a mere contractor but a developer, as the assessee developed roads, electrical work, and water connection systems in the projects. The Tribunal cited ITAT decisions in Paras Housing Private Limited and Vardhaman Builders & Developers, which supported the view that the assessee was a developer and not a mere contractor.Conclusion:The Tribunal allowed the appeals, holding that the assessee was eligible for the deduction under section 80IB(10) for the assessment years from 2004-05 to 2009-10. The Tribunal directed to allow the deduction and dismissed the grounds raised by the revenue.Pronounced in open Court on 30.7.2015.