2016 (8) TMI 314 - AT - Income Tax

Tribunal affirms deduction under Section 80IB(10) for housing project developer.

The Tribunal upheld the CIT(A)'s decision, allowing the assessee's deduction under Section 80IB(10) of the Income Tax Act. The Tribunal emphasized that ... Eligibility of deduction u/s. 80IB(10) - denial of clam for the reason that assessee was not the owner of the land, the permission was not received by the assessee and according to AO assessee was mere a “Contractor” who had entered into a development agreement with the land owners for the construction of the housing project - Held that:- We find that the ld.CIT(A) after considering the development agreement and the decisions rendered in the case of Radhe Developers (2011 (12) TMI 248 - GUJARAT HIGH COURT ) has given a finding that the facts in the present case of the assessee are identical to the case dealt with by the Hon’ble Gujarat High Court and he therefore relying on the decision cited in his order has allowed the claim of assessee. Before us, Revenue has not placed any contrary binding decision in its support. In view of the aforesaid facts, we see no reason to interfere with the order of the ld.CIT(A) - Decided in favour of assessee Issues Involved:1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.2. Ownership of land and its impact on eligibility for deduction.3. Nature of the assessee's role as a 'Developer' or 'Contractor.'Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10):The primary issue revolves around the assessee's eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961. The assessee, a partnership firm engaged in construction, filed its return of income for AY 2008-09, declaring a total income of Rs. NIL after claiming a deduction of Rs. 88,72,527/- under Section 80IB(10). The Assessing Officer (AO) denied the deduction, determining the total income at Rs. 88,72,527/-. The AO's decision was based on the conclusion that the assessee did not qualify as a 'Developer' but was instead a 'Contractor' for the landowners. The Commissioner of Income Tax (Appeals) [CIT(A)], however, allowed the assessee's claim, leading to the Revenue's appeal.2. Ownership of Land and its Impact on Eligibility for Deduction:The AO argued that the assessee was not the owner of the land and that the construction approval was not granted to the assessee but to the landowners. The AO emphasized that the assessee had entered into a Development Agreement with the landowners and acted merely as a contractor. The CIT(A), referencing the Gujarat High Court's judgment in the case of CIT vs. Radhe Developers, concluded that ownership of the land was not a prerequisite for claiming deduction under Section 80IB(10). The CIT(A) highlighted that the assessee had acquired dominion over the land through the development agreement, thereby fulfilling the conditions for deduction.3. Nature of the Assessee's Role as a 'Developer' or 'Contractor':The AO's denial of the deduction was based on the assertion that the assessee was a contractor, not a developer. The CIT(A), however, found that the assessee had full responsibility for the execution of the housing project, including enrolling members, collecting charges, and bearing the risks and rewards of the project. The CIT(A) relied on the Gujarat High Court's interpretation that the essence of Section 80IB(10) requires involvement in developing and building housing projects, regardless of land ownership. The High Court had ruled that the developer's role, responsibilities, and risks were crucial factors, not the ownership of the land.Conclusion:The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee fulfilled the conditions for deduction under Section 80IB(10). The Tribunal noted that the Revenue did not present any contrary binding decision. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order to allow the deduction of Rs. 88,72,527/- to the assessee. The judgment emphasized that the developer's involvement, responsibilities, and risk-taking in the housing project were the determining factors for eligibility under Section 80IB(10), not the ownership of the land.