2017 (12) TMI 419 - AT - Income Tax

Assessee qualifies as developer under Section 80IB(10) and entitled to deductions. Lower authorities' disallowances deleted.

The tribunal allowed the assessee's appeals, determining that the assessee qualified as a developer under Section 80IB(10) and was entitled to the claimed ... Deduction claimed u/s. 80IB(10) - housing project in the name and style of a society M/s. Saundarya Cooperative Housing Society Ltd. - ownership of plot - Held that:- It is no more in dispute that Section 80IB(10) deduction does not envisage ownership of the plot in question relevant to a housing project. See CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] Assessee only has undertaken the above entrepreneurial risk / reward in developing the above housing project after having acquired dominant control thereof. It had further discharged onerous responsibility inter alia of advertising the above housing project; if required followed by booking of allottees as well as collection of consideration money whereas the owner society never performed any such liability in developing its housing projects. We therefore accept assessee’s arguments claiming itself to have developed the above housing project thereby raising Section 80IB(10) deduction claim. We accordingly delete the impugned disallowance - Decided in favour of assessee. Issues Involved:1. Correctness of disallowance of Section 80IB(10) deductions for assessment years 2000-01 to 2003-04 and 2005-06.2. Determination of whether the assessee qualifies as a developer or merely a contractor under the provisions of Section 80IB(10).Issue-wise Detailed Analysis:1. Correctness of Disallowance of Section 80IB(10) Deductions:The primary issue in these appeals is the correctness of the lower authorities' action in disallowing the assessee's deduction claims under Section 80IB(10) of the Income Tax Act, 1961, for the specified assessment years. The appeals arise from the orders of the CIT(A)-XV, Ahmedabad, which upheld the Assessing Officer's action disallowing the deductions claimed by the assessee for its housing project.The case records indicate that this is the second round of proceedings before the tribunal. Initially, the assessee's return was processed, and the deduction under Section 80IB(10) was disallowed in the reassessment framed on 24.03.2005. The CIT(A) partly accepted the assessee's claim, but the Revenue appealed, leading to a remand by a co-ordinate bench of the tribunal for reconsideration in light of certain decisions, notably M/s. Shakti Corporation and M/s. Radhe Developers.Upon remand, the Assessing Officer again disallowed the deduction, finding that the assessee acted as a contractor rather than a developer. The CIT(A) confirmed this disallowance.2. Determination of Developer vs. Contractor Status:The tribunal's analysis focused on whether the assessee qualifies as a developer entitled to Section 80IB(10) deductions. It was noted that ownership of the project land is not a prerequisite for claiming this deduction, as established in the Radhe Developers case, upheld by the jurisdictional high court and the apex court.The tribunal examined the development agreement dated 06.03.2000 between the assessee and the owner society, M/s. Saundarya Co-operative Housing Society Ltd. The agreement revealed that the assessee had undertaken significant entrepreneurial risks, including advertising the project, booking allottees, and collecting consideration money. The agreement's clauses indicated that the assessee had dominant control over the project, performing roles beyond those of a mere contractor.The tribunal referenced another co-ordinate bench decision in Shri Umeya Corporation, which emphasized that entrepreneurial risk, rather than land ownership, is the decisive factor for Section 80IB(10) deductions. The tribunal found that the assessee's role in developing the housing project met the criteria for being considered a developer.Consequently, the tribunal concluded that the assessee was entitled to the Section 80IB(10) deductions for the relevant assessment years. The disallowances made by the lower authorities were deleted, and the assessee's appeals were allowed.Conclusion:The tribunal allowed the assessee's appeals, determining that the assessee qualified as a developer under Section 80IB(10) and was entitled to the claimed deductions. The disallowances made by the lower authorities were deleted for all the assessment years in question.