DEDUCTION U/S. 80IB(10) OF THE INCOME TAX ACT

[RAMESH MANSHARAMANI]

one of my client who is proprietor of the firm and engaged in the business of 'Development of Housing Project' In the Asst. Year 2008-2009 the assessee has claimed 100% exemption u/s. 80IB(10) of the Income Tax Act

In which Proprietor fullfill all the conditions of said section but only query is 'assessee is the owner of land and on which he builds residential bunglow (neither appointing developer nor contractor) and same sold to the buyer but at the time of sale he made two agreement with the buyer 1st Agreement of sale of Land on stamp paper (as notified Gujarat Govt. Stamp value) and 2nd Agreement of Building Construction on Rs. 100 stamp Paper but he books both profit under one firm in which he claims 100% deduction u/s. 80IB(10) of the income tax. Can he is eligible to claim if yes then can u send me any judgement came on said issue because Income Tax Officer wants to reject whole deduction with objection that assessee business is just like contractor to do construction work on land alloted to buyer

kindly reply me whether claim is allowable u/s. 80IB(10) if yes then send me judgement if any

If any further clarification require please mail me without fail

Ramesh K M

[email protected]

98258 79833

[B L Bhojwani]

The assessee is engaged in the business of development of housing project.

The objective behind tax concession under section 80-IB(10) is to provide for tax benefit to the person undertaking the investment risk, i.e., the actual developer. However, any person undertaking pure contract risk is not entitled to tax benefits.

With a view to clarify accordingly, an Explanation after sub-section (10) of section 80-IB was inserted so as to provide that nothing contained in section 80-IB(10) shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including Central or State Government). This position is effective from the assessment year 2001-02.

The above amendment seeks to nullify the judgment in Radhey Developers & Ors. v. ITO & Ors. (2008) 20 II ITCL 512 (Ahd 'A' - Trib).

It is not clear as to why he the assessee has executed two separate agreements, one for the sale of land and the other for building construction. This has jeopardized his claim for tax concession under section 80-IB(10). The assessee should so present his case that in reality he was the owner of the land and has undertaken the investment risk. The substance of a transaction shall always prevail over its form.

AI Summary

Claim for 100% Tax Deduction Under Section 80IB(10) Challenged; Must Prove Ownership and Investment Risk An individual engaged in the development of a housing project claimed a 100% tax deduction under section 80IB(10) of the Income Tax Act for the assessment year 2008-2009. The individual, who owns the land and constructs residential bungalows without appointing a developer or contractor, made two agreements with buyers: one for land sale and another for building construction. The Income Tax Officer objected, viewing the business as mere contracting, thus questioning the deduction eligibility. A reply emphasized that tax benefits are for those undertaking investment risk, not contract work, and suggested the need to substantiate the claim by demonstrating ownership and investment risk.