TaxTMI 
TaxTMI 
2015 (9) TMI 108
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....the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed a deduction of Rs. 49,34,922 under section 80 IB (10) of the Act, but the assessee was not owner of the land on which housing project was developed. It was noted that "the assessee was not owner of the land on which the project was developed and the assessee had not acquired the dominant control over the project. The Assessing Officer was of the view that since the assessee did not own the land, since the necessary approval of the project was taken by the land owners and since the assessee has merely acted as an agent and as a contractor as it has entered into construction agreement with the landowners, the assessee is not eligible for deduction under section 80IB(10) of the Act. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. While rejecting the contentions of the assesse, learned CIT(A) observed as follows: After going through rival submissions following points emerge: 1. In this case the appellant entered into Development Agreements with the Owners of land to carry out work on behalf of the owners. The appellant invested no amount wit....
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....ons of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus in a case where a person makes the investment and himself executes the development work i.e. carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person (i.e. undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80- IA." Thus the Memorandum points out investment also to make a developer eligible for deduction. Hon'ble ITAT Mumbai decision cited above is applicable in the case of the appellant because the appellant has not A made any investment towards ownership of land or project. It was assigned construction / development of the housing projects by the land owners, though it incurred cost and derived profit but it was never the Owner of the project or of the land on which it was constructed. The individual plots on which tenements were constructed were purchased by the individual tenement buyers from the land owners.....
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....t is material is whether assessee is taking the entrepreneurship risk in execution of such project. When profits or losses, as a result of execution of project as such, belong predominantly to the assessee, the assessee is obviously taking the entrepreneurship risk qua the project and is, accordingly, eligible for deduction under section 80IB(10) in respect of the same. The assumption of such an entrepreneurship risk is not dependent on ownership of the land. The business model of "developing and building housing projects" by buying, on outright basis, and constructing residential units thereon could probably be the simplest business models in this line of activity, but merely because there is an improvisation in the business model or because the assesse has adopted some other business models for the purpose of developing and building housing project does not vitiate fundamental character of the business activity as long as the risks and rewards of developing the housing project, in substance, remain with the assesse. It is difficult, if not altogether impossible, to visualize all the business models that an assessee may use in this dynamic commercial world even as, in substance, t....
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....the authorities below have found fault with. The objections of the authorities below are thus devoid of legally sustainable merits. In view of the above discussions, and bearing in mind entirety of the case, we are of the considered view that the stand of the authorities below, in declining deduction under section 80IB (10) and on the facts of this case, is incorrect. We vacate the same and direct the Assessing Officer to delete the disallowance. 10, Ground no. 1 is thus allowed. 11. In the second ground of appeal, the assessee has raised the following grievance: The learned CIT(A) has erred in law and on facts of the case by confirming the disallowance made by the Assessing Officer amounting to Rs. 32,89,325 under section 40(a)(ia) of the Income Tax Act, 1961. 12. So far as this disallowance is concerned, it was made for the short reason that the assessee did not deposit the tax deducted at source from the related payments well within the time limit permitted under section 200(1) r.w.r. 30 of the Income Tax Rules. While the related payments were made to various contractors before 1st March 2006, the related payments were made only in the month of May 2006. Aggrieved by....