2016 (10) TMI 328

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....s (rounded off) under section 80IB(10) of the Income Tax Act, 1961 ['the Act' for short]. Such return was taken in scrutiny by the Assessing Officer. During the course of such assessment, he examined the petitioner's claim of deduction under section 80IB(10). He passed the order of assessment on 24.10.2007 accepting claim of deduction without any modification. 4. To reopen such assessment, the Assessing Officer issued impugned notice. In order to do so, he had recorded following reasons: "The assessee has filed the return of income for A.Y. 2005-06 on 31/10/2005 showing total income of Rs. 52,910/- after claiming deduction of Rs. 45,73,135/- u/s. 80IB(10) of the Income Tax Act, 1961. In this case assessment for A.Y. 2006- 07 has been finalized u/s. 143(3) of the I.T.Act, after disallowing assessee's claim of deduction u/s. 80-IB(10) of the I.T.Act, 1961 on the ground that the assessee is not the constructive owner of the land and the permission from the AUDA is not obtained by the assessee. On a perusal of the development agreement entered into with the land owners, it is abundantly clear that the land owners have not given any right or dominion of the l....

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....2001 as per which, such deduction would not be available to an undertaking which executes the housing project as a works contractor. 8. From the materials on record, it can be seen that the income from development of a housing project was the main income of the assessee in the return filed for the assessment year 2005-06. Naturally, therefore, the claim of deduction under section 80IB(10) of the Act was the main element of such return. In this context, we may notice how the Assessing Officer examined the claim. Under an undated notice under section 142(1) of the Act, the Assessing Officer asked the assessee to supply several details including the following: "1. Please give a brief narration of your business activity. 2. Details of work executed during the year with proof and receipt in respect of income shown in P & L account along with copies of bills raised by you. In this regard, you are requested to submit list showing names of the members, unit number, price of the unit, amount recovered from them and amount pending to be recovered. 6. In respect of projects undertaken and also those completed during the year under consideration, you are requested to submi....

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....which, as noted, he allowed the deduction while making following observations: "3. The assessee is engaged in the business of building construction and developing the residence project. During the year under consideration, the assessee has undertaken the construction work of a housing project qualified for deduction u/s. 80IB(10) known as"Devdarshan Tenament" situated at Village Bopal, Ahmedabad. The assessee has shown the total sales (work in progress) of Rs. 2,06,91,425/- for the year under consideration on which Net profit of Rs. 45,65,958/- has been declared @22.07%. Besides, the assessee has shown income from other sources such as interest income post office monthly income and ICICI Bond interest in the return of income. 4. After discussion and data made available, the total income of the assessee is computed as under: Total income as per statement of income: Income from business or   Rs. 46,39,963/- profession     Interest income   Rs. 10,399/-     Rs. 46,50,362/- Less: Rs. 12,000/-   Deduction u/s. 80-L     Deduction u/s. 80D Rs. 2,475/- &nbs....

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....related issues in context of the deduction under Section 80IB(10) of the Act. Following observations may be noted: "36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit th....