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2016 (1) TMI 1258 - AT - Income TaxDisallowance u/s. 80IB(10) - whether the assessee is developer and thus eligible to claim deduction u/s. 80IB(10)? - Held that - The case of the assessee in the present appeal is on a better footing, as there is no issue of sale of TDR by the assessee.Thus, we can safely conclude that the assessee executing the project under SRA scheme is a developer and not a contractor. As AR has submitted that the project developed by the assessee is notified under the scheme. This fact has not been controverted by the Department. Once the scheme is notified and the project is approved, the assessee is eligible to claim deduction on the project u/s. 80IB(10) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction under Section 80IB(10) of the Income Tax Act. 2. Ownership of land by the developer. 3. Assessment of business risk undertaken by the developer. 4. Classification of the assessee as a developer or a contractor. 5. Compliance with CBDT notifications and circulars. Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80IB(10): The Revenue challenged the deletion of disallowance of Rs. 6,18,71,636/- under Section 80IB(10) by the Commissioner of Income Tax (Appeals). The Assessing Officer had disallowed the deduction claiming the assessee was a contractor, not a developer, and thus not eligible for the deduction. The Commissioner of Income Tax (Appeals) reversed this decision, which led to the Revenue's appeal. 2. Ownership of Land by the Developer: The Revenue contended that the assessee did not own the land, which is a requirement to be classified as a developer. However, the Tribunal referenced the Hon'ble Gujarat High Court's decision in CIT Vs. Radhe Developers, which clarified that ownership of land is not a prerequisite for claiming deduction under Section 80IB(10). The Tribunal found no merit in the Revenue's objection regarding land ownership. 3. Assessment of Business Risk Undertaken by the Developer: The Revenue argued that the assessee did not undertake any business risk, a necessary condition to be considered a developer. The Tribunal, however, noted that the assessee had made significant investments, faced potential liquidated damages, and did not receive payments during or after the project execution. These factors demonstrated that the assessee undertook substantial financial and entrepreneurial risk, countering the Revenue's argument. 4. Classification of the Assessee as a Developer or Contractor: The primary issue was whether the assessee was a developer or a contractor. The Tribunal examined the agreement between the assessee and the SRA, noting the substantial investment and risks undertaken by the assessee. The Tribunal referenced the Mumbai Bench of the Tribunal's decision in ITO Vs. M/s. Sonasha Enterprises, where a similar project under the SRA scheme was classified as a developer. The Tribunal concluded that the assessee was indeed a developer, not a contractor. 5. Compliance with CBDT Notifications and Circulars: The assessee relied on CBDT Circular No. 5 of 2010 and Notification No. 1 of 2011, which clarified that projects under the SRA scheme are eligible for deduction under Section 80IB(10). The Tribunal found that the assessee's project complied with these notifications, further supporting the claim for deduction. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the Commissioner of Income Tax (Appeals)'s decision to allow the deduction under Section 80IB(10). The Tribunal held that the assessee was a developer, had undertaken significant business risk, and complied with relevant CBDT notifications, thus eligible for the claimed deduction. The appeal was dismissed as devoid of merit.
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