2012 (7) TMI 88 - HC - Income Tax

Denial of grant of benefit of Section 80IB(10) as the assessee has not built the housing project - joint development agreement - assessee firm is engaged in the business of development and construction of residential flats - Held that - Considering the procedure adopted is that assessee in turn entered into a joint development agreement with the builder and the owner of the land was made a party to the said proceedings, thus the assessee contributed to the land, undertook the aforesaid developmental activities in the said land and thus, complied with all other conditions, which have to be fulfilled before claiming benefit under Section 80IB(10) - as the builder has invested the money in the construction, it is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of Section 80IB (10), the assessee is claiming deduction - it is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the builder the persons who undertook this undertaking are entitled to the benefit of Section 80IB(10) in proportion to the share to which they are entitled to in the built up area - against revenue.

Summary

Issues:
- Interpretation of Section 80IB(10) of the Income Tax Act, 1961 regarding deduction for housing projects.
- Whether the assessee is entitled to deduction under Section 80IB(10) despite not directly building the housing project.

Analysis:
1. The case involves appeals against the Tribunal's order granting benefit under Section 80IB(10) of the Income Tax Act. The assessee, a firm engaged in development and construction of residential flats, was involved in a joint development agreement for a housing project.

2. The Assessing Officer initially denied the deduction under Section 80IB(10) to the assessee, stating that the firm did not develop and build the project independently. The Additional Commissioner of Income Tax also held that since the assessee did not build the project, the deduction could not be allowed.

3. The Tribunal, however, found that the assessee actively participated in various development activities essential for the housing project, such as obtaining permits, making the land usable, supervising construction, and marking apartments. The Tribunal concluded that the assessee's activities made them an integral part of the construction process, thus entitling them to the tax benefit.

4. The key legal question raised was whether the assessee, despite not directly building the housing project, could claim deduction under Section 80IB(10). Section 80IB(10) allows deductions for undertakings involved in developing and building approved housing projects by a local authority before a specified date.

5. The High Court analyzed the conditions of Section 80IB(10) and emphasized that the provision requires both developing and building the housing project to qualify for the deduction. The Court noted that the assessee fulfilled all conditions and actively contributed to the project's development activities.

6. The Court highlighted that the assessee's involvement in obtaining permits, making the land usable, and entering agreements with the builder demonstrated their integral role in the project. The Court rejected the revenue's argument that the assessee did not individually undertake building activities, emphasizing that joint efforts with the builder sufficed for claiming the tax benefit.

7. Ultimately, the High Court ruled in favor of the assessee, dismissing the revenue's appeals. The Court held that when all parties involved in the housing project met the prescribed conditions, they were entitled to the tax deduction provided under Section 80IB(10). The judgment emphasized the collaborative nature of the project and the fulfillment of statutory requirements for claiming the benefit.