2012 (8) TMI 66 - AT - Income Tax

Allowing the deduction u/s.80IB(10) - not granted approval by the local authority to carry on the business of an undertaking developing and building housing projects - Held that - The issue is restored back to his file to look into the agreement entered into by assessees with the landowner and decide whether the assessee has in fact purchased the land for a fixed consideration from the landowner and has developed the housing project at its own cost and risks involved in the project - in case the AO finds that the Developer has acted on behalf of the landowner and has got the fixed consideration from the landowner for the development of the housing projects, the assessee should not be allowed deduction u/s.80IB(10) - it has to be ascertained whether it was a work contract or a Development Contract - in favour of revenue for statistical purposes.

Summary

Issues:
1. Interpretation of Section 80IB(10) for deduction eligibility.
2. Ownership of land and control over housing project.
3. Assessment of risks and responsibilities in housing project development.

Analysis:
1. The primary issue in this case revolves around the interpretation of Section 80IB(10) for deduction eligibility. The Revenue contended that the assessee, engaged in building construction activities, was not entitled to the deduction as it did not own the land or obtain approval from the local authority for the housing project. The AO disallowed the claim, leading to an appeal before the CIT(A).

2. The CIT(A) analyzed the situation, considering that although the land was not registered in the name of the assessee, the total cost of the land was paid by the assessee to the landowners. The CIT(A) concluded that the firm had control over the land, undertook risks for the project development, and hence, was eligible for the deduction under Section 80IB(10).

3. Upon further review, the Tribunal decided to send the issue back to the AO for reevaluation based on specific directions. These directions included examining the development agreement terms, determining the nature of the contract (work or development), assessing responsibility for project execution, scrutinizing authority over construction, analyzing profit or loss from the project, and evaluating ownership and control aspects over the land and project.

4. The Tribunal emphasized the need for a comprehensive assessment of various factors such as financial arrangements, risk elements, plot size, built-up area compliance, possession during construction, and fund-raising procedures. The AO was instructed to delve into the agreements related to the land and the approval granted by the local authority to ensure a thorough reconsideration of the deduction claim under Section 80IB(10).

5. Ultimately, the Tribunal allowed the Revenue's appeal for statistical purposes only, highlighting the importance of adhering to legal provisions and factual assessments in determining eligibility for deductions under Section 80IB(10). The case underscores the significance of ownership, control, and risk-bearing in housing project development for claiming tax benefits under the relevant provisions.