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2013 (2) TMI 630 - HC - Income TaxDeduction u/s 80IB(10) - Housing project - HC uphold the order of ITAT in which ITAT directed the A.O. to look into the agreement entered into by the assessee with land owner and decide whether the assessee has in fact purchased the land for a fixed consideration from the land owner and assessee had developed the housing project at its own cost and risk involved in the project, in respect of the issue regarding deductions u/s. 80IB(10) r.w.s. 80IB(1) as claimed by the assessee.
Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961. 2. Requirement of land ownership for claiming deduction under Section 80IB(10). 3. Definition and implications of "works contract" in the context of Section 80IB(10). 4. Interpretation of Section 2(47) of the Income Tax Act and Section 53A of the Transfer of Property Act regarding ownership transfer. Detailed Analysis: 1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961: The central issue was whether the respondent assessee was eligible for the benefit under Section 80IB(10). Both CIT(Appeals) and the Tribunal had allowed the deduction under Section 80IB(10) read with Section 80IB(1). The Tribunal concluded that for deduction under Section 80IB(10), it is not necessary for the assessee to be the owner of the land. It also held that the assessee had acquired dominion over the land, developed the housing project at its own cost and risk, and thus qualified for the deduction. 2. Requirement of land ownership for claiming deduction under Section 80IB(10): The Revenue argued that ownership of the land is a prerequisite for claiming deduction under Section 80IB(10). The Tribunal, however, found that neither Section 80IB(10) nor any other related statutes required the developer to own the land. The Tribunal cited various dictionary definitions of "developer" to support that the term carries a broader meaning and does not necessitate ownership of the land. The Tribunal's decision was based on the understanding that the provision aimed to encourage housing development, and imposing an ownership requirement would be contrary to this objective. 3. Definition and implications of "works contract" in the context of Section 80IB(10): The Tribunal examined whether the assessee acted merely as a works contractor. It concluded that the assessee undertook the entire task of development, construction, and sale of housing units at its own risk and cost. The Tribunal referenced various judicial interpretations distinguishing a "contract for sale" from a "works contract." It emphasized that the substance and predominant object of the contract should be considered. The Tribunal found that the assessee was not merely executing a works contract but was engaged in the development of the housing project, thus qualifying for the deduction under Section 80IB(10). 4. Interpretation of Section 2(47) of the Income Tax Act and Section 53A of the Transfer of Property Act regarding ownership transfer: The Tribunal analyzed whether the assessee could be considered the owner of the land for the purposes of the Income Tax Act. It referred to Section 2(47)(v) and Section 53A, which deal with part performance of contracts and possession of property. The Tribunal found that the assessee had taken possession of the land and carried out construction, thus satisfying the conditions of ownership for the purposes of Section 80IB(10). It emphasized that for the limited purpose of claiming the deduction, the assessee could be deemed the owner of the land, even if the title had not formally transferred. Conclusion: The Tribunal upheld the assessee's eligibility for deduction under Section 80IB(10), emphasizing that ownership of the land was not a prerequisite and that the assessee's role went beyond that of a mere works contractor. The Tribunal's decision was consistent with the objective of encouraging housing development and aligned with judicial interpretations of related provisions. The appeal by the Revenue was thus dismissed, and the Tribunal's order was upheld.
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