2013 (8) TMI 142 - HC - Income Tax

Deduction u/s 80IB(10) - Assessee not owner of land - Tribunal deleted disallowance - Held that - Assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk - Supreme Court dismissed decision appeal in case of CIT v. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT - Therefore, Decided against Revenue.

Summary

Issues:
1. Disallowance of deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Entitlement to deduction under Section 80IB(10) despite not owning the land.

Analysis:
1. The primary issue in this case revolved around the deduction claimed by the assessee under Section 80 IB of the Income Tax Act, 1961. The Revenue contested this claim on the basis that the assessee was not the rightful owner of the land utilized for the housing project development. The Tribunal upheld the assessee's claim, concurring with the CIT(Appeals) and drawing support from its own decision in the case of CIT v. Radhe Developers.

2. The Court examined the terms of the development agreements and sale agreements between the parties involved in the Radhe Developers case. It was observed that the landowner had received consideration and granted development permission to the assessee, transferring possession of the land. The assessee was responsible for the entire development process, including construction, obtaining approvals, and financial arrangements. The assessee bore the risk and invested funds in the project, while the landowner received a fixed price for the land, being shielded from risks. The Court concluded that the assessee had full control over the land and assumed all responsibilities and risks associated with the project.

3. The Counsel for the Revenue acknowledged the Court's detailed analysis in the Radhe Developers case, emphasizing the comprehensive control and risk-bearing role undertaken by the assessee in the development project. Despite the Revenue's challenge and subsequent dismissal of the case by the Supreme Court, the present appeal contesting the deduction under Section 80IB(10) was also dismissed by the High Court.

4. In summary, the judgment reaffirmed the principles established in the Radhe Developers case regarding the entitlement to deductions under Section 80IB(10) of the Income Tax Act, emphasizing the significance of control, responsibilities, and risks assumed by the party claiming the deduction in the development projects involving land ownership disputes.