2014 (1) TMI 914 - AT - Income Tax

Deduction u/s 80IB(10) of the Act Works contract - Held that - The assessee has to appoint contractor and other agencies for execution of work - it has to appoint architect and get the plan prepare from them and get it approved for the local authority - The developers are also entitled to enroll the members to receive money from them to issue receipts from them and to give necessary documents and other certificates to members to obtaining loans - the developer is entitled to develop the said land and for that he has to bare all expenses for construction and for obtaining other permission etc. - The details of payment to the landlord is also appearing on the asset side of balance sheet - payment to the land lord is not an essential condition for granting deduction u/s 80IB of the Act - There is no such mention in the Act that entire construction of the land should be paid to the land lord. The decision in Income-tax Officer, Ward-2(5), Ahmedabad Versus Shakti Corporation 2008 (11) TMI 436 - ITAT AHMEDABAD followed - The land owners were entitled to a fixed consideration of Rs. 11 per square feet and the housing project was to be developed by the assessee at his own cost and risk - Assessee had full control over development of land and sale of tenements - CIT(A) has rightly allowed the deduction u/s 80IB(10) of the Act to the assessee Decided against Revenue.

Summary

Issues:
- Appeal against deduction allowed under section 80IB(10) of the IT Act.
- Interpretation of the development agreement and conditions for claiming deduction.

Analysis:
1. The revenue filed an appeal against the order of Ld. CIT(A) allowing a deduction of Rs. 10,47,808 claimed by the assessee under section 80IB(10) of the IT Act. The assessee, engaged in construction as a developer and builder, had declared nil income after claiming the deduction, but the AO determined the total income at Rs. 12,51,458. The Ld. CIT(A) partly allowed the appeal, leading to the revenue's appeal before the ITAT.

2. The ITAT, in a previous order, directed the AO to ascertain if the assessee had control over the project and developed the land at their own cost and risks. In the subsequent assessment proceedings, the assessee provided details of the development agreement, highlighting responsibilities such as appointing contractors, architects, and obtaining necessary approvals. The assessing officer, however, disallowed the claim under section 80IB(10) due to the inability to understand Gujarati documents submitted by the assessee.

3. The assessee, before the Ld. CIT(A), presented the development agreement specifying the land details, possession, responsibilities, and entitlements under the agreement. The CIT(A) considered the agreement and concluded that the assessee fulfilled the conditions for claiming the deduction under section 80IB(10) as per the decision in the case of M/s Shakti Corporation.

4. The ITAT upheld the CIT(A)'s decision, noting that the assessee had control over the land development and sale, as per the terms of the development agreement. The ITAT found that the conditions outlined in the Shakti Corporation case were met, justifying the allowance of the deduction under section 80IB(10) to the assessee. Consequently, the revenue's appeal was dismissed, affirming the CIT(A)'s order.

In conclusion, the judgment centered on the interpretation of the development agreement and the fulfillment of conditions for claiming a deduction under section 80IB(10) of the IT Act. The ITAT's decision aligned with the terms of the agreement and the criteria established in the Shakti Corporation case, leading to the dismissal of the revenue's appeal.