2015 (10) TMI 1863 - AT - Income Tax

Non grant of deduction u/s.80IB(10) - Held that - It is appropriate to go through the agreements entered with the prospective buyers alongwith financial statements to see the details of investment made by assessee and decide the issue in the light of the judgment of Madras High Court in the case of Sanghvi & Doshi Enterprise 2014 (11) TMI 556 - MADRAS HIGH COURT . Accordingly, we remit the entire issue to the file of Assessing Officer with direction to examine whether the assessee made investment by itself, executed development work and carried out civil works, deployment of technical personal, plant and machinery, technical knowhow, expertise and financial resources before handing over the completed project to the owner of the flats. If it is so, then the assessee has to be treated as developer rather than contractor. In other words, the assessee would not be denied deduction u/s.80IB(10) if the contract involves design, development, financial involvement and technical knowhow from assessee s side itself. - Decided partly in favour of assessee for fresh consideration.

Summary

Issues:
Non-grant of deduction u/s.80IB(10) of the Income Tax Act for the assessment year 2009-2010.

Analysis:
The appeal was against the rejection of the assessee's claim for deduction u/s.80IB(10) by the Assessing Officer, who deemed the assessee a contractor, not a developer, based on the agreement with the purchaser. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the current appeal. The assessee argued being a developer undertaking construction of flats with various owners, not owning the land, citing relevant case laws. The Departmental Representative contended that the assessee was labeled a contractor in the agreement, thus ineligible for the deduction.

The Tribunal considered the arguments and previous judgments, emphasizing that to qualify as a developer under section 80IB(10), the assessee must undertake all risks from project commencement to completion, not necessarily owning the land. The Tribunal noted the need to review all agreements with buyers and financial statements to assess the assessee's investments and activities. Referring to the Madras High Court's decision in a similar case, the Tribunal directed the Assessing Officer to examine if the assessee invested, conducted development work, civil works, and utilized technical resources before project completion. If so, the assessee should be treated as a developer, ensuring deduction eligibility.

Consequently, the Tribunal remitted the issue to the Assessing Officer for a fresh evaluation, allowing the appeal partially for statistical purposes. The decision was pronounced on 19.6.2015 by the Appellate Tribunal ITAT CHENNAI, with detailed considerations of the assessee's status as a developer or contractor for the purpose of claiming deduction u/s.80IB(10) under the Income Tax Act for the relevant assessment year.