2016 (1) TMI 348 - AT - Income Tax

Eligibility of deduction u/s. 80IB(10) - CIT(A) deleted the disallowance - Held that - CIT(A) has examined development agreement and observed that as per Clause 1, the possession of the property has been handed over the assessee. As per Clause 2, all materials required for carrying out development would be brought by the assessee. As per Clause 3, all the expenses would be borne by the assessee. Clause 10 authorizes the first authority to sell bungalow to any person. The revenue has not disputed the fact that the entire amount has been demonstrated by the assessee. The possession of the land was given to the assessee. The assessee incurred all cost and was liable for any risk or consequences. The assessee was also authorized to dispose of the sale of bungalow as per his own risk. The aforementioned observation of ld. CIT(A) is not contradicted by the Revenue by placing any contrary material on record. Hence it can be inferred from the facts placed before us that all risk and consequences were borne by the assessee. Under these facts the Assessing Officer was not justified in treating the assessee as merely a contractor. Law is well settled now by the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT ., that even if the developer of a project is not owner of the land but he bears all risk and consequences he cannot be denied deduction u/s.80IB(10) of the Act. The Assessing Officer has not pointed violation of any other condition(s) embodied u/s.80IB(10) of the Act under these facts. Therefore, in our view, the Assessing Officer was not justified in treating the assessee as merely a work contractor. We do not see any reason to interfere in the order of ld. CIT(A). - Decided in favour of assessee

Summary

Issues Involved:
- Eligibility of deduction u/s.80IB(10) for the appellant.
- Interpretation of the development agreement and ownership of land.
- Application of the conditions of section 80IB(10) by the Assessing Officer.
- Decision of the ld. CIT(A) in allowing the claim for deduction.

Analysis:

Eligibility of deduction u/s.80IB(10):
The appellant claimed a deduction u/s.80IB(10) amounting to a specific sum. The Assessing Officer disallowed the claim, contending that the appellant was not a developer and builder as required by the provisions of the section. The AO argued that the appellant was merely a contractor for construction under a development agreement with the landowner and had not sold any units to purchasers. However, the ld. CIT(A) allowed the claim by referring to a previous decision and the appellant's investment in the land.

Interpretation of the development agreement and land ownership:
The ld. CIT(A) examined the development agreement and found that the appellant had practically purchased the land and developed it at its own cost and risk. The possession of the property was handed over to the appellant, who bore all expenses and was authorized to sell the bungalow. The ld. CIT(A) concluded that the appellant fulfilled the tests laid down by a previous ITAT decision and allowed the deduction under section 80IB(10).

Application of conditions by the Assessing Officer:
The Assessing Officer disallowed the deduction based on the appellant's role as a contractor and not meeting the conditions of section 80IB(10). However, the ld. CIT(A) disagreed, stating that the appellant had invested in the land, borne all risks, and fulfilled the necessary criteria for the deduction.

Decision of the ld. CIT(A) in allowing the claim:
The ld. CIT(A) observed that the appellant had paid the land consideration, possessed the land, and bore all costs and risks associated with the project. Referring to a jurisdictional High Court judgment, the ld. CIT(A) concluded that the appellant, even if not the landowner, was entitled to the deduction under section 80IB(10). The Tribunal affirmed the ld. CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the judgment focused on the eligibility of the appellant for deduction under section 80IB(10), emphasizing the appellant's investment, ownership, and risk-bearing in the project. The decision highlighted the importance of fulfilling the statutory conditions and interpreting agreements to determine entitlement to tax benefits.