2016 (2) TMI 489 - AT - Income Tax

Claim of deduction u/s.80-IB (10) - Revenue has rejected the claim of the assessee under Section-80IB(10) of the Act only for the reason that, (a) the appellant was not the owner of the land, (b) the building plan approval and completion certificate were not in the name of the appellant, (c) M/s.Ishwaraylakshmi Properties Pvt. Ltd., on who s name the building plan approval & completion certificate obtained was a loss making company having carried forward losses and therefore would not be worthwhile to claim the benefit of Section-80IB(10) of the Act, etc. - Held that - The assessee had undertaken to complete the project with all risks attached to the project and accordingly it is eligible to claim the reward also. It is pertinent to mention here that the entire project is developed as Joint Venture between the owners of the land and the assessee firm. The owners of the land and the assessee firm have their respective roles in the development of the project jointly, sharing the risk involved in the project and also executing the project. Further, it is evident that the entire project is jointly developed by both the parties ie., the owners of the land and the assessee firm on the land extending more than one acre(106 cents) as stipulated under the Act. No other associate concern of the assessee has claimed the benefit of Section-80IB (10) of the Act on the same project as the entire profit was declared in the hands of the assessee firm and deduction claimed accordingly. As the assessee has executed the project undertaking the risks and rewards and therefore, the claim of Section-80IB(10) of the Act is justified. Needless to mention that the appellant need not be the landowner for claiming deduction uls.80-IB(10) of the Act and further the approvals or the completion certificate need not be in the name of the appellant who is the developer of the property as held by the decisions cited by the assessee supra. Hence, we hereby direct the Ld. Assessing Officer to grant deduction U/s.80IB (10) of the Act to the assessee. - Decided in favour of assessee

Issues Involved:
1. Denial of deduction under Section 80-IB(10) of the Income Tax Act.
2. Ownership of land and eligibility for deduction.
3. Approval and completion certificates not in the name of the appellant.
4. Examination of the joint venture agreement and its implications.
5. Verification of books of accounts and the role of M/s. Ishwaraylakshmi Properties Pvt. Ltd.
6. Revenue's observations and legal precedents supporting the appellant's claim.

Issue-Wise Detailed Analysis:

1. Denial of Deduction under Section 80-IB(10):
The core issue is the denial of the appellant's claim for deduction under Section 80-IB(10) by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT (A)]. The AO denied the benefit on the grounds that the appellant was not the landowner, the building plan approval and completion certificate were not in the appellant's name, and the project was allegedly developed by M/s. Ishwaraylakshmi Properties Pvt. Ltd., which was a loss-making entity.

2. Ownership of Land and Eligibility for Deduction:
The appellant argued that ownership of the land is not a prerequisite for claiming deduction under Section 80-IB(10). The land was owned by four individuals who entered into a joint venture agreement with the appellant for developing residential apartments. The appellant cited judicial precedents, including CIT v. Radhe Developers and CIT v. Moon Star Developers, which held that developers need not be landowners to claim the deduction.

3. Approval and Completion Certificates:
The AO and CIT (A) contended that since the building plan approval and completion certificate were in the name of M/s. Ishwaraylakshmi Properties Pvt. Ltd., the appellant was not eligible for the deduction. The appellant countered that the approvals and certificates were obtained in the name of the power of attorney holder, M/s. Ishwaraylakshmi Properties Pvt. Ltd., on behalf of the landowners, and the appellant was the actual developer of the project.

4. Examination of Joint Venture Agreement:
The joint venture agreement dated 21st December 2005 between the landowners and the appellant outlined the roles and responsibilities of both parties. The agreement specified that the appellant would develop the residential flats, bear the entire project cost, and share the constructed area with the landowners. The Tribunal noted that the appellant undertook the project with all associated risks and rewards, making it eligible for the deduction.

5. Verification of Books of Accounts:
The AO observed that the appellant did not produce books of accounts, bills, and vouchers to verify the construction activities. However, the AO accepted the profit declared by the appellant, indicating that the books of accounts were not rejected. The Tribunal emphasized that the appellant had the right to arrange its affairs to maximize benefits under the law, and the joint venture agreement supported the appellant's claim.

6. Revenue's Observations and Legal Precedents:
The Revenue's primary objections were based on the ownership of the land and the name on the approval and completion certificates. The Tribunal referred to legal precedents, including decisions from the Gujarat High Court and the Jurisdictional High Court, which supported the appellant's eligibility for deduction under Section 80-IB(10) even if the land was not owned by the developer and the approvals were in the name of the landowners or their power of attorney holder.

Conclusion:
The Tribunal concluded that the appellant had executed the project, undertaken the risks, and was eligible for the rewards. The appellant satisfied the conditions of Section 80-IB(10), and the deduction was justified. The Tribunal directed the AO to grant the deduction to the appellant.

Order:
The appeal of the assessee was allowed, and the AO was instructed to grant the deduction under Section 80-IB(10). The order was pronounced on 18.12.2015.

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