2017 (7) TMI 1181 - HC - Income Tax

Deduction u/s 80IB(10) - reason for holding assessee as the developer - whether specific development agreement entered into by assessee merely as land owner with another developer to execute and construct the flats on the land of the assessee? - Held that - As decided in assessee s own case upto 31/3/2005 (subject to fulfilling other conditions), deduction under Section 80IB (10) is allowable to housing projects approved by the logal authority having residential units with commercial user to the extent permitted under DC Rules/Regulations framed by the respective local authority. Where the commercial user permitted by the local authority is within the limits prescribed under the DC Rules/Regulation, the deduction under Section 80IB(10) upto 31.3.2005 would be allowable irrespective of the fact that the project is approved as housing project or residential plus commercial - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the Tribunal was justified in holding the assessee as the developer and thereby allowing deduction u/s 80IB(10).
2. Whether the Tribunal was justified in allowing deduction u/s 80IB(10) when the assessee neither undertook development and construction of the housing project nor furnished the completion certificate.
3. Whether the Tribunal's findings were perverse, contrary to the record, and untenable in law.

Issue-wise Detailed Analysis:

1. Justification of Holding Assessee as Developer:
The Tribunal held the assessee as the developer, allowing deductions u/s 80IB(10). The assessee entered into a development agreement with M/s. Unique Builder and Developer (Reality) due to a lack of resources. The Tribunal and CIT(A) reversed the Assessing Officer's findings, allowing the deduction claimed by the assessee. The Tribunal relied on the facts that the assessee undertook significant activities such as obtaining land conversion, sanctioning plans, constructing approach roads, and retaining rights to supervise and transfer flats. The Tribunal referenced the case of M/s Indo Continental Hotels & Resorts Ltd., where similar circumstances led to the allowance of deductions. The Tribunal concluded that the assessee's involvement in the project justified the deduction.

2. Deduction Without Development and Construction or Completion Certificate:
The Tribunal allowed the deduction despite the assessee not furnishing the completion certificate. The CIT(A) noted that the deduction for previous years (AY 2010-11 and 2011-12) was allowed on similar grounds. The CIT(A) observed that the flats in question were allotted before the provisions of clause (e) and (f) of section 80IB(10) came into force, thus no violation occurred. The Tribunal upheld this view, emphasizing that all approvals and permissions were in the name of the assessee, making the deduction valid.

3. Tribunal's Findings:
The Tribunal's findings were deemed consistent with previous decisions and judicial precedents. The Tribunal referenced the decision in the assessee's own case for previous assessment years, where similar grounds were raised and decided in favor of the assessee. The Tribunal also cited the Karnataka High Court's judgment in Shravanee Construction, which supported the eligibility for deduction even when another agency was involved in construction. The Tribunal's decision was aligned with the legislative purpose of section 80IB(10), and no contrary binding precedent was presented by the revenue.

Conclusion:
The Tribunal's decision was upheld, and the issues were answered in favor of the assessee. The appeals were dismissed, and the judgment was consistent with previous rulings and judicial interpretations of section 80IB(10).