2018 (11) TMI 1885 - AT - Income Tax

Deduction claimed u/s 80IB(10) - AO disallowed the said deduction by holding that the assessee is merely an owner and not a developer and therefore not qualified for seeking deduction - HELD THAT - Section 80IB(10) of the Act clearly speaks about the deduction in the case of an undertaking developing and building housing project and such a development of housing project is not possible without contribution of land and specified pre-approved sanction. In the present case the process of acquisition of land by the assessee conversion from agricultural to non-agricultural seeking statutory approvals by the assessee for the purpose of construction of dwelling units/houses for weaker sections from the Government of Maharasthra appropriate plan sanctions and finally the grant of bare permission and licence to the developer to enter upon the property for construction of the said building was also falls within the ambit of undertaking of development and building housing projects . Therefore in this way we are of the considered view that the assessee is entitled for seeking deduction under section 80IB(10) of the Act. Therefore in view of the above discussion we set aside the order of the CIT(A) holding that the assessee is not entitled for deduction under section 80IB(10) of the Act. Whether assessee is not entitled to deduction u/s. 80IB in view inter alia of the provisions of Section 80AC wherein it is provided that the assessee is required to file return of income on or before the date specified in Section 139(1)? - As identical issue has already been decided in the case of Uma Developers ( 2016 (9) TMI 992 - ITAT MUMBAI wherein it was categorically held that the claim of the assessee cannot be disallowed under section 80IB(10) of the Act only on the ground that the return of income was filed beyond the period stipulated under section 139(1) of the Act in view of the provisions of Section 80AC of the Act as the same is beyond the scope of Section 139(1) of the Act the submission of return within time as specified under sub section (4) of section 139 has to be taken as sufficient compliance for the provision of the Income Tax Act 1961 as it was expounded that the sub section (1) and sub section (4) of section 139 have to be read together. Hence it is the inevitable conclusion that the return of income filed within the time specified in sub-section (4) has to be considered as having been filed within the time prescribed in sub section (1) of Section 139 of the Act - See TRUSTEES OF TULSIDAS GOPALJI CHARITABLE AND CHALESHWAR TEMPLE TRUST VERSUS COMMISSIONER OF INCOME-TAX 1993 (9) TMI 75 - BOMBAY HIGH COURT

Summary

Issues Involved:
1. Reasonable opportunity to present the case.
2. Disallowance of deduction under Section 80IB(10) of the Income Tax Act, 1961.
3. Eligibility for deduction under Section 80IB(10) based on the development agreement.
4. Timeliness of filing the return of income under Section 139(1) and its impact on deduction eligibility under Section 80IB(10).

Detailed Analysis:

1. Reasonable Opportunity to Present the Case:
- The assessee did not press ground No. 1 regarding the failure of the CIT(A) to provide a reasonable opportunity to present the case and demonstrate the written submissions made by the assessee. Accordingly, this ground was dismissed as not pressed.

2. Disallowance of Deduction under Section 80IB(10):
- The assessee claimed a deduction of Rs. 2,79,01,503 under Section 80IB(10) of the Income Tax Act, 1961, for the A.Y. 2011-12. The AO disallowed the deduction, holding that the assessee was merely an owner and not a developer, thus not qualified for the deduction.
- The AO’s decision was based on the Development Agreement between the assessee and M/s. Lalani Developers, which indicated that the assessee was not engaged in the business of construction or development of lands.
- The AO cited the Supreme Court decision in Liberty India vs. CIT, stating that the deduction under Section 80IB(10) is a profit-linked incentive, and the assessee did not derive profit from eligible business activities as required.

3. Eligibility for Deduction under Section 80IB(10) Based on the Development Agreement:
- The Tribunal examined the development activities undertaken by the assessee, which included acquiring land, obtaining necessary approvals, and entering into a Development Agreement with M/s. Lalani Developers.
- The assessee retained control over the property, only granting the developer a license to enter and construct, without transferring ownership or possession.
- The Tribunal found that the assessee’s activities fell within the ambit of "undertaking of development and building housing projects" as per Section 80IB(10).
- The Tribunal drew support from the Karnataka High Court’s judgment in CIT vs. Sharvanee Constructions and the ITAT Bangalore Bench decision in Abdul Khader vs. ACIT, which held that development activities, including obtaining sanctions and plan approvals, qualify for deduction under Section 80IB(10).
- The Tribunal concluded that the assessee was eligible for the deduction, setting aside the CIT(A)’s order.

4. Timeliness of Filing the Return of Income under Section 139(1):
- The Revenue’s Cross Objection argued that the assessee was not entitled to the deduction under Section 80IB due to the late filing of the return beyond the date specified in Section 139(1).
- The Tribunal noted that the AO did not raise this objection during the assessment, implying the issue was decided against the Revenue.
- The Tribunal referred to the Supreme Court’s decision in ITO vs. Tech Span India Pvt. Ltd. and the ITAT Mumbai Bench decision in ITO vs. Uma Developers, which held that a return filed within the time specified under Section 139(4) should be considered as filed within the time prescribed under Section 139(1).
- The Tribunal dismissed the Revenue’s Cross Objection, holding that the return filed within the time specified under Section 139(4) suffices for compliance with the provisions of the Income Tax Act, 1961.

Conclusion:
- The appeal filed by the assessee was partly allowed, granting the deduction under Section 80IB(10).
- The Cross Objection filed by the Revenue was dismissed, affirming that the return filed within the time specified under Section 139(4) meets the requirements for claiming the deduction.