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2018 (11) TMI 1885 - AT - Income Tax


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 ?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.

 

 

 

 

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