2018 (3) TMI 1979 - AT - Income Tax

Deduction u/s. 80IB (10) - Denial of deduction as assessee treated as contractor of the unit owner - there were two separate agreements for sale of plot and construction on the plot and there was no sale of constructed house and thus assessee had merely acted as a contractor of the unit owner in respect of construction of house and therefore not entitled to deduction u/s. 80IB(10) of the Act because the sub section does not apply to a developer of a plotting scheme or a contractor - HELD THAT - In the present case the assessee by cutting land into independent plots on different sized sold the land thereafter by entering into an independent construction agreement with individual plot owners undertook construction work. AO held that after selling plots the assessee seized to having a status of developer of the project and therefore became ineligible for claiming deduction u/s. 80IB(10) of the Act. But these contentions of the AO does not stand on the merits in view of the decisions of Hon ble Jurisdictional High Court as respectfully noted above. The conclusion drawn by the ld. CIT(A) is quite correct and we are unable to see any perversity or any other valid reason to interfere with the same. Thus the same is confirmed. Accordingly sole ground of the Revenue being devoid of merits is dismissed.

Summary

Issues:
Challenge to order of CIT(A) on disallowance of deduction u/s. 80IB(10) for AY 2009-10.

Analysis:
The Revenue appealed against the CIT(A)'s order deleting disallowance of Rs.1,52,37,149 claimed as deduction u/s. 80IB(10) of the IT Act for the assessment year 2009-10. The Revenue contended that the assessee was not entitled to the deduction as there were separate agreements for sale of plot and construction, making the assessee a contractor, not eligible for the deduction. The Departmental Representative argued in support of the assessment order, urging the Tribunal to set aside the CIT(A)'s decision.

The Assessee's Representative cited precedents from the Hon'ble Gujarat High Court and ITAT Ahmedabad to support the claim that ownership of land was not a prerequisite for claiming deduction u/s. 80IB(10) of the Act. The representative highlighted decisions in cases such as CIT vs. Vishal Construction Company and CIT vs. Mahadev Developers to support the contention that ownership of land was not a condition precedent for developing a housing project and claiming the deduction.

Upon careful consideration of the arguments, the Tribunal analyzed the CIT(A)'s order and various decisions of the Hon'ble Gujarat High Court. The Tribunal noted that the High Court rulings established that ownership of land was not a precondition for claiming the deduction u/s. 80IB(10) of the Act. Referring to the ITAT decisions in similar cases, the Tribunal held that if an assessee sold land separately and undertook construction work on the land under separate contracts, the assessee qualified as a developer, making them eligible for the deduction.

In this case, the assessee sold land in independent plots and entered into separate construction agreements with individual plot owners for construction work. The AO contended that after selling the plots, the assessee lost the status of a developer, rendering them ineligible for the deduction. However, the Tribunal found the AO's contentions unsubstantiated in light of the High Court decisions. The Tribunal upheld the CIT(A)'s conclusion, finding no reason to interfere with it, and dismissed the Revenue's appeal, confirming the allowance of the deduction u/s. 80IB(10) for the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision to allow the deduction u/s. 80IB(10) for the assessee for the assessment year 2009-10.