2017 (2) TMI 1124 - AT - Income Tax

Disallowance of deduction u/s 80IB(10) - development of commercial property by Raj Chandra Commercial Co-operative Housing Society limited was a sham and the artificial bifurcation of residential and commercial project was only to claim deduction under section 80IB(10) - Held that - As decided in the case of Shri Umeya Corporation vs. ITO 2015 (9) TMI 108 - ITAT AHMEDABAD it is not even the case of the Assessing Officer that the assessee did not assume the entrepreneurship risks of the housing project. The format of arrangements for transfer of built up unit and business model of the assessee for that purpose is not decisive factor for determining eligibility of deduction under section 80 IB (10) but that is all that the authorities below have found fault with. The objections of the authorities below are thus devoid of legally sustainable merits. In view of the above discussions and bearing in mind entirety of the case we are of the considered view that the stand of the authorities below in declining deduction under section 80IB (10) and on the facts of this case is incorrect. We vacate the same and direct the Assessing Officer to delete the disallowance. As regards the points raised by the learned CIT(A) with regard to commercial construction by some other society it is difficult to understand and as to what it has to do with the present claim. The approval is given to the housing project and the assessee has claimed deduction in respect of projects of the same. The objections taken by the learned CIT(A) are purely on the field of surmises and conjectures. Thus reject the same. Thus deduction under section 80IB(10) allowed - Decided in favour of assessee

Summary

Issues:
Challenge to correctness of order dated 6th January, 2011, regarding disallowance of deduction under section 80IB(10) for the assessment year 2007-08.

Analysis:
1. The appellant contested the disallowance of deduction under section 80IB(10) amounting to ?34,76,223. The Assessing Officer noted the appellant's role as a contractor in a development agreement with a housing society, leading to the denial of the deduction.

2. The Assessing Officer concluded that the appellant did not qualify as both developer and builder as required by section 80IB(10) due to not owning the land and being a contractor in the project. The appellant's involvement was deemed that of a mere builder, not fulfilling the primary requirement of developing and building a housing project.

3. The appellant appealed to the CIT(A), who upheld the disallowance, citing the development of commercial property by the housing society as a sham. However, the appellant argued that entrepreneurship risk in project execution, rather than land ownership, is crucial for eligibility under section 80IB(10).

4. The Tribunal referred to a Division Bench order supporting the appellant's position that entrepreneurship risk, not land ownership, determines eligibility for the deduction. The Tribunal emphasized that assuming entrepreneurship risk qualifies an assessee for the deduction, regardless of land ownership or specific business models.

5. The Tribunal dismissed the Assessing Officer's objections, finding them legally unsustainable, and directed the deletion of the disallowance. The Tribunal rejected the CIT(A)'s objections regarding commercial construction by another society, deeming them speculative.

6. Consequently, the Tribunal upheld the appellant's plea and directed the Assessing Officer to delete the disallowed deduction under section 80IB(10) amounting to ?34,76,223, as the appellant satisfied the entrepreneurship risk criterion for eligibility.

This detailed analysis of the judgment highlights the issues, arguments, and the final decision rendered by the Tribunal in favor of the appellant regarding the disallowance of deduction under section 80IB(10).