2017 (5) TMI 63 - AT - Income Tax

Claim for deduction u/s. 80IB(10) - Held that - There can hardly be any dispute that ownership of the land in question is not a valid criteria to disallow the impugned deduction claim as held in CIT vs. Radhe Developers case (2011 (12) TMI 248 - GUJARAT HIGH COURT ). Assessing Officer is fair enough in admitting that the assessee had been given right of possession over the project land and it had exercised all rights of admission of prospective buyers collection of consideration as well as finance arrangements. It has come on record that the assessee had placed the above development agreement before the Assessing Officer as well as the CIT(A). CIT(A) finds in lower appellate order that it is the assessee developer who has incurred total expenditure and received the sale consideration. We afforded ample opportunity to the Revenue to rebut this clinching finding by reading the corresponding terms in above development agreement. We notice that the same does not even form part of the case records. This clinching factor makes us to conclude that the learned CIT(A) has rightly held the assessee to have undertaken all risk and reward in developing the abovestated residential project so as to be eligible for Section 80IB(10) deduction in question. - Decided against revenue

Summary

Issues Involved:
1. Eligibility for Section 80IB(10) deduction under the Income Tax Act, 1961.
2. Classification of the assessee as a developer or a contractor.
3. Ownership and development rights over the land in question.

Detailed Analysis:

1. Eligibility for Section 80IB(10) Deduction:
The primary issue revolves around whether the assessee is entitled to claim deductions under Section 80IB(10) of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the deductions for the assessment years 2008-09 and 2009-10, contending that the assessee did not meet the necessary conditions. The CIT(A) reversed this decision, asserting that the assessee fulfilled all the eligibility criteria for the deduction. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had undertaken all risks and rewards in developing the residential project, thereby qualifying for the deduction.

2. Classification as Developer or Contractor:
The AO classified the assessee as a contractor rather than a developer, citing that the land was owned by Shri Natvarbhai Ishwarbhai Patel, and the assessee merely carried out construction activities. The AO supported this classification by noting that the landowner bore the expenses for basic infrastructure. However, the CIT(A) and the Tribunal found that the assessee had dominant control over the land and was responsible for the entire development process, including planning, obtaining permissions, and incurring all expenditures. The Tribunal referenced the Hon'ble Gujarat High Court's decision in the case of Radhe Developers, which established that ownership of the land is not a criterion for denying Section 80IB(10) deductions.

3. Ownership and Development Rights:
The AO argued that since the project approval and building use permission were not in the name of the developer, the assessee could not claim the deductions. The CIT(A) and the Tribunal disagreed, stating that the development agreement granted the assessee substantive development rights over the land. The Tribunal noted that the assessee had entered into development agreements and agreements to sell, acquiring all substantive rights and responsibilities for the development project. The Tribunal further observed that the landowner's role was limited to cooperating with the assessee and executing necessary documents, while the assessee managed the development and sale of the housing units.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming that the assessee was entitled to claim deductions under Section 80IB(10) for both assessment years. The Tribunal concluded that the assessee was a developer, not a contractor, and had met all the conditions required for the deduction, including undertaking all risks and rewards associated with the housing project. The decision was pronounced in the open court on April 28, 2017.