2017 (5) TMI 1420 - AT - Income Tax

Deduction u/s 80IB(10) - whether the assessee is a developer - assessee was not the owner of the land on which the project was constructed and approval by the local authority was not granted to the assessee but to the land owner - Held that - The business model adopted by the assessee does not vitiate the claim of deduction under section 80IB(10) but then the Assessing Officer has primarily declined the deduction with that basic approach. There is no dispute regarding assessee having taken the entrepreneurial risk and acted as an entrepreneur rather than as a contractor and that is what is relevant. In view of the above discussions as also bearing in mind entirety of the case we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.

Summary

Issues:
Challenge to correctness of order under section 143(3) for assessment year 2010-11 regarding deduction under section 80IB(10).

Analysis:
The Assessing Officer challenged the order granting deduction under section 80IB(10) to the assessee, contending that the assessee did not own the land on which the housing project was built. The CIT(A) reversed the Assessing Officer's decision based on a previous judgment in the assessee's favor for the same project. The ITAT, after considering the legal position and relevant facts, found no infirmity in the CIT(A)'s decision. The ITAT noted that the ownership of land is not a mandatory condition for claiming deduction under section 80IB(10) as long as the assessee bears the entrepreneurial risk. The ITAT referred to a judgment by the jurisdictional High Court emphasizing that the entrepreneurship risk, not land ownership, is crucial for eligibility under section 80IB(10).

The ITAT highlighted that the entrepreneurship risk taken by the assessee in executing the project is the determining factor for claiming deduction under section 80IB(10). The ITAT emphasized that the business model adopted by the assessee does not affect the eligibility for deduction as long as the entrepreneurial risk is assumed. The ITAT found the objections raised by the authorities below regarding the business model of the assessee to be legally unsustainable. Consequently, the ITAT directed the Assessing Officer to delete the disallowance of deduction under section 80IB(10) and vacate the stand taken by the authorities below.

In conclusion, the ITAT dismissed the appeal and upheld the CIT(A)'s decision to grant the deduction under section 80IB(10) to the assessee. The ITAT emphasized that the entrepreneurial risk assumed by the assessee, rather than the ownership of land or the business model, is the key factor in determining eligibility for the deduction. The ITAT's decision was based on the principle that as long as the assessee bears the entrepreneurial risk in developing and constructing housing projects, they are entitled to claim the deduction under section 80IB(10).