2018 (1) TMI 977 - AT - Income Tax

Deduction u/s.80IB(10) - DR submitted that the assessee is not engaged in development of a housing project and it is Brahma Skyline (JV) that has developed the housing project and not the assessee who had only provided the land to the joint venture formed i.e. Brahma Skyline JV - Held that - We concur with the findings of Commissioner of Income Tax (Appeals) in holding that the assessee was not merely contributor of the land but was engaged in the development of housing project. That apart, it is a well settled law that owner of the land as well as developer of the land both are eligible for claiming deduction u/s. 80IB(10) in respect of housing project where the owner contributes the land and the other party develops the housing project. In the present case, as is emanating from records the assessee has also contributed towards the development of housing project. Apart from contributing land, the assessee was purportedly instrumental in removing of encumbrances from land and marketing of flats. Thus, the assessee is also eligible for claiming deduction u/s. 80IB(10) of the Act. Benefit of section 80IB(10) - whether can only be granted to an AOP and not to the assessee - Held that - No merit in this contention of the Revenue. The assessee and M/s. Brahma Builders, the two constituents of Brahma Skyline JV had agreed to share gross receipts of the joint venture in the ratio of 32% and 68% and not the net profits. The joint venture was merely used as conduit to facilitate execution of housing project work, the actual work was done by the two members of JV. All the expenditure for the execution of project was incurred by the individual members and not the joint venture. Therefore, the deduction was rightly claimed by the members - Eligibility of deduction u/s. 80IB(10) to the assessee confirmed - Decided against revenue

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
2. Role of the assessee as a builder and developer.
3. Claim of deduction by the assessee versus the Joint Venture (JV).

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10) of the Income Tax Act:
The primary issue is whether the assessee, a builder and developer, is eligible for deduction under Section 80IB(10). The assessee filed its return declaring total income as Nil after claiming this deduction. The Assessing Officer (AO) denied the deduction on the grounds that the assessee only provided land while the construction was carried out by Brahma Builders. The Commissioner of Income Tax (Appeals) overturned this decision, allowing the deduction based on various precedents that support the eligibility of landowners for such deductions.

2. Role of the Assessee as a Builder and Developer:
The AO argued that the assessee did not fulfill the role of a builder and developer, as it only provided land for the housing project. However, the Commissioner of Income Tax (Appeals) found that the assessee did indeed take part in the development of the housing project by constructing flats for the members of Kausar Baug Co-op. Housing Society and subsequently developing the remaining land in a joint venture with Brahma Builders. The Tribunal agreed with this finding, emphasizing that the assessee was actively involved in the project and bore responsibilities such as removing encumbrances and marketing flats.

3. Claim of Deduction by the Assessee versus the Joint Venture (JV):
The Revenue contended that the deduction under Section 80IB(10) should be claimed by the JV rather than the individual members. The Tribunal found no merit in this argument, noting that the JV was merely a conduit for the project execution, with actual work and expenses being handled by the individual members. The Tribunal cited the Karnataka High Court decision in Commissioner of Income Tax Vs. Shravanee Constructions, which supports the eligibility of both landowners and developers for such deductions. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision that taxing the same income in the hands of the JV would result in double taxation, which is not permissible.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the eligibility of the assessee for deduction under Section 80IB(10). It was established that the assessee was not merely a land contributor but actively engaged in developing the housing project. The Tribunal also rejected the contention that the deduction should be claimed by the JV, affirming that the individual members were rightfully entitled to claim the deduction.

Order:
The appeal of the Revenue is dismissed. The findings of the Commissioner of Income Tax (Appeals) on the eligibility of deduction under Section 80IB(10) to the assessee are confirmed. The order was pronounced on Wednesday, January 10, 2018.