2008 (1) TMI 434 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80HHBA.
2. Interpretation of "execution" in the context of housing projects.
3. Role of consultancy and supervisory services in project execution.

Summary:

1. Deduction u/s 80HHBA:
The Revenue appealed against the CIT(A)'s order allowing deduction u/s 80HHBA amounting to Rs. 70,52,819. The AO had disallowed the deduction, arguing that the assessee's role was limited to providing consultancy and supervisory services, which did not qualify as "execution" of a housing project.

2. Interpretation of "execution" in the context of housing projects:
The assessee, engaged in engineering and technical consultancy for infrastructural projects, claimed that "execution" includes all activities necessary for project completion, such as survey, design, and engineering supervision. The AO contended that "execution" should be limited to physical construction activities. However, the CIT(A) and ITAT found that the assessee's role in providing engineering and technical inputs and supervising the contractor's day-to-day work was integral to the project's execution.

3. Role of consultancy and supervisory services in project execution:
The CIT(A) and ITAT referenced the Supreme Court's decision in Continental Construction Ltd. vs. CIT, which held that "execution" encompasses technical knowledge and services necessary for construction. The ITAT agreed with the CIT(A) that the assessee's role was an integral part of the project execution, thus qualifying for the deduction u/s 80HHBA.

Conclusion:
The ITAT upheld the CIT(A)'s order, allowing the deduction u/s 80HHBA, and dismissed the Revenue's appeal. The ITAT emphasized the importance of consistency, noting that the Revenue had accepted similar claims in previous years and for foreign projects under s. 80HHB.