2024 (8) TMI 171 - AT - Income Tax

Deduction u/s 80IB(10) - claim denied as assessee has not developed a housing project but he has simply constructed houses owned by buyers in whose favour the sale deed was executed by the assessee prior to the construction of the houses - HELD THAT - Mere construction of the Colony Road and other facilities will not change the project of developing residential plots into a housing project. Once the plots of land were sold then the assessee has lost his status of owning the project much less the development of housing project unless some contrary is brought on record. Therefore, this is requires to furnish the evidence to substantiate the claim that the sale deeds were executed only to facilitate the buyer to take loan from banks/financial institutions. Completion certificate - This issue is pending adjudication before the Hon ble Supreme Court in case of Global Reality decided against the assessee 2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT and further appeal is pending adjudication before the Hon ble Supreme Court. It is also brought to the notice of the Bench that operation of the judgment of Hon ble jurisdictional High Court has been stayed by the Hon ble Supreme Court. Accordingly in the facts and circumstances of the case where one of the issue is pending adjudication before Hon ble Supreme Court and other requires fresh adjudication after verification and examination of the supporting evidence to be filed by the assessee the matter is set aside to the record of the AO for afresh adjudication after proper verification and examination of the supporting evidences if any to be filed by the assessee to show that the sale deed of plots were executed only with a view to facilitate the buyers to take loans from the banks. Further the issue of completion certificate has to be decided as per outcome of the judgment of Hon ble Supreme Court. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80IB(10).
2. Compliance with conditions under Section 80IB(10) for Phase-I of the housing project.
3. Ownership of land and developer vs. contractor status.
4. Requirement of completion certificate for the housing project.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10):
The primary issue is the disallowance of the deduction of Rs. 67,30,612 under Section 80IB(10) by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that the CIT(A) failed to appreciate the binding order of the Honourable ITAT, Indore, which had previously decided in favor of the assessee for the same project for A.Y. 2010-11. The assessee contended that the project met all conditions prescribed under Section 80IB(10) for Phase-I, and the deduction should be allowed even if Phase-II could not be completed due to legal disputes.

2. Compliance with Conditions under Section 80IB(10) for Phase-I:
The assessee claimed that Phase-I of the project was completed and met all conditions, including the area of land required under Section 80IB(10). The CIT(A) and the Assessing Officer (AO) denied the deduction, arguing that the completion should have been for the whole project (Phase-I & Phase-II). The Tribunal noted that the assessee had obtained a completion certificate for Phase-I and argued that it should be treated as a "stand-alone" project. The Tribunal referenced several cases supporting the treatment of phases as independent projects for deduction purposes.

3. Ownership of Land and Developer vs. Contractor Status:
The AO and CIT(A) treated the assessee as a contractor rather than a developer, primarily because the assessee sold plots to buyers and then constructed houses on those plots. The Tribunal highlighted that the section does not specify the stage at which property transfer should occur. The assessee argued that the sale deeds were executed to facilitate buyers in obtaining loans, and possession letters were provided as evidence. The Tribunal emphasized that the AO did not provide substantial evidence to classify the assessee as a contractor.

4. Requirement of Completion Certificate for the Housing Project:
The AO disallowed the deduction partly because the assessee did not furnish a proper completion certificate from the Municipal authority. The Tribunal noted that this issue is pending adjudication before the Hon'ble Supreme Court in a related case. The Tribunal set aside this issue for fresh adjudication by the AO, pending the Supreme Court's decision.

Conclusion:
The Tribunal found that the AO and CIT(A) had not adequately considered the evidence and arguments presented by the assessee. The Tribunal set aside the matter to the AO for fresh adjudication, emphasizing the need for proper verification and examination of supporting evidence. The appeal was allowed for statistical purposes, pending the outcome of the Supreme Court's judgment on the completion certificate issue.