2013 (7) TMI 8 - AT - Income Tax

Deduction u/s. 80IB denied - as per AO assessee is not owner of the land on which he has claimed the deduction of business income - assessee s submitted that there is no requirement of ownership of land for claiming the deduction u/s. 80IB(10) as assessee fulfills all the conditions mentioned in the Act for claiming deduction - CIT(A) allowed the claim - Held that - As during the appellant proceeding CIT(A) after going through the agreement for development, found that assessee was de facto owner of the land and assessee had full freedom to develop the plot in the manner he desired. He had also undertaken the entire task of development, construction and sale of the housing units to be located on the land being developed by him. The assessee had taken financial risk of developing the project as the investment in purchasing the land in the name of the society was also made by the assessee. The assessee was enrolling the members, receiving the contributions and the price of the unit was also decided by the assessee. All these activities of the assessee show that the profit as well as loss would have accrued to the assessee only. Thus CIT(A) has rightly held that the assessee was entitled for deduction u/s. 80IB(10) following the decision of Gujarat High Court in case of Radhe Developers and Others 2011 (12) TMI 248 - GUJARAT HIGH COURT . Revenue s appeal is dismissed.

Summary

Issues:
1. Disallowance of deduction u/s. 80IB(10) of the Income Tax Act based on ownership of land.
2. Interpretation of conditions for claiming deduction u/s. 80IB(10) of the Act.
3. Application of the decision in the case of Radhe Developers in determining eligibility for deduction.

Issue 1: Disallowance of deduction u/s. 80IB(10) based on ownership of land:
The Assessing Officer disallowed the assessee's claim for deduction u/s. 80IB(10) of the Act due to the lack of ownership of the land on which the project was developed. The assessee contended that ownership of land was not a prerequisite for claiming the deduction under this section. The assessee argued that all other conditions stipulated in the Act for claiming the deduction were fulfilled. The ld. CIT(A) examined the agreement for development and found that the assessee was the de facto owner of the land, having undertaken the entire process of development, construction, and sale of housing units on the land. The CIT(A) noted that the assessee bore the financial risk of the project, including the investment in purchasing the land. Considering these factors, the CIT(A) concluded that the assessee was entitled to the deduction u/s. 80IB(10) of the Act, in line with the decision of the Gujarat High Court in the case of Radhe Developers & Others. The Tribunal upheld the CIT(A)'s decision, emphasizing the factual circumstances showing the assessee's ownership-like control over the project.

Issue 2: Interpretation of conditions for claiming deduction u/s. 80IB(10) of the Act:
The assessee contended that all necessary conditions for claiming deduction u/s. 80IB(10) of the Act were fulfilled. These conditions included deriving profit from the housing project, approval by local authorities, commencement of development after a specific date, completion within the prescribed timeline, minimum plot size, maximum built-up area for residential units, audit of accounts, and limitations on commercial establishments within the project. The assessee provided detailed explanations and evidence to demonstrate compliance with each condition, such as profit derivation, project approval, project commencement, completion certificate, plot size, built-up area, audit reports, and absence of commercial establishments exceeding limits. The Tribunal acknowledged the fulfillment of these conditions by the assessee, leading to the allowance of the deduction u/s. 80IB(10) for the relevant assessment year.

Issue 3: Application of the decision in the case of Radhe Developers in determining eligibility for deduction:
The assessee relied on the decision in the case of Radhe Developers to support the claim for deduction u/s. 80IB(10) of the Act. The Tribunal considered this precedent along with the specific facts of the present case, where the assessee demonstrated substantial involvement and financial risk in the housing project. Drawing parallels with the Radhe Developers case, the Tribunal affirmed the CIT(A)'s decision to allow the deduction, emphasizing the assessee's active role in project development and financial investment. The reliance on the Radhe Developers case played a crucial role in establishing the entitlement of the assessee to the deduction under the relevant provisions of the Income Tax Act.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal concerning the disallowance of deduction, interpretation of statutory conditions, and the application of legal precedents in determining the eligibility for deduction under section 80IB(10) of the Income Tax Act.