2014 (1) TMI 1083 - HC - Income Tax

Deduction u/s 80IB - Held that - Decision in Commissioner of Income- Tax v. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT followed - For special deduction u/s. 80IB(10) of the Act, ownership of property is not a condition precedent - the assessee is entitled to the benefits u/s. 80IB(10) of the Act even where the title of the lands had not passed on to the assessee and in some cases the development permission may also have been obtained in the name of the original land owners - Decided against Revenue.

Summary

Issues:
1. Interpretation of deduction under sections 80IB(10) and 80IB(1) of the Income Tax Act, 1961.
2. Entitlement to deduction for construction activities without land ownership.
3. Transferability of rights and obligations under approval by local authority.
4. Transfer of dwelling units by landowner instead of the assessee.

Analysis:
The judgment by the Gujarat High Court involved a dispute regarding the entitlement to deduction under sections 80IB(10) and 80IB(1) of the Income Tax Act, 1961. The appellant, engaged in construction activities, claimed a deduction under section 80IB(10) based on the construction of housing units and subsequent transfer to customers. The Assessing Officer disallowed the deduction citing non-ownership of the land and approval for the project being in the name of the landowner. The CIT(A) upheld the disallowance, leading to an appeal before the ITAT.

The ITAT, in its decision, allowed the appeal, overturning the disallowance by the Assessing Officer. It held that ownership of the land was not a prerequisite for claiming the deduction under section 80IB(10) of the Act. The Revenue, dissatisfied with the ITAT's decision, filed a Tax Appeal before the High Court to consider the issue at hand.

During the proceedings, the counsel for the respondent cited a precedent from the Division Bench of the Court in the case of Commissioner of Income-Tax v. Radhe Developers, where it was established that ownership of the property is not a mandatory condition for claiming the deduction under section 80IB(10). The Division Bench's decision clarified that the benefits under section 80IB(10) could be availed even if the land title had not transferred to the assessee and if the development permission was in the name of the original landowners.

Applying the precedent set by the Division Bench in Radhe Developers to the present case, the High Court ruled against the Revenue, affirming the ITAT's decision to allow the deduction under section 80IB(10) to the assessee. Consequently, the High Court dismissed the appeal, emphasizing that ownership of the land was not a prerequisite for availing the deduction under the Income Tax Act. The judgment highlighted that the entitlement to the deduction was not contingent upon the transfer of land ownership to the assessee, as clarified by the Division Bench's decision in Radhe Developers.