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2016 (4) TMI 588 - AT - Income TaxEligibility of deduction u/s.80IB(10) - denial of claim in the hands of the AOP - Held that - Since in their own action the revenue in A.Yrs. 2011-12 and 2012-13 has accepted the status of the assessee as AOP and allowed the claim of deduction u/s.80IB(10), therefore, we do not find any reason as to why the claim of the assessee that the agreement between Darode Jog and Associates and Lagad Brothers Developers constitutes an AOP should not be allowed. In view of our above discussion we hold that the agreement between Darode Jog and Associates and Lagad Brothers Developers did constitute an AOP and not a mere Development Agreement. Therefore, the assessee has rightly claimed the status of the assessee as AOP. In view of the above, we set aside the order of the CIT(A) and direct the AO to accept the status of the assessee as AOP. As we have already accepted the grounds raised by the assessee by holding that the Agreement between the Darode Jog and Associates and Lagad Brothers Developers constitute an AOP and not a Development Agreement. Once it is held that the agreement constitutes AOP any amount drawn from the AOP cannot be taxed in the hands of the assessee member. It is only the Joint Venture that has to pay the tax and the assessee is not liable to pay any tax on the amount withdrawn from the Joint Venture. The assessee is also not entitled for any deduction u/s. 80IB(10) and it is the joint venture that is eligible for the deduction u/s.80IB(10). We therefore set aside the order of the CIT(A) and direct the AO to accept the return of income filed.
Issues Involved:
1. Legitimacy of assessment under Section 143(3) read with Section 153C. 2. Nature of the agreement between Darode Jog & Associates and Lagad Brothers Developers-whether it constitutes an Association of Persons (AOP) or a Development Agreement. 3. Taxability of withdrawals from the Joint Venture. 4. Eligibility for deduction under Section 80IB(10) of the Income Tax Act. Detailed Analysis: 1. Legitimacy of Assessment under Section 143(3) read with Section 153C: The assessee did not press this ground, and it was dismissed as 'not pressed.' 2. Nature of the Agreement: The core issue was whether the agreement between Darode Jog & Associates and Lagad Brothers Developers constituted an AOP or was merely a Development Agreement. The AO and CIT(A) held that the agreement was a Development Agreement, not an AOP, based on various clauses indicating that Darode Jog & Associates were responsible for development and incurred all related expenses. The CIT(A) noted that the landowners had essentially transferred possession and rights to Darode Jog & Associates, which pointed to a development agreement rather than a joint venture. However, the assessee argued that the agreement was a joint venture, supported by a supplementary agreement clarifying the profit-sharing ratio. The Tribunal found merit in the assessee's argument, noting that the AO had accepted the status of the assessee as an AOP in subsequent assessment years (2011-12 and 2012-13). The Tribunal emphasized that the supplementary agreement was valid and aimed at removing ambiguities in the original agreement. Consequently, the Tribunal held that the agreement constituted an AOP and not a mere Development Agreement. 3. Taxability of Withdrawals from the Joint Venture: The AO treated the withdrawals by the assessee from the joint venture as taxable income, arguing that the amounts received were in consideration of the transfer of development rights. The CIT(A) upheld this view. The Tribunal, however, held that since the agreement constituted an AOP, any withdrawals from the joint venture could not be taxed in the hands of the individual member (assessee). The Tribunal noted that the assessee had acted upon the supplementary agreement, which clarified the profit-sharing mechanism, and thus, the withdrawals were not taxable as individual income. 4. Eligibility for Deduction under Section 80IB(10): The AO and CIT(A) denied the deduction under Section 80IB(10) to the assessee, asserting that the assessee was not the developer and had merely transferred development rights. The Tribunal, however, emphasized that the deduction under Section 80IB(10) should be claimed by the AOP (joint venture) and not the individual members. Since the Tribunal recognized the agreement as constituting an AOP, it directed that the AOP should be considered for the deduction under Section 80IB(10), not the individual assessee. Conclusion: The Tribunal allowed the appeals partially, holding that the agreement constituted an AOP, and thus, the withdrawals by the assessee from the joint venture were not taxable in the hands of the individual member. The Tribunal also directed that the AOP should be considered for the deduction under Section 80IB(10).
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