2016 (7) TMI 818 - AT - Income Tax

Disallowance u/s 80IB(10) - treatment to assessee as developer - Held that - A bare reading of the agreement would suggest that the assessee had borne the risk and also entitled for the reward. Clause-4 of the agreement duly authorizes the assessee to register individuals firms or companies as a member of the Society and determine the price for unit registered for them. The emphasis of the ld.AO towards clause-9 of the agreement is concerned it contemplates remuneration at the rate of 15% on the contribution collected from the members. The ld.CIT(A) has considered this aspect and held that it is not a very substantial aspect for determining character of assessee as a contractor or developer. It is pertinent to mention here that clause (4) authorizes the assessee to register new member and settle price for units registered for them. This authority to the assessee is in addition to already existing members. Therefore if we look the details in the light of the above agreement then it would reveal that the CIT(A) has rightly treated the assessee as developer and rightly allowed the deduction under section 80IB(10) of the Income Tax Act - Decided in favour of assessee.

Summary

Issues:
- Disallowance of deduction under section 80IB(10) for Asstt. Years 2004-05 and 2005-06.

Analysis:
1. The Revenue appealed against the orders of the ld.CIT(A) for the Asstt. Years 2004-05 and 2005-06, challenging the deletion of deductions under section 80IB(10) of the Income Tax Act, 1961.

2. The Tribunal had previously set aside the issue for re-adjudication by the AO based on a previous decision. The AO, however, did not thoroughly analyze the details as directed by the Tribunal and disallowed the deduction, stating that the assessee was not the owner of the land and thus not a developer.

3. The ld.CIT(A) reviewed the development agreement and concluded that the assessee fulfilled all conditions set by the Hon’ble Gujarat High Court in a previous case. The agreement detailed the responsibilities and rights of the assessee as a developer, including the authority to register new members and determine prices for units, indicating the assessee's role as a developer.

4. The Tribunal found that the ld.CIT(A) correctly treated the assessee as a developer and allowed the deduction under section 80IB(10) of the Income Tax Act. The Tribunal dismissed the Revenue's appeals, upholding the decision of the ld.CIT(A).

5. The appeals of the Revenue were ultimately dismissed by the Tribunal, affirming the decision of the ld.CIT(A) to allow the deduction under section 80IB(10) for the Asstt. Years 2004-05 and 2005-06.