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2017 (3) TMI 801 - AT - Income TaxDeduction u/s 80IB(10) eligibility - whether housing project undertaken on behalf of SRA was a contract awarded by the State Government and therefore not eligible for deduction under section 80IB(10)? - Held that - The assessee was a developer in common parlance as well as legal parlance and could not be regarded as works contractor and accordingly the explanation to section 80IB inserted w.e.f. 1.4.2001 has no application as the project is not a works contract. Further the assessee was, in part performance of the agreement to sell was given possession of the land and had also carried out construction of housing project, it has to be deemed as owner u/s 2(47)(v) r.w.s. 53A of the Transfer of Property Act even though no formal title deed was executed. In the case of Unity Infra projects V/s DCIT(ITAT Mum) (2014 (10) TMI 930 - ITAT MUMBAI) held that the profit from sale of TDR from SRA is eligible u/s 80IB(10) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Confirmation of disallowance under Section 80IB(10) of the Income Tax Act, 1961. 2. Determination of whether the development rights (TDR) from the Slum Rehabilitation Authority (SRA) constitute a work contract. Issue-wise Detailed Analysis: 1. Confirmation of Disallowance under Section 80IB(10): The assessee filed a return for the assessment year 2007-08, claiming a deduction under Section 80IB(10) of ?4,71,15,704, which was disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO argued that the project undertaken by the assessee for the SRA was a work contract awarded by the State Government, thus not eligible for the deduction under Section 80IB(10). The AO based this on the observation that the consideration received was predetermined and fixed in the form of TDR, which was sold in the open market. The CIT(A) upheld this view, stating that the appellant did not own the land and merely held development rights, thus qualifying as a contractor rather than a developer. 2. Determination of Whether the Development Rights (TDR) Constitute a Work Contract: The assessee contended that the TDR received from the SRA was a consideration for the development work and not a work contract. The assessee argued that the project was undertaken in a principal-to-principal relationship with the SRA and not as a contractor. The CIT(A) examined the agreements and concluded that the ownership of the land was never with the assessee and that the development was carried out under the terms dictated by the SRA, thus constituting a work contract. The CIT(A) also noted that the appellant did not undertake the investment risk typically associated with a developer. Judgment Analysis: The appellate tribunal reviewed the case and the documents presented, including the agreements and certificates issued by the SRA and the Municipal Corporation of Greater Mumbai. The tribunal noted that the assessee received TDR as consideration for the development work, which was sold in the open market. The tribunal referred to the case of CIT V/s Radhe Developers, where it was held that deduction under Section 80IB(10) is available even if the developer is not the owner of the land, provided the project is developed at the developer's risk and cost. The tribunal found that the assessee acted as a developer and not merely as a contractor, and therefore, the explanation to Section 80IB(10) regarding work contracts did not apply. The tribunal also cited similar judgments from other cases where profits from the sale of TDR were deemed eligible for deduction under Section 80IB(10). Conclusion: The tribunal set aside the order of the CIT(A) and directed the AO to allow the deduction claimed by the assessee under Section 80IB(10). The appeal of the assessee was allowed, recognizing the assessee as a developer eligible for the deduction. Order Pronouncement: The order was pronounced in the open court on 14th March 2017.
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