2018 (10) TMI 508 - HC - Income Tax

Deduction u/s 80IB 10 - assessee developer of the Housing Project - AO disallowed the claim mainly on the ground that the assessee was not the owner of the land and the approval of the project was not in the name of the assessee - Held that - As decided in assessee s own case 2018 (9) TMI 1181 - GUJARAT HIGH COURT held that the assessee had undertaken the development of housing project at their own risk and cost. The owner of the land had accepted the full price of the land. He was therefore not concerned with the successor or failure of the housing project. Reference was made to the definition of term transfer under section 2(47)and held that merely because the land was held by the original owner when the housing development project was executed would not be detrimental to the assessee s claim of deduction under section 80IB(10) - Decided against revenue

Summary

Issues:
1. Whether the ITAT erred in allowing the deduction under Section 80IB [10] of the Act to the assessee?
2. Whether the ITAT erred in ignoring the fact that a significant portion of the project's sale proceeds were work contract receipts, making the assessee ineligible for the deduction under Section 80IB [10] of the Act?

Analysis:
1. The appeal was filed by the Revenue against the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the deduction under Section 80IB [10] of the Act. The first issue questioned whether the ITAT erred in allowing the deduction to the assessee, treating them as a developer of a Housing Project even though the project was not primarily developed by the assessee but completed by them as a contractor of plot purchasers. The Tribunal's decision was based on the assessee undertaking the development of the housing project at their own risk and cost, as highlighted in the judgment of Commissioner of Income Tax vs. Radhe Developers. The Court held that the ownership of the land by the original owner during the project's execution did not affect the assessee's claim for deduction under Section 80IB [10] of the Act.

2. The second issue raised whether the ITAT erred in allowing the deduction under Section 80IB [10] of the Act despite 70% of the project's sale proceeds being work contract receipts, indicating the assessee did not bear entrepreneurial and investment risks. The Revenue contended that the assessee was not the owner of the land and had not sold residential spaces but only residential plots with construction up to plinth level, making them a contractor rather than a developer. However, the Tribunal, following its earlier judgment, confirmed the decision of the CIT (A) allowing the claim based on the assessee's engagement in housing development activities at their own risk and cost, as observed in the Radhe Developers case.

In conclusion, the High Court dismissed the Tax Appeal filed by the Revenue, upholding the ITAT's decision to allow the deduction under Section 80IB [10] of the Act to the assessee based on their involvement in the development of the housing project at their own risk and cost, despite certain aspects of the project being carried out as work contracts.