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2021 (2) TMI 216 - AT - Income Tax


Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility of the assessee for deduction under Section 80IB(10) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The Revenue filed the appeal with a one-day delay. The delay was attributed to the transit of relevant assessment records and documents from higher authorities, which were received only on 18.03.2019, and the appeal was filed the next day. The Revenue pleaded that the delay was due to circumstances beyond their control and requested the Tribunal to condone the delay. After hearing the rival parties, the Tribunal condoned the delay.

2. Eligibility for Deduction under Section 80IB(10):
The core issue was whether the assessee, M/s. Anjali Foundations, was eligible for the deduction claimed under Section 80IB(10) of the Income Tax Act. The assessee, a firm formed on 26.07.2005, purchased land and entered into a joint development agreement with M/s. Narendra Properties Ltd. on 16.08.2005. The assessee transferred 50% of the land to the developer, who undertook the construction of flats. The assessee claimed 100% deduction under Section 80IB(10) on its entire net profit. The Assessing Officer (AO) disallowed the claim, arguing that the assessee was neither a builder nor a developer as it had not independently developed or completed the project and had transferred 50% of the property to the developer.

The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the appeal, referencing the case of CIT vs. Sanghvi & Doshi Enterprises, where it was held that ownership of the land is not a criterion for claiming deduction under Section 80IB(10). The CIT(A) concluded that both the developer and the landowner could claim the benefit of deduction in respect of their shares, and the deduction is available for the project, not for the individual assessee.

The Revenue appealed against the CIT(A)'s order, arguing that the assessee was merely a landowner and had not developed or built housing projects approved by the local authority, thus failing to meet the primary condition for claiming the deduction under Section 80IB(10).

Tribunal's Analysis:
The Tribunal examined several case laws, including CIT vs. Radhe Developers, CIT vs. Shravanee Constructions, and CIT vs. Sanghvi & Doshi Enterprises, to determine the eligibility criteria for deduction under Section 80IB(10). These cases emphasized that the deduction is oriented towards the project and not necessarily tied to the ownership of the land. The key factor is whether the assessee undertook the development and construction activities.

In the case of the assessee, the Tribunal noted that:
- The assessee was the owner of the land and had transferred 50% of the land to the developer.
- The agreement specified that the developer would construct the flats, and both parties would hold 50% rights in the built-up area, undivided share of land, and open terrace area.
- The assessee's profit and loss account showed no expenses towards construction, indicating that the assessee did not undertake any developmental activities.

The Tribunal concluded that the assessee did not establish that it had undertaken developmental activities either as an owner or as a developer. The assessee's role was limited to owning the land and sharing the built-up area with the developer. The risk and responsibility of development and construction were borne entirely by the developer.

Conclusion:
The Tribunal held that the assessee was not entitled to the deduction claimed under Section 80IB(10) as it did not fulfill the primary condition of developing and building housing projects approved by the local authority. The Revenue's appeal was allowed, and the assessee's claim for deduction was disallowed.

Order Pronounced:
The order was pronounced on 28th January 2021 at Chennai.

 

 

 

 

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