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2021 (2) TMI 344 - AT - Income TaxDeduction u/s 80IB(10) - developing the housing project even though neither land nor development permission was in the name of builder - AO held that assessee failed to substantiate the necessary criteria for claiming deduction under section 80IB(10) as assessee simply engaged in the construction business and executed job on behalf of Co-operative Society - CIT(A) while granting relief to the assessee held that the assessee is a developer, the building plan was approved at the instance of the assessee, the area of development of housing project is more than one (01) acre, the project was completed before 31.03.2003 - HELD THAT - The assessee firm paid the cost of land purchased from the seller. Expenses for the registration of land, stamp duty were borne by the assessee. All project cost were also borne by the assessee, all the buyers have confirmed about the sales of flats by the firm. Profit on the completion of project was retained by the assessee firm on the basis of aforesaid observation the ld.CIT(A) held that assessee is a developer who applied for approval of plan, constructed the project on more than one acre of land, construction was completed before 31.03.2003, commercial area was less than 3%. The assessee was having dominant control over the project. On the aforesaid observation, the ld.CIT(A) held that decision of Radhe Developers and other 2011 (12) TMI 248 - GUJARAT HIGH COURT is squarely applicable on the case. In Radhe Developers (supra) the Hon'ble High Court held that neither the provision of section 80IB nor any other provisions contained in other relevant statues were brought to demonstrate that ownership of land would be condition precedent for developing housing project.It was perhaps not in the case of Revenue that under other law governing construction in Urban and Semi-urban area there was any restriction. Also in CIT vs Sahajanand Associates 2014 (4) TMI 76 - GUJARAT HIGH COURT while relying on earlier decision of High Court in Radhe Developers (supra) held that assessee is entitled for deduction under section 80IB(10) in respect of developing the housing project even though neither land nor development permission was in the name of builder. Even though title of land had not passed on the assessee and development permission obtained in the name of original land owner, the deduction under section 80IB is admissible to the assessee. No illegality or infirmity in the order passed by the ld.CIT(A) - Decided against revenue.
Issues Involved:
1. Justification of CIT(A) in recognizing the assessee as the beneficial landowner based on alleged false facts. 2. Control and possession of the land by the assessee. 3. Validity of the partnership firm's claim as the beneficial owner of the land. 4. Reliance on the English version of the MOU without verification. 5. Consideration of reimbursable expenses as proof of development activity. 6. Deletion of disallowance made by the AO based on various documents. Detailed Analysis: 1. Justification of CIT(A) in Recognizing the Assessee as the Beneficial Landowner: The Revenue contended that the CIT(A) erred in recognizing the assessee as the beneficial landowner based on false facts, particularly the sathakhat (agreement) with landowners, while the assessee firm was non-existent at that time and provided incorrect incorporation dates. The Tribunal found that the CIT(A) had thoroughly examined the facts and evidence, including the formation of the Rutvan Co-operative Society and the role of the assessee in the development project, and concluded that the assessee had fulfilled the conditions for deduction under section 80IB(10). 2. Control and Possession of the Land by the Assessee: The AO argued that the assessee never had possession or control over the land, as it was controlled by the landowners and later by the society. The Tribunal noted that the CIT(A) had determined that the assessee had dominant control over the project, incurred all construction expenses, engaged architects, and managed the sale of flats. The Tribunal upheld the CIT(A)'s findings that the assessee had sufficient control over the development project to qualify for the deduction. 3. Validity of the Partnership Firm's Claim as the Beneficial Owner: The Revenue questioned whether the firm could be considered the beneficial owner of the land when only one of the original purchasers became a partner in the newly formed firm. The Tribunal supported the CIT(A)'s conclusion that the firm, through its partners, had effectively managed the development project and bore all associated risks and expenses, thus qualifying as the beneficial owner for the purposes of section 80IB(10). 4. Reliance on the English Version of the MOU Without Verification: The Revenue argued that the CIT(A) relied on an unverified English translation of the MOU between the society and the assessee. The Tribunal found that the CIT(A) had considered all relevant documents and evidence, including the MOU, and had provided ample opportunity for the AO to verify the translations. The Tribunal did not find any procedural errors in the CIT(A)'s reliance on the translated documents. 5. Consideration of Reimbursable Expenses as Proof of Development Activity: The AO contended that reimbursable expenses could not be considered proof of development activity by the assessee. The Tribunal noted that the CIT(A) had reviewed detailed submissions and evidence showing that the assessee bore all significant development costs, including land acquisition, registration, construction, and administrative expenses. The Tribunal agreed with the CIT(A) that these expenses demonstrated the assessee's active role in the development project. 6. Deletion of Disallowance Made by the AO: The AO had disallowed the deduction under section 80IB(10) based on various documents, including the sathakhat, partnership deed, MOU, and certificates from local authorities. The CIT(A) reversed this disallowance, finding that the assessee had met all the necessary conditions for the deduction. The Tribunal upheld the CIT(A)'s decision, citing the jurisdictional High Court's rulings in similar cases, such as CIT vs. Radhe Developers and CIT vs. Sahajanand Associates, which supported the assessee's eligibility for the deduction despite not holding the land title directly. Conclusion: The Tribunal affirmed the CIT(A)'s order, concluding that the assessee met all the conditions for the deduction under section 80IB(10) and had a dominant role in the development project. The appeal by the Revenue was dismissed.
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