HC Denies Benefit of S. 80IA since Filling or Leveling of the Earth of the Projects which is part of Development had commenced prior to 1.10.1998 [Read Judgment]

A division bench of the Allahabad High Court has held that filling or leveling of the earth is also the part of development and construction of the project and therefore, denied the exemption claimed by the assessee under section 80IA of the Income Tax Act 1961 for the reason that the same had been commenced prior to 1/10/1998.

The assessee, in this case, is a company engaged in building and construction activities. During the relevant assessment year, it undertook the construction of two major complexes and each of the complexes were subdivided into small projects. For this, the assessee claimed deduction under section 80 IA(4F) read with Section 80 IA(5) and Section 80 IB (10) of the Income Tax Act.

While completing the assessment proceedings, the Assessing Officer (AO) denied the claim of the assessee under the aforesaid section by finding that the construction and development work had commenced by the assessee prior to 1.10.1998, therefore, the assessee company is ineligible to get the benefit of section 80IA of the Act.

Challenging the above order, the assessee contended that the assessee has entered into the agreement with the development authority on 12.12.1996 and the foundation was laid down was laid on 4.10.1998 and the construction of the projects started in October 1998.

After considering the submissions of both the parties, Justice Pankaj Mithal, and Justice Vinod Kumar Misra jointly rejected the contention of the assessee and observed that the evidence on record may prove that the foundation laying ceremony of the projects may have been performed on 30.9.1998 and actual construction may have started later on but the levelling of the earth in the project had started much earlier. Thus, with the leveling of the earth, the development and construction of the project had commenced which was prior to 1st October 1998.

The bench noted that the assessee has failed to satisfy the condition for grant of benefit under Section 80 IA (4F) read with Section 80 IA (5) and 80 IB (10) of the Act. It was said that development and construction of the housing project are integral to each other and as the filling or leveling of the earth of the projects which is also part of development had commenced prior to 1.10.1998.