In ITO v. Shree Narayan Associates, the Ahmedabad ITAT held that a Developer of Housing project can claim benefit of section 80IB(10) of the Income Tax Act even if the project was approved in the name of Land Owner.
The sole grievance of the assessee in the instant case was that the AO denied the benefit of Section 80IB(10) to them on ground that the housing project was approved by the Municipality in the name of the land owner and not in the name of the assessee.
The assessee maintained that they are not the owner of the land on which the project was constructed and approval by the local authority was not granted to the assessee but to the land owner. The land owner directly sold pieces of land to the Unit Holders. The assessee entered into a separate agreement with the plot owners for construction of houses. However, AO was of the view that assessee is merely a contractor.
Assessee successfully appealed the order before the first appellate authority, who relied on the decision of the Gujarat High Court in CIT Vs Radhe Developers. The Revenue therefore, approached the Tribunal against the order of the first appellate authority.
Dismissing the departmental appeal, the bench aligned with the findings of the first appellate authority and said that the business model adopted by the assessee does not vitiate the claim of deduction under section 80IB(10) of the Income Tax Act but then the Assessing Officer has primarily declined the deduction with that basic approach. “There is no dispute regarding assessee having taken the entrepreneurial risk and acted as an entrepreneur rather than as a contractor, and that is what is relevant. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.”
Read the full text of the Order below.
