The Income Tax Appellate Tribunal (ITAT), Delhi bench has recently held that the income tax deduction shall not be denied to the assessee, a cooperative society of Sahara India group and is engaged in the business of development and construction of residential and commercial units merely because the assessee has delegated some of its functions to another entity to execute the construction project.
The Assessing Officer while concluding the assessment proceedings against the assessee, observed that the assessee has executed a developer agreement with M/s Sahara India Commercial Corporation Ltd. (SICCL), considering the nature of which, the assessee is not eligible to claim the deduction u/s 80IB(10) since it does not fulfill the conditions laid down in section 80IB(10) of the Act. It was also observed that the assessee is not a ‘developer’ so as to avail the benefit of the provision.
The bench comprising Judicial Member Ms. Suchitra Kamble and Accountant Member Mr. R.K. Panda found that the condition of the developer was decided and allowed in the initial years of claim, i.e., in the A.Y. 2003-04 and 2004-05 which is evident from the order of the CIT(A) for A.Y. 2005-06.
“Therefore, we find merit in the argument of the ld. Counsel that the same is not open for examination in the subsequent years in absence of change in the factual position. In our opinion, without disturbing the assessment for the initial assessment year it is not open to the Revenue to make disallowance of such deduction in the subsequent years by taking a contrary stand. Further, merely appointing SICCL as a contractor for the development and construction of the project, in our opinion, cannot lead to the conclusion that the said activities were not carried on by the assessee society. Since the assessee is bearing the entire risks and responsibilities relating to the project and SICCL was appointed only to execute the project.”
“We find merit in the argument of the ld. Counsel that merely because certain procedural formalities relating to the collection of booking application forms and money from the buyers were delegated to SICCL, it would not render SICCL as the developer of the project since the money collected by SICCL was on behalf of the assessee only and on the authorization of the assessee and not in its independent capacity. Therefore, in our opinion, a delegation of certain formalities regarding the collection of booking application forms and money on behalf of the assessee would not cease the assessee company as being rendered as a developer of the project,” the bench said.
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