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2013 (1) TMI 535 - AT - Income TaxDeduction u/s. 80IB (10) - Whether the assessee is a developer and builder or a Contractor – Land owned by five persons – Assessee enter into agreement to develop such land with the land owners - Construction of a residential-cum-commercial complex - Development agreement, 46% of the constructed space and, consequently, 46% of the land continues to belong to the land owners, who have thus divested themselves - through this arrangement, only the balance 54% of the land against the value of 46% of the construction - Assessee develops only 54% of the project on its own account, and the balance 46% on account of the land owners - Realizes profit from only its 54%, claiming deduction u/s. 80IB(10) thereon Held that:- Though the assessee develops the entire project, its interest therein is limited to a part thereof (54%). Not only the assessee undertakes the entire work, even the sale function is also managed by it. It is, thus, it who pays the land owners through the value of a part of the project, i.e., 46%, rather than being paid for, similarly, by them, i.e., at 54% of its value, as a contractor would be, where not by paid in cash. In favour of assessee Deduction u/s. 80IB(10) – In absence of any sales – Assessee had shown inflated profit, i.e., at 60%, as against the rate of 23% for another non-80IB – Held that:- We set aside the impugned order to this extent, and remit the issue of determination of the accrual of income, including, where so, its extent, back to the file of the AO Also clarify as to the revenue neutrality of this exercise, as, if and to the extent income has not accrued, it could neither be brought to tax nor deduction in its respect claimed by, or allowed to, the assessee. The same though is crucial in the overall context of the case, inasmuch as only the real income, since accrued, can be assessed. Further, the value of the closing WIP, as assessed, shall be adopted as the opening WIP for the following year. Also, as this is the first year of construction, and some qualifying conditions u/s. 80IB(10) are subject to satisfaction over time, which has since elapsed, the AO shall also, if not already so verified, i.e., while framing the assessment for any succeeding year(s), satisfy himself as to the satisfaction of those conditions, being, principally, though not limited to, the completion of the project within the stipulated time period, issuing definite findings in its respect. Remand back to AO
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