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2015 (2) TMI 492 - ITAT HYDERABADNon genuine business arrangement - suppression of receipts - applicability of arms length price - charging of ₹ 300 per sft payable by M/s. Sri Sai Builders is very low when compared to the cost of construction at ₹ 849.42 per sft - Held that:- Find no infirmity in the order of the CIT(A) as nothing h ad been brought out by the Department to prove that the agreement of the assessee with M/s. Sri Sai Builders is not genuine. The Department has also not been able to prove that the Joint Development Agreement and Agreement of Construction are between close relatives and we find that both the parties are independent. The rate of ₹ 300 per sft towards construction cost had been agreed upon after due deliberations between the parties in the year 2003-04 at the time of preparing and finalising the building plan at the then prevailing fair market rate for the cost of construction. The loss could have arisen due to escalation in the construction cost subsequently especially between the years 2006 and 2009 and, therefore, in these circumstances it cannot be held that charging of ₹ 300 per sft payable by M/s. Sri Sai Builders is very low when compared to the cost of construction at ₹ 849.42 per sft. Further in this project as a whole a gross profit of 25% and net profit of 19% was earned and had been declared. These profits were computed after absorbing the entire loss incurred on construction receipts from M/s. Sri Sai Builders. The person running the business has viewed the entire project instead of taking construction contract of a single stand alone transaction and that is why at the end of the project, the assessee firm made the net profit about 19%. In these circumstances, we confirm the order of the CIT(A) - Decided against revenue. Disallowance of deduction u/s. 80IB(10) - CIT(A) allowed the claim - Held that:- No infirmity in the order of the CIT(A) as the provisions of section 80IB(10) inter alia provide that 100% of the profit derived by an undertaking developing and building housing projects approved by a local authority shall be allowed as deduction in computing the total income for tax purpose. A plain reading of this provision requires that the profits are derived from an 'approved housing project' and such approval should be by a local authority. It does not provide that the approval of the local authority should only be in the name of the undertaking proposing to develop the housing project. As observed by the CIT(A) when the land on which housing project has been approved is sold the approval still continues to apply. Subsequent ratification or regularisation are required only if there are deviations from the approved plan. Hence the claim of deduction u/s. 80IB(10) of the Act cannot be rejected on the ground that sanction from the local authority for the housing project is standing in the name of M/s. Sai Developers. - Decided against revenue.
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