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2015 (9) TMI 108 - ITAT AHMEDABAD

2015 (9) TMI 108 - ITAT AHMEDABAD - TMI - Depreciation claim under section 80IB(10) rejected - Held that:- In order to answer the question as to whether the condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not the assessee is engaged in “developing and building housing projects”, all that is material is whether assessee is taking the entrepreneurship risk in execution of such project. When profits or losses, as a result of execution of project as suc .....

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g eligibility of deduction under section 80 IB (10), but that is all that the authorities below have found fault with. The objections of the authorities below are thus devoid of legally sustainable merits. In view of the above discussions, and bearing in mind entirety of the case, we are of the considered view that the stand of the authorities below, in declining deduction under section 80IB (10) and on the facts of this case, is incorrect. We vacate the same and direct the Assessing Officer to .....

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e, is only clarificatory in nature and it will also apply to the assessment years prior to the assessment years 2010-11 as well.

There is no dispute that on the facts of this case, the taxes were deposited in May 2006, as is the categorical finding in paragraph no. 17 of the order passed the CIT(A), which was well before the due date of filing income tax return under section 139(1). Thus we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned di .....

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d of appeal, the assessee has raised the following grievance: The learned CIT(A) has erred in law and on facts of this case by holding that the Assessing Officer has rightly rejected the claim of depreciation of ₹ 49,34,922 under section 80IB(10) of the Income Tax Act, 1961. 3. So far as this grievance of the assessee is concerned, the relevant material facts are as follows. The assessee before us, a partnership firm, is engaged in the business of developing residential housing projects. D .....

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not own the land, since the necessary approval of the project was taken by the land owners and since the assessee has merely acted as an agent and as a contractor as it has entered into construction agreement with the landowners, the assessee is not eligible for deduction under section 80IB(10) of the Act. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. While rejecting the contentions of the assesse, learned CIT(A) observed as follows: After going thr .....

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sed lands but the lands owned by the other persons have been developed in terms of Development Agreement. Development Agreement dated 2.7.2003 was entered by the appellant with the land owner Shri Ramabhai Chaturdas Patel for construction of the housing project known as Someshwar and another Agreement dated 2.4.2004 was entered with Shri Parsotambhai Joitaram Patel for construction / development of the housing project known as Someshwar Part 2. The perusal of the Development Agreements shows tha .....

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ies. (please refer to clause 1 of the Development Agreement) . Clause 2 of the Development Agreement states as under: The said Owner shall sell / allot to the desiring persons the plot/s either by himself or through the Developer/Builder being the party of the Second Part. Thus in this case the land was never purchased by the appellant, neither any investment was made by the appellant towards cost of land. The appellant acted as an Agent / Contractor of the land owners and constructed the housin .....

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elevant portion is reproduced below: ..... Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus in a case where a person makes the investment and himself executes the development work i.e. carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into .....

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housing projects by the land owners, though it incurred cost and derived profit but it was never the Owner of the project or of the land on which it was constructed. The individual plots on which tenements were constructed were purchased by the individual tenement buyers from the land owners. The disallowance made by the AO u/s. 80IB(10) (on the grounds summarized in para 5 above) is therefore confirmed. 4. The assessee is not satisfied and is in further appeal before us. 5. We have heard the r .....

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32. Sec. 80-IB(10) of the Act thus provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances noted above. It does not provide that the land must be owned by the assessee seeking such deductions. 33. It is well settled that while interpreting the statute, particularly, the taxing statute, nothing can be read into the provisions which has not been provided by the legislature. The condition which is not made part o .....

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essional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. (Emphasis, by underlining, supplied by us) 7. In our humble understanding, therefore, in order to answer the question as to whether the conditio .....

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section 80IB(10) in respect of the same. The assumption of such an entrepreneurship risk is not dependent on ownership of the land. The business model of developing and building housing projects by buying, on outright basis, and constructing residential units thereon could probably be the simplest business models in this line of activity, but merely because there is an improvisation in the business model or because the assesse has adopted some other business models for the purpose of developing .....

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e in the way of eligibility for an incentive which is for the purpose of developing and building a housing project . There is no justification, conceptual or legal, in restricting eligibility of deduction under section 80IB(10) to any particular business model that an entrepreneur adopts in the course of developing and constructing housing project. 8. As regards learned CIT(A) s reliance on the decision of a larger bench of this Tribunal, in the case of B T Patil & Sons (Belgaum) Constructio .....

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these views. Quite to the contrary, following Hon ble Bombay High Court decision in the case of CIT Vs ABG Heavy Industries Ltd and Ors [(2010) 322 ITR 323 (Bom)] and upon by taking into account Hon ble Bombay High Court s specific directions in the case before the Tribunal, the Tribunal s final order had, inter alia, concluded as follows: ……….while giving effect to the opinion of Third Member u/s.255(4) of the Act, we take view in conformity with order of jurisdictional Hig .....

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e the entrepreneurship risks of the housing project. The format of arrangements for transfer of built up unit, and business model of the assessee for that purpose, is not decisive factor for determining eligibility of deduction under section 80 IB (10), but that is all that the authorities below have found fault with. The objections of the authorities below are thus devoid of legally sustainable merits. In view of the above discussions, and bearing in mind entirety of the case, we are of the con .....

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der section 40(a)(ia) of the Income Tax Act, 1961. 12. So far as this disallowance is concerned, it was made for the short reason that the assessee did not deposit the tax deducted at source from the related payments well within the time limit permitted under section 200(1) r.w.r. 30 of the Income Tax Rules. While the related payments were made to various contractors before 1st March 2006, the related payments were made only in the month of May 2006. Aggrieved by the disallowance so made, assess .....

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