TMI Blog2016 (4) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 ( the Act hereinafter) for the Assessment Year 2003-04. 2. Grievances raised by the Assessing Officer are as follows :- 1). The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the Assessee's claim for deduction of ₹ 55,94,649/- u/s. 801B(10) of the I.T. Act. 2). The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in holding that the Assessee fulfills the conditions laid down for claiming deduction u/s. 80IB(10) even when the land was in the name of Manohar Co-op. Housing Society Ltd., which is a separate legal entity in the eye of law and the Assessee entered into the project by a development agreement with the Society. The entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the Society. The local Authority had granted permission for development and construction of the project to the Society, Assessee was just a contractor of the land owners constructing r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are borne by the assessee and he is the developer of the project. Relying upon a larger bench of this Tribunal in the case of BT Patil the Assessing Officer held that a mere contractor cannot be called developer. The Assessing Officer thus proceeded to decline deduction under section 80IB(10) of the Act by observing as follows :- To sum up, the Society is a legal entity and it acquired the land and has to be recognized as the owner of the land. The Manohar Co. Op. Housing Society Ltd., Ahmedabad got the plan for the housing project approved from the local authority as an owner of the land on which the project was to come up. It is immaterial whether the assessee approached the Society or the Society approached the assessee for construction. The fact remains that the Society is the principal and the assessee is a contractor satisfying all the ingredients of the contract as discussed above. In the instant case, the assessee is a mere builder who has entered into an agreement with the Society for construction of the housing project as per the approval obtained by the Society on the land owned by the Society. The assessee is not the Developer of the project as it is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract awarded by any person (including the Central or State Government). In view of the above factual and legal position, it is held that the assessee is not a developer and builder as required under the provisions of the section 80 IB in respect of the said housing project and in fact, it is merely a contractor/agent on behalf of the housing society and their members. In nutshell, conditions of section 80IB(10) are not satisfied and hence the profit of the assessee for the year being ₹ 55,94,649/- is treated as income of the assessee and no claim under this section is allowed. Hence the same is added to the total income of the assessee. 4. Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). The Assessing Officer noted that the investment in land was, in fact, made by the assessee. He was also of the view that the assessee was owner of the land by virtue of development agreement and the agreement itself. He then discussed the judgement of Hon ble Gujarat High Court in the case of CIT vs. Radhe Developers [(2012) 341 ITR 403 (Guj)] and held that the fact of the assessee s case being identical with the case dealt by the Hon ble Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 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 such, belong predominantly to the assessee, the assessee is obviously taking the entrepreneurship risk qua the project and is, accordingly, eligible for deduction under 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f above discussion, following the ratio of jurisdictional High Court in case of ABG Heavy Industries Ltd. (supra), the Assessing Officer is directed to allow deduction u/s.80IA(4) of the Act to the assessee with regard to the projects in question for both the years. 9. It is not even the case of the Assessing Officer that the assessee did not assume 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 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 delete the disallowance. 6. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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