COMMISSIONER OF INCOME TAX-IV vs. ADITYA CORPORATION

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TAXAP/1381/2011HC GujaratGJHC24025749201106 September 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that for the purposes of availing deduction under Section 80IB(10), a developer of a housing project may not be the owner of the land. The Tribunal's decision was based on its own prior ruling in Radhe Developers vs. ITO, which was subsequently upheld by this Court in CIT v/s Radhe Developers. The Court reiterated the principle that the essence of Section 80IB(10) requires an undertaking involved in developing and building housing projects approved by the local authority, and it does not mandate ownership of the land by the developer. The Court found that the assessee had taken full responsibility for the execution of the development projects, bore all risks and benefits, and thus qualified as a developer. The fact that the assessee may not have owned the land was of no consequence. The appeal was dismissed as devoid of merits and not raising any substantial question of law.

What were the facts?

The Revenue, Commissioner of Income Tax-IV, filed an appeal against the Income Tax Appellate Tribunal's order dated June 17, 2011. The Tribunal had dismissed the Revenue's appeals for assessment years 2006-2007 and 2007-2008. The assessee, Aditya Corporation, had claimed a deduction of Rs. 8,26,266 under Section 80IB(10) of the Income Tax Act, 1961. The Assessing Officer disallowed this claim by an order dated December 26, 2008. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, setting aside the Assessing Officer's order. The Revenue's subsequent appeal to the Tribunal was dismissed, leading to the present appeal before the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in allowing the deduction under Section 80IB(10) of the Act? Assessee's Contention: The assessee claimed deduction under Section 80IB(10). The Assessing Officer disallowed it, but the CIT(A) allowed it. The Tribunal upheld the CIT(A)'s decision. The High Court's decision in CIT v/s Radhe Developers (2012) P. 41 ITR 403 is relevant. Revenue's Contention: The Revenue argued that the assessee was not entitled to the deduction under Section 80IB(10). The learned advocate for the appellant (Revenue) fairly submitted that the issue was decided by this Court in CIT v/s Radhe Developers (2012) P. 41 ITR 403. The Tribunal relied on its own decision in Radhe Developers vs. ITO (2008) 23 SOT 420 (Ahmedabad), which was upheld in Radhe Developers (supra).

Which sections of the Income-tax Act were involved?

Section 80IB(10)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1381/2011 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1381 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-IV - Appellant(s) Versus ADITYA CORPORATION - Opponent(s) ========================================================= Appearance : MS PAURAMI B SHETH for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 06/09/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The Income Tax Appellate Tribunal by its common order dated 17.06.2011 passed in two ITAs being ITA No 2738 & 2379 of TAXAP/1381/2011 2/5 2010 dismissed the appeals of the Revenue which were for the corresponding assessment years 2006-2007 & 2007-2008 respectively. The present appeal is directed against the said common order in so far as it relates to ITA no. 2738 of 2010.

1.

1 The following question of law is raised as substantial question of law by the appellant. “Whether the Appellate Tribunal is right in law and on facts in allowing the deduction u/s 80IB(10) of the Act?”

2.

Heard Ms. Paurami B. Sheth, learned advocate for the appellant.

2.

1 In respect of year under consideration, the assessee had claimed deduction of Rs. 8,26,266/- under section 80IB(10) of the Income Tax Act, 1961 (hereinafter referred to as 'the act' for sake of brevity). The claim was disallowed by the Assessing Officer by order dated 26.12.2008. The asssessee's appeal before the Commissioner of Income Tax (Appeals) was allowed on 30.07.2010 wherein the CIT(A) set aside the order of the Assessing Officer. The department went in appeal before the Income Tax Appellate Tribunal, which came to be dismissed as per the impugned order.

2.

2 Learned advocate for the appellant fairly submitted that the TAXAP/1381/2011 3/5 issue in the present appeal was decided by this Court in CIT v/s “The essence of sub-section (10) of section 80-IB, therefore, requires involvement of an undertaking in developing and building housing projects approved by the local authority. Apparently, such provision would be aimed at giving encouragement to providing housing units in the urban and semi-urban areas, where there is perennial and acute shortage of housing, particularly, for the middle income group citizens. To ensure that the benefit reaches the people, certain conditions were provided in sub-section (1) such as specifying date by which the undertaking must commence the developing and construction work as also providing for the minimum area of plot of land on which the project would be put up as well as maximum built up area of each of the residential units to be located thereon. The provisions nowhere requires that only those developers who themselves own the land would receive deduction under section 80-IB(10) of the Act.” “Neither the provisions of Section 80-IB nor any other

TAXAP/1381/2011 4/5 provisions contained in other related statutes brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the arguments of the Revenue that in order to receive benefit under section 80-IB(1) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under section 80-IB(10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term “developer” has been understood in common parlance as well as in legal sense carrying a much wider connotation.” “Section 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.” “It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. The 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.”

TAXAP/1381/2011 5/5

4.

The Tribunal has on the facts of the case held as under : “Thus now it is settled that it is not necessary that assessee should be legal owner of the land. It is sufficient that he should be beneficial owner and has taken all the risks and benefits of developing the projects. A contractor only works at a fixed profit and as per agreement between the owner of the project and himself. The risks and benefits goes to the owner of the project but in the present case, the risks and benefits of the projects go to the assessee and, therefore, he is a developer. The approval granted in the name of the land owner does not really make any difference because it is not prescribed that such approval should always be granted in the name of the assessee. It is sufficient the project is approved. As a result, following above three decisions, we allow the claim of the assessee holding that it is a developer u/s 80IB(10)”.

5.

In the aforesaid view of the matter, the impugned order of the Tribunal is eminently just and legal. The appeal is devoid of merits and does not raise any question of law much less substantial question of law. Accordingly, the appeal is dismissed. [V.M.SAHAI, J.] [N.V.ANJARIA, J.] cmjoshi

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