COMMISSIONER OF INCOME TAX-IV vs. YUG CORPORATION

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TAXAP/1387/2011HC GujaratGJHC24025755201106 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 the Tribunal's order was eminently just and legal. The Court affirmed the principle laid down in CIT v/s Radhe Developers (2012) P. 41 ITR 403, which held that for the purposes of deduction under Section 80IB(10), the developer of a housing project may not necessarily be the owner of the land. The Tribunal had correctly applied this principle, finding that the assessee had taken on all the risks and benefits of developing the projects, thereby qualifying as a developer. The Court found no requirement in Section 80IB(10) or related statutes that ownership of the land must vest in the assessee seeking deduction. The fact that the approval was granted in the name of the landowner was also considered of no consequence, as long as the project itself was approved and the assessee was the beneficial owner bearing the risks and benefits. Therefore, the appeal was dismissed as devoid of merits and not raising any substantial question of law.

What were the facts?

The Commissioner of Income Tax-IV (Revenue) filed an appeal against the order of the Income Tax Appellate Tribunal (Tribunal) dated June 17, 2011. The Tribunal had dismissed the Revenue's appeal for assessment year 2007-2008. The assessee, Yug Corporation, had claimed a deduction of Rs. 67,78,990/- under Section 80IB(10) of the Income Tax Act, 1961. This claim was disallowed by the Assessing Officer (AO) on December 31, 2008. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal on June 17, 2009, setting aside the AO'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 directing the Assessing Officer to allow deduction of Rs. 67,78,990/- made u/s 80IB(10) of the Act? (Question of law and fact) Assessee's Contention: The judgment does not record any specific arguments made by the assessee before the High Court. However, it notes that the Tribunal relied on its own decision in Radhe Developers vs. ITO (2008) 23 SOT 420 (Ahmedabad), which was upheld by this Court in CIT v/s Radhe Developers (2012) P. 41 ITR 403. The Tribunal's reasoning, as reflected in the judgment, indicates that the assessee was considered a developer under Section 80IB(10) because it took on all risks and benefits of developing the projects, even if it was not the legal owner of the land. Revenue's Contention: The Revenue argued that ownership of the land is a condition precedent for availing deduction under Section 80IB(10). The judgment notes that the Revenue's argument was that this requirement must be read into the statute, which the Court ultimately rejected.

Which sections of the Income-tax Act were involved?

Section 80IB(10),Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1387/2011 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1387 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 YUG 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 present appeal under section 260A of the Income Tax Act, 1961 arises out of the order dated 17.06.2011 of the Income Tax

TAXAP/1387/2011 2/5 Appellate Tribunal passed in ITA No. 2703 of 2009, whereby it dismissed the appeal of the Revenue which was for the assessment year 2007-2008.

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 directing the Assessing Officer to allow deduction of Rs. 67,78,990/- made 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. 67,78,990/- 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 31.12.2008. The asssessee's appeal before the Commissioner of Income Tax (Appeals) was allowed on 17.06.2009 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 issue in the present appeal was decided by this Court in CIT v/s

TAXAP/1387/2011 3/5 Radhe Developers (2012) P. 41 ITR 403. On going through the “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 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 TAXAP/1387/2011 4/5 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.”

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

TAXAP/1387/2011 5/5 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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