INCOME TAX OFFICER WARD 1 vs. CHITRAKOOT CORPORATION

In this group of appeals, the sole issue, though may have been worded differently and different questions have been framed by the Courts at the time of admission of appeals, pertains to deduction under section 80IB(10) of the Income Tax Act, 1961 (‘the Act’ for short) claimed by the respondents-assessees.

The assessees had developed housing projects fulfilling the conditions contained in section 80IB(10) of the Act and claimed deduction envisaged therein. The Revenue, however, was of the opinion that since neither the land nor the development permission was in the name of the builder, he cannot be stated to have developed the housing project and at best can be treated as works contractor. On such basis, disputes had previously reached the Tribunal in two sets of cases referred to as the Radhe group of matters and Shakti group of matters. Both the sets of cases ultimately reached this Court which confirmed the view of the Tribunal and ruled in favour of the assessees in the case of CIT v. Radhe Developers, 341 ITR 403 (Guj.) wherein it was held as under:

Section 80IB(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 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 of Section 80IB(10) of the Act,namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent.

We have reproduced relevant terms of development agreements in both the sets of cases. 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. 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.

With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the Income Tax Act and, in particular, Section 80IB (10) of the Act and to examine the effect of Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together.

We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour Commissioner of Income-Tax vs. Podar Cement Pvt. Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 80IB(10) of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary.

In the case of Shakti Corporation similarly the assessee had entered into a development agreement with the land owners on similar terms and conditions. It is true that there were certain minor differences, however, in so far as all material aspects are concerned, we see no significant or material difference. Here also assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. Entire profit flowing therefrom was to be received by the assessee. It is true that the agreement provided that the assessee would receive remuneration. However, such one word used in the agreement cannot be interpreted in isolation out of context. When we read the entire document, and also consider that in form of “remuneration” the assessee in the name of the original land owners.” In the result, the issue being identical, the questions are answered in favour of the assessee. All the Tax Appeals are therefore, dismissed. (AKIL KURESHI, J.) (MS SONIA GOKANI, J.) (vjn)