Whether mere sale of development rights would equate to activities of developer and builder eligible for deduction u/s. 80-IB

Assistant / Deputy Commissioner of Income Tax Vs Bombay Real Estate Development Company Private Limited (ITAT Mumbai)- Whether the CIT(A) erred in directing the AO to allow the deduction u/s 80-IB(10) to the assessee as allowable to a developer and builder for the Poisar Housing Project at Kandivali (E).- Whether the receipts of sale proceeds of development right would amount to income eligible for deduction u/s. 80-IB. – Whether mere sale of development rights would equate to activities of developer and builder eligible for deduction u/s. 80-IB. – Whether the assessee was entitled to deduction u/s. 80-IB(10) even though the development project was started prior to 01.10.1998.

Since the AO has not brought on record anything to show that the payment to the MD is excessive or unreasonable, having regard to the fair market value of the services for which the payment was made or the legitimate needs of the business, no disallowance can be made under s 40A(2)(b). Further, the AO ought to have compared the payment made to the MD with payments made for similar services by other companies.

IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, ‘B’, MUMBAI

BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI T R SOOD, ACCOUNTANT MEMBER

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