Case Law Details
If all the costs, risks and responsibility to be bear by assessee then deduction u/s 80IB(10) cannot be denied just on the presentation of the profit & Loss A/c.
ITAT Ahmedabad held in Megha Developers Vs ITO that as the assessee had entered into an agreement in which he had to bear all the costs related with the building of the project and also he was having the rights to receive all the payments from the members of the society and also to remove the name of the member if that member did not pay the required amount and also to receive the development charges and other related charges of electricity and water so it would be deemed to be the owner of the project so deduction u/s 80IB(10) would not be denied. Assessee used to show only the development charges @ 25% of the total receipts in its profit & Loss A/c instead of showing purchases separately and total receipts separately.
Moreover clause (d) of sec 80IB(10) would be applicable from 01-04-2005 not from any earlier date.
Facts of the case:
AO had disallowed the claim for deduction u/s 80IB of Rs 11,24,990 each for A.Y 2000-01, 01-02,02-03 and 03-04 and 04-05 Rs 21,86,870/- each on the ground that the assessee had received only the development charges and labour charges. So he was not in the business in the of building projects. So deduction could not be allowed to the assessee.
Contention of the assessee:
Assessee was of the view that as he had entered into an agreement through which he used to receive all the payments from the members and to bear all the costs of building like cement, steel etc. He also had to bear the cost of electricity and water etc so he should be allowed the deduction u/s 80IB(10) while deeming to be the owner of the project because deduction u/s 80IB(10) would be allowed only to that person who was in the business of development and construction of house building.
Contention of the revenue:
Revenue was of thee view that as the assessee used to get only the development charges @ 25% and labour charges @ 700/ sq yard which he had presented in his profit & Loss A/c so he should not be allowed the deduction u/s 80IB(10). Deduction was allowed only to the assessee to carry the business of development and construction of house building.
As the assessee was not carrying on the business of development and construction of house building, he was just receiving the development charges and labour charges so he would be denied the deduction u/s 80IB(10).
Held by ITAT:
ITAT after relying on the decision given in the case of M/s. Skyland Developers Vs. ITO, in ITA No.1191, 1192 and 1993/Ahd/2011held that as the assessee was having the rights to develop the project and to receive the payment from the members and also to bear all the costs related with the building of the project. He was also having the rights to remove the name of the members who made fault in making the payments So, he should be considered as the owner of the project and all the rights related with that project. Further Just by showing the development charges and labour charges in the profit & Loss A/c did not deny the assessee from claiming the deduction u/s 80IB(10) instead of showing the total payments and total receipts separately.
Moreover the clause (d) of sec 80IB(10) would have prospective effect not retrospective effect.
