Ownership of land is not a pre-condition for deduction u/s 80 IB (10)

Brief of the case:

Tribunal examined that whether AO is right in rejecting the claim u/s 80 IB (10) on facts that assessee is engaged in business of development of housing project without ownership of land. After examining the facts of the case tribunal decided that 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.

Facts of the case:

• The assessee is engaged in the business of developing residential housing projects. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed a deduction of Rs 49,34,922 under section 80 IB (10) of the Act, but the assessee was not owner of the land on which housing project was developed.
• It was noted that assessee was not owner of the land on which the project was developed and the assessee had not acquired the dominant control over the project.
• The Assessing Officer was of the view that since the assessee did not own the land, since the necessary approval of the project was taken by the land owners and since the assessee has merely acted as an agent and as a contractor as it has entered into construction agreement with the landowners.
• The assessee is not eligible for deduction under section 80IB(10) of the Act. Aggrieved, assessee carried the matter in appeal before the CIT(A) but confirmed the assessment order.

Contention of the revenue:

• Assessee has entered into an agreement with the owner of the land and he is working as an agent and hence cannot be held in engagement of development of housing projects.
• Revenue took reliance on Hon’ble ITAT Mumbai Larger Bench, Mumbai decision in the case of M/s. B.T. Patil & Sons Belgaum Construction Private Limited dated 26.10.2009 (ITA No.1408 & 1409 / PN / 2003 AY 2000-2001 and 2001-02) where 80IA deduction has been denied holding the assessee to have entered into a Works Contract.

Contention of the assessee:

• Entrepreneurship risk is not depend upon the ownership of land.
• Assessee placed reliance on the decision of Hon’ble Jurisdictional Gujrat high Court in case of CIT Vs Radhe Developers (2012) 341 ITR 403 (Guj) in which court had an occasion to consider the issue of ownership of land, on which housing project is developed, in the context of eligibility of deduction under section 80IB(10). Hon’ble jurisdictional High Court has, in this context, inter alia observed as follows:

“Sec. 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.”

Held by the tribunal:

• When profits or losses, as a result of execution of project as such, belong predominantly to the assessee, the assessee is obviously taking the entrepreneurship risk qua the project and is, accordingly, eligible for deduction under section 80IB(10) in respect of the same.
• It is not even the case of the Assessing Officer that the assessee did not assume the entrepreneurship risks of the housing project. The format of arrangements for transfer of built up unit, and business model of the assessee for that purpose, is not decisive factor for determining eligibility of deduction under section 80 IB (10), but that is all that the authorities below have found fault with.