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Ownership of land is required for claiming deduction u/s 80IB(10)

ITAT Ahmedabad held in M/s Nirmala Developers Vs ITO that it was not necessary to be the owner of the land to claim the deduction u/s 80IB(10). But the necessary condition to claim the deduction u/s 80(IB)10 was that the assessee had borne the all expenses and took all the risk involved in the project.
Brief of the case:  ITAT Ahmedabad held in M/s Nirmala Developers Vs ITO that it was not necessary to be the owner of the land to claim the deduction u/s 80IB(10). But the necessary condition to claim the deduction u/s 80(IB)10 was that the assessee had borne the all expenses and took all the risk involved in the project.

Facts of the case:  Assessee had claimed deduction u/s 80IB(10) of Rs 1,02,00,421 relating to “Gayatari Krupa Tenements” project in Vadodara. The assessee was a contractor, not owner of the land in the above said project and was allotted the work of construction of units and all the expenses and risk was to be borne by the assessee. The assessee had never sold the units to the ultimate buyers by way of registered documents. His work was just to complete the construction agreement. On the other hand revenue disallowed the above claimed deduction of the assessee on the basis that the assessee was not the owner of the land which was the required condition to claim the deduction u/s 80IB(10).

Contention of the assessee:  Assessee was of the view that it was not necessary to be the owner of the land to claim the deduction u/s 80IB(10). If the assessee was to borne with all the expenses and to take up all the risks then he was eligible to claim the deduction u/s 80IB(10) by relying on the decision given by Hon’ble High Court in CIT Vs Radhey Developers (2012) 341 ITR 403 that ownership of land was not a condition precedent for developing it under a housing project as per Gujarat Town Planning and Control Regulations.

Moreover assessee also relied on the decision given in ITA 532/Ahd/2013 Pushpak Developer Vs DCIT in which it was decided that if the assessee was responsible for incurring all the expenses and was also responsible for taking up all the risks then the deduction u/s 80(IB)10 could not be denied.

Contention of the revenue:  Revenue was of the view that as the assessee was not the owner of the land of the residential project nor he had obtained building approval plan from the local authority and the land owner had already sold the units to the unit holders. He had never sold the residential houses to the ultimate buyers. So as he was not the owner of the land so he was not eligible to the deduction u/s 80(IB)10.

Held by the ITAT:  ITAT held that as revenue was unable to find out any distinction of the facts of the assessee. So considering the decision given by the Hon’ble High Court in CIT Vs Radhey Developers (2012) 341 ITR 403 and 532/Ahd/2013 Pushpak Developer Vs DCIT that the ownership of the land was not required to claim the deduction u/s 80(IB)10 if the assessee had bear all the related expenses of the project and was taking all the risks related to the project.

So the appeal of the assessee was allowed.

Categories: Income Tax
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