Case Law Details
DLF Ltd. Vs. JCIT (ITAT Delhi)
Conclusion: Deduction of Rs. 1.78 Billion in respect of profits derived on account of development considerations of bare shells would constitute profits and gains derived from business of developing any Special Economic Zone within the meaning of Section 80 IAB and was allowable to DLF Limited.
Held: Assessee-company was engaged in the business of realistic development. The main issue was with regard to allowability of claim of deduction u/s.80IAB in respect of profit arising from sale of bare shell building in SEZ by assessee to M/s. DLF Pvt. Ltd. As a part of its business activities, assessee had undertaken to develop SEZ project in a Govt. designate Special Economic Zone after obtaining requisite approval under SEZ Act and SEZ Rules in terms of provisions of Section 80IAB. Assessee had undertaken to develop SEZ project which was duly approved by Government of India and later on had entered into MOU with co-developer, wherein it was agreed that assessee shall develop the bare shell building and transfer to M/s. DLF Pvt. Ltd. (co-developer) for further development and lease of the same to eligible tenants. It was also agreed that land on which building was to be constructed will not be sold to the co-developer, M/s. DLF Ltd. but will be leased out for a definite period. It was the profit from such developmental activity, amounting to ₹ 11,19,06,82,702/- arising from transfer of bare shell building was claimed as deduction u/s.80IAB, after obtaining the approvals from ‘Board of Approvals, Ministry of Commerce and Industry’, Government of India in respect of SEZ Project. AO had submitted that transfer of building of co-developer could not be treated as a business activity and the income from such transfer could not be treated as business income. In fact, it was a sale of a building in the nature of capital asset. It was held that the lease was only in respect of land and same could not be applied on transfer of building. In any case, the recognition of revenue relating to real estate projects was governed by AS-7 and assessee had been consistently following POCM which had accepted by the Tribunal in assessee’s own case for AY 2006-07. Hence, such a reasoning of AO to disallow proportionate deduction could not be sustained. Assessee was eligible for deduction under Section 80IAB because they were in consonance not only under the SEZ but also Board of Approval for SEZ had approved such activities.
FULL TEXT OF THE ITAT JUDGEMENT
1. These are the cross appeals filed by the assessee as well as The Deputy Commissioner Of Income Tax, Circle 7 (1)), New Delhi (the Learned Assessing Officer/AO) against the order of Commissioner Of Income Tax (Appeals) – 3, New Delhi (the learned that CIT A) dated 14 May 2015 for assessment year 2010 – 11.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
