S.80IB(10):Deduction – Undertaking Developing and building Housing Project Eligible even if developer not “owner” of land.

The assessee entered into a ‘development agreement’ with the owner of the land pursuant to which
it agreed to develop the land. Deduction under section 80‐IB(10) in respect of the profits arising
from the said activity was claimed on the ground that it was “derived from the business of
undertaking developing and building housing project approved by the local authority”. The
Assessing Officer & CIT(A) rejected the claim on the ground that the assessee was not the “owner”
of the land and that the approval of the local authority to, and the completion certificate of, the
“housing project” was given to the owner and not to the assessee. However, the Tribunal allowed
the claim. On appeal by the department to the High Court, HELD dismissing the appeal:
Section80IB(10) allows deduction to an undertaking engaged in the business of developing and
constructing housing projects. There is no requirement that the land must be owned by the
assessee seeking the deduction. Under the development agreement, the assessee had undertaken
the development of housing project at its own risk and cost. The land owner had accepted the full
price of the land and had no responsibility. The entire risk of investment and expenditure was that
of the assessee. Resultantly, profit and loss also accrued to the assessee alone. The assessee had
total and complete control over the land and could put the land to the agreed use. It had full
authority and responsibility to develop the housing project by not only putting up the construction
but by carrying out various other activities including enrolling members, accepting members,
carrying out modifications engaging professional agencies and so on. The risk element was entirely
that of the assessee. The assessee was a “developer” in common parlance as well as legal parlance
and could not be regarded as only a “works contractor”. The Explanation to section 80IB inserted
w.r.e.f. 1.4.2001 has no application as the project is not a “works contract”. Further, as the assessee
was, in part performance of the agreement to sell the land, given possession and had also carried
out the construction work for development of the housing project, it had to be deemed to be the
“owner” under section 2(47)(v) r.w.s. 53A of the TOP Act even though formal title had not passed
(Faqir Chand Gulati vs. Uppal Agencies(2008) 10 SCC 345 distinguished)
CIT v. Radhe Developers ( 2012) 204 Taxman 543(Guj.)(High Court)www.itatonline.org