Section 80IB(10) — Deduction u/s.80IB(10) cannot
be denied on the ground that the assessee is not the owner of the
property which he undertakes to develop, nor can it be denied on the
ground that the development agreement is not registered — Merely because
the commencement certificate was obtained prior to 1-10-1998, it does
not mean that the assessee has commenced the development and
construction of the project unless the assessee has taken some effective
steps on the site.
Facts:
The assessee entered
into a development agreement with M/s. Jay Jay Construction Co. on
12-10-1998. This development agreement, which was not registered, was in
respect of development right to construct a building ‘C’ on a plot of
land on which two buildings were already constructed (not by the
assessee). For the assessment years under consideration, the assessee
claimed deduction u/s.80IB(10) of the Act in respect of profits derived
from developing and building a housing project viz. ‘Building C’, which
claim was not accepted by the Assessing Officer (AO) on the ground that
the commencement certificate issued by the local authority was not in
the name of the assessee; development agreement was not registered;
commencement certificate was obtained prior to 1-10-1998 and building
‘C’ is not a separate project.
Aggrieved the assessee preferred
an appeal to the CIT(A) who confirmed the order of the AO and also had
an additional objection viz. that the condition regarding the area of
the plot is not fulfilled.
Aggrieved the assessee preferred an appeal to the Tribunal.
Held:
The
Tribunal noted that subsequent to the two buildings being constructed
on the said plot, the plan of building ‘C,’ in respect of which the
assessee acquired the development right, was approved by the local
authority. The original plan was approved in 1995, but final approval
was given to the modified plan 10-9-1998 and permission for construction
of the building was finally given on 9-10-1998. The Tribunal also noted
that in the original approved plan/layout building ‘C’ was not shown.
Having observed that the commencement certificate (CC) was in the name
of the original owner since the title of the property was not in the
name of the assessee, the Tribunal held that:
(a) merely because
the commencement certificate is issued in the name of the original
landowner, the assessee cannot be deprived of deduction u/s.80IB(10) as
nowhere it is a mandate of the said provision that the assessee must be
the owner of the property which he undertakes to develop;
(b)
merely because the agreement is not registered, the assessee cannot be
deprived of the deduction u/s.80IB(10) as the assessee has developed
building ‘C’;
(c) merely because the CC was obtained prior to
1-10-1998, that does not mean that the assessee has commenced the
development and commencement of the building ‘C’;
(d) CC was
granted for the first time on 24-2-1995 and hence, building ‘C’ was not
part of the original project. It observed that on the said plot the
owner had constructed building ‘A’ consisting of 95 flats and tenements
and also building ‘B’. Just because the plot of land remained the same,
it cannot be construed that building ‘C’ is a part of the original
housing project;
As regards the objection of the CIT(A) on the
area of plot of land on which the project was constructed, the Tribunal
on facts found that there was no clearcut finding by the AO and CIT(A)
hence it restored the issue to the file of the AO to verify whether the
area of the plot on which the building ‘C’ is constructed is one acre or
not.
The appeal filed by the assessee was allowed.
