Section 80IB(10) — If conditions prescribed u/s.80IB(10) are satisfied, claim cannot be denied merely because the assessee had not carried on construction activity itself.

Section 80IB(10) — If conditions prescribed u/s.80IB(10) are satisfied, claim cannot be denied merely because the assessee had not carried on construction activity itself.

The assessee, a builder and developer, was owner of an agricultural land which was converted into stock-in-trade and put the same for development by entering into a joint development agreement. Under the joint development agreement, the assessee contributed land and incurred expenses for statutory approvals. The assessee did not carry on construction activity. The assessee was entitled to 24% share in the said project. The assessee sold 49 flats which it got as its share and claimed as deduction u/s.80IB(10).

The Assessing Officer denied the claim on the ground that the assessee had not carried on the construction activity. This was confirmed by CIT (A). The assessee preferred an appeal to the Tribunal.

Held:

The Tribunal noted that the assessee contributed land as its contribution of capital and incurred initial expenses for development and building of housing project like sanction of plan, getting the electricity and water connection by making the payments to BWSSB and KEB, etc. It also noted that it is not the case of the Department that the project was not approved or developed and built by the assessee. The only reason for denying the deduction u/s.80IB(10) was that the assessee had not carried out construction activity himself.

The Tribunal also noted that on a joint reading of s.s (10) of section 80IB and Explanation thereto it is clear that deduction is allowable to an undertaking developing and building housing project approved, it is nowhere mentioned that, construction has to be carried out by the undertaking. Moreover, the Explanation clarified that any undertaking which has executed housing project as a works contract awarded by any person is not eligible for claiming this deduction, which clearly shows that even if any undertaking is constructing the housing project under a works contract entered by a person is not eligible for deduction. The only condition for claiming deduction u/s.80IB(10) is that the undertaking is developing and building housing projects approved by a local authority.

It observed that in such type of cases, getting the approval and plan sanction is the first and initial stage which was to be taken by the assessee and for that purose the assessee was required to make investments. So, it cannot be said that assessee did not make any investment for the project under consideration.

The Tribunal held that the deduction u/s.80IB(10) cannot be denied merely on the basis that the assssee did not construct himself. Considering the totality of the facts and the ratio of the decision of Jurisdictional High Court in the case of CIT v. Shravanee Constructions, (2012) 22 taxmann. com 250 (Kar.), the Tribunal set aside the order passed by the CIT(A) and directed the AO to allow deduction u/s.80IB(10) of the Act.