Shri Umeya Corporation vs. ITO (ITAT Ahmedabad)

DATE: July 7, 2015 (Date of pronouncement)
DATE: July 10, 2015 (Date of publication)
AY: 2006-07
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S. 80-IB(10): To be the "developer" of a housing project, the assessee has to undertake the entrepreneurship risk in execution of the project. He need not be the owner of the land. S. 40(a)(ia): The amendment is clarificatory and retrospective w.e.f. 01.04.2005

(i) In order to answer the question as to whether the condition precedent for deduction under section 80IB has been satisfied inasmuch as whether or not the assessee is engaged in “developing and building housing projects”, all that is material is whether assessee is taking the entrepreneurship risk in execution of such project. When profits or losses, as a result of execution of project as such, belong predominantly to the assessee, the assessee is obviously taking the entrepreneurship risk qua the project and is, accordingly, eligible for deduction under section 80IB(10) in respect of the same. The assumption of such an entrepreneurship risk is not dependent on ownership of the land. The business model of “developing and building housing projects” by buying, on outright basis, and constructing residential units thereon could probably be the simplest business models in this line of activity, but merely because there is an improvisation in the business model or because the assesse has adopted some other business models for the purpose of developing and building housing project does not vitiate fundamental character of the business activity as long as the risks and rewards of developing the housing project, in substance, remain with the assesse. It is difficult, if not altogether impossible, to visualize all the business models that an assessee may use in this dynamic commercial world even as, in substance, the fundamental character of the business remains the same, but certainly such modalities or complexities of business models cannot come in the way of eligibility for an incentive which is for the purpose of ‘developing and building a housing project’. There is no justification, conceptual or legal, in restricting eligibility of deduction under section 80IB(10) to any particular business model that an entrepreneur adopts in the course of developing and constructing housing project (CIT Vs Radhe Developers [(2012) 341 ITR 403 (Guj), CIT Vs ABG Heavy Industries Ltd and Ors [(2010) 322 ITR 323 (Bom)] & B T Patil & Sons (Belgaum) Constructions Pvt Ltd vs ACIT [(2010) 1 ITR (Tribunal) 703 (Mum)] referred).

(ii) It is not in dispute, in the light of a series of judgments of Hon’ble jurisdictional High Court, that the amendment brought to Section 40(a)(ia), which provides that as long as the taxes deducted at source have been deposited before the due date of filing return under section 139(1), disallowance under section 40(a)(ia) cannot be invoked for delay in depositing the tax deducted at source, is only clarificatory in nature and it will also apply to the assessment years prior to the assessment years 2010-11 as well. In the case of CIT Vs Omprakash R Chaudhury & Others (TA No. 412 of 2013; judgment dated 22nd November 2013), it was held that the amendment made in section 40(a)(ia) of the Income Tax Act, 1961, as retrospective in operation having effect from 1st April 2005, i.e. from the date of insertion of Section 40(a)(ia) of the Act.

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