A landowner who enters into a development agreement with a developer to construct flats on his land is entitled to deduction under section 80IB(10) of the Income Tax Act, 1961, if he undertakes various activities for the development of the project, including obtaining approvals and permissions, and the project is completed before the due date.

JUDGMENT

JUDGMENT

K.S. Jhaveri, J. - In both these appeals common question of law and facts are involved, they are decided by this common judgment.

2. By way of these appeals, the appellants have assailed the judgment and order of the Tribunal whereby Tribunal has dismissed the appeals of the department.

3. Counsel for the appellants has framed the following substantial question of law:-

DB ITA No.146/2017

(i) Whether the Tribunal was justified in holding assessee as the developer and thereby allowing deduction under section 80IB(10) of Rs. 1,01,86,533/-, ignoring the specific development agreement entered into by him merely as land owner with another developer to execute and construct the flats on the land of the assessee?

(ii) Whether the Tribunal was justified in allowing deduction under section 80IB(10) to the assessee when neither he undertook development and construction of the housing project nor the completion certificate of the project as required in Clause-ii of explanation to Section 80IB(10)(a) was furnished by the assessee?

(iii) Whether on the facts and circumstances of the case, the finding of the Tribunal is perverse, contrary to the record and untenable in the eye of law?

DB ITA No. 114/2016

(i) Whether the Tribunal was justified in holding assessee as the developer and thereby allowing deduction under section 80IB(10) of Rs. 5,22,92,252/-, ignoring the specific development agreement entered into by him merely as land owner with another developer to execute and construct the flats on the land of the assessee?

(ii) Whether the Tribunal was justified in allowing deduction under section 80IB(10) to the assessee when neither he undertook development and construction of the housing project nor the completion certificate of the project as required in Clause-ii of explanation to Section 80IB(10)(a) was furnished by the assessee?

(iii) Whether on the facts and circumstances of the case, the finding of the Tribunal is perverse, contrary to the record and untenable in the eye of law?

The brief facts of the case are that during the assessment year under question the assessee claimed deduction under section 80IB(10) of the Act of Rs. 1,01,86,533/- on the income earned from sale of flats, which the assessee received as his share in the project carried out at the land owned by him at Khasra No.10 Gram Durgapura, Tehsil Sanganer, Jaipur.

It is relevant to note that for the development of the said plot of land the assessee entered into a development agreement dated 30.06.2005 with one M/s. Unique Builder and Developer (Reality) with the intent get constructed a residential complex. A perusal of the said development agreement makes it more than explicit that on account of the inability of the assessee to raise construction on account of lack of finance, manpower and infrastructure for construction and for other reasons stated in the development agreement, he entered into the development agreement with M/s. Unique Builder and Developer (Reality), who was specifically referred in the Development Agreement as Developer.

It is submitted by the counsel for the appellant that the Tribunal as well as CIT(A) have committed grave illegality by reversing the findings given by Assessing Officer and thereby allowing the benefit of deduction under Section 80IB(10) of the Act to the assessee of Rs. 1,01,86,533/- after holding that assessee has undertook development and construction of the housing project. Thus, the order passed by the Tribunal deserves to be quashed and set-aside.

He has further submitted that the Tribunal as well as CIT(A) have failed to consider the clauses of agreement, which clearly shows that the assessee was only a land owner. Perusal of clauses of agreements reveals that the assessee was only a land owner. He was not a developer/contractor and by no stretch of imagination could be said to have been involved in developing and building housing project.

It is also submitted that the appellate authorities have completely