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Gujarat HC confirms ITAT’s liberal interpretation on tax holiday for residential projects u/s. 80IB(10)

       Housing developers having undertaken the business of developing and building residential housing projects, with a view to avail 100% deduction in respect of their profits as prescribed under Section 80IB(10) of the Income-tax Act, can truly heave a sigh of relief, with the Gujarat High Court finally resolving some burning controversies raised by the Revenue over the past few years.

        Around 50 Tax Appeals filed by the Department have come to be recently disposed of under a consolidated order passed in the case of ‘Radhe Developers, Shakti Corporation & Others’ by the Bench comprising of Hon’ble Mr. Justice Akil Kureshi and Ms. Justice Sonia Gokani, who were called upon to decide two key contentions relating to eligibility for claim of deduction under Sec. 80IB(10).

        The first issue raised by the Revenue in its appeals was that the benefit of deduction u/s. 80IB(10) could not be allowed in cases where the  developers were neither the land owners nor necessary permissions for development from the local authorities had been granted in the names of such developers. The second core contention was that in such a case, at best the developer can be stated to have acted as a contractor for developing the housing project for and on behalf of the land owner and in view of the Explanation added to Section 80IB(10) by Finance (No.2) Act, 2009, with retrospective effect from 1.4.2001, a tax payer executing a housing project as a works contract cannot qualify for the benefit of tax incentive under this section.


         In its elaborate and well reasoned judgement, the High Court has conclusively held as under:

         “Neither the provisions of Section 80IB nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under Section 80IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, the term developer has been understood in common parlance as well as in legal sense carrying a much wider connotation.”

          In the above context, the High Court has meaningfully observed that it is well settled that while interpreting the statute, particularly, the taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of Section 80IB(10) of the Act, namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent.


          The High Court has also negatived the second line of contention of the Department and clearly held that “by no stretch of imagination can it be said that the assessee acted only as a works contractor. In the present case, as already held the assessee had undertaken the development of housing project at its own risk and cost. The land owner had accepted only the full price of the land and nothing further. The entire risk of investment and expenditure was that of the assessee. Resultantly, profit and loss also would accrue to the assessee alone. In that view of the matter, the addition of the Explanation to Section 80IB with retrospective effect of 1.4.2001 would have no material bearing in the cases on hand.”

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