COMMISSIONER OF INCOME TAX Vs. VRM INDIA LTD.

JUDGEMENT

(1.) The following substantial question of law arises for consideration in these appeals under Section 260-A of the Income Tax Act, 1961 (hereafter "the Act"):- Whether the Income Tax Appellate Tribunal was right in view of the contracts in question that the respondent-assessee is entitled to deduction under Section 80-IB(10) of the Income Tax Act, 1961?

(2.) These appeals of the revenue stem from decisions of the Income Tax Appellate Tribunal (ITAT) for assessment years (AY) 2002-03; 2004-05 and 2005-06. The Commissioner of Income Tax (Appeals) ("CIT(A")) and the ITAT had concurrently ruled against the revenue. Briefly the facts are that the assessee is engaged in the business of building and developing of housing projects. In its return of Income, the assessee claimed deduction under Section 80-IB(10) which was declined by the Assessing Officer ("AO") in the course of assessment under Section 143(3). The AO observed that the assessee company had been undertaking construction activity since 1996-97. The company had been allotted in FY 2001-02 a housing project worth Rs. 12,53,65,692/- for constructing housing units measuring 450 sq. ft. each on more than one acre of land at Sector-62, Noida by the Indian Railway Welfare Organisation ("IRWO"). A housing Project worth Rs. 22,82,96,800/- had also been allotted for the construction of housing units measuring 38 to 42 sq. metre each on a total area of more than one acre of land at Sector 14, Dwarka, Phase-II, New Delhi, by the Delhi Development Authority ("DDA"). Both these continued in the year under consideration. The the contract receipts from these works during the year under consideration disclosed was Rs. 5,47,85,200/-. The profit from this contract receipt was shown at Rs. 48,40,725/-. Of this, Rs. 47,03,714/- was claimed as tax exempt income by virtue of Section 80-IB(10) of the Act.

(3.) The AO, upon a textual analysis of Section 80IB (10) was of the view that profit derived only from developing and building housing projects which are approved by local authority is eligible for deductions u/s 80IB. According to him, these conditions had to necessarily be fulfilled: