I developed a housing project on land I had agreed to buy but never got title to, and the local authority's approval stands in the landowner's name. Can I still claim section 80-IB(10)?
Yes. The Gujarat High Court held that ownership of the land is not a condition of section 80-IB(10). What matters is whether the assessee developed and built the project at its own risk and cost. Here the developer took every decision, invested its own funds, engaged the agencies, bore the entire risk of profit or loss, and paid the landowner a fixed price - so it was not a works contractor. The Court added that in any event, having taken possession under a development agreement and an agreement to sell, the developer was the owner for this purpose by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act.
Decided by the High Court (High Court of Gujarat at Ahmedabad - Justice Akil Kureshi and Justice Sonia Gokani (oral judgment by Akil Kureshi, J)) on 2011-12-13, reported as Tax Appeal No. 546 of 2008 and connected appeals (Gujarat High Court). It bears on section 80-IB(10), section 80-IB(1), section 2(47)(v) of the Income Tax Act 1961, in Deductions & Disallowances and How Tax Law Is Read matters.
This is the judgment builders across the country rely on when the department disallows section 80-IB(10) because the plans, the approval or the completion certificate stand in the landowner's name. The harvested page records it as followed in 179 later decisions. Two features make it durable. The Court decided the case on risk and dominion rather than title, and it addressed ownership only as an alternative, so a developer who never gets registered title is not thereby out. And it disposed of the two authorities the Revenue always cites: Faqir Chand Gulati, decided on the Consumer Protection Act, and K. Raheja Development, decided on an unusually wide inclusive definition of "works contract" in the Karnataka Sales Tax Act, neither of which governs the meaning of developing and building a housing project for section 80-IB(10). The Court also held that the Explanation inserted from 1 April 2001, excluding works contracts, made no difference on these agreements.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Two streams of appeals were heard together on a common question. In the lead case the firm claimed a deduction of Rs.24,75,940 under section 80-IB(10) on income from developing and building a housing project approved by the local authority. On 18 May 2000 it entered into a development agreement with the landowners and with those who had earlier agreed to purchase the land, and on the same day the landowners entered into an agreement to sell the land to the firm. The Assessing Officer refused the deduction on the footing that the firm did not own the land, that the approval to develop and the permission to commence construction were not in its name, and that it had acted merely as an agent or contractor. The Commissioner (Appeals) affirmed, holding that land is an intrinsic and inalienable part of a housing project so that no one can carry on such a business without owning the land. The Tribunal reversed, on two grounds: that ownership is not required, and that in any event section 2(47) read with section 53A of the Transfer of Property Act made the firm the owner for income tax purposes. The second stream, led by Shakti Corporation, involved a similar development agreement, and there the Tribunal had confined itself to the ownership route in view of Faqir Chand Gulati. The question framed on admission was whether the Tribunal was right to allow the deduction where the approval and completion certificate were granted to the landowner and not the assessee, the rights under the approval were not transferable, and the dwelling units were transferred to the end users by the landowner.
The question was answered in favour of the assessees and against the Revenue, and all the appeals disposed of accordingly. The Tribunal committed no error in holding that the assessees were entitled to the benefit of section 80-IB(10) even where title to the land had not passed to them and, in some cases, the development permissions stood in the names of the original landowners. On the facts of the lead case the assessee had taken all the crucial decisions, engaged the professional agencies, invested its own funds and borne the entire risk of profit or loss, while the landowner was insulated by a fixed predetermined price payable first; by no stretch of imagination could it be said to have acted only as a works contractor, and the Explanation to section 80-IB(10) inserted from 1 April 2001 therefore had no effect. The same conclusion followed in Shakti Corporation despite the agreement's use of the word "remuneration". As an alternative, having been put in possession and having carried out the construction, the assessee was to be treated as the owner of the land for the limited purpose of section 80-IB(10) by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act. The Court recorded that the Revenue had not contended that the other conditions of section 80-IB were unfulfilled.
The Court's approach was to look at the substance of the arrangement rather than at the register. On the works contract question it applied the settled distinction, taken from the Bombay High Court in Glenmark Pharmaceuticals and the Supreme Court cases collected there, that whether a contract is one for work or one of sale depends on the dominant interest and object of the parties as shown by the terms, the circumstances and the custom of the trade. Applying that, the allocation of risk was decisive: the developer funded the project, engaged the agencies, made the decisions, agreed to pay the landowner first out of the sale proceeds, and stood to gain or lose, while the landowner took a fixed sum and no risk at all. A single word in a document could not be read out of context to convert that into a contract for work done on the owner's behalf. On ownership the Court accepted that title passes only on a registered sale deed and that title had not passed, but held that it was not concerned with the passing of title, only with whether the assessee could be treated as owner for section 80-IB(10). Following Mysore Minerals and Podar Cement, ownership is understood differently in different contexts, and possession taken under an agreement to sell, coupled with performance, brings section 2(47)(v) and section 53A into play. Finally the Court confined the Revenue's authorities to their own statutory settings: Faqir Chand Gulati was decided on whether a landowner is a consumer and the builder a service provider under the Consumer Protection Act, and K. Raheja Development turned on the deliberately wide inclusive definition of "works contract" in section 2(1)(v-i) of the Karnataka Sales Tax Act, which covers any agreement for building or construction for consideration and does not require the work to be done on another's behalf.
In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be.
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Handle my notice → Ask a CA on WhatsAppYes. The Gujarat High Court held that ownership of the land is not a condition of section 80-IB(10). What matters is whether the assessee developed and built the project at its own risk and cost. Here the developer took every decision, invested its own funds, engaged the agencies, bore the entire risk of profit or loss, and paid the landowner a fixed price - so it was not a works contractor. The Court added that in any event, having taken possession under a development agreement and an agreement to sell, the developer was the owner for this purpose by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act. This was decided by the High Court (High Court of Gujarat at Ahmedabad - Justice Akil Kureshi and Justice Sonia Gokani (oral judgment by Akil Kureshi, J)) and bears on section 80-IB(10), section 80-IB(1), section 2(47)(v) of the Income Tax Act 1961. It is reported as Tax Appeal No. 546 of 2008 and connected appeals (Gujarat High Court). This is the judgment builders across the country rely on when the department disallows section 80-IB(10) because the plans, the approval or the completion certificate stand in the landowner's name. The harvested page records it as followed in 179 later decisions. Two features make it durable. The Court decided the case on risk and dominion rather than title, and it addressed ownership only as an alternative, so a developer who never gets registered title is not thereby out. And it disposed of the two authorities the Revenue always cites: Faqir Chand Gulati, decided on the Consumer Protection Act, and K. Raheja Development, decided on an unusually wide inclusive definition of "works contract" in the Karnataka Sales Tax Act, neither of which governs the meaning of developing and building a housing project for section 80-IB(10). The Court also held that the Explanation inserted from 1 April 2001, excluding works contracts, made no difference on these agreements. If it applies to you, the first step is this: Draft the development agreement so the risk sits with the developer: a fixed price to the landowner payable first, the developer funding construction, engaging the agencies and taking the profit or loss.
Two streams of appeals were heard together on a common question. In the lead case the firm claimed a deduction of Rs.24,75,940 under section 80-IB(10) on income from developing and building a housing project approved by the local authority. On 18 May 2000 it entered into a development agreement with the landowners and with those who had earlier agreed to purchase the land, and on the same day the landowners entered into an agreement to sell the land to the firm. The Assessing Officer refused the deduction on the footing that the firm did not own the land, that the approval to develop and the permission to commence construction were not in its name, and that it had acted merely as an agent or contractor. The Commissioner (Appeals) affirmed, holding that land is an intrinsic and inalienable part of a housing project so that no one can carry on such a business without owning the land. The Tribunal reversed, on two grounds: that ownership is not required, and that in any event section 2(47) read with section 53A of the Transfer of Property Act made the firm the owner for income tax purposes. The second stream, led by Shakti Corporation, involved a similar development agreement, and there the Tribunal had confined itself to the ownership route in view of Faqir Chand Gulati. The question framed on admission was whether the Tribunal was right to allow the deduction where the approval and completion certificate were granted to the landowner and not the assessee, the rights under the approval were not transferable, and the dwelling units were transferred to the end users by the landowner. The matter was decided on 2011-12-13 by the High Court (High Court of Gujarat at Ahmedabad - Justice Akil Kureshi and Justice Sonia Gokani (oral judgment by Akil Kureshi, J)). On those facts the High Court held as follows. The question was answered in favour of the assessees and against the Revenue, and all the appeals disposed of accordingly. The Tribunal committed no error in holding that the assessees were entitled to the benefit of section 80-IB(10) even where title to the land had not passed to them and, in some cases, the development permissions stood in the names of the original landowners. On the facts of the lead case the assessee had taken all the crucial decisions, engaged the professional agencies, invested its own funds and borne the entire risk of profit or loss, while the landowner was insulated by a fixed predetermined price payable first; by no stretch of imagination could it be said to have acted only as a works contractor, and the Explanation to section 80-IB(10) inserted from 1 April 2001 therefore had no effect. The same conclusion followed in Shakti Corporation despite the agreement's use of the word "remuneration". As an alternative, having been put in possession and having carried out the construction, the assessee was to be treated as the owner of the land for the limited purpose of section 80-IB(10) by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act. The Court recorded that the Revenue had not contended that the other conditions of section 80-IB were unfulfilled.
The Court's approach was to look at the substance of the arrangement rather than at the register. On the works contract question it applied the settled distinction, taken from the Bombay High Court in Glenmark Pharmaceuticals and the Supreme Court cases collected there, that whether a contract is one for work or one of sale depends on the dominant interest and object of the parties as shown by the terms, the circumstances and the custom of the trade. Applying that, the allocation of risk was decisive: the developer funded the project, engaged the agencies, made the decisions, agreed to pay the landowner first out of the sale proceeds, and stood to gain or lose, while the landowner took a fixed sum and no risk at all. A single word in a document could not be read out of context to convert that into a contract for work done on the owner's behalf. On ownership the Court accepted that title passes only on a registered sale deed and that title had not passed, but held that it was not concerned with the passing of title, only with whether the assessee could be treated as owner for section 80-IB(10). Following Mysore Minerals and Podar Cement, ownership is understood differently in different contexts, and possession taken under an agreement to sell, coupled with performance, brings section 2(47)(v) and section 53A into play. Finally the Court confined the Revenue's authorities to their own statutory settings: Faqir Chand Gulati was decided on whether a landowner is a consumer and the builder a service provider under the Consumer Protection Act, and K. Raheja Development turned on the deliberately wide inclusive definition of "works contract" in section 2(1)(v-i) of the Karnataka Sales Tax Act, which covers any agreement for building or construction for consideration and does not require the work to be done on another's behalf. In the words reproduced by the source cited on this page: "In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be."
It was decided by the High Court on 2011-12-13 and is reported as Tax Appeal No. 546 of 2008 and connected appeals (Gujarat High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80-IB(10), section 80-IB(1), section 2(47)(v), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The question was answered in favour of the assessees and against the Revenue, and all the appeals disposed of accordingly. The Tribunal committed no error in holding that the assessees were entitled to the benefit of section 80-IB(10) even where title to the land had not passed to them and, in some cases, the development permissions stood in the names of the original landowners. On the facts of the lead case the assessee had taken all the crucial decisions, engaged the professional agencies, invested its own funds and borne the entire risk of profit or loss, while the landowner was insulated by a fixed predetermined price payable first; by no stretch of imagination could it be said to have acted only as a works contractor, and the Explanation to section 80-IB(10) inserted from 1 April 2001 therefore had no effect. The same conclusion followed in Shakti Corporation despite the agreement's use of the word "remuneration". As an alternative, having been put in possession and having carried out the construction, the assessee was to be treated as the owner of the land for the limited purpose of section 80-IB(10) by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act. The Court recorded that the Revenue had not contended that the other conditions of section 80-IB were unfulfilled. It arises in Deductions & Disallowances and How Tax Law Is Read matters, on section 80-IB(10), section 80-IB(1), section 2(47)(v) of the Income Tax Act 1961, and was decided by High Court of Gujarat at Ahmedabad - Justice Akil Kureshi and Justice Sonia Gokani (oral judgment by Akil Kureshi, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not be deflected by a single word such as "remuneration" in the agreement; the Court read the document as a whole and looked at who actually bore the loss. Where the approval and completion certificate stand in the landowner's name, lead evidence of possession under the development agreement and the agreement to sell, and take the section 2(47)(v) point with section 53A as an alternative. Answer Faqir Chand Gulati and K. Raheja by showing what statute each was decided under; neither was construing section 80-IB(10).
Still good law. I read the framed question, the facts, the Court's conclusions at paragraphs 36 to 46 and its operative order answering the question for the assessees. The harvested page records it as cited in 179 later decisions. I could not check whether the Revenue took it to the Supreme Court. Section 80-IB(10) applies only to projects approved within the dates the section prescribes, so the point is now largely historical. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page is clipped: the source marks that about 31,908 characters of the middle are not reproduced. The missing passage covers the remainder of counsel's submissions and the earlier part of the Court's own analysis, including its reading of the terms of the development agreements, which it had said it would set out. What survives is the framing of the question, the facts of both streams, the concluding part of the Court's analysis from paragraph 36, its treatment of the works contract authorities and of Faqir Chand Gulati and K. Raheja, and the operative order. The batch line dated the case to 2012; it was decided on 13 December 2011 and the date is taken from the judgment. Section 2(47)(v) is added from the judgment. The judgment identifies the second stream as led by Tax Appeal No. 733 of 2009, which does not appear in the list of connected appeals printed at the head of the harvested text; I could not resolve that. The source page carried no reporter citations, so the case numbers are given instead. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question was answered in favour of the assessees and against the Revenue, and all the appeals disposed of accordingly. The Tribunal committed no error in holding that the assessees were entitled to the benefit of section 80-IB(10) even where title to the land had not passed to them and, in some cases, the development permissions stood in the names of the original landowners. On the facts of the lead case the assessee had taken all the crucial decisions, engaged the professional agencies, invested its own funds and borne the entire risk of profit or loss, while the landowner was insulated by a fixed predetermined price payable first; by no stretch of imagination could it be said to have acted only as a works contractor, and the Explanation to section 80-IB(10) inserted from 1 April 2001 therefore had no effect. The same conclusion followed in Shakti Corporation despite the agreement's use of the word "remuneration". As an alternative, having been put in possession and having carried out the construction, the assessee was to be treated as the owner of the land for the limited purpose of section 80-IB(10) by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act. The Court recorded that the Revenue had not contended that the other conditions of section 80-IB were unfulfilled.
TaxSphere, “CIT v Radhe Developers”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-radhe-developers/ (validity last checked 2026-08-29)
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The Department has taxed my housing project income as business profit. Can I claim the section 80-IB(10) deduction now, in appeal, when I never claimed it in my return?
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My company is a member of an AOP and takes 35% of the AOP's gross sale proceeds under the AOP deed. We showed it as an exempt share of the AOP's profit. After a survey the AO reopened two years and now says it is revenue. Can he reopen, and is the money taxable in my hands?
My housing project was sanctioned by the municipal corporation as residential plus commercial. For years before April 2005, does that label alone cost me the section 80-IB(10) deduction?
