INCOME TAX ACT, 1961

--Deduction under section 80-IB--Profits and gains from developing and building of housing projectsAssessee developing housing project on the land owned by others--The assessee entered into a land development agreement with the land owners. The owner of the land had received part of sale consideration and in lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Held: Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner proves that the assessee had total and complete control over the land in question. The assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk. By no stretch of imagination can it be said that the assessee acted only as a works contractor. In that view of the matter, the addition of the Explanation to section 80-IB with retrospective effect of 1-4-2001 would have no material bearing in the cases on hand. Accordingly, the assessee cannot be treated as mere works contractor in term of the said Explanation.