Deduction under s 80-IB(10)

The assessee, who had the development rights over the land, had undertaken the responsibility of obtaining all statutory clearances, permissions, etc, for putting up the housing project on the land and cannot be denied a deduction under s 80-IB(10) merely because the assessee had collaborated with EBPL, which had the necessary technical know-how as well as the finance for putting up the construction, as held by MumTrib in ADy CIT v Bombay Real Estate Development Company Pvt Ltd — In favour of: The assessee; ITA Nos 6504, 6505/Mum/2008, 4219/Mum/2009, 4728/Mum/2007: (AYs 2002–2003, 2003–2004, 2004–2005 and 2005–2006).

Disallowance under s 40A(2)(b) — Since the AO has not brought on record anything to show that the payment to the MD is excessive or unreasonable, having regard to the fair market value of the services for which the payment was made or the legitimate needs of the business, no disallowance can be made under s 40A(2)(b). Further, the AO ought to have compared the payment made to the MD with payments made for similar services by other companies.

Decided on: 3 June 2011.