TMI Blog2014 (4) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... he Transfer of Property Act leads to conclusion even for limited purpose of Income tax that assessee had satisfied the condition of ownership also - assessees were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners - The assessee, in the process of developing two housing projects, had utilized 9595.64 sq.m of buildable area against the maximum permissible area of 13004 sq.m and in other cases, put up construction of 5997.28 sq.m against maximum permissible construction on 8127.75 sq.m. Underutilization, if at all was in the marginal range of 25% to 30% - marginal underutilization of FSI would not be hit by disallowance of deduction u/s 80IB of the Act – Decided against Revenue. - Tax Appeal No.147-148 of 2014 - - - Dated:- 1-4-2014 - Akil Kureshi And Sonia Gokani,JJ. For the Appellant : Mr. K. M. Parikh, Adv. For the Respondent : None JUDGMENT (Per : Honourable Mr. Justice Akil Kureshi) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal { Tribunal for short} da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... {Explanation-For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)}. 39. We may now move on to the question of ownership of the land. 40. Relevant portion of Section 2(47) reads as under:- 2(47): transfer , in relation to a capital asset, includes,- (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882); or Section 53A of the Transfer of Property Act reads as under:- 53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the housing project, the assessee did not realize the full FSI available for development. The assessee thus sold part of the unutilized FSI and the profit derived from such sale cannot be said to have been and would not arise out of the assessee s activity of development and construction of housing project. To such extent, assessee s claim for deduction under Section 80IB (10) of the Act must be restricted. In this respect, heavy reliance was placed by the learned counsel for the Revenue on the judgment dated 5/11th March 2014 passed by this Court in case of Commissioner of Income-Tax v. Moon Star Developers. In such case, the Court did examine the Revenue s stand with respect to various assesses selling unutilized FSI in the process of development and construction of housing project. Facts in that case were that various assesses had claimed full deduction under Section 80IB (10) of the Act on the sole consideration of the residential units developed and constructed by the assesses fulfilling other conditions under Section 80IB (10) of the Act. It was, however, noticed that in all such cases, there was heavy under utilization of FSI. The utilization in various cases ranged from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees ranges from the minimum of 11.14% of the full FSI available to a maximum of 65.81%. In majority of the cases, the assessees have covered barely about one-fourth or one-0third of the permissible FSI. 30. For any commercial activity of construction, be it residential or commercial complex maximum utilization of FSI is of great importance to the developer. Ordinarily, therefore, it would be imprudent for a developer to un-derutilize available FSI. Sale price of constructed properties is decided on the built up area. It can thus be seen that given the rate of constructed area remaining same, non-utilization of available FSI would reduce the profit margin of the developer. When a developer therefore utilizes only say 25% of FSI and sells the unit leaving 75% FSI still available for construction, he obviously works out the sale price bearing in mind this special feature. Let us compare two instances. In the same area two residential schemes are developed. Both have residential units of 1500 sq. feet. In one scheme 100% FSI is used in another 25% FSI is used and 75% is passed on to the buyer of the unit. Price of the unit in the later scheme would for apparent reason be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e area of construction, looking to the scheme of section 80IB(10) of the Act and the purpose of granting deduction on the income from development of housing projects envisaged thereunder, bifurcation of such profits arising out of such activity and that arising out of the net sell of FSI must be resorted to. In the present case, none of the assessees have made any special ground for non utilization of the FSI. 32. The contention of the counsel for the assessee that as long as there has been 100% utilization of the maximum permissible area on the ground floor, deduction under section 80IB(10) of the Act cannot be declined, cannot be accepted. As noted earlier, in case of M/s. Moon Star Developers and many other assesses, such full utilization of the ground floor area available for construction resulted into barely 20% to 25% of the FSI being used, remaining more than 75% being left unused. 33. What is available for deduction under section 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project. Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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