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2017 (1) TMI 768 - AT - Income TaxDecline of claim of deduction u/s.80IB(10) - as per AO the profit claimed as deduction u/s 80-IB(10) of the Act was not derived from the housing project but from sale of unutilized FSI - Held that:- The assessee had fully utilized the FSI as per the rehabilitation scheme. The consideration for construction of the rehabilitation building was received in the form of FSI which could either be used for sale, or for construction of the sale building. Unlike the facts of the case before the Hon'ble Gujarat High Court, the assessee had not acquired any land with FSI. The assessee's case was that the receipt of the consideration for developing housing project in the form of FSI which was encashed and converted by the assessee in monetary terms by sale of the said FSI. We had verified the P & L account of the assessee which reflects that the only source of Revenue out of the construction carried out was sale consideration of FSI. Accordingly, profit earned by assessee was entirely due to construction activity and not due to purchase and sale of land / FSI. Consideration in the instant case was received for handing over the constructed tenements to the Slum Rehabilitation Authorities free of cost. Whether FSI sold was part of the project under development, therefore the project itself was incomplete, therefore, on such incompleted project the assessee was not eligible for deduction u/s.80IB(10)? - Held that:- From the record, we found that the Commencement Certificate dated 04/10/2011 and permission for construction of the saleable area under the said Scheme would not have been issued in case the project meant for rehabilitation of the downtrodden was incomplete. Thus, the FSI for construction of the saleable area was the 'consideration' for undertaking construction of the rehabilitation buildings and by no stretch of imagination the revenue could have assumed that the State would have given the consideration before completion of construction of the awarded project. In any case, as per the proviso below clause (b) in S. 80-IB(10) of the Act neither clause (a) concerning completion of the project, nor clause (b) relating to the size of the land applies to a project constructed for rehabilitation of slum dwellers. Accordingly, the objection raised by Revenue authorities are devoid of any merit. FSI sold to each of the person was in excess of 1000 sq.ft which was in violation of Section 80IB(10)(iii)(c) - Held that:- As we found that this objection of the AO was misconceived. The stipulation of limitation of the area of the constructed tenements prescribed in clause (c) of Section 80IB (10)((iii) of the Act is concerned with the residential units constructed and not for sale of FSI received as consideration towards the cost of construction undertaken. We found that the tenements so constructed under the said scheme was much below the ceiling fixed under the statute i.e., 250 sq.ft. In inferring that there was breach of the condition prescribed u/s. 80-IB(10)(c)(iii) of the Act the Assessing Officer mistook the area of FSI sold to the area of the tenements constructed. Thus, the objection raised by AO with regard to the area is also devoid of any merit. Objection to the price at which FSI were sold to the party on the plea that they were related to the assessee - Held that:- As found that Smt. Kantarani Gulati was an independent buyer and she was erroneously mentioned as a related party. Similarly, Shri Hafeez Contractor was, and still is, a renowned Architect and the fact as to how he and Smt. Pearl Contractor were considered as related parties is a mystery. In so far as Smt. Kunjal Shah and Smt. Falguni Shah were concerned, they were not partners of the assessee but were having 7.03% and 8.74% shareholding in M/s. Hubtown Limited which was 27.25% stakeholder in the assessee. Therefore, the stake of Smt. Kunjal Shah and Smt. Falguni Shah were only to the extent of 1.91% and 2.38% respectively. As regards Shri Rushank Shah, he was having only 5% stake and, hence, none of the parties was closely associated with the assessee, as assumed by AO. However, we do not find any material having been brought on record by the AO to prove close connection between the buyers and the assessee, and any 'arrangement' between the parties so as to produce more profit to the assessee. With regard to the observation of the AO to the effect that FSI sold was at inflated rates, we found that all the sales were at ‘arm’s length’. The rates at which FSI were sold to Smt. Kantarani Gulati and Shri Hafeez Contractor, who were independent and unrelated parties, were ₹ 82,364/- (incorrectly mentioned by the Assessing Officer as ₹ 67,545/-) and ₹ 72,874/- respectively, as against ₹ 85,437/- to Shri Rushank Shah having 5% shareholding. In so far as Smt. Kunjal Shah and Smt. Falguni Shah having 1.91% and 2.38% stakes respectively through M/s. Hubtown Limited, it was sold at ₹ 83,552/- and ₹ 83,543/- respectively. In view of these comparison the inference drawn by the Assessing Officer that the FSI sold was at inflated rates was contrary to his own record. - Decided in favour of assessee
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