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TMI Blog2014 (4) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction u/s. 80IB (10) read with Section 80IB(1) to the assessee on profit derived from sale of unutilized FSI without appreciating that the said profit is not eligible for deduction u/s. 80IB (10) r.w.s 80IB (1) as it has not been derived by the assessee from the business activity of development and construction of a housing project ?" Both the expenses pertaining to assessee's claim for deduction under Section 80IB (10) of the Income-tax Act, 1961 {"Act" for short} has a slightly different angle. Question {A} pertains to Revenue's stand that since the assessee was not the owner of the land and perhaps even the permission for construction was granted in favour of the erstwhile owner, the assessee must be seen to have acted as a works contractor and deduction under Section 80IB (10) was not available. This aspect of the matter is fully covered by a decision of this Court in case of Commissioner of Income-Tax v. Radhe Developers, reported in [2012] 341 ITR 403, where under similar circumstances, the Court has held and observed as under:- "38. In the present case, as already held the assessee had undertaken the development of housing project at its own risk and cost. The land o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho has no notice of the contract or of the part performance thereof." 41. In the present case, we find that the assessee had, in part performance of the agreement to sell the land in question, was given possession thereof and had also carried out the construction work for development of the housing project. Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act would lead to a situation where the land would be for the purpose of Income Tax Act deemed to have been transferred to the assessee. In that view of the matter, for the purpose of income derived from such property,the assessee would be the owner of the land for the purpose of the said Act. It is true that the title in the land had not yet passed on to the assessee. It is equally true that such title would pass only upon execution of a duly registered sale deed. However, we are, for the limited purpose of these proceedings, not concerned with the question of passing of the title of the property, but are only examining whether for the purpose of benefit under Section 80IB (10) of the Act, the assessee could be considered as the owner of the land in question. As held by the Apex Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipalities and Panchayats, frame regulations for regulating activities of development of lands within their local areas. Such regulations are popularly referred to General Development Control Regulations (GDCR). In addition to providing different zones controlling development activities in different areas for regulated and orderly development of urban areas, these regulations also provide for various other details such as maximum height upto which the construction can be carried out, maximum area on the ground floor or on other floors which can be covered under construction, margin to be left on sides, parking facilities to be provided depending on the nature of building and most importantly, the maximum construction that can be carried out on a given piece of land. The last element, namely, the ratio of the land area versus the maximum construction permissible on such land, is referred to as floor space index (FSI for short). It is this FSI which will decide the maximum area of construction that can be carried out on any given piece of land. It is, therefore, not difficult to appreciate that besides several other factors of situational and other advantages and disadvantages, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable. The question however is, can an un-dertaking utilize only a small portion of the available area for construction, sell the property leaving ample scope for the purchaser to carry on further construction on his own and claim full deduction under section 80IB(10) of the Act on the profit earned on sale of the property? If this concept is accepted, in a given case, an assessee may put up construction of only 100 sq. ft. on the entire area of one acre of plot and sell the same to a single purchaser and claim full deduction on the profit arising out of such sale under section 80IB(10) of the Act. Surely, this cannot be stated to be development of a housing project qualifying for deduction under section 80IB(10) of the Act. This is not to suggest that for claiming deduction under section 80IB (10) of the Act, invariably in all cases, the assessee must utilize the full FSI and any shortage in such utilization would invite wrath of the claim under section 80IB(10), being rejected. The question is where does one draw the line. In our opinion, the issue has to be seen from case to case basis. Marginal underutilization of FSI certainly cannot be a ground for rejecting the claim unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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