TMI Blog2019 (4) TMI 1850X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is justified in allowing the appeal of the assessee for deduction in respect of unutilized FSI except Pratham Citadel after taking into consideration the special grounds and circumstances as elaborated supra in his findings. Therefore, we do not find any merit in the this ground of appeal of the revenue and the same are dismissed. Project Pratham Citedal on which the ld. CIT(A) has disallowed the claim of the assessee u/s. 80IB(10) deduction in respect of utilization of FSI, we observe that in this case the assessee has shown very less area of utilization of FSI. It is noticed that total un-utilization of FSI was worked out at 45.30% which was quite high therefore the ld. CIT(A) has disallowed the claim of the assessee -restore this issue to the file of assessing officer for deciding afresh after examination and verification of the detail to be furnished by the assessee. Revision u/s 263 - taxability of profit on sale of un-utilized FSI in respect of taxability of profit on sale of un-utilized FSI - HELD THAT:- Specific details were required to be examined by the assessing officer and the ld. PCIT has rightly held in his order u/s. 263 that matter was set aside to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the ld.CIT (Appeals) erred in allowing deduction u/s 8016(10) of the Act to the assessee on a pro rata basis when there is no such provision under the statute to grant the same? 3. All the grounds of appeal of the Revenue 1(1) to 1(iii) are interconnected against the decision of ld. CIT(A) allowing deduction u/s. 80IB(10) of the act, therefore, for the sake of convenience these grounds of appeals are adjudicated together. ITA No. 2000/Ahd2014, Ground no. 1 of ITA No. 2192/Ahd/2015 assessment year 2010-11, Ground No. 1 of ITA No. 2769/Ahd/2015, assessment year 2012-13 4. As the facts in all the above mentioned grounds of appeals are similar, so, Ground No. 1 of ITA No. 2000/Ahd/2015 is taken as lead case and its finding will be applicable to Ground no. 1 of ITA No. 2192/Ahd/2015 assessment year 2010-11 and Ground No. 1 of ITA No. 2769/Ahd/2015, assessment year 2012-13. 5. The brief fact on this issue is that assessee has filed return of income declaring income of Rs. nil on 30th October, 2010. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 27th August, 2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee was not the sole owner of the land in question and approval of the layout plan/Rajachithi issued by the local authority was of housing project consisting of 158 residential units out of which the built up area of 55 residential units exceed the prescribed limit of 1500 sq. ft. thereby contravening the provision sedition 80IB(10)(c) of the act. The assessing officer has further stated that the there was no provision in the act to allow partial benefit of section 80IB(10) of the act therefore entire deduction claimed u/s. 80IB(10) of the case of ₹ 76158914/- was disallowed. The ld. CIT(A) has deleted the disallowance after placing reliance on the decision of the judicial High Court of Gujarat in CIT Vs. Radhe Developer (2012) 341 ITR 403 (Guj). It is also held that 55 residential units in respect of Pratham Meadow was a separate project developed by another assessee named M/s Pratham Properties. The relevant part of the decision is reproduced as under:- 3.3. DECISION: 3.3.1. I have considered the submissions of the Id. counsel, facts of the case and the decision of Jurisdictional High Court of Gujarat in CIT Vs Radhe Developers [2012] 341 ITR 403 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading 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 of Mysore Minerals Ltd. (supra), and in the case of Podar Cement (P.) Ltd. and others (supra), the ownership has been understood differently in different context. For the limited purpose of deduction under Section 8018(10) of the Act, the assessee had satisfied the condition of ownership also; even if it was necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m part of the housing project developed by the appellant. Appellant filed various documents which consist of Copy of Brochure of 'Pratham Meadows' developed by Pratham Properties and Copy of Development Agreement entered into between the Land Owners and Pratham Properties on which 'Pratham Meadows' scheme is developed by Pratham Properties. The Appellant has also stated that M/s Pratham Properties is assessed to income tax under PAN AAHFP5012C and has furnished copies of the said firm's return of income filed for A.Y. 2010-11, 2011-12 and 2012-13 together with audited accounts for the year ended 31.03.2010, 31.03.2011 and 31.03.2012. A separate profit loss account hasr also been furnished in respect of 'Pratham Meadows' scheme of Pratham Properties to show that the entire expenditure for the project is incurred by Pratham Properties and the income on sale of residential units also forms a part of profit loss account of Pratham Properties. It is also brought to my notice that all these facts are verifiable from the assessment order passed by the Assessing Officer u/s 143(3) of the Act in respect of A.Y. 2008-09. During the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is 671.51 and selling price of per unit per sq.ft is 877.47. Whereas, in the commercial project the total cost is ₹ 751.06 sq.ft and selling rate is 1175.69. the Assessing Officer has rightly contended that the assessee has shown cost of construction of residential at ₹ 671.51 and cost of construction of commercial unit as 751.06. Normally in the case of Flats, the different type of amenities to be provided whereas in the case of commercial shops no such amenities required to be provided. In the shops, three walls with shutter are to be provided and therefore, the cost of construction of the shop should be less than the cost of construction of flats. In view of above the Assessing Officer held that the assessee has not satisfactorily cost of construction, selling rate comparing with his other projects in which deduction u/s. 80 IB(10) claimed. He therefore, estimate profit of residential unit at 30% as against 23.47% shown by the assessee and in the case of commercial 40% as against 36.11%. the Assessing Officer accordingly made addition of ₹ 10,83,700/- i.e. ₹ 5,22,000/- in respect of commercial units sold (40-36.12% on sales of ₹ 1,34,47,287/-) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry has to be made thereon as to whether the built-up area is in fact 1500 sq.ft. or more than that, we do not think that the Revenue could have any serious objection on this aspect. In the circumstances, we confirm the order of the Tribunal on the remand portion. 3.3.8. The Ld. Authorized Representative for the appellant has also relied upon the decision of Madras High Court in case of Viswas Promoters (P.) Ltd. Vs CIT [2013] 255 CTR 149 (Mad.) wherein it has been held that each residential block in a housing project is a 'housing project' in itself for purpose of claiming deduction u/s. 80IB(10) of the Act. It has been held by the High Court that the proportionate deduction has to be allowed to the assessee in respect of the units which fulfill the eligibility conditions. Ratio of these two decisions as well as decisions in cases of Bengal Ambuja Housing Development Ltd., ITA 1735/KOL.-205 and Saroj Sales Organization Vs ITO 115 TTJ 485 (Mumbai), are also in favour of the Appellant. However, in view of my finding that the two projects are distinct projects being developed by two different persons, I find no reason to comment on this argument. As a result, the ground ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 4 of ITA No. 2673/Ahd/2015. 10. During the course of assessment, the assessing officer noticed that the assessee has carried out construction activities on the land without fully utilizing the permissible FSI (Floor Space Index). It is further stated that assessee firm has carried out only partial construction of the available FSI/Entire plot of land available for development with the assessee firm and the assessee firm has claimed deduction u/s. 80IB(10) of the act also on the profit earned from sale of unutilized FSI of the housing project. The assessing officer has stated that deduction u/s. 80IB(10) of the act in respect of profit earned on sale of unutilized FSI on which no construction under taken was not available. The assessing officer has referred the decision of Hon ble Gujarat High Court of Gujarat in the case of Moon Star developer vide Tax Appeal of 148 of 2008. The assessing officer has restricted the deduction u/s. 80IB(10) of the act claimed by assessee to the extent of profit earned on construction work carried on utilized FSI only and the proportion profit earned on sale of un-utilized FSI to the extent of ₹ 6798955/- was disallowed. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced as under:- 4.3.1 I have considered the submissions made by the Authorized representative and have gone through the orders of CIT (A)-ll, Baroda for A.Y. 2006-07, the order of the Hon'ble ITAT, Ahmedabad in ITA No.2183/Ahd/2010 ITA No. 3300/Ahd/2009 for A.Ys. 2006-07 2007-08. From the order of the Hon'ble ITAT, Ahmedabad, I find that they have followed the decision of Hon'ble Co-ordinate Bench in the case of Radhe Developers Ors. V. ITO Ors. (2008) 113 TTJ 300 (Ahd.) and dismissed the revenue's appeal. However, subsequent to the decision of ITAT, Ahmedabad in the case of Radhe Developers Ors. (supra), Hon'ble High Court of Gujarat in the case of CIT-1 V. Moon Star Developers [2014] 367 ITR 621 (Guj.) have considered the decision of Radhe Developers Ors. (supra) and have given the following findings: ..... However, in cases where the utilization of FSI is way short of the permissible 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 there under, bifurcation of such profits arising out of such activity and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich a Developer keeps in mind while demarking, designing and laying out plot of land in a housing project. In his written submission it is stated: Your honour will appreciate that when a developer demarcates a'plot of land for housing projects, the following issues are always kept in mind: a. There is a standardized design for the housing unit with almost all the houses having a standard ground floor(built up) area. b. The developer has to meet the regulations for common plot - generally 10% of the land area with restrictions on dimensions (Minimum size of the common plot shall be 250 sq.mts. with no side less than 10.50 meters.) and road width (7.5metres.). The arrangement of ownership tenement in a plot, shall be as may be approved by the Authority with due regard to internal approach roads, marginal open spaces common plot, water supply, drainage, and internal road lighting. c. Where the land is evenly shaped, the area of common plot can be restricted to the legal requirement, however in case of land with uneven shapes, higher area may be required for the common plots and roads as it will not be possible to fit the maximum number of standardized houses in the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various projects undertaken by them.. We had demonstrated before your honour scheme wise details and the various reasons as to why FSI could not be utilized in full. It was brought to your honour's kind notice that there were various Impediments and limiting factors such as passing of high tension electric line, naliya road, odd shape of the plots and various construction restrictions by regulators etc. etc., and we had demonstrated before your honour scheme wise reasons in respect of the utilization of FSI. These have now been tabulated to show the details of the plot wise variation- and their effect on the overall project. Your Honour will appreciate from the charts in respect of the various schemes viz. Pratham Residency, Pratham Citadel, Pratham Vatika Ahmedabad and Pratham Vistas regarding the loss in constructible area on account of the various factors stated. In the said charts, the plot wise details are furnished and from which a deduction on account of the impediments stated is mad. A summary of the variations is given at the end of the charts. Your Honour will kindly observe the following from the enclosed charts: The project wise analysis of available FSI vis-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbers 194A, 195. 8. A part of plots 196 197 will be pruned as there is a proposed residential scheme for EWS category of people on the adjacent plot and there is straightening of the boundaries Subsequently, Town Planning Scheme was announced and certain portion of the plot were cut. This has affected many plots in the scheme. 6.2. In addition to this, the Authorized Representative has brought on record detailed explanations as to why full utilization of FSI was not possible on as many as fifty four plots because of their odd shapes, being corner plots, because of disputes with adjacent landowner and the necessary margins on account of the roads. The Authorized Representative has also furnished plot wise and project-wise summary of plot size, special reasons for underutilization of FSI as enunciated in the case of Shreenath infrastructure (supra). This summary is placed as Annexure 'A' of the paper book and from that it transpires that Gross FSI available with the appellant is 48614 Sqm, whereas, total 3427 Sqm is to be reduced considering special reasons forcing underutilization of FSI and this included town planning restriction, irregular shape of particular plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as claimed by the appellant B. Pratham Vatika (Ahmedabad):- 7.1. Ld. Authorized Representative has submitted that Pratham Vatika (Ahmedabad) project is constructed on land at Block Nos. 801 804 of Village Ghuma, Daskroi which was situated within the Ahmedabad Urban Development area. The project consists of 100 units on a total plot area of 18792.99 square meters and according to the AUDA (Ahmedabad Urban Development Authority) provision, a 12 meter by road is required across the entire project as main road. Authorized Representative has further contended that from the enclosed brochure, it can be seen that the project is constructed on 2 plots which are joined by narrow strip of 31.5 meter, therefore, according to the road regulation, after leaving the road across the project, only 19.5 meter was remaining on the eastern plot on the southern side and within the constrains the project was developed. It is argued by the Authorized Representative that the ground floor (Built up area) utilized is as high as 96%. 7.2. It is further submitted before me that there is a major public road to the west of the Project which necessitated higher margins and, therefore, the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of deduction U/s 808(10) of the Act. 7.4. In view of the various reasons cited and the explanations given above, I agree with the AR that the Appellant had exploited the project land to the maximum keeping in mind the various legal and regulatory impediments and that the Appellant had sufficient reasons for not being able to fully utilize the FSI in the project. Hon'ble Gujarat High Court in the case of Moon Star Developers (Supra) has considered utilization of FSI up to 65% as reasonable. However, later on Hon'ble Gujarat High Court in the case of Shreenath infrastructure (supra) has allowed deduction due to special reasons for underutilization of FSI and after considering the same FSI utilization becomes 6% as mentioned by the Ld. Authorized Representative in above para. Therefore, keeping in mind this decision of Shreenath infrastructure (supra), I hold that the profits from the Pratham Vatika (Ahmedabad) project are fully eligible for deduction under section 80IB(10) of the Income Tax Act, 1961. Jhe Assessing Officer is accordingly directed to allow the deduction under the said section as claimed by the appellant. C. Pratham Vistas:- 8.1. Ld. Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le with the appellant is 23,625 Sqm, whereas, total 2,165 Sqm is to be reduced considering special reasons forcing underutilization of FSI and this included town planning restriction, irregular shape of particular plots and naliya road. Considering these special reasons, available FSI remains 20,161 Sqm, whereas, FSI utilized in this project is 14,071 Sqm. This is tabulated by the appellant as under: 8.4. During the appeal before me Ld. Authorized Representative has made further submission as under:- As against the total plot area of 14765.75 square metres the variation in respect of the plots which are covered by the reasons for under utilization is 2164.95 square metres which leaves balance plot area of 12600.80 square metres The FSI available on the same works out to 20161.28 square metres as against this the actual utilization of FSI in Pratham Vista project is 14070.65 square metres, i.e. utilization is 70%% of the available FSI. Your honour will kindly appreciate that the underutilization was in the marginal range of 25% to 30%. The judgment of the Hon. Gujarat High Court in the case of Shreenath Developers would apply to the facts of this project and therefore the margin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion shall have to be obtained. It was also explained that there was a dispute as to the ownership of land demarcated for plots 32 to 34 and land adjacent to plot 43 and no construction was possible. 9.2. It was also stated that vide letter dated 29.12.2012, the Town Planning Officer (TPO) has intimated that the original final plot of 14805 square meters has been reduced to 14061 square meters. 9.3. Similarly, during the course of the hearing, it was explained to me that the entire row of houses on the northern side of the project was facing a public road with higher margin requirements. It was also pointed out that the northern and southern sides of the project land were not parallel resulting in an odd shape which necessitated leaving more space for corner plots. 9.4. The regulations regarding laying down of the road has also played a very important role in putting up the number of units. It was explained that If against the regulatory margin an additional margin of 2.5 meter was to be given to the residential units. Had this not been done, unutilized land of 6 to 7 meter width would have been left where no construction could have been done. This would have ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat high Court's decision in the case of Shreenath Infrastructure (Supra). In the assessment order the Assessing Officer has computed the profit attributable to unutilized FSI in respect of Pratham Citadel project of the Appellant at ₹ 10,07,054/- for the entire project. The Authorized Representative has contended that in view of above mentioned facts, the Profit attributable to unutilized FSI in respect of Pratham Citadel Project has to be restricted to 54 Plots and the disallowance in respect of the Profit attributable to Unutilized FSI for Pratham Citadel Project be calculated as under: No of Units Land Area Sqm FSI Sqm Total Project 66 11163 17745 Less: 12 2545 4073 54 8618 13672 [As against the FSI available of 13,672 Sqm, the appellant has utilized FSI f 7,479 SQM, therefore, underutilization of FSI is worked out at 6,193 Sqm i.e., 30%]. However, during the appeal before me Ld. Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted the order of ld. CIT(A). 13. We have heard both the sides and perused the material on record carefully. We have gone through the aforesaid mentioned finding of ld. CIT(A). It is noticed that the ld. CIT(A) has considered the different circumstances in respect of different projects mentioned by the assessee i.e. land demarcated for road, deduction in the size of plot, shape of the plot etc. We have further noticed that ld. CIT(A) has considered the decision of Hon ble Jurisdictional High court in the case Shreenath Infrastructure. In this decision, the Hon ble High Court has also referred the para 31 of the earlier decision given in the case of Moon Star Developers which is reproduced as under:- 31. It is true that section 80IB(10) of the Act does not provide that for deduction, the undertaking must utilize 100% of the FSI available. The question however is, can an undertaking 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 accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 1. Pratham Vatika (Ahmedabad), 2. Pratham Vistas and 3. Pratham Residency in assessment year 2011-12 and all the above projects in assessment year 2012-13 including Pratham Srushti on similar facts and circumstances, ld. CIT(A) has allowed deduction due to special reasons for underutilization of FSI as enunciated in the case of Shreenath Infrastructure. In view of the above facts and circumstances, we do not find any infirmity in the decision of the Ld. CIT(A) pertaining to assessment year 2011-12 and assessment year 2012-13. Considering the similar facts facts and circumstances, the claim of 80IB(10) for assessment year 2010-11 in respect of project Pratham Residency, Pratham Vatika, Pratham Vistas and Pratham Shrusti except Pratham Citedal are also allowed as per the ground of appeal of the assessee vide ITA No. 3086/Ahd/2016 for assessment year 2010-11. 14. In respect of project Pratham Citedal on which the ld. CIT(A) has disallowed the claim of the assessee u/s. 80IB(10) deduction in respect of utilization of FSI, we observe that in this case the assessee has shown very less area of utilization of FSI. It is noticed that total un-utilization of FSI was worked out at 45.30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, the PCIT has concluded that the assessing officer has not examined this issue while finalizing assessment, therefore, ld. PCIT has set aside the issue to the file of the assessing officer to be framed afresh after giving assessee opportunity of being heard. 16. We have heard the rival contentions and perused the material on record. The assessment u/s. 143(3) of the act was completed on 04-02-2012. The assessing officer has disallowed the claim of deduction u/s. 80IB(10) of the act to the amount of ₹ 77568761/- on account of the following reasons:- (i) The assessee was not the sole owner of the land on which the project was constructed. (ii) In respect of Prathma Vistas Project, the approval of the Housing Project consisting of 158 residential units of which the built up area of 55 residential units exceeds the prescribed limit of 1500 sq. fts. (iii) Exclusion of other income to the amount of ₹ 17,13,580/- for the claim of 80IB(10) deduction We have also considered the number of judicial pronouncements referred by the ld. counsel in the index of case law, however he has mainly made reference to the facts of this case to the following two decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 80IB(10) on un-utilized FSI, therefore, the order u/s. 143(3) was set aside to be framed afresh. We find that assessee has submitted detail in response to notice u/s. 263 placed at page no. 67 to 195 of the paper book furnished during the course of appellate proceedings before us, but we observe that these specific information pertaining to unutilized sale for FSI area was not furnished before the assessing officer during the course of assessment proceedings. Therefore, we are of the view that these specific details were required to be examined by the assessing officer and the ld. PCIT has rightly held in his order u/s. 263 that matter was set aside to the assessing officer to provide opportunity to the assessee to prove its contentions. After considering the aforesaid fact and legal finding, we observe that the assessing officer has not examined the issue of under-utilization of the FSI in the case of the assessee according to the directions of the Hon ble High Court of Gujarat laid down in the above cited judicial pronouncements, therefore, the issue to be examined by the assessing officer according to the directions of Hon ble High Court in the referred cases. In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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