TMI Blog2020 (3) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;. After taking into consideration the special grounds and circumstances, the ratio of the decision in the case of Shreenath Infrastructure [ 2014 (4) TMI 482 - GUJARAT HIGH COURT ] was applied for allowing the deduction claimed by the assessee under Section80IB(10) of the Act. In respect of the project 'Pratham Citadel', for which, the CIT(A) disallowed the claim of the assessee under Section80IB(10) of the Act, the deduction in respect of utilization of FSI, the Tribunal has restored the matter back to the file of Assessing Officer for deciding afresh for examination and verification of the details to be furnished by the assessee so as to consider whether there is any special reasons for underutilization of FSI as enunciated in the case of Shreenath Infrastructure [ 2014 (4) TMI 482 - GUJARAT HIGH COURT ] When both the CIT(A) and the Tribunal have arrived at concurrent findings of fact on the basis of the material and records, none of the questions nos.2(d), (e) and (f) could be termed as substantial question of law. The appeal, therefore, fails and stands dismissed. - R/Tax Appeal No. 34 of 2020 - - - Dated:- 2-3-2020 - Honourable Mr. Justice J.B. Pardiwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of tenements? (e) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in upholding the decision of Ld. CIT(A) in allowing the deduction u/s.80IB(10) ignoring the facts that in Pratham Residency, Pratham Vatika and Pratham Vistas, assessee has exploited the project land to the maximum keeping in view the various legal and regulatory impediments and the assessee firm had sufficient reasons for not being able to fully utilize the FSI in project? (f) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in upholding the decision of CIT(A) in allowing the deduction u/s.80IB(10) ignoring the fact that the only the profits which are derived from development and construction of housing units are eligible for benefit u/s.80IB(10) and not the profits which are attributable to the FSI that was sold as such without developing and constructing? 3. So far as the question nos.2(a), (b) and (c) are concerned, similar questions are considered in the Tax Appeal No.25 of 2020 and similar questions are not admitted by the order in the Tax Appeal No.25 of 2020 of even date. Therefore, the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the issue regarding under utilization of FSI is discussed at length. The Hon'ble ITAT has followed the decision of the Hon'ble Coordinate Bench in the case of Radhe Developers Ors. The decision of Radhe Developers Ors. is overruled by the decision of Moon Star Developers (supra) and, therefore, I do not find any merit in holding that the issue regarding under utilization of FSI was duly considered in the earlier years and that it is a matter which is covered by the order of the Hon'ble ITAT in appellant's own case. 4.3.2 On merits of the case, the Authorized Representative has made further submissions before me regarding the reasons why the full FSI could not utilize in the four projects. This was particularly in light of the Gujarat High Courts pronouncements in the case of Shreenath Infrastructure (Tax Appeal No.147 of 2014 with Tax Appeal No.148 of 2014) wherein, the Hon'ble High Court while referring to the case of Moon Star Developers (Supra) has remarked as under: Marginal under utilization of FSI certainly cannot be a ground for rejecting the claim under section 80IB(10) of the Act. Even if there has been considerable under utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot edge. In case of public roads (those which are not a part of the project roads) there as requirements for distance of construction line from the center of the road. For example, where the developer incorporates a naliya road (called a village road basically meant for drainage of rain water) into a road as a part of the housing scheme, the requirement in the GDCR is that no construction can be made up to a distance of six meters from the center of the naliya road. Similarly, where an overhead high tension electricity line passes, no construction is permitted up to a distance of 17.5 meters from the center of such line. e. The developer tries to fit in the maximum number of housing units in the remaining area which is plotted for the individual houses. The ground coverage for the houses is kept to the maximum permissible in law. However, issues like architectural aesthetics and marketability of the houses, sometimes concessions have to be made. f. In the various projects undertaken during the year by the appellant the ground coverage is as under: Project Name No. of Residential Units Available Ground Floor Coverage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that the project Pratham Residency is constructed on Block Nos.418, 422, 424 and 425 of village Kapurai. The project consists of 285 units classified as Manor and Villas. Manors have a built up area of 1043.67 square feet and Villas have a built up areas of 1278.87 square feet. The four blocks of land, while they had a squarish srape independently, they were so positioned that the total area for the project esulted in three differently sized squarish shapes joined with each other resulting in a very odd shape for the project. This odd shape resulted in nooks and crannies and keeping in mind the need to keep the required Common Plot and the 7.5 meter wise roads, the maximum number of residential units which could be fitted in the plot came to 285. After the project drawings was approved a Town Planning Scheme No.40, demarcating the final plot/s for the project was announced. According to the revised TP Scheme there was substantial delineation which has affected the plot size of a number of plots. Examples are: 1. Straightening of the boundary between Plot No.261 and 268 which reduces the area of individual plots in the section. 2. Similarly, the size of Plot N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89 Sqm, whereas, FSI utilized in this project is 32279 Sqm. This is verifiable from the plotwise details submitted by the authorized Representative along with copies of maps and approved plans of the project which were furnished by the Appellant before the Assessing Officer also for verification. 6.3 During the appeal before me Ld. Authorized Representative has made further submission in respect of Pratham Residency project as under: As against the total plot area of 30490.49 square meters, the variation in respect of the plots, which are covered by the reasons for under utilization is 3426.81 square meteres. This leaves balance plot area of 27063.68 square meters. The FSI available on the same works out to 43301.89 square meters, as against this the actual utilization of FSI in Pratham Residency project is 32279.28 square meters, i.e. utilization is 75% 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 marginal under utilization would not be hit by disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 plot and the common facilities (club house, swimming pool etc.) had to be kept on that side. It is also submitted that almost all the building in the project are quadruplicates units i.e. they are conjoined back to back as well as side to side. The only exception are plot Nos.1, 10 11 where because of the common plot odd shape has come across leaving space constructing only 3 units there. The row 42 to 51 and 93 to 100 are twin units i.e. conjoined side to side. This is because of the space constraints. Similarly, plot Nos.52 to 62 are twin units conjoined from side to side because of the space limitation. 7.3 The Authorized Representative has also furnished plot wise and projectwise 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Assessing Officer is accordingly directed to allow the deduction under the said section as claimed by the appellant. C. Pratham Vistas: 8.1 Ld. Authorized Representative has submitted that Pratham Vistas is a project which has been executed on land bearing Block No.s1740, 1746 and 1757 (Part) of Village Bhaili, District Vadodara. The project consists of 103 units of various sizes. The defect in the plot is that towards south west of the plot there is 220KV high tension electricity power line passing and towards the south of the plot in the middle there is a naliya road which extends almost 8.0 meter inside the project. As per the guidelines, a margin of 17.5 meter from the center of the high tension line is required to be kept before any construction work can be done. 8.2 It is also contended before me that there is a legal requirement that no construction is permitted up to a distance of 6 meters from the center of the naliya (drain) road line. On examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable 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 marginal underutilization would not be hit by disallowance of deduction u/s.80IB(10) of the Act. 8.5 In view of the various reasons cited and the explanation given above, I agree with the Authorized Representative that the appellant had exploited the project land to the maximum keeping in mind the various legal and regulatory impediments like the existence of the high tension electricity line passing on the plot and the naliya road necessitating higher margins. I am of the opinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned that if against the regulatory margin an additional margin of 2.5 meter was to be given to the residential width would have been left where no construction could have been done. This would have ultimately resulted in huge waste of land on which no construction would have been permitted. 9.5 It was explained the Plot Nos.14, 32, 33, 34, 65 and 66 were included in the town planning scheme and accordingly, construction can be commenced only after receipt of possession of Final Plot. In the building construction permission a condition was laid down whereby the revised permission was to be obtained. Scheme Total land area of Plots in Sq.mtr. Excess Plot Area in view of limitations Balance Land Area FSI on Balance land Actual Utilization of FSI Utilization % Pratham Citadel 11163 751 10412 16658 9139 55.00% 9.7 I have gone through the details of the Project and also the various explanations given to me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total plot area of 11162.54 square meters the variation in respect of the plots which are covered by the reasons for under utilization is 750.98 square meters which leaves balance plot area of 10411.56 square meters. The FSI available on the same works out to 16658.50 square meters as against this the actual utilization of FSI in Pratham Citadel project is 9139 square meters i.e. utilization is 55% of the available FSI. Your honour will kindly appreciate that this is a case of under utilization and was in the marginal range keeping in view the various regulatory restrictions. 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 marginal under utilization would not be hit by disallowance of deduction u/s.80IB(10) of the Act. Thus, after considering the special circumstances (viz. various regulatory restrictions), the underutilization of FSI is worked out at 6,193 Sqm i.e. 45.30% which is otherwise as high as 55% as admitted by the Ld. Authorized Representative above. This is definitely very high considering the benchmark propounded by the Hon'ble Gujarat High Court in the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 80IB(1) of the Act, in variably 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 under section 80IB(10) of the Act. Even if there has been considerable underutilization. If the assessee can point out any special grounds why the FSI could not be fully utilized, such as, height restriction because of special zone, passing of high tension electric wires overhead, or any such similar grounds to justify under utilization, the case may stand on a different footing. 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 thereunder, bifurcation of such profits arising out of such activity and that arising out of the net sell of FSI must be restored to. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for less utilization of FSI as mentioned on page 65 to 66 on the order of the ld. CIT(A) as per the findings of the Hon'ble High Court of Gujarat given in the above cited judgment. In the light of the above facts and findings, we are of the view that it will be appropriate to restore this issue of claim of 80IB(10) deduction of unutilized FSI in respect of project Pratham Citadel to the file of assessing officer for deciding afresh after examination and verification of the detail to be furnished by the assessee. Therefore, this ground of appeal of assessee is allowed for statistical purposes. 7. We have noticed that both the CIT(A) and the Tribunal have arrived at concurrent findings of fact except the project of 'Pratham Citadel'. After taking into consideration the special grounds and circumstances, the ratio of the decision in the case of Shreenath Infrastructure [Supra] was applied for allowing the deduction claimed by the assessee under Section80IB(10) of the Act. 8. In respect of the project 'Pratham Citadel', for which, the CIT(A) disallowed the claim of the assessee under Section80IB(10) of the Act, the deduction in respect of utilization of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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