2012 (11) TMI 1135 - AT - Income Tax

Deduction u/s.80IB(10) - fulfillment of mandatory condition of commercial area - Claim allowed in favour of assessee

Issues Involved:
1. Assessment of total income at Rs. 43,99,220 instead of NIL.
2. Disallowance of deduction under Section 80-IB(10) due to non-ownership of land.
3. Disallowance of deduction under Section 80-IB(10) due to excess commercial construction.
4. Allegation of income from the sale of Floor Space Index (FSI).
5. Alternate plea of disallowing part of the deduction under Section 80-IB(10) related to the sale of FSI.

Detailed Analysis:

1. Assessment of Total Income:
The appellant contested the assessment of total income at Rs. 43,99,220 instead of NIL. However, this ground was deemed general and no specific finding was provided on this issue.

2. Disallowance of Deduction under Section 80-IB(10) Due to Non-Ownership of Land:
The appellant claimed a deduction of Rs. 48,99,220 under Section 80-IB(10) for the development and building of a housing project. The Assessing Officer (A.O.) disallowed this deduction on the grounds that the appellant was not the owner of the land, which was in the name of Smt. Kokilaben Narendrabhai Dalwadi and others. The CIT(A) confirmed this disallowance, referencing the cases of M/s. Radhe Developers and M/s. Shakti Corporation, which emphasized the need for the assessee to satisfy all conditions laid down in Section 80-IB(10) cumulatively.

3. Disallowance of Deduction under Section 80-IB(10) Due to Excess Commercial Construction:
The A.O. also disallowed the deduction under Section 80-IB(10) because the commercial construction exceeded the limit prescribed in Clause (d) of subsection (10) of Section 80-IB. The CIT(A) upheld this view, noting that the built-up area of the shops and other commercial establishments exceeded the permissible limit, thus making the appellant ineligible for the deduction.

4. Allegation of Income from Sale of FSI:
The A.O. held that the appellant earned profit from the sale of unutilized FSI, which was included in the profit from the housing project. The appellant contended that it neither sold any FSI nor earned any income from it. The CIT(A) found that the appellant had indeed sold unutilized FSI and confirmed the addition made by the A.O.

5. Alternate Plea of Disallowing Part of the Deduction under Section 80-IB(10) Related to Sale of FSI:
The A.O. took an alternate plea that out of the total deduction claimed under Section 80-IB(10), Rs. 39,27,168 was disallowable as it pertained to the sale of FSI. The appellant argued that no part of the deduction was disallowable since it had not sold any FSI. The CIT(A) allowed the appeal in favor of the appellant, referencing the ITAT Ahmedabad's decision in the case of M/s. Radhe Developers, which stated that there is no mandatory requirement to fully utilize permissible FSI under Section 80-IB(10).

Conclusion:
The Tribunal considered the facts and submissions, and the decision of the Hon'ble Gujarat High Court in the case of Manan Corporation vs. ACIT, which held that the amended provisions of Section 80-IB(10) are not applicable to projects sanctioned before 01.04.2005. Consequently, the Tribunal allowed the appeal in favor of the appellant regarding the disallowance of the deduction under Section 80-IB(10). However, the Tribunal dismissed the grounds related to the sale of FSI, upholding the CIT(A)'s decision.

Final Judgment:
The appeal was partly allowed, with the Tribunal ruling in favor of the appellant on the deduction under Section 80-IB(10) but dismissing the grounds related to the sale of FSI. The orders were pronounced in open court on 09.11.2012.

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