2018 (3) TMI 1712 - AT - Income Tax

Deduction claimed by the assessee u/s.80IB(10) - scaling down of deduction u/s.80IB(10) - assessee claimed the deduction in relation to the profits derived from construction of three buildings which covered the total estimated area of 43, 782 sq.ft. - FSI used by the assessee for the three buildings in question was 4067.45 sq.mtrs which was less than one acre - Held that - Similar issue has come up in the case of Bunty Builders vs. ITO 2010 (2) TMI 791 - ITAT PUNE wherein as explained that one acre would mean 4046 sq.mtrs or 43, 560 sq.ft. Reliance has also been placed on the decision of Pune Bench of the Tribunal in the case of Baba Promoters and Development vs. ITO 2012 (8) TMI 84 - ITAT PUNE wherein also it has been accepted that one acre would mean 4046 mtrs or 43, 560 sq.ft. Considered in this light even if one goes along with the stand of the Assessing Officer and consider only the land covered by the three buildings even then the area in question fulfils the requirement of being not less than one acre. Therefore on this aspect we find no merit in the plea of the Revenue and the decision of the CIT(A) is affirmed. No fault can be found with the conclusion by the CIT(A) on this aspect. The charge made by the Assessing Officer is that there is a collusive arrangement in order to claim the benefit u/s.80IB(10) of the Act; this charge in our view is not maintainable because even if M/s. Kashish Park Realty Pvt. Ltd. would have carried out the development in terms of CBDT communication dated 04/05/2001(supra) such project would also be eligible for the benefits of Section 80IB(10) of the Act. Thus the order of CIT(A) on this aspect is also affirmed. Considering all these aspects we confirm the order of CIT(A) and therefore so far as the grounds raised by the Revenue are concerned the same are dismissed. Addition invoking Section 80IB(13) read with Section 80IA (10) - assessee had acquired the development rights of the land from M/s. FGP Ltd. at a price much lesser than the market price and therefore there was unreasonable profits generated for the purpose of claiming deduction u/s.80IB(10) - Held that - Section 80IB(13) of the Act prescribes that provisions of Section 80IA(10) of the Act so far as may be shall apply to the eligible business referred to in Section 80IB(10) also. The first and foremost requirement in order to invoke Section 80IA(10) is to establish the close connection between the assessee herein and M/s. FGP Ltd. with whom the transaction of acquisition of TDRFSI has been done. On this aspect there is not even an allegation by the Assessing Officer much less reference to any evidence in this regard. Before us it has been pointed out that M/s. FGP Ltd. and assessee firm are unrelated parties and therefore there is no question of invoking Section 80IA(10) of the Act qua the transaction of purchase of TDR-FSI by the assessee. Thus on this pertinent point itself we find that the invoking of Section 80IA(10) read with Section 80IB(13) of the Act is untenable. We hold so. Thus we hereby set aside the order of the CIT(A) to the above extent and allow the appeal of the assessee. - Revenue appeal dismissed.

Summary

Issues Involved:
1. Deduction claimed by the assessee under Section 80IB(10) of the Income Tax Act.
2. Eligibility of the housing project for the deduction under Section 80IB(10) based on the size of the plot.
3. Determination of whether the housing project is an independent project.
4. Application of Section 80IA(10) read with Section 80IB(13) regarding unreasonable profits.

Issue-wise Detailed Analysis:

1. Deduction Claimed by the Assessee under Section 80IB(10) of the Income Tax Act:
The primary issue in the cross-appeals is the deduction claimed by the assessee under Section 80IB(10) amounting to ?19,83,97,563/-. The Assessing Officer (AO) disallowed the deduction, questioning the eligibility of the assessee and the quantum of profits declared. The CIT(A) upheld the eligibility for the deduction but partially agreed with the AO on recomputing the profit, reducing the deduction by ?1,02,02,930/- instead of ?6,18,67,801/- as determined by the AO.

2. Eligibility of the Housing Project for the Deduction under Section 80IB(10) Based on the Size of the Plot:
The AO argued that the FSI used for the three buildings (MN-6, MN-7, MN-8) was 4067.45 sq.mtrs, less than one acre, thus not meeting the criteria under Section 80IB(10)(b). However, the CIT(A) found that the total area covered by the housing project was 8952.45 sq.mtrs, which is more than one acre. The Tribunal affirmed the CIT(A)'s findings, noting that the total land area with the assessee was 12,484 sq.mtrs with an FSI of 9,581.82 sq.mtrs, fulfilling the requirement of being more than one acre.

3. Determination of Whether the Housing Project is an Independent Project:
The AO contended that the project was part of an existing housing project and thus ineligible for the deduction. The CIT(A) disagreed, citing a CBDT communication that allowed deduction for additional housing projects consuming TDR on an existing project site, provided it was undertaken by a separate entity with distinct books of accounts. The Tribunal upheld the CIT(A)'s conclusion, noting that the project was indeed an independent project eligible for the benefits of Section 80IB(10).

4. Application of Section 80IA(10) Read with Section 80IB(13) Regarding Unreasonable Profits:
The AO applied Section 80IA(10) read with Section 80IB(13), alleging that the assessee acquired development rights at a price lower than the market rate, resulting in unreasonable profits. The CIT(A) partially upheld this, reducing the addition to ?1,02,02,930/-. The Tribunal found that the AO failed to establish a "close connection" between the assessee and M/s. FGP Ltd., a prerequisite for invoking Section 80IA(10). Since the parties were unrelated, the Tribunal held that the application of Section 80IA(10) was untenable and set aside the CIT(A)'s order to this extent, fully allowing the assessee's appeal.

Conclusion:
The Tribunal dismissed the appeal of the Revenue and allowed the appeal of the assessee, affirming the CIT(A)'s decision on the eligibility of the deduction under Section 80IB(10) and rejecting the application of Section 80IA(10) read with Section 80IB(13) due to the lack of a close connection between the parties involved.