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2014 (5) TMI 184 - AT - Income TaxDisallowance of deduction u/s 80IB(10) of the Act Profits attributable to sale of unutilized FSI not allowed Held that - Following Commissioner of Income-tax Versus Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT assessee was entitled to the benefit u/s 80-IB (10) even where the title of the lands had not passed on to the assessee and in some cases the development permissions may also have been obtained in the name of the original land owner - ownership of land is not a necessary condition for claiming the deduction u/s 80IB(10) - Assessee has acquired dominant control over the land Assessee is responsible for incurring all the expenses and taking all the risks involved - Assessee is not a contractor - Revenue could not controvert the findings of CIT(A) Decided in favour of Assessee.
Issues Involved:
1. Disallowance of deduction under section 80IB(10) of the Income-tax Act. 2. Sale of unutilized Floor Space Index (FSI). 3. Commercial area exceeding specified limits. 4. Completion of the project within the due date. 5. Separate agreements for land sale and construction. 6. Penalty under section 271(1)(c) of the Act. Detailed Analysis: 1. Disallowance of Deduction under Section 80IB(10): The primary issue was the disallowance of the deduction claimed by the assessee under section 80IB(10) of the Income-tax Act. The Assessing Officer (AO) disallowed the deduction on the grounds that the assessee was not the owner of the land and the development permission was not in the assessee's name. The AO also noted that the landowners sold the land directly to unit holders, and the assessee acted merely as a confirming party and contractor. The CIT(A) decided in favor of the assessee, stating that the disallowance was incorrect as the assessee was eligible for the deduction. This decision was supported by the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Radhe Developers. 2. Sale of Unutilized Floor Space Index (FSI): The AO also disallowed the deduction for the profit attributable to the sale of unutilized FSI, stating that it was not derived from the development and construction activities. The CIT(A) ruled in favor of the assessee, directing the AO to delete the disallowance on this issue. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by the Tribunal decision in the case of ITO vs. Shakti Corporation Baroda. 3. Commercial Area Exceeding Specified Limits: The CIT(A) raised new objections during the appellate proceedings, noting that the commercial area under the two projects exceeded the specified limit, violating section 80IB(10)(d). The Tribunal found no merit in this objection, stating that the relevant factor was the actual construction of the commercial area, not the approved project's commercial area. Since the assessee did not actually construct the commercial area and had sold the relevant land, there was no violation of the specified limits. 4. Completion of the Project within the Due Date: The CIT(A) also objected that the projects were not completed within the due date, as the commercial area and certain residential apartments were not constructed. The Tribunal found this objection to be without merit, noting that the construction of the remaining area was completed before the due date, and the completion certificates were obtained. Therefore, the project was considered complete within the specified time. 5. Separate Agreements for Land Sale and Construction: The CIT(A) objected that the assessee sold the land separately and undertook the construction work under separate agreements, thus acting as a contractor rather than a developer. The Tribunal rejected this objection, citing similar cases where it was held that separate agreements for land sale and construction do not disqualify the assessee from being considered a developer. The Tribunal referenced decisions in the cases of M/s. Vardhman Builders and Developers vs. ITO, DCIT vs. SMR Builders (P.) Ltd., and Raghava Estates vs. Dy. CIT, which supported the assessee's position. 6. Penalty under Section 271(1)(c) of the Act: In light of the Tribunal's decision on the quantum appeals, it was held that the assessee was eligible for the deduction under section 80IB(10). Consequently, the penalty imposed under section 271(1)(c) had no basis and was deleted. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed both appeals of the assessee. The Tribunal upheld the CIT(A)'s decision to grant the deduction under section 80IB(10) and found no merit in the CIT(A)'s additional objections regarding the commercial area, project completion, and separate agreements. The penalty under section 271(1)(c) was also deleted.
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