2014 (11) TMI 486 - AT - Income Tax

Ascertainment of base year Held that - Out of 456 units the approval granted for 222 units of plots and 234 units of residential units from Vadodara Mahanagar Seva Sadan - assessee contended that the assessee has made claim with regard to residential units only and not with regard to the plots - CIT(A) followed the decision in Commissioner of Income-tax IV Versus Tarnetar Corporation 2012 (10) TMI 803 - GUJARAT HIGH COURT 0 wherein it has been held that the assessee had not only completed the construction two years before the final date but had applied for the building use permission - Such building permission was not rejected on the ground that construction was not completed but on some other technical ground - the assessee had completed the construction and applied for the issuance of completion certificate - the order of the CIT(A) is upheld Decided against revenue. Allowability of deduction u/s 80IB(10) proportionate disallowance on the completed units of the project Held that - The application for certificates was made on 09.05.2007, i.e. before the due date of 31.03.2008 - only 3 units out of total 223 approved by the BMC remained incomplete on which deduction u/s.80IB(10) will not be available - CIT(A) has followed the judgement of The Commissioner of Income Tax Business Ward XV(3), Chennai. Versus M/s. Sanghvi and Doshi Enterprise 2012 (12) TMI 84 - MADRAS HIGH COURT Decided against revenue. Deduction on unutilized FSI units Held that - In The Commissioner of Income Tax-I Versus Moon Star Developers 2014 (4) TMI 1042 - GUJARAT HIGH COURT it has been held that Marginal underutilization of FSI certainly cannot be a ground for rejecting the claim u/s 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, the case may stand on a different footing - 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, bifurcation of profits arising out of such activity and that arising out of the net sell of FSI must be resorted to thus, the matter is remitted back to the file of AO to verify the unutilization of FSI and decide this issue afresh in the light of the judgement as mentioned Decided in favour of assessee.

Summary

Issues Involved:
1. Base year for deciding the completion year and date of the project.
2. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
3. Proportionate deduction under Section 80IB(10).
4. Allowance of deduction in respect of unutilized FSI.
5. Levy of interest under Sections 234A, 234B, 234C, and 234D.
6. Initiation of penalty under Section 271(1)(c).

Detailed Analysis:

1. Base Year for Deciding Completion Year and Date of the Project:
The Revenue argued that the CIT(A) erred in not considering 25.10.2000 as the base year for deciding the completion year and date of the project. The Tribunal had earlier directed the AO to examine the agreement between the assessee and the landowner to determine if the assessee had purchased the land and developed the project independently. The AO found that the developer had dominant control over the project and developed it at its own cost and risks. However, the completion certificate was not issued within the stipulated time, leading to disallowance under Section 80IB(10).

2. Eligibility for Deduction Under Section 80IB(10):
The CIT(A) allowed deduction for 220 out of 223 units. The Revenue contended that the assessee did not produce the completion certificate for 129 units, but the CIT(A) granted relief based on the application made to the Vadodara Municipal Corporation. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court's judgment in Tarnetar Corporation, which held that the application for a completion certificate before the due date suffices for the deduction.

3. Proportionate Deduction Under Section 80IB(10):
The CIT(A) allowed proportionate deduction for the units that met the eligibility conditions, even if the completion certificate was not issued for all units. The Tribunal upheld this view, citing the Madras High Court's decision in Sanghvi and Doshi Enterprise and Viswas Promoters, which allowed proportionate deduction for eligible units.

4. Allowance of Deduction in Respect of Unutilized FSI:
The Tribunal restored the issue of unutilized FSI to the AO for verification, referencing the Gujarat High Court's judgment in Moon Star Developers, which required bifurcation of profits from the sale of FSI and those derived from the housing project.

5. Levy of Interest Under Sections 234A, 234B, 234C, and 234D:
The levy of interest under Sections 234A, 234B, and 234C was deemed consequential. No specific argument was advanced for Section 234D, leading to its rejection.

6. Initiation of Penalty Under Section 271(1)(c):
The initiation of penalty under Section 271(1)(c) was considered premature and thus rejected.

Separate Judgments Delivered:
- The Tribunal upheld the CIT(A)'s decision for AY 2005-06, allowing deduction for 220 units.
- For AY 2007-08, the Tribunal directed the AO to allow deduction as per the CIT(A)'s order for AY 2005-06.
- For AY 2008-09, the Tribunal allowed the assessee's appeal and directed the AO to grant deduction in line with the CIT(A)'s order for AY 2005-06.
- The issue of unutilized FSI was consistently restored to the AO for verification across different assessment years.

Conclusion:
The Tribunal's consolidated order addressed multiple appeals, affirming the CIT(A)'s decisions on deduction under Section 80IB(10) and directing the AO to verify unutilized FSI in light of relevant High Court judgments. The levy of interest and initiation of penalties were addressed as per the specific circumstances of each case.