2015 (1) TMI 481 - HC - Income Tax

Deduction u/s.80IB(10) r.w.s. 80IB(1) - ownership of land - approval by the local authority as well as completion certificate was not granted to the assessee - profit derived from sale of unutilized FSI - Held that - As decided in CIT V. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT a combined reading of section 2(47)(v) of the Act and section 53A of the Transfer of Property Act, 1882, would lead to a situation where the land would for the purpose of the Act be deemed to have been transferred to the assessees. In that view of the matter, for the purpose of income derived from such property, the assessees would be the owners of the land for the purpose of the Act although title in the land had not yet passed on to the assessees and would pass only upon execution of a duly registered sale deed. For the limited purpose of deduction under section 80-IB(10) of the Act, the assessees had satisfied the condition of ownership also, even if it was necessary. - Decided in favour of the assessee.

Summary

Issues:
Challenge to ITAT judgment on deduction u/s.80IB(10) & profit from sale of unutilized FSI.

Analysis:
1. The appellant challenged the ITAT judgment regarding the deduction u/s.80IB(10) and profit from the sale of unutilized FSI for the Assessment Year: 2005-2006. The primary issue raised was whether the Tribunal was correct in allowing the deduction u/s.80IB(10) to the appellant when the approval by the local authority and completion certificate were granted to the landowner, not the appellant. Additionally, the Tribunal considered whether the profit derived from the sale of unutilized FSI was eligible for deduction under section 80IB(10) as it was not directly related to the business activity of developing and constructing housing projects.

2. The appellant, a partnership firm engaged in developing housing projects, claimed a deduction u/s.80IB(10) at 100% of its gross total income. The Assessing Officer disallowed this deduction as the local authority approval was granted to the landowner, not the appellant, based on a development agreement between them. Furthermore, the Assessing Officer observed that the appellant had not fully utilized the permissible FSI, leading to profits from the sale of unutilized FSI. The issue arose whether such profits were eligible for deduction under section 80IB(10), distinct from the profits related to the construction and sale of tenements.

3. The CIT(A) and the Appellate Tribunal, relying on a precedent, held in favor of the appellant, allowing the deduction under section 80IB(10) for the profits related to the sale of unutilized FSI. The Tribunal's decision aligned with the interpretation that the appellant satisfied the conditions for ownership under section 80IB(10) despite not holding the title to the land. The High Court, considering the precedent and the specific circumstances of the case, dismissed the appeal, stating that the questions of law had already been addressed in favor of the appellant. Consequently, the appeal was rejected based on the existing legal position and precedents.

In conclusion, the High Court upheld the decision of the Appellate Tribunal, emphasizing that the appellant met the ownership conditions for the deduction u/s.80IB(10) and that the profits from the sale of unutilized FSI were considered eligible for the deduction. The judgment provided clarity on the interpretation of relevant legal provisions and precedent, leading to the dismissal of the appeal.