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2014 (8) TMI 42

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..... y and that arising out of the net sell of FSI must be resorted to - none of the assessees have made any special ground for non-utilization of the FSI - The finding recorded by the AO is on appreciation of evidence and it has never been disputed by the assessee - when the factual aspect with respect to the total permissible FSI available for construction; the FSI utilized by the assessee and the FSI unutilized by the assessee is available on record, there is no question to remand the matter to the AO – Decided in favour of Revenue. - Tax Appeal No. 150 of 2014 - - - Dated:- 15-7-2014 - M. R. Shah and K. J. Thaker,JJ. For the Petitioner : Mr. K. M. Parikh For the Respondent : Mr. B. S. Soparkar JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1. Feeling aggrieved by and dissatisfied with the impugned judgment and order dated 14.6.2013 passed by the learned Income-tax Appellate Tribunal, Ahmedbad Bench D , Ahmedabad in ITA No. 2191/Ahd/2012 for A.Y. 2009-10, the revenue has preferred the present Tax Appeal to consider the following substantial questions of law: (1) Whether on the facts and in the circumstances of the case, the ITAT was right in law in a .....

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..... as found that the assessee had constructed the housing project by deploying construction of 3665.39 sq.mtrs. of FSI. It was found that thus, the FSI of 5864.62 sq. mtrs. came to be utilized for the construction of the same, out of permissible FSI of 16863.5 sq. mtrs. It was found by the AO that the profit ensuring from the entire project for the year as per the profit and loss account, includes additional profit attributable to sale of unutilized FSI has also been booked by the assessee firm. Therefore, the AO observed and held that since the eligible profit for claim of deduction u/s 80IB(10) can only relates to those from the project of development and construction, the profit attributable to the sale of untilized FSI not relating to development and construction undertaken shall not become eligible for the said claim. Consequently, the AO disallowed ₹ 32,81,410/- claimed under sec. 80IB(10) of the Act being profit under untilized sale of FSI of project in housing units. The AO also disallowed ₹ 22,44,480/- claimed under sec. 40(a)(ia) of the Act. 5. Feeling aggrieved by and dissatisfied with the order passed by the AO disallowing the claim of assessee under sec. 80 .....

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..... requested to remand the matter to the learned A.O. 10. Heard the learned advocates appearing for the respective parties. 11. The question, which is posed for consideration of this Court is, whether on the facts and in the circumstances of the case and in law, the ITAT was right in law in allowing deduction u/s80IB(10) r.w.s. 80IB(1) to the assessee on profit derived from sale of unutilized FSI without appreciating that the said profit is not eligible for deduction u/s. 80IB(10)r.w.s. 80IB(1) as it has not been derived by the assessee from the business activity of development and construction of a housing project. The aforesaid substantial question of law is now not res integra in view of the recent decision of this court rendered in Tax Appeal No. 549 of 2008 and other allied Tax Appeals. In the aforesaid decision, the Division Bench of this Court has specifically observed and held that the profit relatable to the sale of unutilized FSI would not be eligible for deduction under sec. 80IB(10) of the Act. In para -28 to 32, the Division Bench of this Court has observed and held as under: 28. In this context, we may examine, whether the decision of the Assessing Officer to tr .....

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..... thus be seen that given the rate of constructed area remaining same, nonutilization of available FSI would reduce the profit margin of the developer. When a developer therefore utilizes only say 25% of FSI and sells the unit leaving 75% FSI still available for construction, he obviously works out the sale price bearing in mind this special feature. Let us compare two instances. In the same area two residential schemes are developed. Both have residential units of 1500 sq. feet. In one scheme 100% FSI is used in another 25% FSI is used and 75% is passed on to the buyer of the unit. Price of the unit in the later scheme would for apparent reason be considerably higher than the former because the buyer there gets not only a residential unit of 1500 sq. feet, he also gets the right to build further construction of 4500 sq. feet. Whether this includes open land or not is not important. In terms of construction business, it is equivalent to sale of land. Thus, therefore, when a developer constructs residential unit occupying a fourth or half of usable FSI and sells it, his profits from the activity of development and construction of residential units and from sale of unused FSI are dist .....

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..... rea on the ground floor, deduction under section 80IB(10) of the Act cannot be declined, cannot be accepted. As noted earlier, in case of M/s.Moon Star Developers and many other assesses, such full utilization of the ground floor area available for construction resulted into barely 20% to 25% of the FSI being used, remaining more than 75% being left unused. 12. Under the circumstances and in view of the aforesaid decision of coordinate Bench of this Court in Tax Appeal No. 549 of 2008 with other allied Tax Appeals, the substantial question of law raised in the present appeal is to be answered in favour of the revenue and against the assessee. So far as request made by Mr. Soparkar on behalf of assessee relying upon the decision of the Division Bench this court in the case of Shreenath Infrastructure (supra) and to remand the matter to the AO to calculate the exact unutilized FSI is concerned, in the facts and circumstances of the case, the aforesaid cannot be accepted. At the out-set, it is required to be noted that in the assessment order on the basis of the material on record, the AO has given full particulars and details with respect to the total permissible FSI available .....

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