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TMI Blog2017 (1) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case was received for handing over the constructed tenements to the Slum Rehabilitation Authorities free of cost. Whether FSI sold was part of the project under development, therefore the project itself was incomplete, therefore, on such incompleted project the assessee was not eligible for deduction u/s.80IB(10)? - Held that:- From the record, we found that the Commencement Certificate dated 04/10/2011 and permission for construction of the saleable area under the said Scheme would not have been issued in case the project meant for rehabilitation of the downtrodden was incomplete. Thus, the FSI for construction of the saleable area was the 'consideration' for undertaking construction of the rehabilitation buildings and by no stretch of imagination the revenue could have assumed that the State would have given the consideration before completion of construction of the awarded project. In any case, as per the proviso below clause (b) in S. 80-IB(10) of the Act neither clause (a) concerning completion of the project, nor clause (b) relating to the size of the land applies to a project constructed for rehabilitation of slum dwellers. Accordingly, the objection raised by Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as ₹ 67,545/-) and ₹ 72,874/- respectively, as against ₹ 85,437/- to Shri Rushank Shah having 5% shareholding. In so far as Smt. Kunjal Shah and Smt. Falguni Shah having 1.91% and 2.38% stakes respectively through M/s. Hubtown Limited, it was sold at ₹ 83,552/- and ₹ 83,543/- respectively. In view of these comparison the inference drawn by the Assessing Officer that the FSI sold was at inflated rates was contrary to his own record. - Decided in favour of assessee - ITA No. 4190/Mum/2016 - - - Dated:- 5-1-2017 - Shri R. C. Sharma, AM And Shri Ravish Sood, JM Assessee by Shri Vijay Mehta with Shri Dharmesh Shah Revenue by Shri R. P. Meena ORDER Per R. C. Sharma ( A. M ) This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2012-13, in the matter of order passed u/s.143(3) of the IT Act. 2. The only grievance of assessee relates to decline of claim of deduction u/s.80IB(10) of the Income Tax Act. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is engaged in the business of real estate development, construction of building and slum reh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject. Against this order of CIT(A) assessee is in further appeal before us. 8. It was vehemently argued by learned AR that the profit so earned by assessee on the rehabilitation project represented the consideration received for sale of unutilized FSI, therefore, eligible for claim of deduction u/s.80IB(10). 9. In support of claim of deduction, learned AR relied on the following judicial pronouncements. ITO v. M/s. Suraksha Realtors for AY. 2007-08 in ITA No. 4223/Mum/2010 dated 21.10.2011 ITO v. M/s. Suraksha Realtors (Anik) for AY. 2008-09 in ITA No. 6760/Mum/2011 dated 12.09.2012 ITO v. Sonasha Enterprises for AYs. 2007-08 and 2008-09 in ITA Nos. 4911 4912/Mum/2010 dated 31.10.2011 DCIT v. Sonasha Enterprises for A.Y. 2009-10 in ITA No. 5292/Mum/2011 dated 08.06.2012 Judgment of the Hon'ble Bombay High Court in CIT v. Sonasha Enterprises 10. On the other hand, learned DR submitted that profit claimed as deduction u/s. 80-IB(10) of the Act was not derived from the housing project; there was violation of S. 80-IB(10)(iii)(c) of the Act; the project of rehabilitation of building and sale of building were one and not separate; and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component or part thereof can be taken as TDR if there are physical or economic constraints. 12. Upon completion of construction of the rehabilitation buildings as per the terms and conditions specified in the revised LOI to the satisfaction of SRA in 2010, the assessee became entitled to construct the saleable area of 2,209.84 sq. mtr on the basis of the FSI granted as consideration in situ or, in the alternative to sell it off as such, or in the form of TDR by virtue of clause (v) of DCR 33(1) extracted above. The assessee, therefore, made the requisite application to SRA on 08.12.2010 and it was granted by issuance of Commencement Certificate dated 04.10.2011. The assessee, thereafter, had disposed off the FSI received as consideration for construction of the rehabilitation tenements as permitted vide clause (v) of DCR 33(10) to third parties rather than undertaking construction of saleable area. In the premises, the profits realised by the assessee from the sale of the FSI did qualify for deduction u/s. 80-IB(10) of the Act. The provisions of S. 80-IB(10) of the Act did not mandate that for the purpose of availing the benefit the assessee should construct the tenements on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment) Act, 1971. The construction activity were governed under DC regulation 33(10). The scheme required to construct and hand over the new homes. Since the SRA did not have sufficient funds and as per the scheme devised the payment was agreed to be made in the form of TDR part of which shall be required to be consumed for construction of tenements for slums and part of which shall be unutilized and shall be available for sale in the 'open market.' Thus sale consideration in the entire housing project was in the form of TDR. The next objection of the AO is the profit on sale of TDR was attributable to to the Assessee and was not derived from developing and building housing project. Since the profit earned on sale of TDR was only incidental, it cannot be considered as income from the project and shall not be eligible for deduction u/s 80IB(10). The Assessee had received various amounts on sale of TDR and such sale of TDR was credited to the profit and loss account. The issue is whether the sale of TDR was attributable to , but not derived from developing and building housing project. TDR stands for Transferable Development Rights. Development Control Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s got TDR allotted to the Assessee. Therefore the value of the TDRs allotted to the Assessee (determined on the basis of the price realised from the subsequent sale of the TDRs) would constitute the sale consideration realised. SRA confirms such mode of payment in clause 16 and 17 of the agreement. Thus TDR was received as money or money's worth as consideration from SRA. Supreme Court in the case of CIT vs George Henderson Co. Ltd (1967) 66 ITR 622(SC) that in case of an exchange the money's worth of the property received in exchange constitutes the consideration for the property parted in exchange. Therefore, the value of the TDRs received in exchange for the development of the tenements should be taken into account for the purpose determining the relief u/s.80IB (10). 14. ITA Mumbai Bench followed the same decision in the assessment year 2008-09 vide order dated 12/09/2012. 15. Exactly under similar facts and circumstances, the Tribunal directed the AO to allow claim of deduction u/s. 80IB(10) in the case of Sonasha Enterprises ITA No.4911 4912/Mum/2010 vide order dated 31/10/2011. The precise observation of Tribunal was as under:- 5.2 As regard the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety, which is the legislative intention behind S. 80-IB(10) of the Act. In view of these facts, the Hon ble Gujarat High Court held that assessee was not eligible for deduction u/s.80IB(10) in respect of profit so earned on sale of unutilized FSI. However, in the instant case before us, the assessee had fully utilized the FSI as per the rehabilitation scheme. The consideration for construction of the rehabilitation building was received in the form of FSI which could either be used for sale, or for construction of the sale building. Unlike the facts of the case before the Hon'ble Gujarat High Court, the assessee had not acquired any land with FSI. The assessee's case was that the receipt of the consideration for developing housing project in the form of FSI which was encashed and converted by the assessee in monetary terms by sale of the said FSI. We had verified the P L account of the assessee which reflects that the only source of Revenue out of the construction carried out was sale consideration of FSI. Accordingly, profit earned by assessee was entirely due to construction activity and not due to purchase and sale of land / FSI. 19. The facts of the case of Moon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not have been issued in case the project meant for rehabilitation of the downtrodden was incomplete. Thus, the FSI for construction of the saleable area was the 'consideration' for undertaking construction of the rehabilitation buildings and by no stretch of imagination the revenue could have assumed that the State would have given the consideration before completion of construction of the awarded project. In any case, as per the proviso below clause (b) in S. 80-IB(10) of the Act neither clause (a) concerning completion of the project, nor clause (b) relating to the size of the land applies to a project constructed for rehabilitation of slum dwellers. Accordingly, the objection raised by Revenue authorities are devoid of any merit. However, the CIT(A) in his order inferred that the project undertaken by the assessee was not covered under DCR 33(10) as notified by the CBDT in Notification No. 67/20-10 dated 03.08.2010, as according to him, it was effective from the date of its publication, i.e. 03.08.2010 and, therefore, the assessee could not take benefit thereof since the project undertaken by it was approved much anterior, i.e. on 16.09.2004. The CIT (A) had also inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO has also objected to the price at which FSI were sold to the party on the plea that they were related to the assessee. In this regard, the AO observed that the purchasers of the FSI were closely related to the assessee and, therefore, it was an attempt to defraud the revenue also. We had carefully gone through the sale made to each and every party and we found that Smt. Kantarani Gulati was an independent buyer and she was erroneously mentioned as a related party. Similarly, Shri Hafeez Contractor was, and still is, a renowned Architect and the fact as to how he and Smt. Pearl Contractor were considered as related parties is a mystery. In so far as Smt. Kunjal Shah and Smt. Falguni Shah were concerned, they were not partners of the assessee but were having 7.03% and 8.74% shareholding in M/s. Hubtown Limited which was 27.25% stakeholder in the assessee. Therefore, the stake of Smt. Kunjal Shah and Smt. Falguni Shah were only to the extent of 1.91% and 2.38% respectively. As regards Shri Rushank Shah, he was having only 5% stake and, hence, none of the parties was closely associated with the assessee, as assumed by AO. However, we do not find any material having been brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I in lieu of construction of slum rehabilitation building as consideration in kind. The consideration of said FSI is offered to tax and the profit derived therefrom was claimed as deduction u/s. 80lB (10) of the Act. Ackruti has claimed such deduction in various years. The AO has accepted eligibility of revenue from sale of FSI /TDR. AO, however, denied deduction u/s.80IB(10) of the Act for want of compliance of other pre-conditions of Section 80IB(10).These matters went up to Hon'ble Tribunal and in all these years, Hon'ble ITAT has upheld the claim of said deduction u/s. 80IB(10) of the Act. Subsequently the Dept. filed appeal before Hon'ble Bombay High Court against the orders of Tribunal raising the question that profits derived by assessee from housing project are eligible for deduction u/s.80IB(10) of I.T. Act. Hon'ble Bombay High Court has dismissed this appeal of the Dept. vide its order dated 09/01/2013 relying on its earlier decision dated 20/03/2012 in case of Vandana Properties. Thereafter, the Dept. preferred SLP before Hon'ble Supreme Court. These matters were tagged along with other matters. The Hon'ble Supreme Court has dismissed the SLP vide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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