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TMI Blog2018 (5) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... tar Developers reported in [2014 (4) TMI 1042 - GUJARAT HIGH COURT] 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 - none of the assessees have made any special ground for non-utilization of the FSI - Decided in favour of Revenue. - Tax appeal no. 173 of 2012 - - - Dated:- 5-3-2018 - MR. AKIL KURESHI AND MR. B.N. KARIA, JJ. For The Petitioner : Mr KM Parikh For The Respondent : Mr Manish J Shah ORAL JUDGMENT ( PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the Revenue challenging the judgement of the Income Tax Appellate Tribunal dated 26.08.2011. The Revenue has presented two questions. First one was whether the Tribunal had committed an error in allowing the assessee claiming deduction under section 80IB(10) of the Act not appreciating that the relationship between the assessee and the end user of the units was that of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to the sale of unutilized FSI not relating to development and construction undertaken by you shall not become eligible for the said claim. The values thereof are computed as per table below: Calculation of are and cost of land not utilized for construction but sold as stated above Project Total permissible FSI available for construction (sq mtrs)= Total land x1.6 FSI Utilized (sq.mtrs) FSI Unutilized (sq.mtrs) Subhlaxmi 20198.00 4538.13 15659.87 Samruddhi 11426.00 2212.42 9213.58 Bhagyalaxmi 13130.00 2639.26 10490.74 Sub Total 44754.00 9389.81 35364.19 4. In response to the notices issued by the Assessing Officer, the assessee contended inter alia that there is a difference between total permissible FSI as per the building by laws and permitted FSI as per the plan approved by the Vadodara Municipal Corporation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to development and construction undertaken by the assessee is ineligible for deduction u/s. 80IB. Accordingly, deduction u/s. 80IB(10) is not available to the assessee on the said value being in the amount of ₹ 1,26,23,064/-. Penalty proceeding u/s. 271(1)(c) r.w.s. 274 of the Act is initiated. 6. The assessee carried the matter in appeal. CIT (Appeals) allowed the assessee's appeal relying on the judgement of the Tribunal in case of Shakti Corporation dated 07.11.2008. 7. The Revenue carried the matter in appeal. The Tribunal dismissed such appeal by the impugned judgement dated 26.08.2011. 8. As noted at the outset, the assessee's eligibility for deduction under section 80IB(10) of the Act is concluded. The Revenue's objection was overruled relying on the judgement of this Court in case of Radhe Developers (supra). The only question that survives is, would the assessee be entitled to entire deduction as claimed or would there be disallowance as held by the Assessing Officer on the ground that the substantial portion of the assessee's profit was not derived from development of housing project? 9. We have already noticed that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors of situational and other advantages and disadvantages, FSI permissible for the land in question would be an important factor in the context of development of the land. Given all other factors same, higher the FSI, the greater the value of the land. 30. It is in this context, we have to appreciate the underutilization of the FSI by the assessees in different housing projects under consideration. From the figures recorded in the earlier portion of the judgment, we can gather that such utilization of the FSI by the assessees ranges from the minimum of 11.14% of the full FSI available to a maximum of 65.81%. In majority of the cases, the assessees have covered barely about one fourth or one third of the permissible FSI. 31. For any commercial activity of construction, be it residential or commercial complex maximum utilization of FSI is of great importance to the developer. Ordinarily, therefore, it would be imprudent for a developer to underutilize available FSI. Sale price of constructed properties is decided on the built up area. It can thus be seen that given the rate of constructed area remaining same, nonutilization of available FSI would reduce the profit margi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization of FSI certainly cannot be a ground for rejecting the claim under section 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, such as, height restriction because of special zone, passing of high tension electric wires overhead, or any such similar grounds to justify under utilization, the case may stand on a different footing. However, 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 thereunder, bifurcation of such profits arising out of such activity and that arising out of the net sell of FSI must be resorted to. In the present case, none of the assessees have made any special ground for nonutilization of the FSI. 33. The contention of the counsel for the assessee that as long as there has been 100% utilization of the maximum permissible area on the ground floor, deduction under section 80IB(10) of the Act cannot be declined, cannot be accepted. As noted earlier, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Nirma Industries Ltd (supra) rested on different facts. It was a case where the assessee had claimed deduction under section 80IA of the Act. Such claim included the interest received from trade debtors towards late payment of sale consideration. This became a matter of dispute between the assessee and the Revenue. The Court held in favour of the assessee holding that such additional consideration can also be stated to be derived from the business. It was observed that when the purchaser pays a higher sale price, if it delays payment of sale proceeds, there is a converse situation to offering of cash discount. In principle, thus the transaction remains the same and there is no distinction as to the source. 37. In view of the above discussion, the question is answered in favour of the Revenue. All Tax Appeals to this extent are allowed. Respective decisions of the Tribunal are reversed to that extent. Appeals are disposed of accordingly. 10. In the result, the Revenue's appeal is allowed. Judgement of the Tribunal and CIT (Appeals) are reversed that of Assessing Officer is restored. Question is answered against the assessee. Tax Appeal is disposed of accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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