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TMI Blog2018 (5) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT has erred in law in ignoring the fact that by nonutilization of 'available FSI' on the approved plot of land, the pre-condition for the development of minimum one acre of land had not been fulfilled and hence assessee was not eligible for claim of deduction?" 2. With some difficulty, we have been able to gather facts from record. Respondent-assessee is an HUF and was engaged in the development of housing projects. For the assessment year 2006-07, the assessee had filed return of income, on 28.12.2006 showing total of income of Rs. 7,870/- after claiming deduction of Rs. 70,11,618/- under section 80IB(10) of the Income Tax Act. The Assessing Officer in his order of assessment dated 29.12.2008 rejected the claim on the ground that the assessee was not the owner of the land. In his opinion therefore, the assesee failed the test of being a developer. In the opinion of the Assessing Officer, the assessee was merely an agent of the land and not a developer of land. 3. The assessee carried the matter in appeal. CIT(Appeals) noted that there were several conditions required to be fulfilled for claiming deduction under section 80IB(10) of the Act. One of them being that the project m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Star Developers reported in [2014] 367 ITR 621 (Guj.) had considered such a case in following manner: "29. In this context, we may examine, whether the decision of the Assessing Officer to treat the income of the assessees from sale of FSI separate and excludable from the purview of section 80IB(10) of the Act? The concept of FSI, is a wellknown one. Local authorities, such as Corporations, Municipalities and Panchayats, frame regulations for regulating activities of development of lands within their local areas. Such regulations are popularly referred to General Development Control Regulations (GDCR). In addition to providing different zones controlling development activities in different areas for regulated and orderly development of urban areas, these regulations also provide for various other details such as maximum height upto which the construction can be carried out, maximum area on the ground floor or on other floors which can be covered under construction, margin to be left on sides, parking facilities to be provided depending on the nature of building and most importantly, the maximum construction that can be carried out on a given piece of land. The last element, name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructs 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 distinct and separate and rightly segregated by the Assessing Officer. 32. It is true that section 80IB(10) of the Act does not provide that for deduction, the undertaking must utilize 100% of the FSI available. The question however is, can an undertaking utilize only a small portion of the available area for construction, sell the property leaving ample scope for the purchaser to carry on further construction on his own and claim full deduction under section 80IB(10) of the Act on the 6 10 profit earned on sale of the property? If this concept is accepted, in a given case, an assessee may put up construction of only 100 sq. ft. on the entire area of one acre of plot and sell the same to a single purchaser and claim full deduction on the profit arising out of such sale under section 80IB(10) of the Act. Surely, this cannot be stated to be development of a housing project qualifying for deduction under section 80IB(10) of the Act. This is not to suggest that for claiming deduction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee earned import entitlements to use itself or sell the same to others. During the year under consideration, the assessee included such sale proceeds for claiming relief under section 80HH of the Act, in case of any profit or gain derived from an industrial undertaking in backward areas. In this context, the Apex Court held that the import entitlements cannot be said to be derived from the industrial undertaking of the assessee. For the application of the words "derived from", there must be a direct nexus between the profits and gains and the industrial undertaking and in the case on hand, the nexus was not direct but only incidental. 35. In case of Pandian Chemicals Ltd (supra), once again, the assessee claimed deduction under section 80HH of the Act. This claim included interest on deposit made with Electricity Board for supply of electricity. The Apex Court held that the interest derived by the industrial undertaking of the assessee on such deposits made with the Electricity Board cannot be said to flow directly from the industrial undertaking itself and was not profit earned or gain derived by the undertaking for the purpose of special deduction under section 80HH of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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