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TMI Blog2022 (10) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance at 10.41% being profit on sale of unutilized FSI - HELD THAT:- Marginal under utilization of FSI certainly cannot be a ground for rejecting the claim under section 80IB(10) of the Act. It has further contended that due to certain special grounds there may be considerable under utilization and such case may stand on a different footing. It has further contented that in the judgement in the case of CIT Vs. Shreenath Infrastructure [ 2014 (4) TMI 482 - GUJARAT HIGH COURT ] the Hon'ble High Court, after considering the judgment in the case of Moonstar Developers has held that it is not possible to utilize the full FSI allotted and that the under utilization in the marginal range of 25 - 30% would not be hit by disallowance of deduction u/s 80IB(10). Assessee has also placed reliance on the case of Narayan Housing Corporation [ 2016 (9) TMI 247 - ITAT AHMEDABAD ]wherein the order has been passed after discussing both the orders in the case of Moonstar and Srireenath Infrastructure. The Hon'ble ITAT Ahmedabad has held that disallowance on account of unutilized FSI was restricted to 30% as against the 60% made by AO. On the basis of the above order of Hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the judgment of Hon'ble High Court in the case of Moon Star Developers reported in 45 taxmann.com. 181 being ratio decedent . 2.2 On the facts and circumstances in the case and in law, the Ld. CIT(A) erred in deleting the disallowance u/s 80IB of the Act of Rs.76,74,800/- out of Rs.1,06,94,319/- by restricting the disallowance at 10.41% without appreciating that the assessee during the course of appellate proceedings did not furnish the manner of working /arriving the figure of disallowance at 10.41% being profit on sale of unutilized FSI. 3. The assessee craves to add to, amend or alter the above ground as may be deemed necessary. 3. Succinct facts are that assessee before us is a partnership firm. The assessee`s assessment for the year under consideration for assessment year 2010- 11 was re-opened by issuing notice u/s 148 of the Act, dated 27.03.2017. Subsequently notice u/s 142(1) was issued on 14.07.2017 and duly served upon the assessee. In response, vide assessee`s submission dated 29.08.2017, the assessee has requested to treat the return of income filed on 28.08.2010, be the return of income (ROI) filed against notice u/s 148 of the Act. Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the submissions made by you, it is observed that you have claimed deduction u/s 80IB(10) of the Act amounting to Rs.2,90,05,475. All the conditions laid down in section 80IB(10), just as those in section 80IB(3) to 80IB(11)and 80IB(11A) and 80IB(11A) of the Act, have to be satisfied by the assessee referred to Section 80IB(1) of the Act. These conditions are as under: (i) The gross total income of the assessee should include the profits from the business of an undertaking developing and building housing projects. (ii) The housing project should be approved by the local authority (iii) The project should be on the size of a plot of land which has a minimum area of one are. (iv) The residential units under the project should have a maximum built up area of 1000 sq.ft in Delhi or Mumbai and of 1500 sq.ft in any other place. On examination of the submission made by you it is seen that, you have not developed the entire project, with a size of land which has a but had entered into contract agreement with small plot owners and developed and constructed units as per the specification provided by the small land owners. No even a single unit has a min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as the assessee transfers the ownership of the plots to the individual plot owners. Thereafter, the assessee entered into agreement with the independent owners of plot of land to construct house on the respective plot as per the plot owner's requirement. Therefore, after selling the plots of land, the assessee becomes an entity which executes the housing project as a works contract awarded by the individual plot owner. As per the explanation to section 80IB(10) : For removal of doubts, it is hereby declared that nothing contained in this subsection shall apply to any undertaking which executes the housing project as a works contract awarded by any person ( including the central or State Government.) 8. Therefore, assessing officer noted that that the assessee, by cutting the land into independent plots of different sizes and selling these plots independently, ceased its status as developer of the project and therefore become ineligible for claiming such deductions. Further, the assessee becomes Contractor' by entering into independent construction contracts with individual plot owner. In these circumstances, the condition laid down in section 80IB(10) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted that similar disallowances were made by the A.O. in AY 2009-10 and 2011-12 and in appeal the same were allowed by the CIT(A). Copy of appellate orders for AY 2009-10 and 2011-12 were filed by the assessee and has been perused and placed; on record. For AY 2009-10 the issue was contested by the Department before Hon`ble ITAT, Surat and the same was dismissed vide order ITA No.1558/Ahd/2014/SRT dated 19.03.2018. Copy of the said order filed by the assessee is placed on record. The operative part of the order No.CAB-3/433/2014-15 dated 27.07.2016 of CIT(A)-3, Vadodara for AY 2011-12 on this issue is reproduced as under: 5.3 It is mentioned that similar/same claim of deduction was made by the assessee u/s 80IB(10) in its case for AY 2009-10 also and such claim of the assessee was denied by the AO for the same reasons for which its claim of deduction of Rs.1,11,91,329/- has been denied u/s 80IB(10) for the year under consideration. The Ld. CIT(A) i.e. my predecessor has allowed the similar claim of deduction of the assessee as made u/s 80IB(10) for AY.2009-10. In this regard the relevant part of decision of Ld. CIT(A)-VI, Baroda as given as per his appeal order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k as also providing for the minimum area of plot of land on which such project would be put up as well as maximum built up area of each of the residential units to be located thereon. The provisions nowhere required that only those developers who themselves own the land would receive the deduction under Section 80IB(10) of the Act. 31. Neither the provisions of Section 80IB nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under Section 80IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term developer has been understood in common parlance as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58/AHD/2014/SRT was passed on 19.03.2018. Relevant part of the said order reproduced below: 5. Replying to the above, the ld. Assessee s Representative (AR) submitted that as per decision of Hon ble Gujarat High Court in the cases of CIT vs. Vishal Construction Company [2013] 35 taxmann. Com 182 (Gujarat), CIT vs. Mahadev Developers [2013] 32 taxmann.com 291 (Gujarat) and Radhe Developers, wherein it has been held that ownership of land for development of a housing project is not a precondition for claiming deduction u/s 80IB(10) of the Act. The ld. AR also pointed out that as per order of ITAT, Ahmedabad in the case of M/s. Satsang Developers vs. ACIT, in ITA No.1011/Ahd/2012 and other related appeals order dated 12.11.2013 has followed the decision of Hon ble Gujarat High Court (Supra) and has held that the ownership of land is not a condition precedent for developing housing project and claiming deduction u/s. 80IB(10) of the Act. 6. On careful consideration of above rival submissions, when we carefully perused and logically analyzed that the relevant operative part of the first appellate order i.e., para 5.3 to 5.7 then we find that the ld. CIT(A) has considered rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as a Works Contractor , therefore assessee is not eligible to claim deduction under section 80IB(10) of the Act. Therefore, ld DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 12. On the other hand, ld Counsel for the assessee submitted that ld CIT(A) has passed the reasoned and speaking order and after relying on the judgment of the Jurisdictional ITAT Surat vide order in ITA No.1558/Ahd/2014/SRT dated 19.03.2018 in assessee`s own case. Copy of the said order filed by the assessee is placed on record. Therefore, ld Counsel contended that order passed by the ld CIT(A) may be confirmed. 13. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. AR, we find that the issue involved in the present appeal is no longer res integra. The question as to whether assessee is a Developer or Works Contractor has been adjudicated by the Coordinate Bench of ITAT, Surat, in favour of assessee, in ITA No.1558/Ahd/2014/SRT dated 19.03.2018 in assessee`s own case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the deduction u/s 80IB(10) in relation to the sale of unutilized FSI relying upon decision of Hon'ble High Court of Gujarat as given in the case of CIT Vs. Moon Star Developers, 45 taxmann.com 181. In this referred case, the assessee developed a housing project and it had filed return of income claiming deduction u/s 80IB(10) on the entire income. The AO noticed that the assessee had carried out only partial construction out of total available FSI for the land in question. Though as per approved plan, construction was carried out, but there was balance FSI available on the plots of land which was not utilized. The AO was, therefore, of the opinion that the assessee could not claim deduction u/s 80IB(10) for the profit relatable to sale of unutilized FSI. In view of this decision of Hon'ble High Court of Gujarat, as an alternative stand the AO disallowed Rs.1,06,94,319/- being the profit claimed from unutilized FSI out of total claim of deduction u/s 80IB(10) of Rs. 2,90,05,475/-. 18. We note that during the appellate proceedings, the assessee contended that the marginal under utilization of FSI certainly cannot be a ground for rejecting the claim under section 80IB(10) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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